SECURITY AGREEMENT
among
FIRST INVESTORS AUTO CAPITAL CORPORATION
as Debtor,
FIRST UNION CAPITAL MARKETS CORP.,
as Deal Agent and Collateral Agent,
and
FIRST INVESTORS FINANCIAL SERVICES, INC.,
as Seller
Dated as of January 1, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1. Definitions...............................................1
ARTICLE II
GRANT OF SECURITY INTEREST
Section 2.1 Grant of Security Interest................................18
Section 2.2 [reserved]................................................19
Section 2.3 Re-Liening Trigger........................................19
Section 2.4 [reserved]................................................20
Section 2.5 Increase of Note..........................................20
Section 2.6 Release of Receivables....................................21
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEBTOR
Section 3.1 Representations and Warranties Concerning Receivables.....22
Section 3.2 Covenants of the Debtor...................................27
ARTICLE IV
SERVICING AND ADMINISTRATION
Section 4.1 Servicing.................................................33
Section 4.2 Rights After Designation of Successor Servicer............34
Section 4.3 Responsibilities of the Debtor............................34
Section 4.4 Monthly Debtor's Certificate..............................35
Section 4.5 Re-Written Receivables....................................35
ARTICLE V
ALLOCATION AND APPLICATION OF COLLECTIONS; RESERVE ACCOUNT
Section 5.1 Collections...............................................35
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Section 5.2 Remittances to the Secured Party..........................37
ARTICLE V-A
THE RESERVE ACCOUNT AND THE DEAL AGENT
Section 5A.1 Establishment of the Reserve Account.....................38
Section 5A.2 Maintenance of Eligible Investments......................40
Section 5A.3 Termination of Reserve Account; Release of Funds.........40
ARTICLE VI
TERMINATION EVENTS; SERVICING TERMINATION
Section 6.1 Termination Events........................................40
Section 6.2 Wind-Down Events..........................................42
Section 6.3 Amortization Events.......................................43
Section 6.4 Remedies..................................................43
Section 6.5 Proceeds..................................................44
ARTICLE VII
THE COLLATERAL AGENT
Section 7.1 Duties of the Collateral Agent............................44
Section 7.2 Compensation and Indemnification of Collateral Agent......45
Section 7.3 Representations, Warranties and Covenants of the
Collateral Agent............................................46
Section 7.4 Liability of the Collateral Agent.........................47
Section 7.5 Merger or Consolidation of, or Assumption of the
Obligations of, the Collateral Agent........................49
Section 7.6 Limitation on Liability of the Collateral Agent and
Others......................................................49
Section 7.7 Indemnification of the Secured Party......................50
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices, etc..............................................50
Section 8.2 Successors and Assigns....................................51
Section 8.3 Severability Clause.......................................52
Section 8.4 Amendments; Governing Law.................................52
Section 8.5 No Bankruptcy Petition Against the Company................52
Section 8.6 Setoff....................................................52
Section 8.7 No Recourse...............................................53
Section 8.8 Further Assurances........................................53
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Section 8.9 Other Costs, Expenses and Related Matters.................53
Section 8.10 Reporting................................................53
Section 8.11 Counterparts.............................................54
Section 8.12 Headings.................................................54
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Receivables Schedule
EXHIBIT C Servicing Agreement
EXHIBIT D List of Eligible Investments
EXHIBIT E Credit Guidelines
EXHIBIT F [reserved]
EXHIBIT G Form of Reassignment of Removed Receivables
EXHIBIT H Form of Monthly Debtor's Certificate
EXHIBIT I Form of Funding Notice
EXHIBIT J [reserved]
EXHIBIT K Forms of Contracts
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SECURITY AGREEMENT
SECURITY AGREEMENT (this "AGREEMENT"), dated as of January 1, 1998 among
FIRST INVESTORS AUTO CAPITAL CORPORATION, a Delaware corporation, as debtor
(together with its successors and assigns, the "DEBTOR"), FIRST INVESTORS
FINANCIAL SERVICES, INC., a Texas corporation (the "SELLER"), and FIRST UNION
CAPITAL MARKETS CORP., as deal agent (the "DEAL AGENT") and as collateral agent
(together with its successors and assigns in such capacity, the "COLLATERAL
AGENT").
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of this Agreement, the Debtor
desires to grant a security interest in and to the Receivables and related
property including the Debtor's security interest in the Financed Vehicles and
the Collections derived therefrom during the full term of this Agreement;
WHEREAS, pursuant to the Note Purchase Agreement, the Debtor has issued
the Note to the Deal Agent, as agent for the Company, and will be obligated to
the holder of such Note to pay the principal of and interest on such Note in
accordance with the terms thereof;
WHEREAS, the Debtor is granting a security interest in the Collateral to
the Collateral Agent, for the benefit of the Secured Party, to secure the
payment and performance of the Debtor of its obligations under this Agreement,
the Note and the Note Purchase Agreement;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.
All capitalized terms used herein shall have the meanings herein
specified, and shall include in the singular number the plural and in the plural
number the singular:
ACCRUED INTEREST COMPONENT: For any Collection Period, the Interest Component of
all Commercial Paper Notes outstanding at any time during such Collection Period
which has accrued from the first day through the last day of such Collection
Period whether or not such Commercial Paper Notes mature during such Collection
Period. For purposes of the immediately preceding sentence, the portion of the
Interest Component of Commercial Paper Notes accrued in a Collection Period in
which Commercial Paper Notes have a stated maturity date that succeeds the last
day of such Collection Period shall be based on the actual number of days
elapsed in such Collection Period during which Commercial Paper Notes were
outstanding.
ADDITIONAL AMOUNTS: (a) Any refunds or other payments under any Extended Service
Agreement; (b) refunds in connection with (i) credit life policies relating to
Financed Vehicles and (ii) accident and health policies relating to Financed
Vehicles and (c) sales tax refunds relating to Financed Vehicles.
ADJUSTED LIBOR RATE: With respect to any Collection Period, a rate per annum
equal to the sum (rounded upwards, if necessary, to the next higher 1/100 of 1%)
of (a) the rate obtained by dividing (i) the applicable LIBOR Rate by (ii) a
percentage equal to 100% minus the reserve percentage used for determining the
maximum reserve requirement as specified in Regulation D (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
that is applicable to the Liquidity Provider during such Collection Period in
respect of eurocurrency or eurodollar funding, lending or liabilities (or, if
more than one percentage shall be so applicable, the daily average of such
percentage for those days in such Collection Period during which any such
percentage shall be applicable) PLUS (b) the then daily net annual assessment
rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as estimated by
the Liquidity Provider for determining the current annual assessment payable by
the Liquidity Provider to the Federal Deposit Insurance Corporation in respect
of eurocurrency or eurodollar funding, lending or liabilities.
ADMINISTRATION AGREEMENT: The Administration Agreement, dated as of
September 28, 1995, between the Company and First Union Capital Markets Corp.,
as amended, modified and/or restated.
ADVANCE RATE: On any day, 88%.
AFFILIATE: With respect to a Person, any other Person which directly or
indirectly controls, is controlled by or is under common control with such
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGENT'S ACCOUNT: A special account (account number 01 41 96 47) in the name of
the Deal Agent, maintained at Bankers Trust Company.
AGREEMENT: This Security Agreement, as it may from time to time be amended,
supplemented or otherwise modified in accordance with the terms hereof.
AMORTIZATION EVENT: Has the meaning set forth in Section 6.3 hereof.
AMOUNT FINANCED: With respect to a Receivable means the amount advanced to,
or for the benefit of, the Obligor under the Receivable toward the purchase
price of the Financed Vehicle and any related costs.
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ANNUAL PERCENTAGE RATE or APR: The annual rate of finance charges of a
Receivable stated in the Receivable.
AVAILABLE COLLECTIONS: With respect to each Remittance Date, all Collections
received by the Servicer, from whatever source, during or with respect to the
prior Collection Period, LESS the fees and expenses of GECC as Servicer which
GECC, pursuant to the Servicing Agreement, is permitted to withhold from amounts
remitted to the Debtor or the Collateral Agent.
BAILEE: A "Bailee" within the meaning of Section 9-305 of the New York UCC.
BASE RATE: A rate per annum equal to the greater of (a) the prime rate of
interest announced by the Liquidity Provider (or, if more than one Liquidity
Provider, then by First Union National Bank) from time to time, changing when
and as said prime rate changes (such rate not necessarily being the lowest or
best rate charged by the Liquidity Provider (or First Union National Bank as
applicable)) and (b) the sum of (i) 1.50%, and (ii) the rate equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the Liquidity Provider
(or, if more than one Liquidity Provider, then by First Union National Bank)
from three Federal funds brokers of recognized standing selected by it.
BORROWING BASE: At any time, the product of (i) (a) the aggregate Principal
Balance of all Eligible Receivables MINUS (b) the aggregate Principal Balance of
all Eligible Receivables that constitute Re-Written Receivables to the extent
that such aggregate Principal Balance exceeds 3.0% of the aggregate Principal
Balance of all Eligible Receivables and (ii) the Advance Rate.
BUSINESS DAY: Any day (excluding Saturday or Sunday) on which banks are open for
business in New York, New York, Charlotte, North Carolina and Houston, Texas.
CARRYING COSTS: For any Collection Period the sum of:
(a) The sum of the dollar amount of the Company's obligations for such
Collection Period determined on an accrual basis in accordance with generally
accepted accounting principles consistently applied
(i) To pay interest with respect to Purchased Interests (such
interest to be calculated based on the Adjusted LIBOR Rate, provided such
rate is available, otherwise, the Base Rate) outstanding at any time
during such Collection Period accrued from the first day through the last
day of such Collection Period whether or not such interest is payable
during such Collection Period;
(ii) Without duplication of the amounts described in clause (i)
above, to pay interest, calculated at the Base Rate, with respect to
amounts disbursed by the Credit
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Support Provider in respect of Defaulted Receivables, outstanding at any
time during such Collection Period accrued from the first day through the
last day of such Collection Period whether or not such interest is payable
during such Collection Period;
(iii) Without duplication of the amounts described in clauses (i)
and (ii) above, to pay the Accrued Interest Component of Commercial Paper
Notes with respect to any Collection Period (it being understood that to
the extent the Company has obtained funding under the Liquidity Agreement
or a Credit Support Agreement, the Company will not obtain duplicative
funding in the commercial paper markets);
(iv) Any past due amounts not paid in clauses (i), (ii) or (iii)
above; and
(v) To pay the costs of the Company with respect to the operation of
the Yield Protection Provision; and
(b) The Program Fee and Liquidity Fee accrued from the first day through
the last day of such Collection Period and payable in accordance with the terms
of the Fee Letter.
CERTIFICATED SECURITIES: "Certificated securities" as defined in Section
8-102(l)(a) of the New York UCC and Section 8-102(a)(4) of the New York UCC
which are in the continuous possession in the State of New York by the
Financial Intermediary.
CLEARING CORPORATION: The Depository Trust Company.
CLEARING CORPORATION SECURITIES: "Certificated securities" as defined in Section
8-102(l)(a) of the New York UCC and Section 8-102(a)(4) of the New York UCC
which are in the continuous possession in the State of New York or the Clearing
Corporation or a Custodian Bank.
CLOSING DATE: January 1, 1998.
CODE: The Internal Revenue Code of 1986, as amended from time to time (including
any successor statute), and the regulations promulgated and the rulings issued
thereunder.
COLLATERAL: Has the meaning set forth in Section 2.1 of this Agreement.
COLLATERAL AGENT: First Union Capital Markets Corp., or any successor
thereto.
COLLECTION ACCOUNT: The account established pursuant to Section 4.1(b).
COLLECTION PERIOD: With respect to any Remittance Date, the calendar month
immediately preceding the month of such Remittance Date (and with respect to the
initial Remittance Date, the time period from and including the Closing Date to
and including January 31, 1998.
COLLECTIONS: All Principal Collections and Finance Charge Collections
received by the Servicer in respect of the Collateral in the form of cash,
checks, wire transfers or other form of payment.
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COMMERCIAL PAPER: Promissory notes of the Company issued by the Company in
the commercial paper market.
COMMERCIAL PAPER NOTES: Commercial Paper the proceeds of which are at any
time allocated by the Deal Agent in respect of the acquisition or maintenance
of the Net Investment.
COMPANY: Variable Funding Capital Corporation, a Delaware corporation,
together with its successors and assigns.
