Exhibit 4.4
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FORM OF SALE AND SERVICING
AGREEMENT
among
FRANKLIN AUTO TRUST 1998-1
Issuer,
FRANKLIN RECEIVABLES LLC
Seller, and
FRANKLIN CAPITAL CORPORATION
Servicer and Representative
Dated as of August 1, 1998
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Table of Contents
Page
ARTICLE I
Definitions
SECTION 1.1 Definitions............................................................................1
SECTION 1.2 Other Definitional Provisions.........................................................18
ARTICLE II
Conveyance of Receivables
SECTION 2.1 Conveyance of Receivables.............................................................19
ARTICLE III
The Receivables
SECTION 3.1 Representations and Warranties of Seller..............................................20
SECTION 3.2 Repurchase upon Breach................................................................24
SECTION 3.3 Custody of Receivables Files..........................................................25
SECTION 3.4 Duties of Servicer as Custodian.......................................................25
SECTION 3.5 Instructions; Authority To Act........................................................26
SECTION 3.6 Custodian's Indemnification...........................................................26
SECTION 3.7 Effective Period and Termination......................................................27
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1 Duties of Servicer....................................................................27
SECTION 4.2 Collection and Allocation of Receivable Payments......................................28
SECTION 4.3 Realization upon Receivables..........................................................28
SECTION 4.4 Physical Damage Insurance.............................................................29
SECTION 4.5 Maintenance of Security Interests in Financed Vehicles................................29
SECTION 4.5-A. Segregation of Receivables Files......................................................30
SECTION 4.6 Covenants of Servicer.................................................................30
SECTION 4.7 Purchase of Receivables upon Breach...................................................30
SECTION 4.8 Servicing Fee.........................................................................31
SECTION 4.9 Servicer's Certificate................................................................31
SECTION 4.10 Annual Statement as to Compliance; Notice of Default..................................31
SECTION 4.11 Annual Independent Certified Public Accountants' Report...............................32
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SECTION 4.12 Access to Certain Documentation and InformationRegarding Receivables..................32
SECTION 4.13 Servicer Expenses.....................................................................33
SECTION 4.14 Appointment of Subservicer............................................................33
SECTION 4.15 Obligations under Basic Documents.....................................................33
ARTICLE V
Distributions; Statements to Certificateholders and Noteholders
SECTION 5.1 Establishment of Trust Accounts.......................................................33
SECTION 5.2 Collections...........................................................................36
SECTION 5.3 Application of Collections............................................................36
SECTION 5.4 Deficiency Notice.....................................................................37
SECTION 5.5 Additional Deposits...................................................................37
SECTION 5.6 Distributions.........................................................................37
SECTION 5.7 [RESERVED]............................................................................39
SECTION 5.8 Statements to Certificateholders and Noteholders......................................39
SECTION 5.9 Net Deposits..........................................................................40
SECTION 5.10 Optional Deposits by the Security Insurer.............................................40
ARTICLE VI
The Seller
SECTION 6.1 Representations of the Seller.........................................................40
SECTION 6.2 Corporate Existence...................................................................42
SECTION 6.3 Liability of Seller; Indemnities......................................................43
SECTION 6.4 Merger or Consolidation of, or Assumption of the Obligations of, Seller........ 44
SECTION 6.5 Limitation on Liability of Seller and Others..........................................44
SECTION 6.6 Seller May Own Certificates or Notes..................................................44
ARTICLE VII
The Servicer and the Representative
SECTION 7.1 Representations of Servicer and Representative........................................45
SECTION 7.2 Indemnities of Servicer...............................................................46
SECTION 7.3 Merger or Consolidation of, or Assumption of the Obligations of, Servicer.......47
SECTION 7.4 Limitation on Liability of Servicer and Others........................................48
SECTION 7.5 Servicer Not To Resign................................................................48
ARTICLE VIII
Default
SECTION 8.1 Servicer Default......................................................................49
SECTION 8.2 Appointment of Successor..............................................................50
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SECTION 8.3 [RESERVED]............................................................................51
SECTION 8.4 Notification to Noteholders and Certificateholders....................................51
SECTION 8.5 Waiver of Past Defaults...............................................................51
ARTICLE IX
Termination
SECTION .9.1 Optional Purchase of All Receivables..................................................51
ARTICLE X
Administrative Duties of the Servicer
SECTION 10.1 Administrative Duties.................................................................53
SECTION 10.2 Records...............................................................................55
SECTION 10.3 Additional Information to be Furnished to the Issuer..................................55
ARTICLE XI
Miscellaneous Provisions
SECTION 11.1 Amendment.............................................................................55
SECTION 11.2 Protection of Title to Trust..........................................................56
SECTION 11.3 Notices...............................................................................58
SECTION 11.4 Assignment............................................................................59
SECTION 11.5 Limitations on Rights of Others.......................................................59
SECTION 11.6 Severability..........................................................................59
SECTION 11.7 Separate Counterparts.................................................................59
SECTION 11.8 Headings..............................................................................59
SECTION 11.9 Governing Law.........................................................................59
SECTION 11.10 Assignment to Trustee.................................................................59
SECTION 11.11 Nonpetition Covenants.................................................................60
SECTION 11.12 Limitation of Liability of Owner Trustee, Trustee and Indenture Collateral Agent 60
SECTION 11.13 Independence of the Servicer..........................................................60
SECTION 11.14 No Joint Venture......................................................................61
SECTION 11.15 Third-Party Beneficiaries.............................................................61
SECTION 11.16 Disclaimer by Security Insurer........................................................61
SCHEDULES
Schedule A - Schedule of Receivables
Schedule B - Location of Receivables
EXHIBITS
Exhibit A - Reserved
Exhibit B - Reserved
Exhibit C - Form of Monthly Noteholder Statement
Exhibit D - Form of Servicer's Certificate
Exhibit E - Form of Note Policy
Exhibit F - Form of Stamp
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SALE AND SERVICING AGREEMENT dated as of
August 1, 1998, among FRANKLIN AUTO TRUST 1998-1, a
Delaware business trust (the "Issuer"), FRANKLIN
RECEIVABLES LLC, a Delaware limited liability company
(the "Seller") and FRANKLIN CAPITAL CORPORATION, a
Delaware corporation (the "Servicer," the
"Representative" or "Franklin Capital").
WHEREAS the Issuer desires to purchase a portfolio of
receivables arising in connection with motor vehicle retail installment sale
contracts acquired by Franklin Capital Corporation through motor vehicle
dealers;
WHEREAS the Seller has purchased such receivables from Franklin
Capital Corporation and is willing to sell such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
Definitions
SECTION 1.1 Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"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 Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. A Person shall not be
deemed to be an Affiliate of any person solely because such other Person has the
contractual right or obligation to manage such Person unless such other Person
controls such Person through equity ownership or otherwise.
"Aggregate Principal Balance" means, with respect to any date
of determination, the sum of the Principal Balances for all Receivables (other
than (i) any Receivable that became a Liquidated Receivable during the related
Monthly Period and (ii) any Receivable that was purchased or repurchased by any
Person pursuant to the Agreement during the related Monthly Period) as of the
date of determination.
"Agreement" means this Sale and Servicing Agreement, as the
same may be amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the
aggregate amount advanced under such Receivable toward the purchase price of the
Financed Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service, car club and warranty contracts, other
items customarily financed as part of retail automobile installment sale
contracts or promissory notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the
annual percentage rate of finance charges or service charges, as stated in the
related Contract.
"Available Funds" means, with respect to any Determination
Date, the sum of (i) the Collected Funds for such Determination Date (including
amounts withdrawn from the Payahead Account but excluding amounts deposited into
the Payahead Account), (ii) all Purchase Amounts deposited in the Collection
Account during the related Monthly Period, and proceeds of any repurchase by a
Dealer pursuant to Dealer Agreement, (iii) following the acceleration of the
Notes pursuant to Section 5.2 of the Indenture, the amount of money or property
collected pursuant to Section 5.4 of the Indenture since the preceding
Determination Date by the Trustee or Controlling Party for distribution pursuant
to Section 5.6 of the Indenture, and (iv) any Insolvency Proceeds received
pursuant to Section 9.1(b) hereof.
"Base Servicing Fee" means, with respect to any Monthly
Period, the fee payable to the Servicer for services rendered during such
Monthly Period, which shall be equal to one-twelfth of the applicable Servicing
Fee Rate multiplied by the Pool Balance applicable to Prime Receivables,
Non-Prime Receivables and Sub-Prime Receivables, as applicable as of the first
day of such Monthly Period.
"Basic Documents" means the Certificate of Trust, the Trust
Agreement, the Sale and Servicing Agreement, the Indenture, the Insurance
Agreement, the Depository Agreement and other documents and certificates
delivered in connection therewith.
"Business Day" means a day other than a Saturday, a Sunday or
other day on which commercial banks located in the states of California, Utah or
New York are authorized or obligated to be closed.
"Certificate" means a Trust Certificate (as defined in the
Trust Agreement).
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"Certificate Distribution Account" has the meaning assigned to
such term in the Trust Agreement.
"Certificateholder" each person in whose name a Certificate is
registered.
"Class" means the Class A-1 Notes and the Class A-2 Notes, as
the context requires.
"Class A-1 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-2 Notes" has the meaning assigned to such term in the
Indenture.
"Closing Date" means August ___, 1998.
"Collected Funds" means, with respect to any Determination
Date, the amount of funds in or to be deposited in the Collection Account
representing collections on the Receivables during the related Monthly Period,
including all Net Liquidation Proceeds and proceeds of any Insurance Policy
collected during the related Monthly Period (but excluding any Purchase
Amounts).
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1 of the Agreement.
"Computer Tape" means the computer tapes or other electronic
media furnished by or on behalf of the Seller to the Issuer and its assigns and
the Security Insurer describing certain characteristics of the Receivables as of
the Cutoff Date.
"Contract" means a motor vehicle retail installment sale
contract.
"Corporate Trust Office" means (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this Agreement is __________, Attention: _____________, and
(ii) with respect to Trustee and the Indenture Collateral Agent, the principal
corporate office of the Trustee, which at the time of execution of this
Agreement is _____________________________________________.
"Cram Down Loss" means, with respect to a Receivable, if a
court of appropriate jurisdiction in an insolvency proceeding shall have issued
an order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the scheduled payments to be made on a Receivable, an amount equal
to (i) the excess of the principal balance of such Receivable immediately prior
to such order over the principal balance of such Receivable as so reduced and/or
(ii) if such court shall have issued an order reducing the effective rate of
interest on such Receivable, the net present value of such reduction (using as
the discount rate the higher of the APR on such Receivable or the rate of
interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
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"Cutoff Date" means as to any Receivable, August __, 1998.
"Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to the Seller under an
existing agreement between such Dealer and the Seller.
"Dealer Agreement" means any agreement between a Dealer and
Franklin Capital Corporation relating to the acquisition of Receivables from a
Dealer by Franklin Capital Corporation.
"Defaulted Receivable" means a Receivable with respect to
which: (i) ten percent or more of a Scheduled Payment is 120 or more days
delinquent, (ii) the Servicer has repossessed the related Financed Vehicle (and
any applicable redemption period has expired) or (iii) such Receivable is in
default and the Servicer has determined in good faith that payments thereunder
are not likely to be resumed.
"Deficiency Claim Amount" shall have the meaning set forth in
Section 5.4 of the Agreement.
"Deficiency Claim Date" means, with respect to any
Distribution Date, the fourth Business Day immediately preceding such
Distribution Date.
"Deficiency Notice" shall have the meaning set forth in
Section 5.4 of the Agreement.
"Delivery" when used with respect to Trust Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
instruments and are susceptible of physical delivery ("Physical Property"):
(i) transfer of possession thereof to the Trustee,
endorsed to, or registered in the name of, the Trustee or its
nominee or endorsed in blank;
(b) with respect to a certificated security:
(i) delivery thereof in bearer form to the Indenture
Collateral Agent; or
(ii) delivery thereof in registered form to the
Indenture Collateral Agent and
(A) the certificate is endorsed to the Indenture
Collateral Agent or in blank by effective endorsement; or
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(B) the certificate is registered in the name of the
Indenture Collateral Agent, upon original issue or
registration of transfer by the Issuer;
(c) with respect to an uncertificated security:
(i) the delivery of the uncertificated security to
the Indenture Collateral Agent; or
(ii) the issuer has agreed that it will comply with
instructions originated by the Indenture Collateral Agent
without further consent by the registered owner;
(d) with respect to any security issued by the U.S. Treasury
that is a book-entry security held through the Federal Reserve System pursuant
to Federal book-entry regulations:
(i) a Federal Reserve Bank by book entry credits the
book-entry security to the securities account (as defined in
31 CFR Part 357) of a participant (as defined in 31 CFR Part
357) which is also a securities intermediary; and
(ii) the participant indicates by book entry that the
book-entry security has been credited to the Indenture
Collateral Agent securities account;
(e) with respect to a security entitlement:
(i) the Indenture Collateral Agent becomes the
entitlement holder; or
(ii) the securities intermediary has agreed that it
will comply with entitlement orders originated by the
Indenture Collateral Agent without further consent by the
entitlement holder;
(f) for the purpose of clauses (b) and (c) hereof "delivery"
means:
(i) with respect to a certificated security:
(A) the Indenture Collateral Agent acquires
possession thereof;
(B) another person (other than a securities
intermediary) either acquires possession thereof on behalf of
the Indenture Collateral Agent or, having previously acquired
possession thereof, acknowledges that it holds for the
Indenture Collateral Agent; or
(C) a securities intermediary acting on
behalf of the Indenture Collateral Agent acquires possession
of thereof, only if the certificate is in registered form and
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has been specially endorsed to the Indenture Collateral Agent
by an effective endorsement;
(ii) with respect to an uncertificated security:
(A) the issuer registers the Indenture
Collateral Agent as the registered owner, upon original issue
or registration of transfer; or
(B) another person (other than a securities
intermediary) either becomes the registered owner thereof on
behalf of the Indenture Collateral Agent or, having previously
become the registered owner, acknowledges that it holds for
the Indenture Collateral Agent;
(g) for purposes of this definition, except as otherwise
indicated, the following terms shall have the meaning assigned to each such term
in the UCC:
(i) "certificated security"
(ii) "effective endorsement"
(iii) "entitlement holder"
(iv) "instrument"
(v) "securities account"
(vi) "securities entitlement"
(vii) "securities intermediary"
(viii) "uncertificated security"
(h) in each case of Delivery contemplated herein, the
Indenture Collateral Agent shall make appropriate notations on its records, and
shall cause same to be made on the records of its nominees, indicating that
securities are held in trust pursuant to and as provided in this Agreement.
"Depository Agreement" means the Note Depository Agreement.
"Determination Date" means, with respect to any Distribution
Date, the fifth Business Day prior to the related Distribution Date.
"Distribution Amount" means, with respect to a Distribution
Date, the sum of (i) the Available Funds for the immediately preceding
Determination Date, plus (ii) the Deficiency Claim Amount, if any, received
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(from an Insurer Optional Deposit or otherwise [other than from draws under the
Note Policy]) by the Trustee with respect to such Distribution Date.
"Distribution Date" means, with respect to each Monthly
Period, the fifteenth day of the following calendar month, or if such day is not
a Business Day, the immediately following Business Day, commencing in September
1998.
"Draw Date" means, with respect to any Distribution Date, the
second Business Day immediately preceding such Distribution Date.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution have a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade.