CONVEYANCE DATE: Has the meaning set forth in Section 3.1(a) hereof.
CREDIT GUIDELINES: Policies and procedures of the Seller, relating to the
operation of the automotive financing business of the Seller, including, without
limitation, the policies and procedures for determining the creditworthiness of
retail automotive installment sales contract customers, the extension of credit
to such customers and relating to the maintenance of retail automotive
installment sales contracts and collection of retail automotive installment
sales contracts, as such policies and procedures may be amended from time to
time and which shall be attached hereto as EXHIBIT E.
CREDIT INSURANCE: VSI Insurance and any other insurance with respect to the
Receivables upon which the Company and the Seller have agreed.
CREDIT SUPPORT AGREEMENT: Any agreement between the Company and the Credit
Support Provider evidencing the obligation of the Credit Support Provider to
provide credit support to the Company in connection with the issuance of
Commercial Paper.
CREDIT SUPPORT PROVIDER: The Person or Persons who will provide credit
support to the Company in connection with the issuance by the Company of its
Commercial Paper.
CUSTODIAN BANK: A "custodian bank" as defined in Section 8-102(4) of the New
York UCC.
CUT-OFF DATE: December 31, 1997.
DEAL AGENT: First Union Capital Markets Corp. and its successors and
assigns, as administrator for the Company.
DEBTOR: First Investors Auto Capital Corporation and its successors and
assigns.
DEFAULTED RECEIVABLE: Each Receivable with respect to which (a) in accordance
with the Credit Guidelines, the Seller has determined in good faith that
eventual payment in full is unlikely, (b) the related Financed Vehicle has been
repossessed (c) any payment or part thereof is over 90 days contractually
delinquent or (d) has been identified by the Servicer as uncollectible.
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DELINQUENT RECEIVABLE: Each Receivable (a) as to which any payment, or part
thereof, remains unpaid for more than 30 days from the original due date for
such payment and (b) is not a Defaulted Receivable.
DELINQUENCY RATIO: With respect to any Determination Date, the ratio (expressed
as a percentage) of (a) the aggregate amount of remaining scheduled payments of
principal and interest with respect to all Receivables which are Delinquent
Receivables as of the last day of the related Collection Period to (b) the
aggregate amount of remaining scheduled payments of principal and interest with
respect to all outstanding Receivables (that are not Defaulted Receivables) as
of the first day of the related Collection Period.
DETERMINATION DATE: With respect to any Remittance Date, the 15th day of the
month in which such Remittance Date falls or, if such day is not a Business Day,
the Business Day next succeeding such day.
DOLLAR, DOLLARS and "$": Lawful money of the United States of America.
ELIGIBLE INVESTMENTS: Each of the investments attached hereto on the list of
investments set forth as EXHIBIT D, as amended or modified only with the prior
written consent of the Deal Agent and which may include investments for which
the Collateral Agent (but not in its capacity as Collateral Agent) or an
Affiliate of the Collateral Agent provides services.
ELIGIBLE RECEIVABLES: As of any day, each Receivable of the Debtor:
(a) which is payable in Dollars;
(b) at the time of origination, the Obligor on which has provided, as its
most recent billing address, an address located in the United States;
(c) which is not a Defaulted Receivable as of the related Conveyance Date;
(d) which has been created in accordance with, or under standards no less
stringent than, the Credit Guidelines relating to the "Tier III" pricing
program, which Credit Guidelines are attached hereto as EXHIBIT E;
(e) which is not more than 30 days contractually delinquent from the due
date, as of the related Conveyance Date, nor does the Obligor with respect
thereto have any other automotive receivable owing to the Seller which is 60 or
more days contractually delinquent or defaulted as of the related Conveyance
Date.
(f) which was acquired by the Debtor in the ordinary course of the
Debtor's business, was acquired by the Seller in the ordinary course of the
Seller's business and which was created as a result of an advance by an
Originator, directly to or for the benefit of an Obligor for the purchase of an
automobile or light truck;
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(g) as of the related Conveyance Date, the Debtor will have good and
marketable title thereto and which is not subject to any Lien or claim or other
encumbrance for any work, labor or materials performed on the related Financed
Vehicle which are Liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by the Receivable, and as to which, the
Collateral Agent, for the benefit of the Secured Party, shall have a valid and
perfected first priority security interest, free and clear of all Liens,
encumbrances, security interests and rights of others;
(h) as of the related Conveyance Date, to the best of the Seller's
knowledge, a bona fide down payment has been made;
(i) which provides for level monthly payments (provided that the payment
in the first and last month of the Receivable may be minimally different from
the level payment) that fully amortize the Amount Financed by maturity and yield
interest at the APR;
(j) which provides for, in the event that such Receivable is prepaid by
the Obligor, a prepayment that fully pays the Principal Balance of such
Receivable and any interest accrued through the date of prepayment;
(k) which does not represent either a direct or indirect obligation of any
federal, state or local government entity;
(l) the Obligor of which has not previously defaulted on an automobile
installment sales contract purchased by the Seller as of the related Conveyance
Date;
(m) which was originated by an Originator approved by the Seller and which
Originator is subject to an Originator Agreement with the Seller, and which if
acquired by the Seller pursuant to a "bulk purchase" from another Originator has
been approved in writing by the Deal Agent;
(n) which has a clear right of repossession on the Financed Vehicle
securing such Receivable;
(o) [reserved];
(p) which is not, as of the related Conveyance Date, subject to any right
of rescission, cancellation, setoff, claim, counterclaim or defense (including
the defense of usury) of the Obligor;
(q) which has an original term of 60 months or less;
(r) which has an APR of at least 15.0%;
(s) the due date for any payment or payments on which has not been
extended as of any date of determination; PROVIDED, that if the Obligor with
respect to a Receivable has made six
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consecutive payments in full on such
Receivable, such Receivable shall be an Eligible Receivable if it satisfies all
other clauses of this definition and if extensions have been granted on the
payments with respect to such Receivable either (i) in the aggregate for no more
than one month for each twelve months of the original term of such Receivable;
or (ii) no more than twice for periods of one month each during the preceding
twelve calendar months;
(t) which is secured by a valid, subsisting, and enforceable first
priority perfected security interest in favor of the Seller in the related
Financed Vehicle, which security interest has been validly assigned by the
Seller to the Debtor;
(u) which represents the genuine, legal, valid and binding payment
obligation in writing of the obligor, enforceable by the holder thereof in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally;
(v) which shall have complied with, at the time of its origination, and
shall remain in compliance with, all Requirements of Law;
(w) which had at the time of origination thereof, an outstanding Principal
Balance of not greater than $40,000;
(x) [reserved];
(y) the Obligor of which is required to make payments to a lockbox under
the control of the Servicer;
(z) which, as of the related Conveyance Date, has not been waived or
modified except as permitted herein by the Deal Agent;
(aa) as to which the Debtor has done nothing, as of the related Conveyance
Date, to impair the rights of the Deal Agent, the Company or the Collateral
Agent therein;
(bb) which is covered by a valid VSI Insurance Policy;
(cc) which constitutes "chattel paper" under and as defined in Article 9
of the UCC as then in effect in the Relevant UCC State; and
(dd) which was acquired pursuant to an Originator Agreement in a
transaction constituting a bona fide sale in the ordinary course of such
Originator's business.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
ERISA AFFILIATE: With respect to the Debtor, at any time, each trade or business
(whether or not incorporated) that would, at the time, be treated together with
the Debtor as a single employer under Section 4001 of ERISA or Sections 414(b),
(c), (m) or (o) of the Code.
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EXTENDED SERVICE AGREEMENT: A service contract covering repairs to a
Financed Vehicle.
FACILITY LIMIT: $25,000,000.
FEDERAL BOOK-ENTRY SECURITIES: Securities issued by the U.S. Treasury, FNMA
or by FHLMC which are maintained in book-entry form on the records of the
Federal Reserve Bank of Dallas.
FEE LETTER: The letter agreement, dated the Closing Date, between the
Company and the Debtor in respect of the payment by the Debtor of certain
fees.
FINANCE CHARGE COLLECTIONS: With respect to any Collection Period, the sum of
the following amounts: (a) that portion of all collections on Receivables
allocable to interest, late fees, insufficient funds check charges and related
charges assessed against Obligors, (b) Liquidation Proceeds to the extent
allocable to interest due thereon in accordance with the Servicer's customary
servicing procedures, (c) any amounts received by the Debtor pursuant to any
Interest Rate Hedge Agreement, and (d) the interest portion of the amount
required to be paid by the Debtor to reduce the principal balance of the Note
and release the lien of the Secured Party on each Receivable that became an
Ineligible Receivable during the related Collection Period.
FINANCED VEHICLE: An automobile or light truck, together with all accessions
thereto, securing an Obligor's indebtedness under the respective Receivable.
FINANCIAL INTERMEDIARY: First Union National Bank and any other entity
acting in the capacity of a "financial intermediary" as defined in Section
8-313(4) of the New York UCC.
FINANCIAL INTERMEDIARY SECURITIES ACCOUNT: A reserve account which is a
securities account maintained by the Financial Intermediary in the name of First
Union Capital Markets Corp., as Collateral Agent for the Secured Party.
GECC: Has the meaning specified in Section 4.1(a).
GOVERNMENTAL AUTHORITY: The United States of America, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
GROSS DEFAULT RATIO: On any Determination Date, a fraction (expressed as a
percentage) the numerator of which is the product of (i) 12 multiplied by (ii)
the aggregate outstanding principal balance of Receivables which became
Defaulted Receivables during the related Collection Period and the denominator
of which is the aggregate outstanding Principal Balance of all Eligible
Receivables as of the first day of the third prior Collection Period (provided,
however, that until the fourth Determination Date, the denominator shall be the
aggregate outstanding Principal Balance of all Eligible Receivables as of the
last day of the first Collection Period).
HEDGE COUNTERPARTY: Has the meaning specified in Section 3.2(n) of this
Agreement.
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INCIPIENT COVERAGE SHORTFALL: Occurs on any day on which the Net Investment
PLUS accrued Carrying Costs exceeds the sum of (a) the Borrowing Base and (b)
the amount on deposit in the Reserve Account.
INELIGIBLE RECEIVABLE: Has the meaning specified in Section 3.1.
INSTRUMENTS: Has the meaning specified in Section 9-105 of the New York UCC.
INTEREST COMPONENT: (i) with respect to any Commercial Paper issued on an
interest-bearing basis, the interest payable on such Commercial Paper at its
maturity (including any dealer commissions or placement agent fees) and (ii)
with respect to any Commercial Paper issued on a discount basis, the portion of
the face amount of such Commercial Paper representing the discount incurred in
respect thereof (including any dealer commissions or placement agent fees).
INITIAL FUNDING: Has the meaning specified in the Note Purchase Agreement.
INITIAL RESERVE ACCOUNT DEPOSIT: $250,000.
INTEREST RATE HEDGE AGREEMENT: Has the meaning specified in Section 3.2(n).
LAW: Any law (including common law), constitution, statute, treaty, regulation,
rule, ordinance, order, injunction, writ, decree or award of any Official Body.
LIBOR RATE: With respect to any Collection Period, the rate determined by First
Union National Bank ("FUNB") to be (a) the per annum rate for deposits in U.S.
Dollars for a term of one month which appears on the Telerate Page 3750 Screen
on the day that is two London Business Days prior to the first day of such
Collection Period except, that if such first day of the Collection Period is not
a Business Day, then the first preceding day that is a Business Day (rounded
upwards, if necessary, to the nearest 1/100,000 of l%), (b) if such rate does
not appear on the Telerate Page 3750 Screen the term "LIBOR Rate" with respect
to that Collection Period shall be the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/100,000 of l%) of the offered quotations obtained by
FUNB from four major banks in the London interbank market selected by FUNB (the
"REFERENCE BANKS") for deposits in U.S. dollars to leading banks in the London
interbank market as of approximately 11:00 a.m. (London time) on the day that is
two London Business Days prior to the first day of such Collection Period,
unless such first day of the Collection Period is not a Business Day, in which
case, the first preceding day that is a Business Day or (c) if fewer than two
Reference Banks provide FUNB with such quotations, the LIBOR Rate shall be the
rate per annum which FUNB determines to be the arithmetic mean (rounded upwards,
if necessary, to the nearest 1/100,000 of l%) of the offered quotations which
leading banks in New York City selected by FUNB are quoting in the New York
interbank market on such date for deposits in U.S. dollars to the Reference
Banks or, if fewer than two such quotations are available, to leading European
and Canadian Banks.