"Eligible Institution" means (a) the corporate trust
department of the Trustee or any other entity specified in the Agreement or (b)
a depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), which (i) has either (A) a long-term
unsecured debt rating of AAA or better by Standard & Poor's and Aaa or better by
Moody's or (B) a certificate of deposit rating of A-1+ by Standard & Poor's and
P-1 or better by Moody's or any other short-term or certificate of deposit
rating acceptable to the Rating Agencies and to the Security Insurer and (ii)
whose deposits are insured by the FDIC. If so qualified under clause (b) above,
the Owner Trustee or the Trustee may be considered an Eligible Institution.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as
to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the laws of
the United States of America or any state thereof or the District of Columbia
(or any domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution authorities
(including depository receipts issued by any such institution or trust company
as custodian with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such depository
receipts); provided, however, that at the time of the investment or contractual
commitment to invest therein (which shall be deemed to be made again each time
funds are reinvested following each Distribution Date), the commercial paper or
other short-term senior unsecured debt obligations (other than such obligations
the rating of which is based on the credit of a Person other than such
depository institution or trust company) of such depository institution or trust
company shall have a credit rating from Standard & Poor's of A-1+ and from
Moody's of P-1;
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(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from Standard & Poor's of
A-1+ and from Moody's of P-1;
(d) investments in money market funds (including funds for
which the Trustee or the Owner Trustee or any of their respective Affiliates is
investment manager or advisor) having a rating from Standard & Poor's of AAA-m
or AAAm-G and from Moody's of Aaa and having been approved by the Security
Insurer;
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are backed by
the full faith and credit of the United States of America, in either case
entered into with a depository institution or trust company (acting as
principal) referred to in clause (b) above;
(g) any demand deposit in a trust account maintained by
___________; provided that such deposits shall consist of direct obligations of,
and obligations guaranteed as to timely payment by, __________________; and
(h) any other investment which would satisfy the Rating Agency
Condition and is consistent with the ratings of the Securities and which, so
long as no Insurer Default shall have occurred and be continuing, has been
approved by the Security Insurer.
Any of the foregoing Eligible Investments may be purchased by
or through the Owner Trustee or the Trustee or any of its Affiliates.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means with respect to (i)
the Class A-1 Notes, the _____ Distribution Date, and (ii) the Class A-2 Notes,
the Distribution Date.
"Final Scheduled Maturity Date" means _________________.
"Financed Vehicle" means a new or used automobile or
light-truck, together with all accessions thereto, securing an Obligor's
indebtedness under the respective Receivable.
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"Indenture" means the Indenture dated as of August 1, 1998,
among the Issuer, the Indenture Collateral Agent and the Trustee, as the same
may be amended and supplemented from time to time.
"Indenture Collateral Agent" means the Person acting as
Indenture Collateral Agent under the Indenture, its successors in interest and
any successor Indenture Collateral Agent under the Indenture.
"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a petition against such Person or the entry of a decree or
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insurance Agreement" means the Insurance Agreement, dated as
of August 1, 1998, among the Security Insurer, the Indenture Trustee, the Trust,
the Servicer, the Representative, the Owner Trustee and the Seller.
"Insurance Agreement Event of Default" means an "Insurance
Agreement Event of Default" as defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4 of
the Agreement) benefiting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the Obligor.
"Insurer's Agent" means The Chase Manhattan Bank.
"Insurer Default" means the occurrence and continuance of any
of the following events:
(a) the Security Insurer shall have failed to make a payment
required under the Note Policy in accordance with its terms;
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(b) The Security Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Security Insurer or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Security Insurer (or the taking of possession
of all or any material portion of the property of the Security Insurer);
provided, however, that the Security Insurer's rights shall be immediately
reinstated upon cure of such Insurer Default.
"Insurer Optional Deposit" means, with respect to any
Distribution Date, an amount delivered by or on behalf of the Insurer pursuant
to Section 5.10 of the Agreement, at its sole option, to the Trustee for deposit
into the Collection Account for any of the following purposes: (i) to provide
funds in respect of the payment of fees or expenses of any provider of services
to the Trust with respect to such Distribution Date; or (ii) to include such
amount as part of the Distribution Amount or for such Distribution Date or, to
the extent that without such amount a draw would be required to be made on the
Note Policy.
"Interest Rate" means, with respect to (i) the Class A-1
Notes,__% per annum [(computed on the basis of the actual number of days elapsed
in a 360-day year)] and (ii) the Class A-2 Notes,__% per annum (computed on the
basis of a 360-day year of twelve 30-day months).
"Investment Earnings" means, with respect to any Distribution
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts and the Certificate Distribution Account.
"Issuer" means Franklin Auto Trust 1998-1.
"Lien" means a security interest, lien, charge, pledge,
equity, or encumbrance of any kind, other than tax liens, mechanics' liens and
any liens that attach to the respective Receivable by operation of law as a
result of any act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle,
an original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which the
original certificate of title is required to be given to the Obligor, the term
"Lien Certificate" shall mean only a certificate or notification issued to a
secured party.
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"Liquidated Receivable" means, with respect to any
Determination Date, a Receivable as to which, as of the last day of the related
Monthly Period, (i) 90 days have elapsed since the Servicer repossessed the
Financed Vehicle, (ii) the Servicer has determined in good faith that all
amounts it expects to recover have been received, (iii) 10% or more of a
Scheduled Payment shall have become 180 or more days delinquent, or (iv) the
Financed Vehicle has been sold and the proceeds received.
"Monthly Period" means with respect to each Distribution Date,
the calendar month preceding the month in which such Distribution Date or
occurs.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., or its
successor.
"Net Liquidation Proceeds" means as to any Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts paid pursuant to this Agreement and draws under the Note Policy) net of
(i) reasonable expenses incurred by the Servicer in connection with the
collection of such Receivable and the repossession and disposition of the
Financed Vehicle and (ii) amounts that are required to be refunded to the
Obligor on such Receivable; provided, however, that the Net Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero.
"Non-Prime Receivables" means those Receivables indicated on
Schedule A hereto as non-prime.
"Note Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.1 of the Agreement.
"Note Insured Payment" has the meaning as defined in the Note
Policy.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that was actually
deposited in the Note Distribution Account on such preceding Distribution Date,
plus interest on the amount of interest due but not paid to Noteholders on the
preceding Distribution Date, to the extent permitted by law, at the respective
Interest Rate borne by each Class of Notes from such preceding Distribution Date
to but excluding the current Distribution Date.
"Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date. Interest on the Class A-1 Notes
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shall be calculated on the basis of a [360 day year and the actual number of
days elapsed in the related interest period]. Interest on the Class A-2 Notes
shall be computed on the basis of a 360-day year of twelve 30-day months.
"Noteholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date, the product of (i) (X) in the case of the
Class A-1 Notes, the product of the Interest Rate for such Class and a fraction,
the numerator of which is [the number of days elapsed from and including the
prior Distribution Date (or, in the case of the first Distribution Date, from
and including the Closing Date) to but excluding such Distribution Date and the
denominator of which is 360] and (Y) in the case of the Class A-2 Notes,
one-twelfth of the Interest Rate for such Class (or, in the case of the first
Distribution Date, the Interest Rate for such Class multiplied by a fraction,
the numerator of which is the number of days elapsed from and including August
__, 1998 to but excluding such Distribution Date and the denominator of which is
360) and (ii) the outstanding principal amount of the Notes of such Class
immediately preceding such Distribution Date.
"Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the Noteholders' Percentage of the
Principal Distributable Amount.
"Noteholders' Percentage" means with respect to any
Determination Date (i) relating to a Distribution Date prior to the Distribution
Date on which the principal amount of the Class A-2 Notes is reduced to zero,
100%; (ii) relating to the Distribution Date on which the principal amount of
the Class A-2 Notes is reduced to zero, the percentage equivalent of a fraction,
the numerator of which is the principal amount of the Class A-2 Notes
immediately prior to such Distribution Date, and the denominator of which is the
Principal Distributable Amount; and (iii) relating to any other Distribution
Date, 0%.
"Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall for the preceding Distribution Date over the amount in respect of
principal that was actually deposited in the Note Distribution Account on such
preceding Distribution Date.
"Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, (other than the Final Scheduled Distribution
Date for any Class of Notes), the lesser of (i) the outstanding principal
balance on the Notes on such Distribution Date prior to making any distribution
thereon and (ii) the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date. The Noteholders'
Principal Distributable Amount on the Final Scheduled Distribution Date for any
Class of Notes will equal the sum of (i) the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date, (ii) the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date, and
(iii) the excess of the outstanding principal amount of such Class of Notes, if
any, over the amounts described in clauses (i) and (ii).
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"Note Policy" means the note guaranty insurance policy issued
by the Security Insurer to the Trustee for the benefit of the Noteholders with
respect to the Notes, including any endorsements thereto, in the form of Exhibit
E to the Indenture.
"Note Pool Factor" for each Class of Notes as of the close of
business on a Distribution Date means a seven-digit decimal figure equal to the
outstanding principal amount of such Class of Notes as of such Distribution Date
after giving effect to principal distributions on such date divided by the
original outstanding principal amount of such Class of Notes.
"Obligor" on a Receivable means the purchaser or co-purchasers
of the Financed Vehicle and any other Person who owes payments under the
Receivable.
"Officer's Certificate" means a certificate signed by the (a)
chairman of the board, the president, any executive vice president or any vice
president and (b) any treasurer, assistant treasurer, secretary or assistant
secretary of the Representative, the Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to the Representatives, the Seller
or the Servicer, which counsel shall be acceptable to the Trustee, the Owner
Trustee, the Security Insurer or the Rating Agencies, as applicable, and which
shall be addressed to the Security Insurer.
"Original Pool Balance" means the Pool Balance as of the
Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in
the Trust Agreement.
"Owner Trustee" means ____, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement, its successors in interest or
any successor Owner Trustee under the Trust Agreement.
"Payahead" on a Precomputed Receivable means the amount, as of
the close of business on the last day of a Collection Period, computed in
accordance with Section 5.3 with respect to such Receivable.
"Payahead Account" means the account designated as such,
established and maintained pursuant to Section 5.1 of the Agreement.
"Payahead Balance" on a Precomputed Receivable means the sum,
as of the close of business on the last day of a Collection Period, of all
Payaheads made by or on behalf of the Obligor with respect to such Precomputed
Receivable, as reduced by applications of previous Payaheads with respect to
such Precomputed Receivable, pursuant to Section 5.3.
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"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in
the definition of "Delivery" above.
"Pool Balance" means, as of any date of determination, the
aggregate Principal Balance of the Receivables (excluding Purchased Receivables
and Liquidated Receivables).
"Precomputed Receivable" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Rule of 78s Method.
"Prime Receivables" means those Receivables indicated on
Schedule A hereto as prime.
"Principal Balance" means, with respect to any Receivable, as
of any date, the Amount Financed minus (i) that portion of all amounts received
on or prior to such date and allocable to principal in accordance with (x) in
the case of Simple Interest Receivables, the terms of the Receivable and (y) in
the case of Precomputed Receivables, the actuarial method, and (ii) any Cram
Down Loss in respect of such Receivable.
"Principal Carryover Shortfall" means, as of the close of
business on any Distribution Date, the excess of the Principal Distributable
Amount plus any outstanding Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal deposited in the Note
Distribution Account with respect to such current Distribution Date.
"Principal Distributable Amount" means, with respect to any
Distribution Date, without duplication, the sum of (i) the principal portion
(calculated in the case of Precomputed Receivables on the basis of the actuarial
method and in the case of Simple Interest Receivables, calculated on the basis
of the Simple Interest Method) of all Collected Funds received during the
immediately preceding Monthly Period (other than Liquidated Receivables and
Purchased Receivables) including the principal portion of all prepayments, (ii)
the Principal Balance of all Receivables that became Liquidated Receivables
during the related Monthly Period (other than Purchased Receivables), (iii)
(without duplication of amounts in clause (ii) hereof) the principal portion of
the Purchase Amounts received with respect to all Receivables that became
Purchased Receivables during the related Monthly Period, (iv) in the sole
discretion of the Security Insurer, the Principal Balance of all the Receivables
that were required to be purchased pursuant to Sections 3.2 and 4.7, during such
Monthly Period but were not purchased, (v) the aggregate amount of Cram Down
Losses that shall have occurred during the related Monthly Period; and (vi)
following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Trustee or
Controlling Party for distribution pursuant to Section 5.6 of the Indenture.
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"Purchase Agreement" means the Purchase Agreement between the
Seller and Franklin Capital Corporation, dated as of August 1, 1998 pursuant to
which the Seller acquired the Receivables, as such Agreement may be amended from
time to time.
"Purchase Amount" means, with respect to a Receivable, the
Principal Balance and all accrued and unpaid interest on the Principal Balance
of such Receivable (including one month's interest thereon, in the month of
payment, at the APR less, so long as Franklin Capital Corporation is the
Servicer, the Servicing Fee), after giving effect to the receipt of any moneys
collected (from whatever source) on such Receivable, if any.
"Purchased Receivable" means a Receivable purchased as of the
close of business on the last day of a Monthly Period by the Servicer or the
Representative pursuant to Section 4.7 of the Agreement or repurchased by the
Seller, Franklin Capital Corporation or the Representative pursuant to Section
3.2 of the Agreement.
"Rating Agency" means Moody's and Standard & Poor's. If no
such organization or successor maintains a rating on the Securities, "Rating
Agency" shall be a nationally recognized statistical rating organization or
other comparable Person designated by the Seller and acceptable to the Security
Insurer (so long as an Insurer Default shall not have occurred and be
continuing), notice of which designation shall be given to the Trustee, the
Owner Trustee, the Security Insurer and the Servicer.
"Rating Agency Condition" means, with respect to any action,
that each Rating Agency shall have been given 10 days' (or such shorter period
as shall be acceptable to each Rating Agency) prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Servicer, the
Security Insurer, the Owner Trustee and the Trustee in writing that such action
will not result in a reduction or withdrawal of the then current rating of any
Class of Notes.
"Realized Losses" means, with respect to any Receivable that
becomes a Liquidated Receivable, the excess of the Principal Balance of such
Liquidated Receivable over Net Liquidation Proceeds to the extent allocable to
principal.
"Receivable" means any Contract listed on Schedule A (which
Schedule may be in the form of microfiche).
"Receivable Files" means the documents specified in Section
3.3.
"Receivables" means any Receivable conveyed to the Trust on
the Closing Date.
"Record Date" with respect to each Distribution Date means the
day immediately preceding such Distribution Date, unless otherwise specified in
the Agreement.
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"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Rule of 78s Method" means the method under which a portion of
a payment allocated to earned interest and the portion allocable to principal is
determined according to the sum of the month's digits or any equivalent method
commonly referred to as the "Rule of 78s."
"Rule of 78s Receivable" means a Receivable which by its terms
calculates interest and principal with respect to each scheduled payment in
accordance with the Rule of 78s method.
"Scheduled Payment" on a Precomputed Receivable means that
portion of the payment required to be made by the Obligor during the respective
Monthly Period sufficient to amortize the Principal Balance thereof under the
actuarial method over the term of the Receivable and to provide interest at the
APR.
"Security Insurer" means MBIA Insurance Corporation, a stock
insurance company incorporated under the laws of the State of New York, or any
successor thereto, as issuer of the Policies.
"Seller" means Franklin Receivables LLC, a Delaware limited
liability company, and its successors in interest to the extent permitted
hereunder.
"Service Contract" means, with respect to a Financed Vehicle,
the agreement, if any, financed under the related Receivable that provides for
the repair of such Financed Vehicle.
"Servicer" means Franklin Capital Corporation, as the servicer
of the Receivables, and each successor Servicer pursuant to Section 7.3 or 8.2
of the Agreement.
"Servicer Default" means an event specified in Section 8.1 of
the Agreement.
"Servicer's Certificate" means an Officer's Certificate of the
Servicer delivered pursuant to Section 4.9 of the Agreement, substantially in
the form of Exhibit D to the Agreement.
"Servicing Fee" has the meaning specified in Section 4.8 of
the Agreement.
"Servicing Fee Rate" means with respect to (i) Prime
Receivables, 1.0% per annum, (ii) Non-Prime Receivables, 1.53% per annum and
(iii) Sub-Prime Receivables, 2.0%per annum.
"Simple Interest Method" means the method of allocating a
fixed level payment to principal and interest, pursuant to which the portion of
such payment that is allocated to interest is equal to the product of the fixed
rate of interest multiplied by the unpaid principal balance multiplied by the
period of time elapsed since the preceding payment of interest was made (in some
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states assuming 30 day months), divided by the actual number of days in a year
(360 days in states which assume 30 day months) and the remainder of such
payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which
the portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Standard & Poor's" means Standard & Poor's Ratings Services,
or its successor.
"Sub-Prime Receivables" means those Receivables indicated on
Schedule A hereto as sub-prime.
"Supplemental Servicing Fee" means charges collected (from
whatever source) on the Receivables during the related Monthly Period including,
in the case of a Precomputed Receivable that is prepaid in full, the difference
between the Principal Balance of such Receivable (plus accrued interest to the
date of prepayment) and the principal balance of such Receivable computed
according to the Rule of 78s, and other late fees, prepayment fees,
administrative fees and expenses or similar charges allowed by applicable law
with respect to Receivables, plus reinvestment proceeds on any payments received
in respect of Receivables during the related Monthly Period.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section
5.1 of the Agreement.
"Trust Agreement" means the Trust Agreement dated as of August
1, 1998 between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.
"Trust Officer" means, (i) in the case of the Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject, and (ii) in the case of the Owner
17
Trustee, any officer in the corporate trust office of the Owner Trustee with
direct responsibility for the administration of this Agreement or any of the
Basic Documents on behalf of the Owner Trustee.
"Trust Property" has the meaning assigned thereto in Section
2.1 of the Agreement.
"Trustee" means the Person acting as Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York on the date of the Agreement.
SECTION 1.2 Other Definitional Provisions
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture, or, if not defined
therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed
hereby and in any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section, Schedule
and Exhibit references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
18
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.1 Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller on the Closing Date of (x) the net
proceeds from the sale of the Notes, (y) the Certificates and (z) the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller does hereby sell, transfer, assign, set over
and otherwise convey to the Issuer, without recourse (subject to the obligations
set forth herein), all right, title and interest of the Seller in and to:
(a) the Receivables, and all moneys received thereon after the
Cutoff Date;
(b) an assignment of the security interests in the Financed
Vehicles granted by Obligors pursuant to the Receivables and any other interest
of the Seller in such Financed Vehicles;
(c) any proceeds with respect to the Receivables from claims
on any physical damage, credit life or disability insurance policies covering
Financed Vehicles or Obligors and any proceeds from the liquidation of the
Receivables;
(d) any proceeds from any Receivable repurchased by a Dealer,
pursuant to a Dealer Agreement, as a result of a breach of representation or
warranty in the related Dealer Agreement;
(e) all rights under any Service Contracts on the related
Financed Vehicles;
(f) the related Receivables Files;
(g) all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under the Purchase
Agreement, including the Seller's rights under the Purchase Agreement, and the
delivery requirements, the representations and warranties and the cure and
repurchase obligations of Franklin Capital Corporation under the Purchase
Agreement; and
(h) the proceeds of any and all of the foregoing (the items
specified in clauses (a) through (h) are referred to herein as the "Trust
Property").
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It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the
Receivables and other Trust Property from the Seller to the Trust and the
beneficial interest in and title to the Receivables and the other Trust Property
shall not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. In the
event that, notwithstanding the intent of the Seller, the transfer and
assignment contemplated hereby is held not to be a sale, this Agreement shall
constitute a grant of a security interest in the property referred to in this
Section 2.1 for the benefit of the Noteholders, the Certificateholders and the
Security Insurer.
ARTICLE III
The Receivables
SECTION 3.1 Representations and Warranties of Seller. The Representative
and the Seller, jointly and severally, make the following representations and
warranties as to the Receivables on which the Issuer is deemed to have relied in
acquiring the Receivables and upon which the Security Insurer shall be deemed to
rely in issuing the Note Policy. Such representations and warranties speak as of
the execution and delivery of this Agreement and as of the Closing Date, but
shall survive the sale, transfer and assignment of the Receivables to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Seller that the transfer
and assignment herein contemplated constitute a sale of the Receivables from the
Seller to the Trust and that the beneficial interest in and title to such
Receivables not be part of the debtor's estate in the event of the filing of a
petition for receivership by or against the Seller under any bankruptcy law.
Immediately prior to the transfer and assignment herein contemplated, the Seller
had good and marketable title to each Receivable, free and clear of all Liens
and, immediately upon the transfer thereof, the Trust shall have good and
marketable title to each such Receivable, free and clear of all Liens; and the
transfer of the Receivables to the Trust has been perfected under the UCC. No
Dealer or any other Person has any right to receive proceeds of any Receivables.
(b) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the Trust a first
priority perfected ownership interest in the Receivables, and to give the
Trustee a first priority perfected security interest therein, shall have been
made.
(c) Characteristics of Receivables. Each Receivable (i) was
originated in the United States of America by (i) a Dealer in connection with
the retail sale of a Financed Vehicle in the ordinary course of such Dealer's
business, was fully and properly executed by the parties thereto, and was
purchased by the Seller from such Dealer under an existing dealer agreement with
the Seller or (ii) Franklin Capital Corporation or an affiliate of Franklin
Capital Corporation in the ordinary course of its business and was fully and
properly executed by the parties thereto, shall have been purchased by the
Seller from Franklin Capital Corporation and shall have been validly assigned by
Franklin Capital Corporation to the Seller in accordance with its terms, (ii)
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shall have created or shall create a valid, subsisting and enforceable first
priority security interest in favor of Franklin Capital Corporation in the
Financed Vehicle, which security interest has been assigned by Franklin Capital
Corporation to the Seller, which in turn shall be assignable by the Seller to
the Trust, (iii) shall contain customary and enforceable provisions such that
the rights and remedies of the holder thereof shall be adequate for realization
against the collateral of the benefits of the security, (iv) shall provide for
level monthly payments (provided that the payment in the first or last month in
the life of the Receivable may be minimally different from the level payment)
that fully amortize the Amount Financed by maturity, (v) in the case of a
Precomputed Receivable, shall provide for, in the event that such Contract is
prepaid, a prepayment that fully pays the Principal Balance and includes a full
months interest to the date of payment in the month of prepayment at the Annual
Percentage Rate, and (vi) has not been amended or collections with respect to
which have been waived, other than as evidenced in the Receivable File relating
thereto.
(d) Schedule of Receivables. The information set forth in
Schedule A to this Agreement is true and correct in all material respects as of
the close of business on the Cutoff Date, and no selection procedures believed
by the Seller to be adverse to the Noteholders or the Security Insurer were
utilized in selecting the Receivables. The Computer Tape regarding the
Receivables is true and correct in all material respects as of the Cutoff Date.
(e) Compliance With Law. Each Receivable complied at the time
it was originated or made and complies at the execution of this Agreement in all
material respects with all requirements of applicable Federal, state and local
laws and regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, the ▇▇▇▇-▇▇▇▇▇▇▇▇ Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Act and other consumer credit laws and equal credit opportunity and
disclosure laws.
(f) Binding Obligation. Each Receivable represents the legal,
valid and binding payment obligation in writing of the Obligor thereunder,
enforceable by the holder thereof in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization and similar laws now or hereafter in
effect related to or affecting creditors' rights generally and subject to
general principles of equity (whether applied in a proceeding at law or in
equity); and all parties to each Receivable had full legal capacity to execute
and deliver such Receivable and all other documents related thereto and to grant
the security interest purported to be granted thereby.
(g) No Government Obligor. None of the Receivables are due
from the United States of America or any State or from any agency, department or
instrumentality of the United States of America or any state.
(h) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment and transfer thereof to the Trust, each Receivable is
secured by a validly perfected first priority security interest in the Financed
Vehicle in favor of Franklin Capital Corporation as secured party or all
21
necessary and appropriate actions have been commenced that would result in the
valid perfection of a first priority security interest in the Financed Vehicle
in favor of Franklin Capital Corporation as secured party. Immediately after the
sale, assignment and transfer thereof to the Trust, although the Lien
Certificate will not indicate the Trust or Owner Trustee as secured party, each
Receivable will be secured by an enforceable and perfected security interest in
the Financed Vehicle in favor of the Trust as secured party for the benefit of
the Noteholders and the Security Insurer, which security interest is prior to
all other Liens in such Financed Vehicle.
(i) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from the
Lien granted by the related Receivable in whole or in part unless another
vehicle has been substituted as collateral securing the Receivable without any
other modification to such Receivable.
(j) No Waiver. No provision of a Receivable has been waived
except as reflected in the Receivable File relating to such Receivable.
(k) No Defenses. No right of rescission, setoff, counterclaim
or defense has been asserted or threatened with respect to any Receivable.
(l) No Liens. There are no Liens or claims, including Liens
for work, labor, materials or unpaid state or federal taxes relating to any
Financed Vehicle securing the related Receivable, that are or may be prior to or
equal to the Lien granted by such Receivable.
(m) No Default. No Receivable has a payment that is more than
30 days delinquent as of the Cutoff Date and, except as permitted in this
paragraph, no default, breach, violation or event (in any such case) permitting
acceleration under the terms of any Receivable has occurred; and no continuing
condition that with notice or the lapse of time would constitute a default,
breach, violation or event (in any such case) permitting acceleration under the
terms of any Receivable shall have arisen as of the Cutoff Date; and the Seller
has not waived and shall not waive any of the foregoing. For purposes of this
clause (m), a Receivable is considered 30 days delinquent as of the end of the
month following the date on which a second consecutive Scheduled Payment has not
been made. As of the Closing Date, no Receivable has had an uncured first
payment default.
(n) No Bankruptcies. No Obligor on any Receivable was the
subject of a bankruptcy proceeding commenced following the execution of the
related Contract.
(o) No Repossessions. As of the Cutoff Date, no Financed
Vehicle securing any Receivable is in repossession status.
(p) Adverse Selection. No selection procedures adverse to the
Noteholders or the Security Insurer were utilized in selecting the Receivables
from those owned by the Servicer which met the selection criteria contained in
this Agreement.
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(q) Chattel Paper. Each Receivable constitutes "chattel paper"
as defined in the UCC.
(r) Insurance. The Seller, in accordance with its customary
procedures, has determined that the Obligor, at the time the Receivable was
originated, obtained physical damage insurance covering the Financed Vehicle and
under the terms of the Receivable the Obligor is required to maintain such
insurance.
(s) Lawful Assignment. No Receivable was originated in, as of
the Cutoff Date, or is subject to the laws of, any jurisdiction under which the
sale, transfer and assignment of such Receivable or this Agreement is unlawful,
void or voidable).
(t) No Insurance Premiums. No portion of the Principal Balance
of any Receivable includes amounts attributable to the payment of any physical
damage or theft insurance premium.
(u) One Original. There is only one original executed copy of
each Receivable.
(v) Location of Receivable Files. The Receivable Files shall
be kept at one or more of the locations listed in Schedule B and each item
required to be in a Receivable File is in such Receivable File.
(w) Computer Records. As of the Closing Date, the accounting
and computer records relating to the Receivables of the Seller have been marked
to show the absolute ownership by the Owner Trustee on behalf of the Trust of
the Receivables.
(x) Taxes. To the best knowledge of the Representative and the
Seller, there are no state or local taxing jurisdictions which have asserted
that nonresident holders of notes issued by, a trust which holds assets similar
to the assets to be held by the Trust are subject to the jurisdiction's income
or other taxes solely by reason of the location in the jurisdiction of the Owner
Trustee, the Seller, the Servicer, the Representative, the obligors on or the
assets securing the Receivables held by the Trust, or the issuer of a financial
guaranty insurance policy.
(y) Maturity of Receivables. Each Receivable has a final
maturity date not later than ____; each Receivable has an original term to
maturity of not more than _____ months; the weighted average original term of
the Receivables is approximately ______ months; the weighted average remaining
term of the Receivables is approximately _____ months as of the Cutoff Date. No
Receivable shall have a remaining term to maturity in excess of _____ months
except __% of the Aggregate Principal Balance of the Receivables represent
Receivables with remaining terms to maturity of up to _____ months.
(z) Financing. Approximately ___% of the aggregate principal
balance of the Receivables, represent new vehicles; the remainder of the
Receivables represent used vehicles; approximately ___% of the aggregate
Principal Balance of the Receivables represent Precomputed Receivables and the
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remainder of the Receivables represent Simple Interest Receivables;
approximately ____% of the Receivables which are Precomputed Receivables are
Rule of 78s Receivables. The aggregate Principal Balance of the Receivables is
$_____.
(aa) APR. The weighted average Annual Percentage Rate of the
Receivables is approximately ___%. Each Receivable has an APR equal to or
greater than ____%.
(bb) Number. There are ____ Receivables.
(cc) Balance. Each Receivable has a remaining principal
balance of not less than $_______ and not more than $_________, the average
Principal Balance of the Receivables is $_________.
SECTION 3.2 Repurchase upon Breach. (a) The Representative, the Seller,
the Servicer, the Security Insurer or the Owner Trustee, as the case may be,
shall inform the other parties to this Agreement and the Trustee promptly, in
writing, upon the discovery of any breach of the Representative's or the
Seller's representations and warranties made pursuant to Section 3.1. As of the
last day of the second (or, if the Representative or the Seller so elects, the
first) month following the discovery by the Representative or the Seller or
receipt by the Representative or the Seller of notice from any of the
Representative, the Seller, the Servicer, the Security Insurer or the Owner
Trustee of such breach, unless such breach is cured by such date, the
Representative and the Seller shall jointly and severally have an obligation to
repurchase any Receivable in which the interests of the Noteholders or the
Security Insurer are materially and adversely affected by any such breach as of
such date. The "second month" shall mean the month following the month in which
discovery occurs or notice is given, and the "first month" shall mean the month
in which discovery occurs or notice is given. In consideration of and
simultaneously with the repurchase of the Receivable, the Representative and/or
the Seller shall remit, or cause Franklin Capital Corporation to remit, to the
Collection Account the Purchase Amount in the manner specified in Section 5.5
and the Issuer shall execute such assignments and other documents reasonably
requested by such person in order to effect such repurchase. The sole remedy of
the Issuer, the Owner Trustee, the Trustee, the Noteholders or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Section 3.1 and the agreement contained in this Section shall be the
repurchase of Receivables pursuant to this Section, subject to the conditions
contained herein or to enforce the obligation of Franklin Capital Corporation to
the Seller to repurchase such Receivables pursuant to the Purchase Agreement.
Neither the Owner Trustee nor the Trustee shall have a duty to conduct any
affirmative investigation as to the occurrence of any conditions requiring the
repurchase of any Receivable pursuant to this Section.