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LIEN: Any mortgage, deed of trust, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement under
the Uniform Commercial Code (other than any such financing statement filed for
informational purposes only) or comparable law of any jurisdiction to evidence
any of the foregoing.
LIQUIDATION PROCEEDS: (a) Proceeds of any claim under any Credit Insurance and
(b) all monies collected in connection with the disposition of any Financed
Vehicle, from whatever source, securing a Defaulted Receivable, net of the sum
of (x) any amounts reasonably expended by the Servicer in connection with the
liquidation of such Financed Vehicle for the account of the Obligor and (y) any
such amounts required by law to be remitted to the Obligor.
LIQUIDITY AGREEMENT: The agreement between the Company and any Liquidity
Provider evidencing the obligation of the Liquidity Provider to provide
liquidity support to the Company in connection with the issuance of Commercial
Paper.
LIQUIDITY FEE: A fee payable to the Investors by the Debtor, the terms of
which are set forth in the Fee Letter.
LIQUIDITY PROVIDER: The Person or Persons who will provide liquidity support to
the Company in connection with the issuance by the Company of its Commercial
Paper, which, initially, shall be First Union National Bank.
LONDON BUSINESS DAY: Any day which is a Business Day and also is a day on
which commercial banks are open for international business (including
dealings in U.S. dollar deposits) in London.
MONTHLY DEBTOR'S CERTIFICATE: Has the meaning specified in Section 4.4.
MOODY'S: Moody's Investors Service, Inc.
MULTI-EMPLOYER PLAN: A "multi-employer plan" as defined in Section
4001(a)(3) of ERISA to which contributions are or have been made by the
Debtor or any ERISA Affiliate of the Debtor.
NET INVESTMENT: With respect to any date of determination, (i) the sum of (a)
the Original Investment and (b) the amount of any Subsequent Funding occurring
on or prior to such date LESS (ii) the sum of (x) all Collections distributed to
the Deal Agent in reduction of the Net Investment pursuant to Section 5.1 hereof
on or prior to such date of determination, and (y) draws from the Reserve
Account distributed to the Noteholder in reduction of the Net Investment.
NOTE: The note issued by the Debtor to the Company pursuant to Section 2.1 of
the Note Purchase Agreement, as the same may be amended from time to time and
any other notes issued in replacement therefor.
11
NOTEHOLDER: The Deal Agent as agent for the Company or any assignee of the
Company which shall include only the Company, any Liquidity Provider, or any
commercial paper conduit administered by First Union National Bank or First
Union Capital Markets Corp.
NOTE PURCHASE AGREEMENT: The Note Purchase Agreement dated as of January 1, 1998
by and among the Debtor, the Company, the Deal Agent, the financial institutions
parties thereto and First Union National Bank, as liquidity agent as such
agreement may be amended, modified and supplemented from time to time in
accordance with the terms thereof.
OBLIGOR: For any Receivable, each and every Person who purchased or
co-purchased a Financed Vehicle or any other person who owes payments under
such Receivable.
OFFICIAL BODY: Any government or political subdivision or any agency, authority,
bureau, central bank, commission, department or instrumentality of either, or
any court, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
ORIGINAL INVESTMENT: The amount advanced to the Debtor in respect of the
Initial Funding (without reduction for any amount the Debtor directs to be
deposited in the Reserve Account).
ORIGINATOR: A bank, finance company, car rental company or factory authorized
dealer or its affiliates or any other Person approved in writing by the Deal
Agent which has entered into an Originator Agreement with the Seller.
ORIGINATOR AGREEMENT: The agreement between the Seller and an Originator
relating to the purchase by the Seller of a Receivable.
PBGC: The Pension Benefit Guaranty Corporation or any other entity
succeeding to the functions currently performed by the Pension Benefit
Guaranty Corporation.
PERSON: An individual, a partnership, a corporation (including a business
trust), a joint stock company, a trust, an unincorporated association, a joint
venture or other entity or a government or an agency or political subdivision
thereof.
PLAN: Any employee pension benefit plan that (a) is or has been maintained by
the Debtor or any ERISA Affiliate of the Debtor, or to which contributions by
any such Person are or have been required to be made, (b) is subject to the
provisions of Title IV of ERISA and (c) is not a Multi-employer Plan.
PLAN EVENT: (a) The provisions of a notice of intent to terminate any Plan under
Section 4041 of ERISA other than in a "standard termination", or the treatment
of a Plan amendment as a distress termination under Section 4041 of ERISA, (b)
the receipt of any notice by any Plan to the effect that the PBGC intends to
apply for the appointment of a trustee to administer any Plan, (c) the
termination of any Plan which may result in a material liability to the Debtor,
(d) the withdrawal of the Debtor or any ERISA Affiliate of the Debtor from any
Plan described in Section 4063 of ERISA which may result in a material liability
of the Debtor, (e) the complete or partial
12
withdrawal of the Debtor or any ERISA Affiliate of the Debtor from any
Multi-employer Plan which may result in a material liability of the Debtor, (f)
a "reportable event" described in Section 4043 of ERISA (other than a
"reportable event" not subject to the provision for 30-day notice to the PBGC)
or an event described in Section 4068(f) of ERISA which may result in a material
liability of the Debtor, and (g) any other event or condition which under ERISA
or the Code may constitute grounds for the imposition of a lien on the assets of
the Debtor in respect of any Plan or Multi-employer Plan which is not corrected
within 30 days.
POTENTIAL AMORTIZATION EVENT: An event which, but for the lapse of time or
the giving of notice, or both, would constitute an Amortization Event.
POTENTIAL TERMINATION EVENT: An event which but for the lapse of time or the
giving of notice, or both, would constitute a Termination Event.
POTENTIAL WIND-DOWN EVENT: An event which, but for the lapse of time or the
giving of notice, or both, would constitute a Wind-Down Event.
PRINCIPAL BALANCE: The Amount Financed on a Receivable as of the close of
business on the last day of a Collection Period, MINUS the sum of (a), if such
Receivable is a Re-written Receivable, all Rewrites related thereto through the
Determination Date and (b) all Collections collected by the Servicer to and
including such day with respect to such Receivable and applied by the Servicer
in accordance with the Servicer's customary servicing procedures to reduce the
principal balance thereof; PROVIDED, HOWEVER, that the Principal Balance of any
Receivable which is a "Defaulted Receivable" as defined herein shall be zero.
PRINCIPAL COLLECTIONS: For any Remittance Date, the sum of the following amounts
with respect to the preceding Collection Period: (a) that portion of all
collections on Receivables allocable to principal, (b) Liquidation Proceeds
attributable to principal in accordance with the Servicer's customary servicing
procedures, (c) partial prepayments of any refunded item included in the Amount
Financed, such as extended warranty protection plan costs, or physical damage,
credit life, or disability insurance premiums, and (d) the principal portion of
the amount paid by the Debtor to reduce the principal balance of the Note and
release the lien of the Secured Party on each Receivable that became an
Ineligible Receivable during the related Collection Period.
PRINCIPAL COMPONENT: With respect to Commercial Paper (a) in the case of
Commercial Paper issued on a discount basis, the amount of proceeds received by
the Company upon the sale thereof and (b) in the case of Commercial Paper issued
on an interest-bearing basis, the face amount thereof.
PROGRAM FEE: A fee payable to the Company by the Debtor, the terms of which
are set forth in the Fee Letter.
PURCHASE AGREEMENT: The Purchase Agreement, dated as of January 1, 1998, between
the Debtor, as purchaser thereunder, and the Seller, as seller thereunder, as
the same may be
13
amended, modified and supplemented from time to time in accordance with the
terms thereof and hereof.
PURCHASED INTEREST: The interest in the Note acquired by the Liquidity
Provider, if any.
RECEIVABLE: Any retail installment sales contract and any indebtedness owed
thereunder (including any Additional Amounts) in which the Debtor has or
acquires at any time an interest, whether constituting an account, chattel
paper, instrument, mortgage, deed of trust or general intangible, arising out of
or in connection with the sale of new or used cars, or new and used light trucks
including the rendering of services by the originator or any other party in
connection therewith, under an Extended Service Agreement or otherwise, and
including the right of payment of any finance charges and other obligations of
the Obligor with respect thereto. Notwithstanding the foregoing, once the
Collateral Agent has released its security interest in a Receivable pursuant to
Section 2.6 hereof, it shall no longer constitute a Receivable hereunder.
RECEIVABLE SCHEDULE: The schedule of Receivables (which schedule may be in the
form of a computer file or microfiche) attached as EXHIBIT B to this Agreement,
as amended or modified from time to time pursuant to the terms of this
Agreement.
RECOVERY RATIO: On any Determination Date, a fraction (expressed as a
percentage) the numerator of which is the sum of (i) the amount of Liquidation
Proceeds received during the related Collection Period from the disposition of
any Financed Vehicles which secured Defaulted Receivables plus (ii) the amount
of any rebates scheduled to be received within five months from the date of
receipt of such Liquidation Proceeds for add-on products financed for the
related Financed Vehicles, and the denominator of which is the aggregate
outstanding Principal Balance (such Principal Balance to be calculated without
giving effect to any Rewrite) of the related Receivables at the time such
Receivables were first classified as Defaulted Receivables.
RELEVANT UCC STATE: The States of New York and Texas.
RE-LIENING EXPENSE: All expenses incurred by the Seller or the Collateral Agent
for the purpose of re-titling the Financed Vehicles to name the Collateral Agent
as lienholder on the certificate of title thereto.
RE-LIENING TRIGGER:
(a) First Investors Financial Services Group, Inc. (including its
consolidated subsidiaries) stockholders' equity falls below $12,000,000;
(b) any event described in Section 6.1(c) hereof shall occur with respect
to the Seller or the Debtor; or
(c) one or more courts of competent jurisdiction have issued final,
non-appealable orders to the effect that the Collateral Agent does not have a
valid perfected first priority security interest in the Financed Vehicles
securing any Receivable where the aggregate initial Principal
14
Balance of such affected Receivables is equal to or greater than 5.0% or more of
the aggregate Principal Balance of the Receivables as of the date of such order.
REMITTANCE DATE: The 20th day of each month beginning February 20, 1998, or, if
such 20th day is not a Business Day, the next succeeding Business Day.
REMOVAL DATE: Has the meaning specified in Section 2.6 hereof.
REQUIRED RESERVE ACCOUNT BALANCE: On any day, the greater of (a) an amount equal
to the product of (i) 1.00% and (ii) the Facility Limit and (b) an amount equal
to the product of (x) 2.00% and (y) the Net Investment on such date of
calculation (after giving effect to any increases in the Net Investment on such
date of determination).
REQUIREMENTS OF LAW: For any Person, the certificate of incorporation or
articles of association and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
RESERVE ACCOUNT: The account established pursuant to Section 5A.1 hereof.
RESERVE ACCOUNT BANK: Bankers Trust Company or such other bank or trust
company as may be appointed by the Deal Agent from time to time.
RESERVE ADVANCE: Amounts advanced from the Reserve Account in accordance
with Section 5.1(b) hereof.
REVOLVING PERIOD: The period from and including the Closing Date to, but not
including, the Termination Date.
REWRITE: As to any Re-Written Receivable, the amount of any reduction of the
Principal Balance of such Re-Written Receivable.
RE-WRITTEN RECEIVABLE: Any Receivable as to which the Servicer has, pursuant to
the provisions of Section 4.5, reduced either (i) the Principal Balance thereof
or (ii) the APR thereof.
S&P: Standard & Poor's, a division of The McGraw-Hill Companies.
SECURED PARTY: The Noteholder.
SELLER: First Investors Financial Services, Inc.
SERVICER: GECC as servicer under the Servicing Agreement or any successor
Servicer acceptable to the Deal Agent.
15
SERVICER EVENT OF DEFAULT: Has the meaning specified in the Servicing
Agreement.
SERVICING AGREEMENT: The Servicing Agreement, dated as of January 1, 1998,
between GECC, as servicer, and the Debtor, as such agreement may be amended,
modified and supplemented from time to time (but only with the consent of the
Deal Agent).
SUBSEQUENT FUNDING: Has the meaning specified in the Note Purchase Agreement.