(b) Pursuant to Section 2.1 of this Agreement, the Seller
conveyed to the Trust all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under the Purchase
Agreement including the Seller's rights under the Purchase Agreement and the
delivery requirements, the representations and warranties and the cure or
repurchase obligations of Franklin Capital Corporation thereunder. The Seller
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hereby represents and warrants to the Trust that such assignment is valid,
enforceable and effective to permit the Trust to enforce such obligations of
Franklin Capital Corporation under the Purchase Agreement.
SECTION 3.3 Custody of Receivables Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Issuer and the Trustee as custodian of
the following documents or instruments which are hereby constructively delivered
to the Trustee, as of the Cutoff Date as pledgee of the Issuer with respect to
each Receivable:
(a) the original Receivable;
(b) a record of the information supplied by the Obligor in the
original credit application;
(c) the original certificate of title or such documents that
the Servicer shall keep on file, in accordance with its customary procedures,
evidencing the security interest of Franklin Capital Corporation in the Financed
Vehicle (it being understood that the original certificates of title generally
are not delivered to the Seller for 120 days but that promptly upon delivery
they shall be delivered to the Servicer as custodian hereunder); and
(d) any and all other documents that the Servicer shall keep
on file, in accordance with its customary procedures, relating to a Receivable,
an Obligor or a Financed Vehicle.
SECTION 3.4 Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Receivables Files on behalf of the Issuer and the
Trustee and maintain such accurate and complete accounts, records and computer
systems pertaining to each Receivable File as shall enable the Issuer 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 the
Servicer exercises with respect to the receivable files relating to all
comparable automotive receivables that the Servicer services for itself or
others, and in any event with no less degree of skill and care than would be
exercised by a prudent servicer or custodian of non-prime motor vehicle retail
installment sales contracts, except that the Servicer shall not be obligated,
and does not currently intend, to (i) pay any premium of force-placed insurance
concerning any Financed Vehicle or (ii) monitor any Obligor's maintenance of
such insurance. The Servicer shall conduct, or cause to be conducted, periodic
audits of the Receivables Files held by it under this Agreement and of the
related accounts, records and computer systems, in such a manner as shall enable
the Owner Trustee, the Security Insurer or the Trustee to verify the accuracy of
the Servicer's record keeping. The Servicer shall promptly report to the Issuer,
the Security Insurer and the Trustee any failure on its part to hold the
Receivables Files and maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such failure.
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(b) Maintenance of Records. The Servicer shall maintain each
Receivable File at its office specified in Schedule B to the Agreement or at
such other office as shall be specified to the Issuer, the Trustee and the
Security Insurer by written notice not later than 10 days after any change in
location. The Servicer shall (i) at all times maintain the original of the fully
executed Receivable and store such original Receivable in a fireproof cabinet;
and (ii) stamp each Receivable on both the first and the signature page (if
different) as of the Closing Date and in accordance with the instructions from
time to time provided by the Security Insurer, in the form attached hereto as
Exhibit F, or such other form as shall be acceptable to the Security Insurer.
(c) Access to Records. The Servicer will provide, on the
Closing Date, an Officer's Certificate stating that the Receivables Files
contain all materials which are required to be kept therein by Section 3.3(a),
(b), (c) and (d). At any time following the Closing Date, the Security Insurer
may conduct a review of the Receivables Files, or a sample thereof as it may
specify, at its own expense but with the cooperation of the Servicer. Should the
Security Insurer find any documents missing or any other irregularities, then
the Trustee shall perform a review, for the benefit of the Security Insurer and
at the expense of the Servicer, of all the Receivables Files.
Upon reasonable prior notice, the Servicer shall make
available to the Issuer, the Trustee, the Security Insurer, or any duly
authorized representatives, attorneys or auditors of any of the foregoing, a
list of locations of, and access to, the Receivables Files and records and
computer systems maintained by the Servicer at such times during normal business
hours as the Issuer, the Trustee or the Security Insurer shall instruct.
(d) Release of Documents. Upon written instruction from the
Trustee or the Security Insurer, at any time following a Servicer Default or
termination of the Servicer's appointment pursuant to Section 3.7 the Servicer
shall release any Receivable File to the Trustee, the Trustee's agent, or the
Trustee's designee, as the case may be, or the Security Insurer, as the case may
be, at such place or places as the Trustee or the Security Insurer, as the case
may be, may designate, as soon as practicable.
SECTION 3.5 Instructions; Authority To Act. The Servicer shall
be deemed to have received proper instructions with respect to the Receivables
Files upon its receipt of written instructions signed by a Trust Officer of the
Trustee. A copy of such instructions shall be furnished by the Trustee to the
Security Insurer. The Trustee shall not have any duty or obligation to provide
the Servicer with any such instructions with respect to the Receivables Files.
SECTION 3.6 Custodian's Indemnification. The Servicer as custodian shall
indemnify and hold harmless the Trust, the Security Insurer, the Owner Trustee
and the Trustee and each of their officers, directors, employees and agents for
any and all liabilities, obligations, losses, compensatory damages, payments,
costs or expenses (including reasonable attorneys' fees and expenses) that may
be imposed on, incurred by or asserted against the Trust, the Owner Trustee or
the Trustee or any of their officers, directors, employees and agents as the
result of any improper act or omission in any way relating to the maintenance
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and custody by the Servicer as custodian of the Receivables Files; provided,
however, that the Servicer shall not be liable to the Trust, the Owner Trustee,
the Trustee or the Security Insurer, as the case may be, for any portion of any
such amount resulting from the willful misfeasance, bad faith or negligence of
the Owner Trustee, the Trustee or the Security Insurer, as the case may be. This
provision shall not be considered to limit the Servicer's or any other party's
rights, obligations, liabilities, claims or defenses which arise as a matter of
law or pursuant to any other provision of this Agreement.
SECTION 3.7 Effective Period and Termination. The Servicer's appointment
as custodian shall become effective as of the Cutoff Date and shall continue in
full force and effect until terminated pursuant to this Section 3.7. If Franklin
Capital Corporation shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of any Servicer shall
have been terminated under Section 8.1, the appointment of such Servicer as
custodian shall be terminated, in the same manner as the Servicer may be
terminated under Section 8.1. The Trustee or, with the consent of the Trustee,
the Owner Trustee may, in each case, with the consent of the Security Insurer,
and the Security Insurer may terminate the Servicer's appointment as custodian
(i) with cause or (ii) upon the occurrence of an Insurance Agreement Event of
Default, upon written notification to the Servicer and the Trustee or Security
Insurer, as the case may be. As soon as practicable after any termination of
such appointment, the Servicer shall deliver the Receivables Files to the
Trustee or the Trustee's agent at such place or places as the Trustee, with the
consent of the Security Insurer, or the Trustee shall, at the direction of the
Security Insurer, reasonably designate in writing. If the Servicer shall be
terminated as custodian hereunder for any reason but shall continue to serve as
Servicer, the Trustee shall, or shall cause its agent to, make the Receivables
Files available to the Servicer during normal business hours upon reasonable
notice so as to permit the Servicer to perform its obligations as Servicer
hereunder.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1 Duties of Servicer. The Servicer, as agent for the Issuer
and the Security Insurer (to the extent provided herein), shall manage, service,
administer and make collections on the Receivables (other than Purchased
Receivables) with reasonable care, using that degree of skill and attention that
the Servicer exercises with respect to all comparable automotive receivables
that it services for itself or others, and in any event with no less degree of
skill and care than would be exercised by a prudent servicer of prime, non-prime
or sub-prime, as applicable, motor vehicle retail installment sales contracts,
except that the Servicer shall not be obligated, and does not currently intend,
to (i) pay any premium of force-placed insurance concerning any Financed Vehicle
or (ii) monitor any Obligor's maintenance of such insurance. The Servicer's
duties shall include collection and posting of all payments, responding to
inquiries of Obligors on such Receivables, investigating delinquencies, sending
payment statements to Obligors, accounting for collections and furnishing
monthly and annual statements to the Owner Trustee, the Trustee and the Security
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Insurer with respect to distributions. Subject to the provisions of Section 4.2,
the Servicer shall follow its customary standards, policies and procedures in
performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered to execute and deliver, on
behalf of itself, the Issuer, the Owner Trustee, the Trustee, the Security
Insurer, the Certificateholders and the Noteholders or any of them, any and all
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to such
Receivables or to the Financed Vehicles securing such Receivables. If the
Servicer shall commence a legal proceeding to enforce a Receivable, the Issuer
(in the case of a Receivable other than a Purchased Receivable) shall thereupon
be deemed to have automatically assigned, solely for the purpose of collection,
such Receivable to the Servicer. If in any enforcement suit or legal proceeding
it shall be held that the Servicer may not enforce a Receivable on the ground
that it shall not be a real party in interest or a holder entitled to enforce
such Receivable the Owner Trustee shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Trust, the Trustee, the Certificateholders or the
Noteholders. The Owner Trustee and the Security Insurer shall upon the written
request of the Servicer furnish the Servicer with any powers of attorney and
other documents reasonably necessary or appropriate (as certified to the Owner
Trustee and/or the Security Insurer by the Servicer) to enable the Servicer to
carry out its servicing and administrative duties hereunder.
SECTION 4.2 Collection and Allocation of Receivable Payments. (a) The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others, and
in any event with no less degree of skill and care than would be exercised by a
prudent servicer of non-prime motor vehicle retail installment sales contracts.
The Servicer shall allocate collections between principal and interest in
accordance with its customary servicing procedures.
(b) The Servicer may grant extensions, rebates or adjustments
on a Receivable which shall not, for the purposes of this Agreement, modify the
original due dates (other than to permit payment on a different date in the
month) or amounts of the Scheduled Payments (unless the Obligor is in default
or, in the judgment of the Servicer, such default is imminent) on a Precomputed
Receivable or the original due dates (other than to permit payment on a
different date in the month) or amounts of the originally scheduled payments of
interest (unless the Obligor is in default or, in the judgment of the Servicer,
such default is imminent) on Simple Interest Receivables; provided, however,
that if the Servicer extends the date for final payment by the Obligor of any
Receivable beyond the Final Scheduled Maturity Date, it shall promptly
repurchase such Receivable from the Trust in accordance with Section 4.7. The
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing a Receivable. The
Servicer shall not agree to any alteration of the interest rate on any
Receivable.
SECTION 4.3 Realization upon Receivables. On behalf of the Issuer and
the Security Insurer, the Servicer shall use its best efforts, consistent with
its customary servicing procedures, to repossess or otherwise convert the
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ownership of the Financed Vehicle securing any Receivable as to which the
Servicer shall have determined eventual payment in full is unlikely. From time
to time, as appropriate for servicing or foreclosing upon any Receivable, the
Owner Trustee shall, upon written request of the Servicer, execute such
documents as shall be reasonably necessary to prosecute any such proceedings.
The Servicer shall follow such customary and usual practices and procedures as
it shall deem necessary or advisable in its servicing of automotive receivables,
which may include reasonable efforts to realize proceeds from Receivables
repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach
of representation or warranty in the related Dealer Agreement or a default by an
Obligor resulting in the repossession of the Financed Vehicle under such Dealer
Agreement. The foregoing shall be subject to the provision that, in any case in
which the Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds in connection with the repair or the repossession of such Financed
Vehicle unless it shall determine in its reasonable discretion that such repair
and/or repossession will increase the Net Liquidation Proceeds by an amount
greater than the amount of such expenses.
SECTION 4.4 Physical Damage Insurance. Franklin Capital Corporation
shall, in accordance with its customary servicing procedures, require that each
Obligor shall have obtained and shall maintain fire, theft and collision
insurance or comprehensive and collision insurance covering the Financed Vehicle
as of the execution of the Receivable. The Servicer shall enforce its rights
under the Receivables to require the Obligors to maintain fire, theft and
collision insurance or comprehensive and collision insurance, in accordance with
the Servicer's customary practices and procedures, and in any event with no less
degree of skill and care than would be exercised by a prudent servicer of prime,
non-prime or sub-prime, as applicable, motor vehicle retail installment sales
contracts, with respect to comparable new or used motor vehicle receivables that
it services for itself or others, except that the Servicer shall not be
obligated, and does not currently intend, to (i) pay any premium of force-placed
insurance concerning any Financed Vehicle or (ii) monitor any Obligor's
maintenance of such insurance.
SECTION 4.5 Maintenance of Security Interests in Financed Vehicles. (a)
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to maintain perfection of the security interest
created by each Receivable in the related Financed Vehicle in favor of the
Seller. The Servicer is hereby authorized to take such steps as are necessary to
re-perfect such security interest on behalf of the Issuer and the Indenture
Collateral Agent in the event of the relocation of a Financed Vehicle or for any
other reason.
(b) Upon the occurrence of an Insurance Agreement Event of
Default, and subject to the other provisions of this Agreement, the Security
Insurer may (so long as an Insurer Default shall not have occurred and be
continuing) instruct the Owner Trustee and the Servicer to take or cause to be
taken, or, if an Insurer Default shall have occurred, upon the occurrence of a
Servicer Default, the Owner Trustee and the Servicer shall take or cause to be
taken such action as may, in the opinion of counsel to the Security Insurer (or,
if an Insurer Default shall have occurred and be continuing, counsel to the
Owner Trustee), be necessary to perfect or reperfect the security interests in
the Financed Vehicles securing the Receivables in the name of the Trust by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Security Insurer or
the Owner Trustee (as applicable), be necessary or prudent. The Servicer hereby
29
agrees to pay all expenses related to such perfection or reperfection and to
take all action necessary therefor.
SECTION 4.5-A Segregation of Receivables Files. The Servicer shall
maintain the Receivables Files (containing the original Receivable and Lien
Certificate, when such Lien Certificate has been returned from the appropriate
recording office) physically segregated from other files of automotive
receivables owned or serviced by it at the location where the Receivables Files
are kept.
SECTION 4.6 Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or payment in full less a deficiency which the Servicer
would not attempt to collect in accordance with its customary procedures or in
connection with repossession or except as may be required by an insurer in order
to receive proceeds from insurance covering such Financed Vehicle, nor shall the
Servicer impair the rights of the Issuer, the Trustee, the Indenture Collateral
Agent, the Security Insurer, the Certificateholders or the Noteholders in such
Receivables (it being understood that no action of the Servicer taken in
compliance with the terms of this Agreement shall be deemed to impair such
rights), nor shall the Servicer increase the number of scheduled payments due
under a Receivable.
SECTION 4.7 Purchase of Receivables upon Breach. The Representative,
the Seller, the Servicer, the Security Insurer or the Owner Trustee shall inform
the other parties and the Trustee promptly, in writing, upon the discovery of
any breach of the Servicer's covenants pursuant to Section 4.2(b), 4.4, 4.5 or
4.6, or of any breach of the Servicer's representations and warranties made
pursuant to Section 7.1(b). As of the last day of the second (or, if the
Representative or the Servicer so elects, the first) month following the
discovery by the Representative or the Servicer or receipt by the Representative
or the Servicer of notice from any of the Representative, the Seller, the
Servicer, the Security Insurer, the Owner Trustee or the Trustee of such breach,
unless such breach is cured by such date, the Representative and the Servicer
jointly and severally shall be obligated to purchase any Receivable in which the
interests of the Noteholders, the Certificateholders or the Security Insurer are
materially and adversely affected by such breach as of such date. The "second
month" shall mean the month following the month in which discovery occurs or
notice is given, and the "first month" shall mean the month in which discovery
occurs or notice is given. In consideration of the purchase of any such
Receivable pursuant to the preceding sentence, the Servicer shall remit (or, if
the Servicer shall fail to so remit, the Representative shall remit) the
Purchase Amount in the manner specified in Section 5.5. The sole remedy of the
Issuer, the Trustee, the Noteholders or the Certificateholders with respect to a
breach pursuant to Section 4.2(b), 4.4, 4.5 or 4.6, or to a breach of
representations and warranties pursuant to Section 7.1(b), shall be limited to
the purchase of Receivables in accordance with this Section 4.7. The Trustee and
the Owner Trustee shall have no duty to conduct any affirmative investigation as
to the occurrence of any condition requiring the purchase of any Receivable
pursuant to this Section 4.7.
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SECTION 4.8 Servicing Fee. The Servicing Fee for a Distribution Date
shall equal the sum of the Base Servicing Fee, the Supplemental Servicing Fee,
all Investment Earnings on the Collection Account plus any reimbursement
pursuant to Section 7.2. The Servicer also shall be entitled to retain from
collections the Base Servicing Fee and the Supplemental Servicing Fee, as
provided herein. The Servicer, in its discretion at its election, may defer
receipt of all or any portion of the Servicing Fee for any Monthly Period to and
until a later Monthly Period for any reason, including in order to avoid a
shortfall in any payments due on any Notes. Any such deferred amount shall be
payable to (or may be retained from subsequent collections by) the Servicer on
demand.
SECTION 4.9 Servicer's Certificate. (a) No later than 12:00 noon New
York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Trustee, the Security Insurer or its fiscal agent, the
Indenture Collateral Agent and each Rating Agency a Servicer's Certificate
containing, among other things, (i) all information necessary to enable the
Trustee to make any withdrawal and deposit required by Section 5.6(a), 5.6(b),
5.6(c) and 5.6(d), to give any notice required by Section 5.4 or 5A.1 and make
the distributions required by Section 5.6 and 5.7, (ii) all information
necessary to enable the Trustee to send the statements required by Section 5.8
to the Owner Trustee, the Noteholders, each Rating Agency and the Security
Insurer, (iii) a listing of all Receivables purchased during the related Monthly
Period, identifying the Receivables so purchased, and (iv) all information
necessary to enable the Trustee to reconcile all deposits to, and withdrawals
from, the Collection Account for the related Monthly Period and Distribution
Date, including the accounting required by Section 5.9. Receivables purchased by
the Servicer, the Seller or the Representative and each receivable which became
a Liquidated Receivable or which was paid in full during the related Monthly
Period shall be identified by account number (as set forth in the Schedule of
Receivables). A copy of such certificate may be obtained by any Noteholder or
Certificateholder by a request in writing to the Trustee or the Owner Trustee
addressed to the applicable Corporate Trust Office. The Trustee shall not be
under any obligation to confirm or reconcile the information provided pursuant
to Section 4.9(a)(iv).
(b) If the Servicer's Certificate contains a manifest error,
the Security Insurer's written notice to the Servicer, the Owner Trustee and the
Trustee containing the corrected information shall be deemed to amend such
Servicer's Certificate.
SECTION 4.10 Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Owner Trustee, the Trustee and the Security
Insurer, on or before April 30 of each year beginning April 30, 1999 an
Officer's Certificate, dated as of the preceding December 31, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
and of its performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof. The Trustee shall send a copy of such certificate and
the report referred to in Section 4.11 to the Rating Agencies. A copy of such
certificate and the report referred to in Section 4.11 may be obtained by any
31
Certificateholder by a request in writing to the Owner Trustee addressed to the
Corporate Trust Office or by any Noteholder by a request in writing to the
Trustee addressed to the Corporate Trust Office. Upon the telephone request of
the Owner Trustee, the Trustee will promptly furnish the Owner Trustee a list of
Noteholders as of the date specified by the Owner Trustee. Each Noteholder, by
its acceptance of a Note, shall be deemed to agree that the Trustee shall be
under no liability for providing the list of Noteholders to the Owner Trustee as
described in the immediately preceding sentence.
(b) The Servicer shall deliver to the Owner Trustee, the
Trustee, the Security Insurer and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five (5) Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under Section 8.1(a) or (b).
SECTION 4.11 Annual Independent Certified Public Accountants' Report.
The Servicer shall cause a firm of independent certified public accountants,
which may also render other services to the Servicer or the Seller, to deliver
to the Seller, the Owner Trustee, the Trustee and the Security Insurer on or
before April 30 of each year beginning April 30, 1999, an agreed-upon procedures
report addressed to the Servicer, the Seller, the Owner Trustee, the Trustee and
the Security Insurer and each Rating Agency, expressing a summary of findings,
(based on certain procedures performed on the documents, records and accounting
records that such accountants considered appropriate under the circumstances)
relating to the servicing of the Receivables, or the administration of the
Receivables and of the Trust, as the case may be, during the preceding calendar
year and that, on the basis of the accounting and auditing procedures considered
appropriate under the circumstances, such firm is of the opinion that such
servicing or administration was conducted in compliance with the terms of this
Agreement, except for (i) such exceptions as such firm shall believe to be
immaterial and (ii) such other exceptions as shall be set forth in such report.
Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 4.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trustee, the
Owner Trustee and the Security Insurer reasonable access to the Receivable
Files. The Servicer shall provide to the Certificateholders and Noteholders
access to the Receivable Files in such cases where the Certificateholders or
Noteholders shall be required by applicable statutes or regulations to review
such documentation as demonstrated by evidence satisfactory to the Servicer in
its reasonable judgment. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect 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 to
information as a result of such obligation shall not constitute a breach of this
Section.
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SECTION 4.13 Servicer Expenses. The Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder and
under any of the Basic Documents, including fees and disbursements of
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Certificateholders and Noteholders.
SECTION 4.14 Appointment of Subservicer. The Servicer may at
any time appoint a subservicer to perform all or any portion of its obligations
as Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; provided further that the Servicer
shall remain obligated and be liable to the Issuer, the Owner Trustee, the
Trustee, the Security Insurer, the Certificateholders and the Noteholders for
the servicing and administering of the Receivables in accordance with the
provisions hereof without diminution of such obligation and liability by virtue
of the appointment of such subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Receivables. The fees and expenses of the subservicer shall be as agreed
between the Servicer and its subservicer from time to time and none of the
Issuer, the Owner Trustee, the Trustee, the Security Insurer, the
Certificateholders or the Noteholders shall have any responsibility therefor.
Any such subservicer shall perform its duties with the same standard of care
applicable to the Servicer pursuant to Section 4.1 of this Agreement.
SECTION 4.15 Obligations under Basic Documents. The Servicer shall
perform all of its obligations under the Basic Documents.
ARTICLE V
Distributions;
Statements to Certificateholders and Noteholders
SECTION 5.1 Establishment of Trust Accounts.
(a)(i) The Servicer, for the benefit of the Trustee on behalf
of the Noteholders, the Owner Trustee on behalf of the
Certificateholders, and the Security Insurer, shall establish and
maintain in the name of the Indenture Collateral Agent an Eligible
Deposit Account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the
benefit of the Trustee on behalf of the Noteholders, the Owner Trustee
on behalf of the Certificateholders and the Security Insurer.
Investment Earnings on funds in the Collection Account shall be paid to
the Servicer.
(ii) The Servicer, for the benefit of the Trustee on behalf of
the Noteholders, shall establish and maintain in the name of the
Indenture Collateral Agent an Eligible Deposit Account (the "Note
Distribution Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Trustee on
behalf of the Noteholders and the Security Insurer. The Note
Distribution Account shall initially be established with the Trustee.
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(iii) The Servicer, for the benefit of the Trustee on behalf
of the Noteholders, the Owner Trustee on behalf of the
Certificateholders, and the Security Insurer, shall establish and
maintain in the name of the Indenture Collateral Agent an Eligible
Deposit Account (the "Payahead Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Trustee on behalf of the Noteholders, the Owner Trustee on behalf
of the Certificateholders and the Security Insurer. Investment Earnings
on funds in the Payahead Account shall be paid to the Servicer.
(b) Funds on deposit in the Collection Account, the Note
Distribution Account, the Payahead Account (collectively, along with the
Capitalized Interest Account, the "Trust Accounts") and the Certificate
Distribution Account shall be invested by the Indenture Collateral Agent with
respect to Trust Accounts and by the Owner Trustee with respect to the
Certificate Distribution Account (or any custodian with respect to funds on
deposit in any such account) in Eligible Investments selected in writing by the
Servicer (pursuant to standing instructions or otherwise); provided, however, it
is understood and agreed that neither the Indenture Collateral Agent nor the
Owner Trustee shall be liable for any loss arising from such investment in
Eligible Investments. All such Eligible Investments shall be held by or on
behalf of the Indenture Collateral Agent or the Owner Trustee, as applicable,
for the benefit of the Noteholders and/or the Certificateholders, as applicable
and the Security Insurer. Other than as permitted by the Rating Agencies and the
Security Insurer, funds on deposit in the Collection Account, the Payahead
Account the Note Distribution Account and the Certificate Distribution Account
shall be invested in Eligible Investments that will mature so that such funds
will be available at the close of business on the Business Day immediately
preceding the following Distribution Date. Funds deposited in a Trust Account or
the Certificate Distribution Account on the day immediately preceding a
Distribution Date upon the maturity of any Eligible Investments are not required
to be invested overnight.
(c)(i) The Indenture Collateral Agent shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (excluding all Investment Earnings on the
Collection Account) and all such funds, investments, proceeds and income shall
be part of the Owner Trust Estate. Except as otherwise provided herein, the
Trust Accounts shall be under the sole dominion and control of the Indenture
Collateral Agent for the benefit of the Noteholders and the Certificateholders,
or the Noteholders, as the case may be, and the Security Insurer. If, at any
time, any of the Trust Accounts or the Certificate Distribution Account ceases
to be an Eligible Deposit Account, the Indenture Collateral Agent (or the
Servicer on its behalf) or the Owner Trustee, as applicable, shall within 10
Business Days (or such longer period as to which each Rating Agency and the
Security Insurer may consent) establish a new Trust Account or a new Certificate
Distribution Account, as applicable, as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Trust Account or a new
Certificate Distribution Account, as applicable. In connection with the
foregoing, the Servicer agrees that, in the event that any of the Trust Accounts
are not accounts with the Trustee, the Servicer shall notify the Trustee in
writing promptly upon any of such Trust Accounts ceasing to be an Eligible
Deposit Account.
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(ii) With respect to the Trust Account Property, the Indenture
Collateral Agent, and with respect to the Certificate Distribution
Account, the Owner Trustee agrees, by its respective acceptance
hereof, that:
A any Trust Account Property or any property in the
Certificate Distribution Account that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts
subject to the penultimate sentence of Section 5.1(c)(i); and,
except as otherwise provided herein, each such Eligible
Deposit Account shall be subject to the exclusive custody and
control of the Indenture Collateral Agent with respect to the
Trust Accounts and the Owner Trustee with respect to the
Certificate Distribution Account, and the Indenture Collateral
Agent or the Owner Trustee, as applicable, shall have sole
signature authority with respect thereto;
B any Trust Account Property shall be Delivered to
the Indenture Collateral Agent in accordance with the
definition of "Delivery" and shall be held, pending maturity
or disposition, solely by the Indenture Collateral Agent or
such other Person acting solely for the Indenture Collateral
Agent as required for Delivery;
C In the event that the Indenture Collateral Agent,
in its capacity as securities intermediary has or subsequently
obtains by agreement, operation of law or otherwise a security
interest in the Trust Accounts or any security entitlement
credited thereto, the Indenture Collateral Agent, in its
capacity as securities intermediary hereby agrees that such
security interest shall be subordinate to the security
interest of the Indenture Collateral Agent. The financial
assets and other items deposited to the Trust Accounts will
not be subject to deduction, set-off, banker's lien, or any
other right in favor of any person (except that the Indenture
Collateral Agent, in its capacity as securities intermediary
may set off the face amount of any checks which have been
credited to the Trust Accounts but are subsequently returned
unpaid because of uncollected or insufficient funds).
(d) The Servicer shall have the power, revocable by the
Security Insurer or, with the consent of the Security Insurer by the Trustee or
by the Owner Trustee with the consent of the Trustee, to instruct the Indenture
Collateral Agent to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Trustee to carry out its duties
under the Indenture.
(e) The Servicer shall on or prior to each Distribution Date
(and prior to deposits to the Note Distribution Account) transfer from
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the Collection Account to the Payahead Account all Payaheads as
described in Section 5.3 received by the Servicer during the Collection
Period. Notwithstanding the foregoing and the first sentence of Section
5.2, for so long as the Servicer is permitted to make monthly
remittances to the Collection Account pursuant to Section 5.2,
Payaheads need not be remitted to and deposited in the Payahead Account
but instead may be remitted to and held by the Servicer. So long as
such condition is met, the Servicer shall not be required to segregate
or otherwise hold separate any Payaheads remitted to the Servicer as
aforesaid but shall be required to remit Payaheads to the Collection
Account in accordance with Section 5.6(a).
SECTION 5.2 Collections. (a) The Servicer shall remit within
two Business Days of receipt thereof to the Collection Account all payments by
or on behalf of the Obligors with respect to the Receivables (other than
Purchased Receivables) and all Liquidation Proceeds, both as collected during
the Monthly Period less any payments owed thereon to the Servicer.
Notwithstanding the foregoing, for so long as (i) Franklin Capital Corporation
remains the Servicer, (ii) no Servicer Default shall have occurred and be
continuing, (iii) there exists no Insurer Default and the Security Insurer has
furnished its prior written consent and (iv) the Rating Agency Condition shall
have been satisfied (and any conditions or limitations imposed by the Rating
Agencies in connection therewith are complied with), the Servicer may remit such
collections with respect to the preceding calendar month to the Collection
Account on the Determination Date immediately preceding the related Distribution
Date. For purposes of this Article V the phrase "payments by or on behalf of
Obligors" shall mean payments made with respect to the Receivables by Persons
other than the Servicer or the Seller.
(b) The Servicer will be entitled to be reimbursed from
amounts on deposit in the Collection Account with respect to a Monthly Period
for amounts previously deposited in the Collection Account but later determined
by the Servicer to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Distribution Date pursuant to Section
5.6(b)(ii) upon certification by the Servicer of such amounts and the provision
of such information to the Trustee and the Security Insurer as may be necessary
in the opinion of the Security Insurer to verify the accuracy of such
certification. In the event that the Security Insurer has not received evidence
satisfactory to it of the Servicer's entitlement to reimbursement pursuant to
Section 5.2(b), the Security Insurer shall (unless an Insurer Default shall have
occurred and be continuing) give the Trustee notice to such effect, following
receipt of which the Trustee shall not make a distribution to the Servicer in
respect of such amount pursuant to Section 5.6, or if the Servicer prior thereto
has been reimbursed pursuant to Section 5.6 or Section 5.9, the Trustee shall
withhold such amounts from amounts otherwise distributable to the Servicer on
the next succeeding Distribution Date.