SUBSIDIARY: Any corporation more than 50% of the outstanding voting securities
of which shall at any time be owned or controlled, directly or indirectly, by
the Debtor or by one or more Subsidiaries, or any similar business organization
which is so owned or controlled.
TARGETED MONTHLY PRINCIPAL PAYMENT: With respect each Remittance Date, the
amount necessary to reduce the Net Investment to an amount no greater than the
Borrowing Base.
TELERATE PAGE 3750 SCREEN: The display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purposes of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar deposits).
TERMINATION DATE: The earliest of (a) December 31, 1998 unless such date shall
be extended by the parties hereto pursuant to a written document, (b) the date
of termination of the commitment of the Liquidity Provider under any Liquidity
Agreement, (c) the date of the termination of the commitment of the Credit
Support Provider under any Credit Support Agreement, (d) the date designated by
the Debtor as the date on which the Revolving Period shall terminate (which date
shall be the last day of a Collection Period) following not less than 30
Business Days' prior written notice to the Company and the Deal Agent, and (e)
the date on which any Termination Event has occurred.
TERMINATION EVENT: Has the meaning specified in Section 6.1 hereof.
TRANSFER or TRANSFERRED: When used with respect to Eligible Investments held
or to be held in the Reserve Account:
(a) with respect to each Clearing Corporation Security, transfer to the
Deal Agent will occur upon the latest of: (i) the making by the Clearing
Corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate securities
account of the Financial Intermediary by the amount of such Clearing Corporation
Security, (ii) the sending of a confirmation to the Deal Agent by the Financial
Intermediary of the purchase by the Deal Agent of such Clearing Corporation
Security and (iii) the identification by book entry to the Financial
Intermediary Securities Account by the Financial Intermediary of the Clearing
Corporation Securities as belonging to the Deal Agent, acting for the Collateral
Agent, on behalf of the Secured Party;
16
(b) with respect to each Certificated Security, transfer to the Deal Agent
will occur upon the latest of (i) the sending of a confirmation by the Financial
Intermediary of the purchase by the Deal Agent of such Certificated Security and
(ii) the identification by book-entry to the Financial Intermediary Securities
Account by the Financial Intermediary of such Certificated Security as belonging
to the Deal Agent, acting for the Collateral Agent, on behalf of the Secured
Party;
(c) with respect to each Federal Book Entry Security, transfer to the Deal
Agent will occur upon the latest of (i) the making by the Federal Reserve Bank
of New York of appropriate entries transferring the Federal Book-Entry Security
on its books and records to the book-entry account of the Financial Intermediary
at the Federal Reserve Bank of New York, (ii) the sending of a confirmation by
the Financial Intermediary of the purchase by the Deal Agent of such Federal
Book-Entry Security, and (iii) the identification by book-entry to the Financial
Intermediary Securities Account by the Financial Intermediary of such Federal
Book Entry Security as belonging to the Deal Agent, acting for the Collateral
Agent, on behalf of the Secured Party;
(d) with respect to Instruments in the possession of the Bailee, in the
State of New York, the sending of notice to the Bailee by the Deal Agent of the
security interest of the Deal Agent, acting for the Collateral Agent, on behalf
of the Secured Party and the sending of an acknowledgment of such notice to the
Deal Agent; and
(e) with respect to any Eligible Investment, by any method creating a
perfected security interest in favor of the Deal Agent, acting for the
Collateral Agent, on behalf of the Secured Party, provided that the Debtor shall
have delivered an opinion of counsel to the Deal Agent and the Collateral Agent
to the effect that the Deal Agent acting for the Collateral Agent, on behalf of
the Secured Party, has a valid perfected first priority security interest in
such Eligible Investment.
UNIFORM COMMERCIAL CODE or UCC: The Uniform Commercial Code as adopted in
the Relevant UCC State.
LIQUIDITY FEE: A fee payable monthly to the Company by the Debtor, the terms
of which are set forth in the Fee Letter.
VSI INSURANCE: The blanket collateral protection insurance policy or policies of
insurance underwritten by Agricultural Excess and Surplus Insurance Company (or
any other insurance company acceptable to the Company) covering each of the
installment sales contracts held by the Debtor, including the Receivables, in
the form attached hereto as EXHIBIT J.
WIND-DOWN EVENT: Has the meaning specified in Section 6.2.
YIELD PROTECTION PROVISION: The compensation of the Company by the Debtor with
respect to increased taxes, reserves and funding costs of the Company as
described in Section 4.2 of the Note Purchase Agreement.
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ARTICLE II
GRANT OF SECURITY INTEREST
SECTION 2.1 GRANT OF SECURITY INTEREST.
As security for the prompt and complete payment of the Note and the
performance of all of the Debtor's obligations under the Note, the Note Purchase
Agreement and this Agreement, the Debtor hereby grants to the Collateral Agent,
for the benefit of the Secured Party, a security interest in and continuing Lien
on all of the Debtor's right, title and interest in, to and under (a) all
Receivables in which the Debtor at any time and from time to time has an
interest, all monies due or to become due with respect to such Receivables on
and after the Cut-Off Date, whether such amounts are considered accounts,
general intangibles or other property, and all monies, instruments, securities
or investments of any type or description on deposit in or credited to the
Collection Account at any time; (b) the security interests in the Financed
Vehicles granted by Obligors pursuant to the related Receivables and any
accessions thereto; (c) any proceeds from claims on any physical damage, credit
life, credit disability, VSI Insurance or other insurance policies covering
Financed Vehicles or Obligors and any other Liquidation Proceeds; (d) any
Interest Rate Hedge Agreement, including the right to payment under any such
Interest Rate Hedge Agreement or other hedging arrangement; and (e) the proceeds
of any and all of the foregoing (collectively, the "COLLATERAL"). As security
for the prompt and complete payment of the Note and the performance of all of
Debtor's obligations under the Note, the Note Purchase Agreement and this
Agreement, the Debtor hereby grants to the Collateral Agent for the benefit of
the Secured Party, a security interest in and continuing Lien on all of Debtor's
right, title and interest in, to and under the Reserve Account and all Eligible
Investments, securities, instruments and other financial assets (as defined in
Section 8-102(a)(9) of the 1994 official Text of the Uniform Commercial Code and
the New York UCC) credited to the Reserve Account and the proceeds thereof. In
addition, the Debtor hereby assigns to the Collateral Agent all of its rights
under the Purchase Agreement with respect to the Receivables. Notwithstanding
the foregoing assignment, the Debtor does not assign its rights as to any retail
installment sales contracts purchased thereunder other than the retail
installment sales contracts and any other rights relating to Receivables. The
foregoing pledge does not constitute an assumption by the Collateral Agent of
any obligations of the Debtor to Obligors or any other Person in connection with
the Collateral or under any agreement and instrument relating to the Collateral,
including without limitation any obligation to make future advances to or on
behalf of such Obligors.
In connection with such pledge, the Debtor agrees to record and file, at
its own expense, financing statements with respect to the Collateral now
existing and hereafter created for the transfer of chattel paper, accounts and
general intangibles (each as defined in Article 9 of the UCC as in effect in the
Relevant UCC State) meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect the first priority
security interest of the Collateral Agent in the Collateral, and to deliver a
file-stamped copy of such financing statements or other evidence of such filing
(which may, for purposes of this Section 2.1, consist
18
of telephone confirmation of such filing) to the Company on or prior to the
Closing Date. In addition, the Debtor agrees to clearly and unambiguously mark
its general ledger and all accounting records and documents and all computer
tapes and records to show that the Receivables have been pledged to the
Collateral Agent hereunder, which marking shall be completed on or before the
relevant Conveyance Date.
In connection with the grant of the security interest pursuant to this
Section 2.1, the Debtor agrees to direct the Servicer, on or prior to the
related Conveyance Date, to indicate, on or prior to the related Conveyance
Date, clearly and unambiguously in its computer files described in the preceding
paragraph that a security interest in the Receivables has been granted to the
Collateral Agent pursuant to this Agreement, which marking shall be completed on
or before the relevant Conveyance Date. The Debtor shall deliver to the
Collateral Agent a computer file or microfiche list containing a true and
complete list of all Receivables, identified by account number and principal
balance as of (i) the Cut-Off Date, which shall be delivered on or before the
date of the Initial Funding and (ii) as of the last day of March, June,
September and December of each year, each such file or list shall be delivered
on the fifteenth Business Day after the end of such month. Such file or list
shall be marked as the Receivable Schedule and EXHIBIT B to this Agreement,
delivered to the Collateral Agent as confidential and proprietary information,
and is hereby incorporated into and made a part of this Agreement. The Debtor
agrees to deliver to the Collateral Agent at such times as requested by the
Collateral Agent in connection with a third party's request to review EXHIBIT B,
as provided in the financing statement filed by the Collateral Agent under the
UCC, a computer file or microfiche list containing a true and complete list of
all Receivables, including all Receivables created on or after the Cut-Off Date,
in existence as of the later of (x) the last day of the prior Collection Period
and (y) the most recent Removal Date by account number and by Principal Balance
as of such day or date. Such updated and revised file or list shall be marked as
the Receivable Schedule and EXHIBIT B to this Agreement, delivered to the
Collateral Agent as confidential and proprietary information, shall replace the
previously delivered Receivable Schedule identified as EXHIBIT B, and shall be
incorporated into and made a part of this Agreement. The Debtor agrees to direct
the Servicer, on each Conveyance Date, to indicate clearly and unambiguously in
its computer files that an undivided interest in the Receivables has been
pledged to the Collateral Agent pursuant to this Agreement.
SECTION 2.2 [RESERVED].
SECTION 2.3 RE-LIENING TRIGGER.
Upon the occurrence of a Re-Liening Trigger and at the direction of the
Deal Agent, the Seller shall take all steps necessary to cause the certificate
of title or other evidence of ownership of the related Financed Vehicle to be
revised to name the Collateral Agent on behalf of the Secured Party as
lienholder. Any costs associated with such revision of the Certificate of Title
shall be paid by the Seller and to the extent such costs are not paid by the
Seller such unpaid costs shall be recovered from funds available for application
as described in Section 5.1 hereof.
19
In addition, with respect to any state in which obligors are located with
respect to Receivables that account for more than 10% of the initial aggregate
Principal Balance of Receivables, the Seller shall be required, at the request
of the Deal Agent, to deliver a legal opinion satisfactory to the Deal Agent and
counsel for the Deal Agent as to the status of the security interest of the
Collateral Agent, on behalf of the Secured Party, in the related Financed
Vehicles or cause the certificate of title or other evidence of ownership of the
related Financed Vehicle to be revised to name the Collateral Agent on behalf of
the Secured Party as lienholder.
Further, in the event that First Investors Financial Services Group, Inc.
(including its consolidated subsidiaries) stockholders' equity falls below
$15,000,000, the Seller shall within 30 days thereof, either (a) deliver to the
Collateral Agent and the Deal Agent opinions of legal counsel, in form and
substance satisfactory to the Deal Agent and counsel to the Deal Agent, with
respect to the laws of each state required by the Deal Agent, as to the status
of the security interest of the Collateral Agent, on behalf of the Secured
Party, in the related Financed Vehicles or (b) at the request of the Deal Agent,
the Seller shall cause to be taken all steps necessary to cause the certificate
of title or other evidence of ownership of the related Financed Vehicle to be
revised to name the Collateral Agent on behalf of the Secured Party as
lienholder. Any costs associated with such revision of the Certificate of Title
shall be paid by the Seller and to the extent such costs are not paid by the
Seller such unpaid costs shall be recovered from funds available for application
as described in Section 5.1 hereof.
SECTION 2.4 [RESERVED].
SECTION 2.5 INCREASE OF NOTE.
The Debtor may increase the outstanding principal amount of the Note only
upon satisfaction of the following conditions:
(a) no Termination Event, no Amortization Event, no Wind-Down Event and/or
Incipient Coverage Shortfall shall have occurred and be continuing;
(b) the Debtor shall have entered into any Interest Rate Hedge Agreement
that is satisfactory to the Deal Agent and meets the criteria set forth in
Section 3.2(n);
(c) after giving effect to any such increase, the sum of (x) the Net
Investment and (y) accrued Carrying Costs shall not be greater than the
Borrowing Base;
(d) after giving effect to any such increase, the sum of (x) the Net
Investment and (y) the interest component of Commercial Paper Notes would not
exceed the Facility Limit;
(e) the amount on deposit in the Reserve Account shall at least equal the
Initial Reserve Account Deposit;
20
(f) after giving effect to such increase, the Debtor shall not have
requested increases in the principal amount of the Note more than seven (7)
times during the calendar month in which such request is made, unless otherwise
approved by the Deal Agent; and
(g) the Debtor shall have provided the Collateral Agent and the Deal Agent
with written notice in the form of Exhibit I hereto (the "FUNDING Notice") at
least three Business Days prior to such increase.