SECTION 5.3 Application of Collections. All collections for the Monthly
Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor, (other than Supplemental
Servicing Fees with respect to such Receivable, to the extent collected) shall
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be applied first, in the case of Precomputed Receivables, to the Scheduled
Payment and, in the case of Simple Interest Receivables, to interest and
principal in accordance with the Simple Interest Method. With respect to
Precomputed Receivables, any remaining excess shall be added to the Payahead
Balance, and shall be applied to prepay the Precomputed Receivable, but only if
the sum of such excess and the previous Payahead Balance shall be sufficient to
prepay the Precomputed Receivable in full. Otherwise, any such remaining excess
payments shall constitute a Payahead and shall increase the Payahead Balance.
All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall, other than as provided in Section
5.9, be deposited in the Collection Account and paid to the Servicer in
accordance with Section 5.6(b).
SECTION 5.4 Deficiency Notice. (a) In the event that the Servicer's
Certificate with respect to any Determination Date shall state that the amount
of the Available Funds with respect to such Determination Date is less than the
sum of the amounts payable on the related Distribution Date pursuant to clauses
(i) through (v) of Section 5.6(b) (such deficiency being a "Deficiency Claim
Amount") then on the Deficiency Claim Date immediately preceding such
Distribution Date the Trustee shall deliver to the Indenture Collateral Agent,
the Security Insurer, the Owner Trustee, the Insurer's Agent and the Servicer,
by hand delivery, telex or facsimile transmission, a written notice (a
"Deficiency Notice") specifying the Deficiency Claim Amount for such
Distribution Date.
(b) Any Deficiency Notice shall be delivered by 10:00 am., New
York City time, on the related Deficiency Claim Date. The amounts distributed to
the Trustee pursuant to a Deficiency Notice shall be deposited by the Trustee
into the Collection Account pursuant to Section 5.5.
SECTION 5.5 Additional Deposits. The Servicer and the Seller, Franklin
Capital Corporation and the Representative, as applicable, shall deposit or
cause to be deposited in the Collection Account on the Determination Date
following the date on which such obligations are due the aggregate Purchase
Amount with respect to Purchased Receivables. On or before each Draw Date, the
Trustee shall remit to the Collection Account any amounts delivered to the
Trustee pursuant to a Deficiency Notice.
SECTION 5.6 Distributions. (a) No later than 12:00 noon New York City
time on each Distribution Date, the Trustee shall (based solely on the
information contained in the Servicer's Certificate delivered on the related
Determination Date) cause to be made the following transfers and distributions
in the amounts set forth in the Servicer's Certificate for such Distribution
Date:
(i) from the Payahead Account (i) to the Collection Account,
in immediately available funds, the aggregate previous Payaheads to be
applied to Scheduled Payments on Precomputed Receivables for the
related Collection Period or prepayments for the related Collection
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Period, pursuant to Section 5.3, in the amounts set forth in the
Servicer's Certificate for such Distribution Date and (ii) to the
Seller, in immediately available funds, the investment earnings, net of
losses on the Payaheads for the related Collection Period.
(b) On each Distribution Date other than the Distribution Date
on which Insolvency Proceeds are to be distributed, the Trustee shall (based
solely on the information contained in the Servicer's Certificate delivered with
respect to the related Determination Date) distribute the following amounts and
in the following order of priority:
(i) from the Distribution Amount, to each of the Trustee and
the Owner Trustee, their respective accrued and unpaid trustees' fees
and any accrued and unpaid fees of the Indenture Collateral Agent (in
each case, to the extent such fees have not been previously paid by the
Servicer or the Representative);
(ii) from the Distribution Amount, to the Servicer, the Base
Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any amounts
specified in Section 5.2(b), to the extent the Servicer has not
reimbursed itself in respect of such amounts pursuant to Section 5.9
and to the extent not retained by the Servicer;
(iii) from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Interest Distributable Amount;
(iv) from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Principal Distributable Amount;
(v) from the Distribution Amount, to the Security Insurer, any
premium amounts and any overdue premium amounts payable pursuant to the
Insurance Agreement, and, any payments made on the Note Policy and any
other amounts owing to the Security Insurer under the Insurance
Agreement and not paid;
(vi) from the Available Funds, to the Certificate Distribution
Account for distribution to the Certificateholders or their designees,
any remaining funds.
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing, following the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii),
5.1(v) or 5.1(vi) of the Indenture, or (C) following the receipt of Insolvency
Proceeds pursuant to Section 9.1(b), amounts deposited in the Note Distribution
Account shall be applied to the Noteholders to the extent necessary to pay
accrued and unpaid interest on the Notes and then, to the extent funds are
available therefore, principal on the Notes until the principal balance of the
Notes has been reduced to zero, in accordance with the provisions of Section 5.6
of the Indenture.
(c) Reserved.
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(d) In the event that the Collection Account is maintained
with an institution other than the Indenture Collateral Agent, the Servicer
shall instruct and cause such institution to make all deposits and distributions
pursuant to Section 5.6(b) and Section 5.6(c) on the related Distribution Date.
SECTION 5.7 [RESERVED] .
SECTION 5.8 Statements to Certificateholders and Noteholders. On or
prior to each Determination Date, the Servicer shall provide to the Trustee
(with a copy to the Security Insurer and the Rating Agencies) for the Trustee to
forward to each Noteholder of record, to each Paying Agent, if any, and to the
Owner Trustee for the Owner Trustee to forward to each Certificateholder of
record, a statement substantially in the form of Exhibit B and Exhibit C,
respectively, setting forth at least the following information with respect to
distributions on the related Distribution Date as to the Notes and the
Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal of
each Class of Notes;
(ii) the amount of such distribution allocable to interest on
or with respect to each Class of Notes;
(iii) the amount of such distribution payable pursuant to a
claim on the Note Policy and any remaining outstanding balance
available to be drawn under the applicable Note Policy;
(iv) the Pool Balance as of the close of business on the last
day of the preceding Monthly Period;
(v) the aggregate outstanding principal amount of each Class
of the Notes, the Note Pool Factor for each such Class, after giving
effect to payments allocated to principal reported under (i) above;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Monthly Period and/or due but unpaid with
respect to such Monthly Period or prior Monthly Periods, as the case
may be;
(vii) the Noteholders' Interest Carryover Shortfall and the
Noteholders' Principal Carryover Shortfall;
(viii) the amount of the aggregate Realized Losses, if any,
for the second preceding Monthly Period;
(ix) the aggregate Purchase Amounts for Receivables, if any,
that were repurchased in such period;
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(x) the amounts which were collected by the Servicer;
(xi) the aggregate amount which was received by the Trust from
the Servicer;
(xii) any reimbursements to the Security Insurer;
(xiii) delinquency information relating to Receivables which
are 30, 60 or 90 days delinquent,
(xiv) the aggregate Payahead Balance; and
(xv) the aggregate amount distributed to the
Certificateholders.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (vii), (x) and
(xi) above shall be expressed as a dollar amount per $1,000 of the initial
principal balance of the Notes (or Class thereof).
SECTION 5.9 Net Deposits. As an administrative convenience, unless the
Servicer is required to remit collections within two Business Days of receipt
thereof, the Servicer will be permitted to make the deposit of collections on
the Receivables and Purchase Amounts for or with respect to each Monthly Period
net of distributions to be made to the Servicer with respect to such Monthly
Period. Similarly, the Servicer may cause to be made a single, net transfer,
from the Collection Account to the Payahead Account, or vice versa. The
Servicer, however, will account to the Owner Trustee, the Trustee, the Indenture
Collateral Agent, the Noteholders and the Certificateholders as if all deposits,
distributions and transfers were made individually.
SECTION 5.10 Optional Deposits by the Security Insurer. The Security
Insurer shall at any time, and from time to time, with respect to a Distribution
Date, have the option (but shall not be required, except in accordance with the
terms of the Note Policy) to deliver or cause to be delivered amounts to the
Trustee for deposit into the Collection Account for any of the following
purposes: (i) to provide funds in respect of the payment of fees or expenses of
any provider of services to the Trust with respect to such Distribution Date, or
(ii) to include such amount to the extent that without such amount a draw would
be required to be made on the Note Policy.
ARTICLE VI
The Seller
SECTION 6.1 Representations of the Seller. The Seller makes the
following representations on which the Security Insurer shall be deemed to have
relied in executing and delivering the Note Policy and on which the Issuer is
deemed to have relied in acquiring the Receivables. The representations speak as
of the execution and delivery of this Agreement and as of the Closing Date, and
shall survive the sale of to the Issuer and the pledge thereof to the Trustee
pursuant to the Indenture.
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(a) Organization and Good Standing. The Seller is duly
organized and validly existing as a Delaware limited liability company 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 has, the power, authority and legal right to acquire
and own the Receivables.
(b) Due Qualification. The Seller is duly qualified to do
business as a limited liability company in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property, including the Receivables, or the conduct of its business
shall require such qualifications.
(c) Power and Authority of the Seller. The Seller has the
power and authority to execute and deliver this Agreement and to perform its
obligations under each of the Basic Documents to which the Seller is a party;
the Seller has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer and the Seller has duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of each of the Basic
Documents to which the Seller is a party has been duly authorized by the Seller
by all necessary corporate action.
(d) Binding Obligation. This Agreement and each of the Basic
Documents to which the Seller is a party constitute legal, valid and binding
obligations of the Seller, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws now or hereafter in effect relating to
creditors' rights generally and subject to general principles of equity (whether
applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof and
thereof do not result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time or both) a default under,
the certificate of formation or limited liability company agreement of the
Seller, or any indenture, agreement or other instrument to which the Seller is a
party or by which it is bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the best of its knowledge, any order, rule or regulation
applicable to the Seller of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(f) No Proceedings. There are no proceedings or investigations
pending against the Seller or, to its best knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Seller of its obligations under, or the
41
validity or enforceability of, the Basic Documents, the Notes or the
Certificates or (iv) that might adversely affect the federal income tax
attributes of the Issuer, the Notes or the Certificates.
(g) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Seller in connection with the execution and
delivery by the Seller of this Agreement or any of the Basic Documents to which
it is a party and the performance by the Seller of the transactions contemplated
by this Agreement, or any of the Basic Documents to which it is a party, have
been duly obtained, effected or given and are in full force and effect, except
where failure to obtain the same would not have a material and adverse effect
upon the rights of the Issuer, the Noteholders or the Certificateholders.
(h) Chief Executive Office. The chief executive office of the
Seller is at ___________________.
SECTION 6.2 Corporate Existence. (a) During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall
observe the applicable legal requirements for the recognition of the Seller as a
legal entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain corporate records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the
Seller shall not commingle its assets and funds with those of its
Affiliates;
(iii) the Seller shall hold such appropriate meetings of its
Board of Directors as are necessary to authorize all the Seller's
corporate actions required by law to be authorized by the Board of
Directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities
(and any successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and applicable
law);
(iv) the Seller shall at all times hold itself out to the
public under the Seller's own name as a legal entity separate and
distinct from its Affiliates; and
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(v) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
SECTION 6.3 Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trust, the Security Insurer, the Trustee and the
Indenture Collateral Agent from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions contemplated
in this Agreement and any of the Basic Documents (except any income taxes
arising out of fees paid to the Owner Trustee or the Trustee and except any
taxes to which the Owner Trustee or the Trustee may otherwise be subject to),
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to, federal or other income taxes
arising out of distributions on the Certificates and the Notes) and costs and
expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trustee, the Indenture Collateral Agent, the
Security Insurer, and the Noteholders from and against any loss, liability or
expense incurred by reason of (i) the Seller's willful misfeasance, bad faith or
negligence in the performance of its duties under this Agreement, or by reason
of reckless disregard of its obligations and duties under this Agreement and
(ii) the Seller's or the Issuer's violation of Federal or state securities laws
in connection with the offering and sale of the Notes.
(c) The Seller shall indemnify, defend and hold harmless the
Owner Trustee and its officers, directors, employees and agents from and against
any and all costs, expenses, losses, claims, damages and liabilities arising out
of, or incurred in connection with the acceptance or performance of the trusts
and duties set forth herein and in the Basic Documents except to the extent that
such cost, expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Owner Trustee.
Indemnification under this Section shall survive the
resignation or removal of the Owner Trustee, the Trustee or the Indenture
Collateral Agent and the termination of this Agreement, the Indenture or the
Trust Agreement, as applicable, and shall include reasonable fees and expenses
of counsel and other expenses of litigation. If the Seller shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Seller, without
interest.
SECTION 6.4 Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
43
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that (i) the Seller shall have received the
written consent of the Security Insurer prior to entering into any such
transaction, (ii) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.1 shall have been breached
and no Servicer Default, and no event which, after notice or lapse of time, or
both, would become a Servicer Default shall have happened and be continuing,
(iii) the Seller shall have delivered to the Owner Trustee, the Trustee and the
Security Insurer an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent, if any, provided for
in this Agreement relating to such transaction have been complied with, (iv) the
Rating Agency Condition shall have been satisfied with respect to such
transaction and (v) the Seller shall have delivered to the Owner Trustee, the
Trustee and the Security Insurer an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
the Trustee, respectively, in the Receivables and reciting the details of such
filings or (B) no such action shall be necessary to preserve and protect such
interest. Notwithstanding anything herein to the contrary, the execution of the
foregoing agreement of assumption and compliance with clauses (i), (ii), (iii),
(iv) and (v) above shall be conditions to the consummation of the transactions
referred to in clauses (a), (b) or (c) above.
SECTION 6.5 Limitation on Liability of Seller and Others. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 6.6 Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority, or distinction as among all
of the Notes or Certificates, provided, however, that any Notes or Certificates
owned by the Seller or any Affiliate thereof, during the time such Notes or
Certificates are owned by them, shall be without voting rights for any purpose
set forth in the Basic Documents and will not be entitled to the benefits of the
Note Policy. The Seller shall notify the Owner Trustee, the Trustee and the
Security Insurer promptly after it or any of its Affiliates become the owner of
a Certificate or a Note. The Seller hereby notifies the Owner Trustee that
immediately following the issuance of the Certificates that it and the
Representative will own all the Certificates.
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ARTICLE VII
The Servicer and the Representative
SECTION 7.1 Representations of Servicer and the Representative.
Franklin Capital makes the following representations on which the Security
Insurer shall be deemed to have relied in executing and delivering the Note
Policy and on which the Issuer is deemed to have relied in acquiring the
Receivables. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date, and shall survive the sale of the
Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the
Indenture.
(a) Organization and Good Standing. Franklin Capital is duly
organized and validly existing as a corporation in good standing under the laws
of the state of its incorporation, with the 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 has, the power, authority and legal right to acquire, own, sell and service
the Receivables and to hold the Receivable Files as custodian.
(b) Due Qualification. Franklin Capital is duly qualified to
do business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of its
business (including the servicing of the Receivables as required by this
Agreement) shall require such qualifications, and was duly qualified and had all
licenses in all relevant jurisdictions required for the origination of the
Receivables.
(c) Power and Authority of the Servicer. Franklin Capital has
the corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and performance
of this Agreement have been duly authorized by Franklin Capital by all necessary
corporate action. All authorizations, consents, orders or approvals of or
registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by Franklin Capital in connection with the execution and delivery by the
Servicer of this Agreement or any of the Basic Documents to which it is a party
and the performance by the Servicer of the transactions contemplated by this
Agreement or any of the Basic Documents to which it is a party, have been duly
obtained, effected or given and are in full force and effect, except where
failure to obtain the same would not have a material adverse effect upon the
rights of the Issuer or the Noteholders.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of Franklin Capital, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
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conveyance, reorganization and similar laws now or hereafter in effect relating
to creditors' rights generally, and subject to general principles of equity
(whether applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under the articles of
incorporation or by-laws of Franklin Capital, or any indenture, agreement or
other instrument to which Franklin Capital is a party or by which it shall be
bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); or violate any law or,
to the best of Franklin Capital's knowledge, any order, rule or regulation
applicable to Franklin Capital of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over Franklin Capital or its properties.
(f) No Proceedings. There are no proceedings or investigations
pending against Franklin Capital, or, to its best knowledge, threatened against
Franklin Capital, before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over Franklin Capital or
its properties: (i) asserting the invalidity of this Agreement or any of the
Basic Documents or the Notes, (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 Basic Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by Franklin Capital of its
obligations under, or the validity or enforceability of this Agreement or any of
the Basic Documents or the Notes or (iv) relating to Franklin Capital and which
might adversely affect the federal income tax or ERISA attributes of the Issuer
or the Notes.
(g) No Insolvent Obligors. As of the Cutoff Date, no Obligor
shall be shown on the related Receivable Files as the subject of a bankruptcy
proceeding commenced following the execution of the related Contract.
SECTION 7.2 Indemnities of Servicer. (a) The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement and the representations made by
the Servicer herein.
(b) The Servicer shall defend, indemnify and hold harmless the
Owner Trustee, the Trustee, the Trust, the Indenture Collateral Agent, the
Security Insurer, the Noteholders and the Seller from and against any and all
costs, expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership or operation by the Servicer or any Affiliate
thereof of a Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the
Owner Trustee, the Trustee, the Seller, the Trust, the Indenture Collateral
Agent, the Security Insurer, their respective officers, directors, agents and
employees and the Noteholders from and against any and all costs, expenses,
losses, claims, damages, and liabilities to the extent that such cost, expense,
loss, claim, damage, or liability arose out of, or was imposed upon any such
Person through, the negligence, willful misfeasance or bad faith of the Servicer
in the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
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(d) The Servicer shall indemnify, defend and hold harmless the
Owner Trustee and its officers, directors, employees and agents 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 herein and in the Trust Agreement contained, except to the extent that
such costs, expense, loss, claim, damage or liability shall be due to the
willful misfeasance, bad faith or negligence (except for errors in judgment) of
the Owner Trustee.
For purposes of this Section, in the event of the termination
of the rights and obligations of Franklin Capital Corporation (or any successor
thereto pursuant to Section 7.3) as Servicer pursuant to Section 8.1, or a
resignation by such Servicer pursuant to this Agreement, such Servicer shall be
deemed to be the Servicer pending appointment of a successor Servicer (other
than the Trustee) pursuant to Section 8.2.
Indemnification under this Section shall survive the
resignation or removal of the Owner Trustee or the Trustee or the termination of
this Agreement, the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section and
the recipient thereafter collects any of such amounts from others, such Person
shall promptly repay such amounts to the Servicer, without interest.
SECTION 7.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed to the properties and
assets of the Servicer, substantially as a whole or (d) with respect to the
Servicer's obligations hereunder, which is a corporation 50% or more of the
voting stock of which is owned, directly or indirectly, by Franklin Resources,
Inc., which Person executed an agreement of assumption to perform every
obligation of the Servicer hereunder shall be the successor to the Servicer
under the Agreement without further act on the part of any of the parties to the
Agreement; provided, however, that (i) the Servicer shall have received the
written consent of the Security Insurer prior to entering into any such
transaction; (ii) immediately after giving effect to such transaction, no
Servicer Default and no event which, after notice or lapse of time, or both,
would become a Servicer Default shall have happened and be continuing, (iii) the
Servicer shall have delivered to the Owner Trustee and the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent provided for in this Agreement relating to
such transaction have been complied with, (iv) the Rating Agency Condition shall
have been satisfied with respect to such transaction and (v) the Servicer shall
have delivered to the Owner Trustee and the Trustee an Opinion of Counsel
stating that, in the opinion of such counsel, either (A) all financing
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statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Trustee in the Receivables and reciting the details of
such filings or (B) no such action shall be necessary to preserve and protect
such interest. Notwithstanding anything herein to the contrary, the execution of
the foregoing agreement of assumption and compliance with clauses (i), (ii),
(iii), (iv) and (v) above shall be conditions to the consummation of the
transactions referred to in clauses (a), (b), (c) or (d) above.
SECTION 7.4 Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of its directors, officers, employees or agents shall be under
any liability to the Issuer, the Noteholders or the Certificateholders, except
as provided under 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 in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer or any subservicer and any of their respective directors, officers,
employees or agents 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.
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 (but shall not be required
to) undertake any reasonable action that it may deem necessary or desirable to
protect the interests of the Certificateholders under the Trust Agreement and
the Noteholders under the Indenture.
SECTION 7.5 Servicer Not To Resign. Subject to the provisions of
Section 7.3, the Servicer may not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements in a
manner which would result in a material adverse effect on the Servicer and the
Security Insurer does not elect to waive the obligations of the Servicer to
perform the duties which render it legally unable to act or does not elect to
delegate those duties to another Person. Notice of any such determination
permitting the resignation of the Servicer shall be communicated to the Owner
Trustee, the Trustee and the Security Insurer at the earliest practicable time
(and, if such communication is not in writing, shall be confirmed in writing at
the earliest practicable time) and any such determination shall be evidenced by
an Opinion of Counsel to such effect delivered to and satisfactory to the Owner
Trustee, the Trustee and the Security Insurer concurrently with or promptly
after such notice. No such resignation of the Servicer shall become effective
until a successor servicer shall have assumed the responsibilities and
obligations of Franklin Capital Corporation in accordance with Section 8.2 of
this Agreement.
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ARTICLE VIII
Default
SECTION 8.1 Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) Any failure by the Servicer to deliver to the Owner
Trustee or Trustee for deposit in any of the Trust Accounts or the Certificate
Distribution Account any payment required to be so delivered under the terms of
the Notes, the Certificates or this Agreement that shall continue unremedied for
a period of five Business Days after written notice of such failure is received
by the Servicer from the Security Insurer, the Owner Trustee or the Trustee or
after discovery of such failure by an Officer of the Servicer; or
(b) Failure by the Servicer duly to observe or to perform in
any material respect any other covenants or agreements of the Servicer or the
Seller (as the case may be) set forth in the Notes, the Certificates, this
Agreement or any other Basic Document, which failure shall (i) materially and
adversely affect the rights of either the Certificateholders or the Noteholders
and (ii) continue unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given (A) to the Servicer by the Security Insurer, the Owner Trustee or the
Trustee or (B) to the Servicer, the Owner Trustee and the Trustee by the Holders
of Notes evidencing not less than 25% of the outstanding principal amount of the
Notes as applicable (or for such longer period, not in excess of 120 days, as
may be reasonably necessary to remedy such default; provided that such default
is capable of remedy within 120 days and the Servicer delivers an Officers'
Certificate to the Security Insurer, the Owner Trustee and the Trustee to such
effect and to the effect that the Servicer has commenced or will promptly
commence, and will diligently pursue, all reasonable efforts to remedy such
default); or
(c) An Insolvency Event occurs with respect to the Servicer or
any successor; or
(d) So long as an Insurer Default shall not have occurred and
be continuing, an Insurance Agreement Event of Default described in Section 5.01
of the Insurance Agreement shall have occurred;
then, and in each and every case, (i) so long as no Insurer Default shall have
occurred and be continuing, the Trustee may, with the consent of the Security
Insurer and at the direction of the Security Insurer, the Trustee shall, subject
to subsection (b) of this Section 8.1, except in the case of an event arising
under Section 5.01(c) of the Insurance Agreement or (ii) if an Insurer Default
shall have occurred and be continuing, any of the Trustee or the Holders of
Notes evidencing not less than a majority of the principal amount of the Notes
then outstanding or Holders of Certificates of Percentage Interests greater than
50% in the case of any default that does not adversely affect the Trustee or the
Noteholders, in any case by notice given in writing to the Servicer (and to the
Trustee if given by the Security Insurer or, as applicable, the Noteholders or
the Certificateholders) may terminate all of the rights and obligations of the
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Servicer under this Agreement. For purposes of Section 8.1(d), any determination
of an adverse effect on the interest of the Certificateholders or the
Noteholders pursuant to Section 8.1(b) shall be made without consideration of
the availability of funds under the Note Policy. On or after the receipt by the
Servicer of such written notice, all authority, power, obligations and
responsibilities of the Servicer under this Agreement, whether with respect to
the Notes, the Certificates or the Receivables or otherwise, automatically shall
pass to, be vested in and become obligations and responsibilities of the Trustee
provided that the Trustee is not unwilling or unable to act; provided, however,
that the Trustee shall have no liability with respect to any obligation which
was required to be performed by the prior Servicer prior to the date that the
Trustee becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the prior Servicer. The Trustee is authorized and
empowered by this Agreement, as successor Servicer to execute and deliver, on
behalf of the prior Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Receivables and the
other Trust Property and related documents, to show the Owner Trustee as
lienholder or secured party on the related Lien Certificates, or otherwise. The
prior Servicer agrees to cooperate with the successor Servicer in effecting the
termination of the responsibilities and rights of the prior Servicer under this
Agreement, including, without limitation, the transfer to the successor Servicer
for administration by it of all cash amounts that shall at the time be held by
the prior Servicer for deposit, or have been deposited by the prior Servicer, in
the Collection Account or thereafter received with respect to the Receivables
and the delivery to the successor Servicer of all Receivables Files, records and
a computer tape in readable form containing all information necessary to enable
the successor Servicer to service the Receivables and the other Trust Property.
The terminated Servicer shall grant the Trustee, (in its capacity as Trustee
and/or successor Servicer), the Owner Trustee and the Security Insurer
reasonable access to the terminated Servicer's premises at the Servicer's
expense.
SECTION 8.2 Appointment of Successor. (a) Upon the Servicer's receipt
of notice of termination, pursuant to Section 8.1 or the Servicer's resignation
in accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (x) the date 45 days
from the delivery to the Owner Trustee and the Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the Servicer's
termination hereunder, the Trustee shall, provided it is not unwilling or unable
to act, assume the obligations of Servicer hereunder, and shall accept its
appointment by a written assumption in form acceptable to the Security Insurer.
Notwithstanding the above, the Trustee, with the prior written consent of the
Security Insurer, or the Security Insurer shall, if the Trustee shall be
unwilling or legally unable so to act, 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 shall include the servicing of
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automotive receivables as the successor to the Servicer under the Agreement. Any
successor Servicer shall be acceptable to the Security Insurer.
(b) Upon appointment, the successor Servicer (including the
Trustee acting as successor Servicer) shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer, subject to the exceptions set forth in Section 8.2(a)
hereof, and shall be entitled to the Servicing Fee and all the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement.
SECTION 8.3 [RESERVED]
SECTION 8.4 Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to, the Servicer pursuant to
this Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders, the Security Insurer and the Trustee shall give prompt
written notice thereof to Noteholders and to the Rating Agencies.
SECTION 8.5 Waiver of Past Defaults. So long as no Insurer Default
shall have occurred and be continuing, the Security Insurer (or, if an Insurer
Default shall have occurred and be continuing, the Holders of Notes evidencing
not less than a majority of the outstanding principal amount of the Notes, or
Holders of Certificates of Percentage Interests greater than 50% in the case of
any default which does not adversely affect the Trustee or the Noteholders may,
on behalf of all Noteholders and Certificateholders, waive any 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 any of the
Trust Accounts in accordance with this Agreement. 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 thereto.
ARTICLE IX
Termination
SECTION 9.1 Optional Purchase of All Receivables. (a) On the last day
of any Monthly Period as of which the Pool Balance shall be less than or equal
to 10% of the Original Pool Balance, the Servicer shall have the option to
purchase the Owner Trust Estate, other than the Trust Accounts and the
Certificate Distribution Account (with the consent of the Security Insurer if
such purchase would result in a claim on the Note Policy or would result in any
amount owing to the Security Insurer under the Insurance Agreement remaining
unpaid); provided, however, that the amount to be paid for such purchase (as set
forth in the following sentence) shall be sufficient to pay the full amount of
principal, premium, if any, and interest then due and payable on the Notes. To
exercise such option, the Servicer shall deposit pursuant to Section 5.5 in the
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Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including Defaulted Receivables), plus any amounts then due and
owing to the Security Insurer plus the appraised value of any other property
held by the Trust, such value to be determined by an appraiser mutually agreed
upon by the Servicer, the Security Insurer, the Owner Trustee and the Trustee,
and shall succeed to all interests in and to the Trust.
(b) Upon any sale of the assets of the Trust pursuant to
Section 9.2 of the Trust Agreement, the Servicer shall instruct the Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made (the "Insolvency Proceeds")
in the Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are not
so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Servicer shall instruct the Trustee to make, and
the Trustee shall make, the following deposits and distributions (after the
application on such Distribution Date of the Distribution Amount pursuant to
Section 5.6(b)) from the Insolvency Proceeds and the Distribution Amount for
such Distribution Date:
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into
the Note Distribution Account on such Distribution Date; and
(ii) to the Note Distribution Account, the outstanding
principal amount of the Notes (after giving effect to the reduction in
the outstanding principal amount of the Notes to result from the
deposits made in the Note Distribution Account on such Distribution
Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid first to the Security Insurer to the extent of any amounts owing to the
Security Insurer under the Insurance Agreement and not paid, and second, to the
extent of any remaining funds, to the Certificateholders.
(c) Notice of any termination of the Trust shall be given by
the Servicer to the Owner Trustee, the Trustee, the Security Insurer and the
Rating Agencies as soon as practicable after the Servicer has received notice
thereof.
(d) Following the satisfaction and discharge of the Indenture
and the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trustee pursuant to this Agreement.
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ARTICLE X
Administrative Duties of the Servicer
SECTION 10.1 Administrative Duties. (a) Duties with Respect to the
Indenture and Depository Agreements. The Servicer shall perform all its duties
and the duties of the Issuer under the Indenture and the Depository Agreements.
In addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture and the
Depository Agreements. The Servicer shall monitor the performance of the Issuer
and shall advise the Owner Trustee when action is necessary to comply with the
Issuer's duties under the Indenture and the Depository Agreements. The Servicer
shall prepare for execution by the Issuer or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare, file
or deliver pursuant to the Indenture and the Depository Agreements. In
furtherance of the foregoing, the Servicer shall take all necessary action that
is the duty of the Issuer to take pursuant to the Indenture and the Depository
Agreements, including, without limitation, pursuant to Sections 2.7, 3.5, 3.6,
3.7, 3.9, 7.2, 7.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall
perform such calculations and shall prepare for execution by the Issuer
or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to
this Agreement or any of the Basic Documents, and at the request of the
Owner Trustee shall take all appropriate action that it is the duty of
the Issuer to take pursuant to this Agreement or any of the Basic
Documents, including, without limitation, pursuant to Sections 2.6 and
2.11 of the Trust Agreement. In accordance with the directions of the
Issuer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with
the Collateral (including the Basic Documents) as are not covered by
any of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability of
the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Servicer shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding
tax is imposed on the Issuer's payments (or allocations of income) to
an Owner (as defined in the Trust Agreement) as contemplated in Section
5.2(f) of the Trust Agreement. Any such notice shall be in writing and
specify the amount of any withholding tax required to be withheld by
the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for
performance of the duties of the Issuer or the Owner Trustee set forth
in Section 5.6(a), (b), (c) and (d) of the Trust Agreement with respect
to, among other things, accounting and reports to Owners (as defined in
the Trust Agreement); provided, however, that once prepared by the
Servicer the Owner Trustee shall retain responsibility for the
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distribution of the Schedule K-1s necessary to enable each
Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in Section 10.2 of the Trust Agreement required to be
performed in connection with the resignation or removal of the Owner
Trustee, and any other duties expressly required to be performed by the
Servicer under this Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on
behalf of the Seller, so long as it is a Certificateholder, all tax returns, tax
elections, financial statements and such annual or other reports of the Issuer
as are necessary for preparation of tax reports as provided in Article V of the
Trust Agreement, including without limitation Forms 1099 and 1066. All tax
returns will be signed by Seller, so long as it is a Certificateholder.