SECTION 2.6 RELEASE OF RECEIVABLES.
On any Business Day, provided that no Termination Event, Amortization
Event, Wind-Down Event or Incipient Coverage Shortfall shall have occurred, the
Debtor shall have the right to require the Collateral Agent to release all of
the Collateral Agent's right, title and interest in and to all or certain
specified Receivables on the terms and conditions set forth herein (the
effective date of any such release, the "REMOVAL DATE"). It shall be a condition
precedent to any such release that (a) after giving effect to any such release,
the sum of (x) Net Investment and (y) accrued Carrying Costs shall not exceed
the sum of (1) Borrowing Base and (2) the amount on deposit in the Reserve
Account (calculated after giving effect to any release of funds from the Reserve
Account on such Removal Date), such determination to be based on the most recent
Monthly Debtor's Certificate delivered by the Debtor, (b) such release does not
result in a Termination Event, a Wind-Down Event or an Amortization Event, (c)
the Debtor shall (i) pay to the Collateral Agent for payment to the Noteholder
on the day of receipt from the Debtor, an amount equal to the amount necessary,
if any, to reduce the Net Investment such that the sum of (x) Net Investment and
(y) accrued Carrying Costs does not exceed the Borrowing Base after giving
effect to such release and (ii) pay to the Collateral Agent for payment to the
Noteholder on the day of receipt from the Debtor, an amount equal to all unpaid
Carrying Costs (including Carrying Costs not yet accrued) to the extent
reasonably determined by the Deal Agent to be attributable to that portion of
the Net Investment to be reduced as a result of the payment referred to in
clause (c)(i)(y) above, (d) the Debtor shall have given the Collateral Agent and
the Deal Agent at least five (5) days prior written notice of its intention to
request the release of such Receivables, (e) all amounts due under the Note
Purchase Agreement, to the extent accrued to the date of such release or, at the
option of the Collateral Agent, acting upon the written instructions of the Deal
Agent, accrued to such date and to accrue thereafter, shall have been
reimbursed, (f) such release shall not materially and adversely affect the
Secured Party or any Purchaser and (g) such release shall include at least
$5,000,000 in Principal Balance of Receivables; PROVIDED, HOWEVER, that there
shall be no minimum release amount with respect to Ineligible Receivables. It is
the intention of the parties that, to the extent the Company is the Noteholder
and the Company is funding its interest in the Note through Commercial Paper
Notes, the Debtor shall pay to the Collateral Agent such amounts as are required
under this Section 2.6 on the Business Day preceding the maturity date of the
Commercial Paper Notes issued by the Company to fund its interest in the Note.
The Deal Agent agrees, subject to the provisions of the Administration
Agreement, to use its reasonable efforts to reinvest in overnight Eligible
Investments any payments received by the Company from the Debtor in respect of
maturing Commercial Paper prior to the Business Day preceding such maturity and
remit the proceeds of such investments to the Debtor.
21
The amount described in clause (c)(i) above upon receipt by the Company
shall be applied in reduction of the Net Investment.
The Debtor shall also be obligated to pay to the Collateral Agent, the
Company and the Deal Agent the reasonable legal fees and expenses of the
Collateral Agent, the Deal Agent and the Company arising in connection with any
such release.
Upon (i) the deposit to the Collection Account and the payment to the
respective parties of the amounts described in this Section, and (ii) the
receipt by the Collateral Agent of a certificate of the Debtor stating that all
conditions precedent contained in this Section 2.6 have been satisfied, the
Collateral Agent shall execute and deliver to the Debtor, at the Debtor's
expense, such documents or instruments as are necessary to terminate the
Collateral Agent's interest in the applicable Receivables and the proceeds
thereof. Any such documents shall be prepared by or on behalf of the Debtor and
shall specifically identify (by loan or account number and outstanding Principal
Balance) the Receivables in which the Collateral Agent's security interest is to
be released.
The Debtor shall deliver to the Collateral Agent and the Deal Agent a
computer file, microfiche list or printed list containing a true and complete
list of all such Receivables to be released, identified by account number and
principal balance as of the Cut-Off Date and/or Removal Date. Such file or list,
when taken together with the list provided pursuant to Section 2.1 hereof shall
constitute the Receivables Schedule as of such Removal Date after giving effect
to such removal.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEBTOR
SECTION 3.1 REPRESENTATIONS AND WARRANTIES CONCERNING RECEIVABLES.
The Debtor represents and warrants to and covenants with the Collateral
Agent and the Secured Party as of the date of the Initial Funding and, except as
otherwise provided herein, as of each Conveyance Date, that:
(a) Immediately prior to the Initial Funding or, as to any Receivable that
is acquired by the Debtor after the Initial Funding, the date such Receivable is
acquired by the Debtor (each a "CONVEYANCE DATE"), the Seller had a valid and
enforceable first priority security interest in the related Financed Vehicle,
and such security interest had been duly perfected and was prior to all other
present and future liens and security interests (except future tax liens and
liens that, by statute, may be granted priority over previously perfected
security interests) that now exist or may hereafter arise, and the Seller had
the full right to assign such security interest to the Debtor.
22
(b) On and after the related Conveyance Date, there shall exist under such
Receivable a valid, subsisting, and enforceable first priority perfected
security interest in the related Financed Vehicle (other than, as to the
priority of such security interest, any statutory lien arising by operation of
law after the related Conveyance Date which is prior to such interest) and,
following the grant of all of the Debtor's right, title and interest in and to
such security interest to the Collateral Agent, at such time as enforcement of
such security interest is sought there shall exist in favor of the Collateral
Agent a valid, subsisting, and enforceable first priority perfected security
interest (other than, as to the priority of such security interest, any
statutory lien arising by operation of law after the related Conveyance Date
which is prior to such interest) in the related Financed Vehicle.
(c) If such Receivable was originated in a state in which notation of a
security interest on the title document for the Financed Vehicle securing such
Receivable is required or permitted to perfect such security interest, the title
document for such Financed Vehicle shows, or if a new or replacement title
document is being applied for with respect to such Financed Vehicle the title
document will show, the Seller as the sole holder of a security interest in such
Financed Vehicle. If such Receivable was originated in a state in which the
filing of a financing statement under the UCC is required to perfect a security
interest in motor vehicles, such filings or recordings have been duly made and
show the Seller as the sole holder of a first priority security interest in such
Financed Vehicle, and in either case the Debtor has the same rights as the
Seller has or would have (if the Seller were still the owner of a Receivable)
against the Obligor and all creditors of the Obligor claiming an interest in
such Financed Vehicles.
(d) Immediately prior to the related Conveyance Date: (i) such Receivable
had not been sold, assigned, or pledged by the Seller to any Person; (ii) the
Seller had good and marketable title thereto free and clear of any encumbrance,
equity, pledge, charge, claim or security interest; (iii) the Seller was the
sole owner thereof and had full right to sell the Receivable to the Debtor and
upon the sale thereof to the Debtor, the Debtor will have good and marketable
title thereto and will own such Receivables free and clear of any encumbrances.
Such Receivable was acquired by the Seller, from an originator with which the
Seller does business, pursuant to an Originator Agreement between the Seller and
such Originator. Such Originator had full right to assign to the Seller such
Receivable and the security interest in the related Financed Vehicle. The Seller
has full right to sell to the Debtor such Receivable and the security interest
in the related Financed Vehicle. The Collateral Agent, for the benefit of the
Secured Party, has a valid and perfected first priority security interest in
such Receivable and all proceeds thereof, free and clear of all Liens,
encumbrances, security interests and rights of others.
(e) As of the related Conveyance Date, there is no lien against the
related Financed Vehicle for delinquent taxes.
(f) Such Receivable, and the sale of the Financed Vehicle securing such
Receivable, where applicable, complied, at the time it was made, and now
complies, in all material respects with applicable state and federal laws (and
regulations thereunder), including, without limitation, usury, disclosure and
consumer protection laws, equal credit opportunity, fair credit reporting,
truth-in-lending or other similar laws, the Federal Trade Commission Act, and
applicable state
23
laws regulating retail installment sales contracts in general and motor vehicle
retail installment sales contracts and loans in particular, and the receipt of
interest on, and the ownership of, such Receivable by the Debtor will not
violate any such laws and the related Obligor has no right of rescission or
cancellation, claims or defenses, setoffs, or counterclaims of any kind
whatsoever as to or against the contract evidencing a related Receivable.
(g) The Receivable constitutes the entire agreement between the Seller (as
assignee of the related Originator) and the related Obligor.
(h) At the time of origination of such Receivable, the proceeds of such
Receivable were fully disbursed, and there is no requirement for future advances
thereunder, and all fees and expenses in connection with the origination of such
Receivable have been paid.
(i) As of the related Conveyance Date, there is no default, breach,
violation or event of acceleration existing under any such Receivable and no
event which, with the passage of time or with notice or with both, would
constitute a default, breach, violation or event of acceleration under any such
Receivable. The Seller has not waived any such default, breach, violation or
event of acceleration.
(j) In connection with the purchase of such Receivable, the Seller
required the related Originator to furnish evidence that the related Financed
Vehicle was covered by a comprehensive and collision insurance policy naming the
Seller as loss payee and insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive and
collision coverage in an amount equal to the actual cash value of the related
Financed Vehicle.
(k) Such Receivable contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against the related Financed Vehicle of the benefits of the
security.
(l) The collection practices used with respect to such Receivable have
been in all material respects legal, proper, prudent and customary in the
automobile installment sales contract or installment loan servicing business as
applied with respect to obligors with credit standings comparable to that of the
Obligor.
(m) [reserved].
(n) The related Obligor does not have any other motor vehicle retail
installment sale contracts owing to the Seller which are 60 or more days
contractually delinquent at the Conveyance Date.
(o) No Receivable is due from an Obligor who has defaulted under a
previous Receivable with the Seller.
24
(p) The Originator that sold such Receivable to the Seller has entered
into an Originator Agreement and such Originator Agreement constitutes the
entire agreement between the Seller and the related Originator with respect to
the sale of such Receivable to the Seller, such Originator Agreement was, at the
time of the origination of such Receivable, in full force and effect and is the
legal, valid, binding and enforceable obligation of such Originator (subject to
applicable bankruptcy and insolvency laws and other similar laws affecting the
enforcement of creditors, rights generally and to principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at
law); there have been no material defaults by such Originator or by the Seller
under such Originator Agreement; the Seller has fully performed all of its
obligations under such Originator Agreement; the Seller has not made any
statements or representations to such Originator inconsistent with any term of
such Originator Agreement; the purchase price for such Receivable has been paid
in full by the Seller, there is no other payment due to such Originator from the
Seller for the purchase of such Receivable, such Originator has no right, title
or interest in or to any Receivable; there is no prior course of dealing between
such originator and the Seller which will affect the terms of such Originator
Agreement; and any additional payment that may be owed to such Originator by the
Seller is a corporate obligation of the Seller.
(q) The Seller has provided to the Servicer the sole original counterpart
of such Receivable as amended, and the related title document or the application
for title document, previously in the possession of the Seller.
(r) Such Receivable constitutes "chattel paper" for purposes of Sections
9-105(1)(b) and 9-308 of the UCC. The Seller's electronic ledgers have been
marked as provided in Section 2.1 and 2.2 of this Agreement with respect to such
Receivable.
(s) Such Receivable was not originated in, nor is it subject to the law
of, any jurisdiction, the laws of which would make unlawful the sale, transfer
or assignment of such document, under this Agreement, including any repurchase
in accordance with this Agreement.
(t) Such Receivable is in full force and effect in accordance with its
respective terms and neither the Seller nor the related Obligor has suspended or
reduced any payments or obligations due or to become due thereunder by reason of
a default by the other party to such Receivable; there are no proceedings
pending, or to the best of the Seller's knowledge, threatened, asserting
insolvency of the related Obligor; there has been no previous default on such
Receivable that resulted in repossession of the related Financed Vehicle; and
there are no proceedings pending, or to the best of the Seller's knowledge,
threatened wherein the related Obligor or any governmental agency has alleged
that such Receivable is illegal or unenforceable.