(d) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the Servicer shall
not take any action pursuant to this Article X unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Trustee of the proposed action and the Owner Trustee and, with
respect to items (A), (B), (C) and (D) below, the Trustee shall not have
withheld consent or provided an alternative direction. For the purpose of the
preceding sentence, "non-ministerial matters" shall include:
(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit
brought by or against the Issuer (other than in connection
with the collection of the Receivables);
(C) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(D) the appointment of successor Note Registrars,
successor Paying Agents and successor Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the
consent to the assignment by the Note Registrar, Paying Agent
or Trustee of its obligations under the Indenture; and
(E) the removal of the Trustee.
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(e) Exceptions. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Basic
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) make any payments to the Noteholders or Certificateholders
under the Basic Documents, (2) sell the Owner Trust Estate pursuant to Section
5.5 of the Indenture, (3) take any other action that the Issuer directs the
Servicer not to take on its behalf or (4) in connection with its duties
hereunder assume any indemnification obligation of any other Person.
SECTION 10.2 Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer at
any time during normal business hours.
SECTION 10.3 Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
ARTICLE XI
Miscellaneous Provisions
SECTION 11.1 Amendment. This Agreement may be amended from time to time
by the Representative, the Seller, the Servicer and the Owner Trustee, with the
consent of the Trustee (which consent may not be unreasonably withheld), with
the prior written consent of the Security Insurer (so long as no Insurer Default
has occurred and is continuing) but without the consent of any of the
Noteholders or the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement, to comply with any changes in the
Code, or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the provisions
of this Agreement or the Insurance Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the Owner
Trustee and the Trustee, adversely affect in any material respect the interests
of any Noteholder or Certificateholder; provided further that if an Insurer
Default has occurred and is continuing, such action shall not materially
adversely affect the interests of the Security Insurer in the Trust.
This Agreement may also be amended from time to time by the
Representative, the Seller, the Servicer and the Owner Trustee, with the consent
of the Security Insurer (so long as no Insurer Default has occurred and is
continuing), the consent of the Trustee, the consent of the Holders of Notes
evidencing not less than a majority of the outstanding principal amount of the
Notes and the consent of the Holders of Certificates evidencing not less than a
Percentage Interest greater than 50% for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
55
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the outstanding principal amount of the Notes
and the Percentage Interests, the Holders of which are required to consent to
any such amendment, without the consent of the Holders of all the outstanding
Notes and the Certificates, of each class affected thereby; provided further,
that if an Insurer Default has occurred and is continuing, such action shall not
materially adversely affect the interest of the Security Insurer.
Promptly after the execution of any such amendment or consent
pursuant to either of the preceding paragraphs, the Owner Trustee shall furnish
written notification of the substance of such amendment or consent to each
Certificateholder and the Rating Agencies.
It shall not be necessary for the consent of
Certificateholders or Noteholders pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Noteholders or Certificateholders
provided for in this Agreement) and of evidencing the authorization of any
action by Noteholders or Certificateholders shall be subject to such reasonable
requirements as the Trustee or the Owner Trustee, as applicable, may prescribe.
Prior to the execution of any amendment to this Agreement, the
Owner Trustee, the Trustee and the Security Insurer shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 11.2(i)(1) has been delivered. The Owner Trustee and the Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Issuer's, the Owner Trustee's or the Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
SECTION 11.2 Protection of Title to Trust. (a) The Seller shall execute
and file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Indenture Collateral Agent on behalf of the
Noteholders, the Certificateholders and the Security Insurer in the Receivables
and in the proceeds thereof. The Seller shall deliver (or cause to be delivered)
to the Security Insurer, the Owner Trustee and the Indenture Collateral Agent
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section 9-402(7)
of the UCC, unless it shall have given the Security Insurer, the Owner Trustee
and the Trustee at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements. Promptly upon such filing, the Seller or
the Servicer, as the case may be, shall deliver an Opinion of Counsel in form
and substance reasonably satisfactory to the Security Insurer, stating either
(A) all financing statements and continuation statements have been executed and
56
filed that are necessary fully to preserve and protect the interest of the Trust
and 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 (B)
no such action shall be necessary to preserve and protect such interest.
(c) Each of the Seller and the Servicer shall have an
obligation to give the Security Insurer, the Owner Trustee and the Trustee at
least 60 days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup archives)
that refer to a Receivable shall indicate clearly the interest of the Issuer and
the Trustee on behalf of the Certificateholders, the Noteholders and the
Security Insurer in such Receivable and that such Receivable is owned by the
Issuer and has been pledged to the Trustee. Indication of the Issuer's and the
Trustee's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable shall
have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other transferee,
the Servicer shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been sold and is
owned by the Issuer and has been pledged to the Trustee on behalf of the
Certificateholders, the Noteholders and the Security Insurer.
(g) The Servicer shall permit the Trustee and the Security
Insurer and their respective agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivable or any other portion of the Trust Property. The
preceding sentence shall not create any duty or obligation on the part of the
Trustee to perform any such acts.
(h) Upon request, the Servicer shall furnish to the Security
Insurer, the Owner Trustee or to the Trustee, within five Business Days, a list
57
of all Receivables (by contract number and name of Obligor) then held as part of
the Trust, together with a reconciliation of such list to the Schedule of
Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Security Insurer, the
Owner Trustee and the Trustee:
(1) promptly after the execution and delivery of the Agreement
and, if required pursuant to Section 11.1, of each amendment, an
Opinion of Counsel stating that, in the opinion of such Counsel, in
form and substance reasonably satisfactory to the Security Insurer,
either (A) all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the 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 (B) no such action shall
be necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of Counsel, dated as of a date during
such 90-day period, stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the 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 (B) no such action shall
be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (l) or (2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable
law, cause the Certificates and the Notes to be registered with the Commission
pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time
periods specified in such sections.
SECTION 11.3 Notices. All demands, notices and communications upon or
to the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered, or
mailed by certified mail, return receipt requested, and shall be deemed to have
been duly given upon receipt (a) in the case of the Seller to ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ___________ (b) in the case of
the Servicer or the Representative to ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: __________ (c) in the case of the Issuer or the Owner
Trustee, at the Corporate Trust Office of the Owner Trustee, with a copy to
________, Attention: ______________ (d) in the case of the Trustee or the
Indenture Collateral Agent, at the Corporate Trust Office, (e) in the case of
the Security Insurer, to MBIA Insurance Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Insured Portfolio Management-SF; (f) in the case of
Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc., ABS Monitoring Department, ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and (g) in the case of Standard &
58
Poor's, to Standard & Poor's Ratings Group, ▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed Surveillance Department. Any notice
required or permitted to be mailed to a Noteholder or Certificateholder shall be
given by first class mail, postage prepaid, at the address of such Holder as
shown in the Certificate Register or Note Register, as applicable. Any notice so
mailed within the time prescribed in the Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder or
Noteholder shall receive such notice.
SECTION 11.4 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.4 and 7.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Owner Trustee, the Trustee and the Security Insurer
(or if an Insurer Default shall have occurred and be continuing the Holders of
Notes evidencing not less than 66% of the principal amount of the outstanding
Notes.)
SECTION 11.5 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Servicer, the Issuer,
the Owner Trustee and for the benefit of the Certificateholders, the Trustee,
the Security Insurer and the Noteholders, as third-party beneficiaries. Nothing
in this Agreement, whether express or implied, shall be construed to give to any
other Person, other than express third-party beneficiaries, any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 11.6 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.7 Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.8 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.9 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.10 Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
59
Issuer Secured Parties (as defined in the Indenture) of all right, title and
interest of the Issuer in, to and under the Receivables and/or the assignment of
any or all of the Issuer's rights and obligations hereunder to the Trustee.
SECTION 11.11 Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the parties hereto shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement,
the parties hereto shall not, prior to the date that is one year and one day
after the termination of this Agreement with respect to the Seller, acquiesce
to, petition or otherwise invoke or cause the Seller to invoke the process of
any court or government authority for the purpose of commencing or sustaining a
case against the Seller under any federal or state bankruptcy, insolvency or
similar law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Seller or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Seller.
SECTION 11.12 Limitation of Liability of Owner Trustee,
Trustee and Indenture Collateral Agent. (a) Notwithstanding anything contained
herein to the contrary, this Agreement has been countersigned by _______________
not in its individual capacity but solely in its capacity as Owner Trustee of
the Issuer and in no event shall _____________ in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by ____________, not in its individual capacity
but solely as Trustee and as Indenture Collateral Agent, and in no event shall
___________ have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 11.13 Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
60
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Servicer shall have no
authority to act for or represent the Issuer or the Owner Trustee in any way and
shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.
SECTION 11.14 No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 11.15 Third-Party Beneficiaries. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Security Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this Agreement,
and shall be entitled to rely upon and directly to enforce such provisions of
this Agreement so long as no Insurer Default shall have occurred and be
continuing. Except as expressly stated otherwise herein or in the Basic
Documents, any right of the Security Insurer to direct, appoint, consent to,
approve of, or take any action under this Agreement, shall be a right exercised
by the Security Insurer in its sole and absolute discretion.
SECTION 11.16 Disclaimer by Security Insurer. The Security Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Note Policy) upon delivery of a written notice to the
Owner Trustee and the Trustee.
61
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and year first above written.
FRANKLIN AUTO TRUST 1998-1
By ,
not in its individual capacity but solely
as Owner Trustee on behalf of the Trust,
By_____________________________________
Name:
Title:
FRANKLIN RECEIVABLES LLC,
Seller
By_____________________________________
Name:
Title:
FRANKLIN CAPITAL CORPORATION,
Servicer and Representative,
By_____________________________________
Name:
Title:
62
Acknowledged and Accepted:
, not
in its individual capacity
but solely as Trustee,
By___________________________
Name:
Title:
Acknowledged and Accepted:
,
not in its individual capacity
but solely as Owner Trustee,
By____________________________
Name:
Title:
Acknowledged and Accepted:
, not
in its individual capacity
but solely as Indenture Collateral
Agent
By____________________________
Name:
Title:
63
SCHEDULE A
Schedule of Receivables
-----------------------
SCHEDULE B
Location of Receivables
-----------------------
-----------------
-----------------
-----------------
Exhibit B
[Intentionally Left Blank]
Exhibit C
FORM OF MONTHLY NOTEHOLDER STATEMENT
FRANKLIN AUTO TRUST 1998-1
Class A-1 _________% Asset Backed Notes
Class A-2 _________% Asset Backed Notes
Distribution Date:
Monthly Period:
Under the Sale and Servicing Agreement dated as of August 1, 1998 among
Franklin Capital Corporation as servicer and representative, Franklin
Receivables LLC, as seller and Franklin Auto Trust 1998-1, as issuer, the
Servicer is required to prepare certain information each month regarding current
distributions to Noteholders and the performance of the Trust during the
previous month. The information that is required to be prepared with respect to
the Distribution Date and Monthly Period listed above is set forth below.
Certain of the information is presented on the basis of an original principal
amount of $1,000 per Note, and certain other information is presented based upon
the aggregate amounts for the Trust as a whole.
A. Information Regarding the Current Monthly Distribution.
1. Notes.
(a) The aggregate amount of the
distribution with respect to:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(b) The amount of the distribution set forth in paragraph A.1.(a)
above in respect of interest on:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(c) The amount of the distribution set forth in paragraph A.1.(a)
above in respect of principal of:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(d) The amount of the distribution in A.1.(a) payable pursuant to a
claim on the Note Policy with respect to:
the Class A-1 Notes.......................................................$_______
the Class A-2 Notes.......................................................$_______
(e) The remaining outstanding balance
available to be drawn under the
Note Policy........................................................................$_______
(f) The amount of the distribution set forth in paragraph A.1.(a)
above per $1,000 interest in:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(g) The amount of the distribution set forth in paragraph A.1.(b)
above per $1,000 interest in:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(h) The amount of the distribution set forth in paragraph A.1.(c)
above per $1,000 interest in:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(i) The amount of the distribution set forth in paragraph A.1.(d)
above per $1,000 interest in:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
B. Information Regarding the Performance of the Trust.
1. Pool Balance and Note Principal Balance.
(a) The Pool Balance at the close of business on
the last day of the Monthly Period.........................................................$_____
(b) The aggregate outstanding principal amount of each Class of
Notes after giving effect to payments allocated to principal as
set forth in Paragraph A.1(c) above with respect to:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(c) The Note Pool Factor for each Class of Notes after giving affect
to the payments set forth in paragraph A.1(c) with respect to:
the Class A-1 Notes.............................................................________
the Class A-2 Notes.............................................................________
(d) The amount of aggregate Realized Losses for the second
preceding Monthly Period................................................................$________
(e) The aggregate Purchase Amount for
all Receivables that were repurchased
in the Monthly Period...................................................................$________
(f) The aggregate Payahead Balance on
such Distribution Date.................................................................$________
(g) The change in the Payahead Balance
from the preceding Distribution Date...................................................$________
2. Servicing Fee.
The aggregate amount of the Servicing
Fee paid to the Servicer with respect
to the preceding Monthly Period..........................................................$_______
3. Payment Shortfalls.
(a) The amount of the Noteholders' Interest Carryover Shortfall
after giving effect to the payments set forth in paragraph
A.1(b) above with respect to:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(b) The amount of the Noteholders' Interest Carryover Shortfall set
forth in paragraph B.3.(a) above per $1,000 interest with
respect to:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(c) The amount of the Noteholders' Principal Carryover Shortfall
after giving effect to the payments set forth in paragraph
A.1(b) above with respect to:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
(d) The amount of the Noteholders' Principal Carryover Shortfall set
forth in paragraph B.3.(a) above per $1,000 interest with
respect to:
the Class A-1 Notes............................................................$________
the Class A-2 Notes............................................................$________
4. (a) The aggregate amount of collections by
the Servicer during the preceding
Monthly
Period...................................................................$______
(b) The aggregate amount which was received by
the Trust from the Servicer during the
preceding Monthly
Period.........................................................$______
(c) The aggregate amount of reimbursements to
the Security Insurer during the preceding
Monthly
Period...................................................................$______
(d) The number of Receivables that are delinquent
for over:
30
days................................................................______
60
days................................................................______
90
days................................................................______
Exhibit D
Form of Servicer's Certificate
Exhibit E
Form of Note Policy
Exhibit F
Form of Stamp
THIS CONTRACT/NOTE IS SUBJECT TO A SECURITY
INTEREST GRANTED TO _________________, AS
TRUSTEE, FOR WHICH UCC-1 FINANCING STATEMENTS HAVE
BEEN FILED WITH THE SECRETARY OF STATE OF DELAWARE.
AS THE LIEN WILL BE RELEASED ONLY BY FILINGS IN SUCH
OFFICES, PURCHASE DOCUMENTS MUST REFER TO SUCH
FILINGS TO DETERMINE WHETHER THE LIEN HAS BEEN
RELEASED.