(u) Each contract evidencing a Receivable being acquired by the Debtor is
substantially similar to one of the Seller's standard form contracts attached
hereto as EXHIBIT K except for immaterial modifications or deviations therefrom
in accordance with state law which will not have a material adverse effect on
the Secured Party and will not reduce the scheduled payments thereunder or other
payments due under the Receivables.
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(v) The Seller has duly fulfilled all obligations to be fulfilled on the
Seller's part under or in connection with the origination, acquisition and
disposition of such Receivable, including, without limitation, giving any
notices or consents necessary to effect the acquisition of such Receivables by
the Debtor, and has done nothing to impair the rights of the Collateral Agent or
the Secured Party in such Receivable or payments with respect thereto. The
Seller has obtained all necessary licenses, permits and charters required to be
obtained by the Seller, which failure to obtain would render any portion of the
transaction document unenforceable and would have a material adverse effect on
the Secured Party.
(w) The Originator that originated such Receivable was selected by the
Seller based on such Originator's financial and operating history.
(x) [reserved]
(y) The contract securing such Receivable arose from a bona fide sale in
the ordinary course of the Originator's business.
(z) Such Receivable represents the sale of goods described in the contract
evidencing the Receivable.
(aa) Such Receivable is exclusive and contains all the terms and
conditions of the related contract.
(bb) To the best of the Debtor's knowledge, all signatures, names,
addresses, telephone numbers, figures and other statements of fact set forth in
the contract evidencing the Receivable are genuine, true and correct.
(cc) To the best of the Debtor's knowledge, no part of the down payment,
or any installment, has been loaned by the Originator to the related Obligor.
(dd) To the best of the Debtor's knowledge, all credit information
provided to the Seller is true and correct and reported as received from the
Obligor.
(ee) To the best of the Debtor's knowledge, the Obligor is in fact the
primary or sole operator of the related Financed Vehicle.
(ff) Each Receivable constitutes an Eligible Receivable.
(gg) The sale of the Extended Service Agreement to the related Obligor
complied at the time of such sale with all applicable state and federal laws
(and regulations thereunder), including without limitation, insurance, usury,
disclosure and consumer protection laws, equal credit opportunity, fair credit
reporting, truth-in-lending or other similar laws, the Federal Trade Commission
Act, and applicable state laws regulating extended service agreements and
insurance, and the ownership of such Extended Service Agreement will not violate
any such laws.
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(hh) To the best of the Debtor's knowledge, each Extended Service
Agreement and each credit life policy and accident and health policy relating to
a Financed Vehicle or an Obligor is the legal, valid and binding obligation of
each party thereto, and is enforceable in accordance with its terms.
(ii) To the best of the Debtor's knowledge, the Seller and any party
obligated to perform services under an Extended Service Agreement relating to a
Financed Vehicle, any credit life insurance policy or any accident and health
policy related to a Financed Vehicle or an Obligor have complied with all
licensing, insurance or other laws applicable to them in connection with the
origination, servicing, performance or administration thereof.
(jj) The Collateral Agent will be entitled to receive all amounts due to
an Obligor or lienholder upon cancellation by an Obligor of an Extended Service
Agreement or any credit life insurance policy and accident and health insurance
policy relating to a Financed Vehicle or an Obligor.
(kk) All rights (but not obligations) of the Seller under each Extended
Service Agreement and any credit life insurance policy and accident and health
insurance policy relating to a Financed Vehicle or an Obligor have been assigned
by the Seller to the Debtor, and subsequently assigned by the Debtor to the
Collateral Agent for the benefit of the Secured Party.
With respect to any Receivable for which any representation or warranty
made by the Debtor set forth in Section 3.1 above shall be or shall have been
untrue as of the last day of the prior Collection Period (each, an "Ineligible
Receivable") the Debtor shall be obligated to pay to the Collateral Agent, for
application in accordance with Section 5.1 as if such amounts constituted
Available Collections for such Remittance Date, the principal balance plus
accrued interest at the applicable APR on each such Ineligible Receivable. Such
payment shall be made on the Business Day preceding the next Remittance Date.
After the payment of such amount in respect of any Receivable, the lien of the
Collateral Agent in any such Receivable shall be released.
SECTION 3.2 COVENANTS OF THE DEBTOR.
The Debtor hereby covenants to the Collateral Agent and the Secured Party,
so long as any amounts shall be outstanding under the Note or the Note Purchase
Agreement, that:
(a) CORPORATE EXISTENCE. The Debtor will preserve and maintain its
existence as a corporation duly organized and existing under the laws of the
jurisdiction of its incorporation and will remain duly qualified as a foreign
corporation under the laws of each other jurisdiction in which the failure to so
qualify would have a material adverse effect on the ability of the Debtor to
perform its obligations under this Agreement, the Note, the Note Purchase
Agreement or the Purchase Agreement.
27
(b) LOSSES, ETC. In any suit, proceeding or action brought by the
Collateral Agent or any Secured Party for any sum owing thereto, the Debtor will
save, indemnify and keep the Collateral Agent and the Secured Party harmless
from and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction of liability whatsoever of the
obligor under such Receivable, arising out of a breach by the Debtor of any
obligation under the related Receivable or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such Obligor or
its successor from the Debtor, and all such obligations of the Debtor shall be
and remain enforceable against and only against the Debtor and shall not be
enforceable against the Collateral Agent or the Secured Party.
(c) COMPLIANCE WITH LAW. The Debtor will comply, in all material respects,
with all acts, rules, regulations, orders, decrees and directions of any
governmental authority applicable to the Receivables or any part thereof;
PROVIDED, HOWEVER, that the Debtor may contest any act, rule, regulation, order,
decree or direction in any reasonable manner which will not materially and
adversely affect the rights of the Collateral Agent in the Receivables or the
collectibility of the Receivables.
(d) NO INSTRUMENTS. The Debtor will take no action to cause any Receivable
to be evidenced by any instrument (as defined in the UCC as in effect in the
Relevant UCC State).
(e) NO LIENS. Except for the conveyances contemplated hereunder, the
Debtor will not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any Receivable or any
interest therein; the Debtor will notify the Collateral Agent and the Deal Agent
of the existence of any Lien on any Receivable immediately upon discovery
thereof; and the Debtor shall defend the right, title and interest of the
Collateral Agent on behalf of the Secured Party in, to and under the applicable
Receivables against all claims of third parties claiming through or under the
Debtor; PROVIDED, HOWEVER, that nothing in this Section 3.2(e) shall prevent or
be deemed to prohibit the Debtor from suffering to exist upon any of the
Receivables any Liens for municipal or other local taxes and other governmental
charges if such taxes or governmental charges shall not at the time be due and
payable or if the Debtor shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto.
(f) NOTICE TO THE COLLATERAL AGENT. The Debtor will advise the Collateral
Agent and the Deal Agent promptly, in reasonable detail, (i) of any Lien
asserted or claim made against any of the Receivables, (ii) of the occurrence of
any breach by the Debtor of any of its representations, warranties and covenants
contained herein and (iii) of the occurrence of any other event which would have
a material adverse effect on the Collateral Agent's security interest on behalf
of the Secured Party in the Receivables or the collectibility thereof, or which
would have a material adverse effect on the interests of the Secured Party.
(g) BOOKS AND RECORDS. The Collateral Agent and the Secured Party and
their agents and representatives shall at all times have full and free access
during normal business hours to all the computer tapes, books, correspondence
and records of the Debtor insofar as they relate to the Receivables, and the
Collateral Agent and its agents and representatives and the Deal Agent may
28
examine the same, take extracts therefrom and make photocopies thereof, and the
Debtor agrees to render to the Collateral Agent and the Deal Agent or its agents
and representatives, at the Debtor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto. The Debtor hereby
assigns to the Collateral Agent and its agents and representatives and the Deal
Agent all rights the Debtor has or shall have to examine computer tapes, books,
correspondence and records relating to Receivables serviced by the Servicer or
any successor servicer thereto. Each of the Collateral Agent and the Deal Agent
acknowledges that in exercising the rights and privileges conferred in this
Section 3.2(g) it, or its agents and representatives, may from time to time
obtain knowledge of information and practices set forth in such computer tapes,
books, correspondence and records (whether in the possession of the Debtor or
the Servicer) of a confidential nature and in which the Debtor has a proprietary
interest. The Collateral Agent and the Secured Party agree that all such
information, practices, books, correspondence and records are to be regarded as
confidential information and that (i) it shall retain in strict confidence and
shall use its best efforts to ensure that its representatives retain in strict
confidence and will not disclose without the prior written consent of the Debtor
any or all of such information, practices, books, correspondence and records
furnished to them and (ii) it will not, and will use its best efforts to ensure
that its agents and representatives will not, make any use whatsoever (other
than for the purposes contemplated by this Agreement) of any of such
information, practices, computer tapes, books, correspondence and records
without the prior written consent of the Debtor, unless such information (A) is
generally available to the public, (B) is required by law to be disclosed or is
requested by any Governmental Authority having authority over the Deal Agent,
the Company, any Liquidity Provider or Credit Support Provider or (C) is
requested by Moody's or S&P in connection with their rating of the Commercial
Paper Notes or the implied rating of the facility.
(h) ADMINISTRATIVE PROCEDURES. The Debtor will maintain and implement
administrative operating procedures (including, without limitation, an ability
to recreate records evidencing the Receivables in the event of the destruction
of the originals thereof) and keep and maintain all documents, books, records
and other information customarily maintained in the servicing of sub-prime auto
loans.
(i) UCC FILINGS. The Debtor shall execute and file such continuation
statements and any other documents requested by the Company, the Deal Agent or
the Collateral Agent or which may be required by law to fully preserve and
protect the interest of the Company, the Deal Agent, and the Collateral Agent
hereunder in and to the Receivables.
(j) CHANGE OF LOCATION. The Debtor will not, (i) without providing 60
days' notice to the Company, the Deal Agent, and the Collateral Agent and (ii)
without filing such amendments to any previously filed financing statements as
the Collateral Agent or the Deal Agent may require, either (A) change the
location of its principal executive office or the location of the offices where
the records relating to the accounts are kept, or (B) change its name, identity
or corporate structure in any manner which would, could or might make any
financing statement or continuation statement filed by the Debtor in accordance
with this Agreement seriously misleading within the meaning of Section 9-402(g)
of the UCC or any applicable enactment of the UCC.
29
(k) FURTHER ASSURANCES. The Debtor shall deliver to the Company, the Deal
Agent, and the Collateral Agent within 90 days of the first anniversary of the
Closing Date and each anniversary thereafter an opinion of independent counsel
to the Debtor, dated as of a date during such 90-day period, either (i) stating
that, in the opinion of such counsel, (A) such action has been taken with
respect to the recording, registering, filing, re-recording, re-registering and
re-filing of financing statements, continuation statements or other instruments
or documents as is necessary to preserve and protect the interest of the
Collateral Agent and the Secured Party in and to the Receivables and reciting
the details of such action or referring to prior opinions of counsel in which
such details are given, and (B) all financing statements, continuation
statements and any other necessary documents have been executed and filed that
are necessary fully to preserve and protect the perfected interest of the
Collateral Agent and the Secured Party in and to the Receivables, and reciting
the details of such filings or referring to prior opinions of counsel in which
such details are given, or (ii) stating that, in the opinion of such counsel, no
such action is necessary to preserve and protect such interest.
(l) REPORTING. The Debtor will furnish, or cause to be furnished to the
Deal Agent, and the Collateral Agent (unless otherwise provided to the
Collateral Agent):
(i) NOTICE OF TERMINATION EVENT, AMORTIZATION EVENT, WIND-DOWN
EVENT, POTENTIAL TERMINATION EVENT, POTENTIAL AMORTIZATION EVENT OR
POTENTIAL WIND-DOWN EVENT. As soon as possible and in any event within
five days of becoming aware of the occurrence of each Termination Event,
Amortization Event, Wind-Down Event, or each Potential Termination Event,
Potential Amortization Event or Potential Wind-Down Event hereunder, or
each Servicer Event of Default (as defined in the Servicing Agreement) or
FIACC Event of Default (as defined in the Servicing Agreement) under the
Servicing Agreement, a statement of the chief financial officer or chief
accounting officer of the Debtor setting forth details of such Termination
Event, Amortization Event, Wind-Down Event, Potential Termination Event,
Potential Amortization Event or Potential Wind-Down Event, Servicer Event
of Default or FIACC Event of Default and the action which the Debtor
proposes to take with respect thereto.
(ii) CHANGE IN CREDIT GUIDELINES. Within 10 days after the date of
any material change in or amendment to the Credit Guidelines, a copy of
the Credit Guidelines then in effect indicating such change or amendment.
Any change that will materially and adversely affect the Deal Agent shall
be approved in writing by the Deal Agent.
(m) The Debtor shall not, without the prior written consent of the
Collateral Agent and the Deal Agent,
(i) engage in any business or activity other than those set forth in
Article III of the Debtor's Certificate of Incorporation;
30
(ii) incur any indebtedness, or assume or guaranty an indebtedness
of any other entity, other than any indebtedness contemplated by Article
IV of the Debtor's Certificate of Incorporation, which indebtedness shall
be subordinated to all other obligations of the Debtor;
(iii) without the affirmative vote of 100% of the members of the
Board of Directors of the Debtor, institute proceedings to be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against it, or file a petition seeking or consent
to reorganization or relief under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver,
liquidate, assignee, trustee, sequestrate (or other similar official) of
the corporation or a substantial part of its property, or make any
assignment for the benefit of creditors, or admit in writing its inability
to pay its debts generally as they become due, or take corporate action in
furtherance of any such action.
(iv) The Debtor shall at all times (A) to the extent the Debtor's
office is located in the offices of the Seller or any Affiliate of the
Seller, pay fair market rent for its executive office space located in the
offices of the Seller or any Affiliate of the Seller, (B) maintain the
Debtor's books, financial statements, accounting records and other
corporate documents and records separate from those of the Seller or any
other entity, (C) not commingle the Debtor's assets with those of the
Seller or any other entity (it being understood that certain Collections
on Receivables owned by the Debtor may be temporarily commingled with
collections on other receivables serviced by the Seller); (D) act solely
in its corporate name and through its own authorized officers and agents,
(E) make investments directly or by brokers engaged and paid by the Debtor
or its agents (provided that if any such agent is an Affiliate of the
Debtor it shall be compensated at a fair market rate for its services),
(F) separately manage the Debtor's liabilities from those of the Seller or
any Affiliates of the Seller and pay its own liabilities, including all
administrative expenses, from its own separate assets, and (G) pay from
the Debtor's assets all obligations and indebtedness of any kind incurred
by the Debtor. The Debtor shall abide by all corporate formalities,
including the maintenance of current minute books, and the Debtor shall
cause its financial statements to be prepared in accordance with generally
accepted accounting principles in a manner that indicates the separate
existence of the Debtor and its assets and liabilities. The Debtor shall
(1) pay all its liabilities, (2) not assume the liabilities of the Seller
or any Affiliate of the Seller, and (3) not guarantee the liabilities of
the Seller or any Affiliate of the Seller. The officers and directors of
the Debtor (as appropriate) shall make decisions with respect to the
business and daily operations of the Debtor independent of and not
dictated by any controlling entity.
(v) The Debtor shall only amend, alter, change or repeal its
Certificate of Incorporation as in effect on the date hereof with the
prior written consent of the Collateral Agent and the Deal Agent.
31
(n) The Debtor shall have at all times from and after the date of the
Initial Funding in effect an interest rate cap agreement or agreements or other
interest rate hedge agreements acceptable to the Deal Agent (each an "INTEREST
RATE HEDGE AGREEMENT" and collectively the "INTEREST RATE HEDGE AGREEMENTS")
with a financial institution or institutions ("HEDGE COUNTERPARTIES") provided
that (i) any such Hedge Counterparty shall be approved by the Deal Agent, (ii)
such Hedge Counterparty shall have irrevocably and unconditionally agreed that,
prior to the date which is one year and one day after the payment in full of the
Note and the Commercial Paper, it will not institute against, or join any other
Person in instituting against, the Company, the Seller or the Debtor any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States, any state of
the United States or any other jurisdiction, (iii) the form and substance of any
such Interest Rate Hedge Agreement shall be acceptable to the Deal Agent, (iv)
all amounts payable by the Hedge Counterparty thereunder shall be required to be
paid by such counterparty directly to the Collection Account, (v) such Interest
Rate Hedge Agreement shall provide that the Hedge Counterparty acknowledges that
the Debtor's rights thereunder shall have been irrevocably assigned to, and a
security interest therein has been granted to, the Collateral Agent for the
benefit of the Secured Party and (vi) the strike rate of any Interest Rate Hedge
Agreement that is an interest rate cap agreement shall be not more than 9.0%.
The Interest Rate Hedge Agreements in effect on the date of the Initial Funding
shall cover at least 100% of the Net Investment, calculated as of the Cut-Off
Date, which hedge agreements shall have a term of at least 36 months from the
Cut-Off Date. On or before the fifth Business Day of each calendar month
("MONTHLY HEDGE DATE"), the Debtor shall have in effect Interest Rate Hedge
Agreements covering at least 100% of the increase in the Net Investment during
the immediately preceding calendar month, which hedge agreements shall have a
term of at 36 months from such Monthly Hedge Date.
(o) CREDIT GUIDELINES. The Debtor shall not amend, modify or supplement
its Credit Guidelines in any manner which would materially and adversely affect
the Noteholder, the Company, the Liquidity Providers or the Credit Support
Provider.
(p) EXTENDED SERVICE AGREEMENTS. The Debtor will not amend, and shall not
permit any amendment to any Extended Service Agreement relating to any Financed
Vehicle which would adversely affect its ability and right to receive refunds
under such contracts, or which would adversely affect the position of the
Noteholder, the Deal Agent, any Liquidity Provider or the Credit Support
Provider.
(q) THE NOTE. The Debtor will not amend, and shall not permit any
amendment to the Note, except in accordance with the Note Purchase Agreement,
except with the consent of the Company and the Deal Agent.
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ARTICLE IV
SERVICING AND ADMINISTRATION
SECTION 4.1 SERVICING.
(a) Pursuant to the Servicing Agreement, the Debtor has contracted with
General Electric Capital Corporation ("GECC") to act as servicer to manage,
collect and administer each of the Receivables. Until such time as GECC is
terminated as servicer under the Servicing Agreement, references to the Servicer
herein shall refer to GECC as servicer under the terms of the Servicing
Agreement. In the event of a Servicer Event of Default pursuant to Section 8.01
of the Servicing Agreement, the Debtor shall, upon the written direction of the
Deal Agent, or may, with the consent of the Deal Agent, terminate GECC as
Servicer thereunder. The Deal Agent shall also have the right to remove the
Servicer for cause, which shall include the material breach of any obligation or
covenant under the Servicing Agreement. Upon the termination of GECC as servicer
of the Receivables pursuant to either Section 8.01 or Section 9.02 of the
Servicing Agreement, the Deal Agent, shall have the right to appoint a successor
servicer and the Debtor shall enter into a servicing agreement with such
successor servicer in form and substance acceptable to the Deal Agent, with such
successor servicer acceptable to the Deal Agent at such time. Such appointment
shall be subject to the consent of the Debtor, which consent shall not be
unreasonably withheld; PROVIDED, HOWEVER, that if a Termination Event, a
Potential Termination Event, Wind-Down Event, Potential Wind-Down Event,
Amortization Event, Potential Amortization Event or Incipient Coverage
Shortfall, shall have occurred and be continuing the consent of the Debtor shall
not be required. Such servicing agreement shall specify the duties and
obligations of such successor servicer, and all references herein to the
Servicer shall be deemed to refer to such successor servicer.
(b) There shall be established on the Closing Date and maintained, for the
benefit of the Secured Party, in the trust department of a bank chosen by the
Collateral Agent (which bank shall be Bankers Trust Company or such other bank
or trust company as may be appointed by the Collateral Agent from time to time
with the consent of the Debtor, which consent shall not be unreasonably
withheld), a segregated account (the "COLLECTION ACCOUNT"), bearing a
designation clearly indicating that all of the funds deposited therein are held
for the benefit of the Secured Party. Funds on deposit in the Collection Account
(other than investment earnings) shall be invested by the Collateral Agent at
the direction of the Debtor in Eligible Investments that will mature so that
such funds will be available prior to the next succeeding Remittance Date,
except that in the case of funds representing Collections with respect to a
succeeding Collection Period, such Eligible Investments may mature so that such
funds will be available no later than the Business Day prior to the Remittance
Date for such Collection Period. Any funds on deposit in the Collection Account
to be so invested shall be invested solely in Eligible Investments. On each
Remittance Date, all interest and earnings (net of losses and investment
expenses) on funds on deposit in the Collection Account shall be available to
make any payments required hereunder and shall be distributed pursuant to the
priorities set forth in Section 5.1.
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(c) The Debtor shall cause GECC as servicer under the Servicing Agreement
to deposit all Collections in the Collection Account no later than ten (10)
Business Days after the end of the related Collection Period (LESS the fees and
expenses of GECC as Servicer which GECC, pursuant to the Servicing Agreement, is
permitted to withhold from amounts remitted to the Debtor or the Collateral
Agent), but in any event, on or before the 14th day of the month following the
related Collection Period.
SECTION 4.2 RIGHTS AFTER DESIGNATION OF SUCCESSOR SERVICER.
At any time following the designation of a Servicer (other than GECC)
pursuant to Section 4.1 as a result of the occurrence of a Servicer Event of
Default pursuant to Section 8.01 of the Servicing Agreement:
(a) The Collateral Agent and the Deal Agent may direct that payment of all
amounts payable under any Receivable be made directly to the Collateral Agent or
its designee.
(b) The Debtor shall, at the Collateral Agent's or the Deal Agent's
request and at the Debtor's expense, give notice of the Collateral Agent's
interest in the Receivables to each Obligor and direct that payments be made
directly to the Collateral Agent or its designee.
(c) The Debtor shall, at the Collateral Agent's or the Deal Agent's
request, (i) assemble all of the records relating to the Collateral, including
all Receivables files, and shall make the same available to the Collateral Agent
and the Deal Agent at a place selected by the Collateral Agent and the Deal
Agent or its designee, and (ii) segregate all cash, checks and other instruments
received by it from time to time constituting collections of Collateral in a
manner acceptable to the Collateral Agent and the Deal Agent and shall, promptly
upon receipt, remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to the Collateral Agent or its designee.
(d) The Debtor hereby authorizes the Collateral Agent to take any and all
steps in the Debtor's name and on behalf of the Debtor necessary or desirable,
in the determination of the Collateral Agent, to collect all amounts due under
any and all of the Collateral with respect thereto, including, without
limitation, endorsing the Debtor's name on checks and other instruments
representing Collections and enforcing the Receivables.
SECTION 4.3 RESPONSIBILITIES OF THE DEBTOR.
Anything herein to the contrary notwithstanding, the Debtor shall (a)
perform all of its obligations under the Receivables to the same extent as if a
security interest in such Receivables had not been granted hereunder and the
exercise by the Collateral Agent of its rights hereunder shall not relieve the
Debtor from such obligations and (b) pay when due any taxes, including without
limitation, any sales taxes payable in connection with the Receivables and their
creation and satisfaction. Neither the Collateral Agent nor any Secured Party
shall have any obligation or liability with respect to any Receivable, nor shall
any of them be obligated to perform any of the obligations of the Debtor
thereunder.
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SECTION 4.4 MONTHLY DEBTOR'S CERTIFICATE.
On each Determination Date, the Debtor shall deliver to the Deal Agent and
the Collateral Agent a certificate in substantially the form of EXHIBIT H
attached hereto (the "MONTHLY DEBTOR'S CERTIFICATE") for the related Collection
Period. The Monthly Debtor's Certificate shall have attached thereto the
certificate of the Servicer with respect to the Receivables relating to the
immediately preceding Collection Period (which for so long as GECC is the
Servicer shall be in the form specified in Section 4.09 of the Servicing
Agreement). The Company shall provide (or cause the Deal Agent to provide) to
the Debtor, by the 10th day of the calendar month following the Collection
Period to which such Monthly Debtor's Certificate relates, information relating
to the amount of each obligation of the Company which comprises Carrying Costs
for such Collection Period. The Monthly Debtor's Certificate shall specify
whether a Termination Event, an Amortization Event or Wind-Down Event is deemed
to have occurred with respect to the Collection Period preceding such
Determination Date. Upon receipt of the Monthly Debtor's Certificate, the
Collateral Agent shall rely (and shall be fully protected in so relying) on the
information contained therein for the purposes of making distributions and
allocations as provided for herein.
SECTION 4.5 RE-WRITTEN RECEIVABLES.
The Servicer may, upon instruction from the Debtor, reduce either (i) the
Principal Balance or (ii) the APR of any Receivable. In the event of any such
reduction, the Seller agrees to deposit, immediately upon the granting of any
such reduction, to the Collection Account an amount, in immediately available
funds, equal to (x) if the Principal Balance of such Receivables is reduced, the
amount of the reduction in such Principal Balance, together with interest to
accrue on such reduction, at a rate per annum equal to the related APR, from the
date of such reduction to and including the last day of the calendar month in
which such reduction is effective and/or (y) if the APR is reduced, an amount
equal to the excess of (A) the amount of all remaining payments to be made by
the Obligor of such Receivable, calculated using the APR prior to such reduction
and (B) the amount of all remaining payments to be made by the Obligor of such
Receivable, calculated using the APR after giving effect to such reduction.
ARTICLE V
ALLOCATION AND APPLICATION
OF COLLECTIONS; RESERVE ACCOUNT
SECTION 5.1 COLLECTIONS.
(a) On each Remittance Date, the Collateral Agent shall determine by
reference to the Monthly Debtor's Certificate the Available Collections for the
prior Collection Period and shall withdraw such amount from the Collection
Account and allocate and pay such amount in the following order of priority;
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(i) to the Reserve Account to repay Reserve Advances;
(ii) to pay to the Collateral Agent all fees and expenses due
pursuant to Section 7.2(a) hereof;
(iii) first, to the Noteholder, an amount equal to Carrying Costs
(net of all amounts paid by a Reserve Advance in respect thereof during
the related Collection Period) for the related Collection Period and then
to pay the servicing fee due to any successor Servicer;
(iv) to the Noteholder, to pay the Targeted Monthly Principal
Payment;
(v) prior to the occurrence of a Termination Event, to the Reserve
Account, the amount necessary to increase the amount on deposit in the
Reserve Account to the Required Reserve Account Balance;
(vi) to the Collateral Agent, FIRST, the amount to be applied by the
Collateral Agent to pay any and all Re-Liening Expenses then due and
payable which have not been previously paid by or on behalf of the Debtor,
and SECOND, all amounts due the Collateral Agent pursuant to Section
7.2(b) hereof;
(vii) after the occurrence of a Termination Event, the remainder to
the Noteholder to reduce the Net Investment;
(viii) to the Noteholder or any other appropriate party, an amount
equal to any other amounts owed thereto under the Note Purchase Agreement
(other than amounts due under the Note, with the exception of costs
incurred in the enforcement of the Note), other amounts due thereto under
this Agreement, and unreimbursed Carrying Costs with respect to prior
Collection Periods; and
(ix) unless an Incipient Coverage Shortfall exists, all remaining
amounts shall be distributed by the Collateral Agent to a bank account
designated by the Debtor for further distribution; if an Incipient
Coverage Shortfall exists, then all remaining amounts shall be retained in
the Collection Account until the next Remittance Date, on which date such
amounts shall constitute funds available for application pursuant to this
Section 5.1(a).
(b) In the event that, on any Business Day on which any Commercial Paper
Notes mature (the "MATURED CP") other than a Remittance Date, the sum of (i)
funds on deposit in the Collection Account on such date and (ii) the aggregate
amounts paid to the Noteholder on any prior Remittance Date representing
Carrying Costs in respect of such Matured CP is less than the Interest Component
of such Matured CP (such difference being the "MATURED CP SHORTFALL"), then the
Deal Agent shall make an advance from the Reserve Account in an amount equal to
such Matured CP Shortfall (a "RESERVE ADVANCE") and pay to the Company the
amount of such
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advance. To the extent that amounts available in the Reserve
Account are insufficient to cover such Matured CP Shortfall, the Debtor shall be
obligated to make a payment to the Collateral Agent, for distribution to the
Company, in an amount equal to such remaining shortfall. Amounts required to be
remitted pursuant to this Section 5.1(b) to the Company shall be remitted in
immediately available funds to the Agent's Account no later than 12:00 noon, New
York City time, on the date due. The Deal Agent shall be entitled to direct the
Collateral Agent to make a demand for payment upon the Debtor for shortfalls
reasonably expected to occur in the amount available to be withdrawn from
Reserve Account pursuant to this Section 5.1(b), PROVIDED, that any such demands
shall be (i) based on the maturity schedule of Commercial Paper Notes and (ii)
made not more than four Business Days prior to the scheduled maturity date of
the Commercial Paper Notes to which such expected shortfall relates. The Debtor
shall deposit to the credit of the Reserve Account, on the Business Day
following any such demand, the amount of such requested payment.
(c) If the Available Collections in respect of a Remittance Date are
insufficient to pay the sum of the amounts to be distributed on such Remittance
Date pursuant to clauses (ii) through (iv) of Section 5.1(a) and, at the Deal
Agent's option, clause (vi) of Section 5.1(a), the Debtor shall notify the Deal
Agent of such shortfall and the Deal Agent shall cause the withdrawal of the
amount of such shortfall from the Reserve Account, to the extent of amounts on
deposit therein, and remit the proceeds of such withdrawal to the Collateral
Agent and the Collateral Agent shall apply such amount to the payment of the
items described in clauses (ii), (iii), (iv) and (vi) of Section 5.1(a), on the
related Remittance Date and in that order of priority. The Deal Agent shall be
entitled to direct the Collateral Agent to make a demand for payment upon the
Debtor for shortfalls reasonably expected to occur in the amount available to be
withdrawn from Reserve Account on any Remittance Date pursuant to this Section
5.1(c), PROVIDED, that any such demands shall be based on the information
contained in the related Monthly Debtor's Certificate. The Debtor shall deposit
to the credit of the Reserve Account, on the Business Day following any such
demand, the amount of such requested payment.
SECTION 5.2 REMITTANCES TO THE SECURED PARTY.
On each Remittance Date, the Collateral Agent shall remit Available
Collections to the Secured Party in accordance with the provisions of Section
5.1. The foregoing notwithstanding, the final remittance in respect of the Note
shall be made in the applicable manner specified above only upon presentation
and surrender of the Note at the office of the Debtor specified by it in the
notice of such final remittance or repurchase.
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ARTICLE V-A
THE RESERVE ACCOUNT AND THE DEAL AGENT
SECTION 5A.1 ESTABLISHMENT OF THE RESERVE ACCOUNT.
(a) ESTABLISHMENT OF RESERVE ACCOUNT. On or before the Closing Date, the
Debtor shall establish a segregated account, which shall be entitled "Reserve
Account of First Union Capital Markets Corp. as Collateral Agent for certain
secured parties under the Security Agreement dated as of January 1, 1998" (the
"RESERVE ACCOUNT"). Subject to the terms hereof, the Deal Agent for the benefit
of the Collateral Agent for the benefit of the Secured Party shall possess all
right, title and interest in and to all funds deposited from time to time in the
Reserve Account. Notwithstanding the foregoing, the Deal Agent shall not
withdraw any funds from, or otherwise exercise control over, the Reserve Account
except as provided in this Agreement and the Deal Agent acknowledges that all
amounts on deposit in the Reserve Account shall be held by the Deal Agent for
the benefit of the Collateral Agent for the benefit of the Secured Party.
(b) DEPOSITS TO AND WITHDRAWALS FROM THE RESERVE ACCOUNT. On or prior to
the date of the Initial Funding, the Debtor shall deposit or cause to be
deposited in the Reserve Account, the Initial Reserve Account Deposit. Such
deposit may be made by instruction from the Debtor to the Deal Agent to withhold
from the Initial Funding an amount equal to such Initial Reserve Account Deposit
and deposit such amount to the Reserve Account on such date. The Debtor shall
deposit into the Reserve Account all amounts which are required to be deposited
therein by this Agreement. The Deal Agent shall promptly withdraw from the
Reserve Account all amounts required to be withdrawn therefrom pursuant to
Section 5.1(b) and 5.1(c) hereof, and shall either (i) pay such amounts to the
Company (in the case of withdrawals pursuant to Section 5.1(b)) or (ii) remit
such amounts to the Collateral Agent (in the case of withdrawals therefrom
pursuant to Section 5.1(c)).
Prior to the occurrence of a Termination Event and at any time during
which an Incipient Coverage Shortfall does not exist and to the extent that
amounts on deposit in the Reserve Account on any Remittance Date, after giving
effect to any required withdrawals therefrom on such day, exceed the Required
Reserve Account Balance, such excess amounts shall be withdrawn from the Reserve
Account by the Deal Agent and be deposited by the Deal Agent in the Collection
Account and shall constitute part of the funds available for application
pursuant to Section 5.1(a) for the next succeeding Remittance Date.
From and after the occurrence of a Termination Event the Deal Agent may
withdraw any and all amounts on deposit in the Reserve Account in accordance
with the provisions of Section 5.1 to be applied in the Deal Agent's discretion
to reduce the Net Investment or to pay the Carrying Costs accrued and to accrue
on such reduction in the Net Investment.
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(c) INVESTMENT OF FUNDS ON DEPOSIT IN THE RESERVE ACCOUNT.
(i) Funds on deposit in the Reserve Account shall be invested in
Eligible Investments by or at the written direction of the Debtor,
PROVIDED that if a Termination Event shall have occurred, such investments
shall be limited to the Eligible Investments set forth in items A, B and C
of EXHIBIT D hereto. Any such written directions shall specify the
particular investment to be made and shall certify that such investment is
an Eligible Investment and is permitted to be made under this Agreement.
(ii) All investments of amounts on deposit in the Reserve Account
shall be accomplished in a manner so as to cause such investments to be
Transferred to the Collateral Agent, as agent, and, if required by
applicable law or any amendment thereto, to be maintained by the
Collateral Agent, as agent, through continued registration of the
Collateral Agent's ownership of such investments, so as to continuously
establish "control" (as defined in Section 8-106 of the 1994 Official Text
of Article 8 of the Uniform Commercial Code and the New York UCC) thereof
by the Collateral Agent, as agent; PROVIDED that investments need not be
Transferred to the Collateral Agent, as agent, in accordance with each
action set forth in the definition of "Transferred", if as a result of the
effectiveness in the State of New York of the 1994 Official Text of
Article 8 of the Uniform Commercial Code, or otherwise, such action is no
longer required to perfect the security interest of the Collateral Agent,
as agent. The Deal Agent and the Collateral Agent shall instruct the
Reserve Account Bank (and any other Financial Intermediary holding the
Reserve Account) to comply with all Entitlement Orders (as defined in
Section 8-102(a)(8) of the 1994 Official Text of the Uniform Commercial
Code and the New York UCC) received by it from the Deal Agent and not to
comply with Entitlement Orders (as defined in Section 8-102(a)(8) of the
1994 version of the Official Text of Article 8 of the Uniform Commercial
Code and the New York UCC) with respect to the Reserve Account given to it
by any Person other than the Deal Agent.
(iii) Funds on deposit in the Reserve Account on the date of the
Initial Funding and thereafter shall be so invested in Eligible
Investments that mature such that sufficient amounts of such funds or the
proceeds thereof will be available for withdrawal pursuant to Section
5.1(b) on the maturity date of Commercial Paper Notes and for remittance
to the Collateral Agent pursuant to Section 5.1(b); in any event the
maturity of any Eligible Investment shall not exceed 30 days. No Eligible
Investment may be liquidated or disposed of prior to its maturity. All
proceeds of any Eligible Investment shall be deposited in the Reserve
Account. Investments may be made on any date (provided such investments
mature in accordance with the preceding sentence), only after giving
effect to deposits to and withdrawals from the Reserve Account on such
date. Not later than 5:00 p.m. (New York time) on the Business Day prior
to each Remittance Date, all interest and earnings (net of losses and
investment expenses, if any) accrued since the previous Remittance Date
(or since the Closing Date in the case of the first Remittance Date) on
funds on deposit in the Reserve Account shall be withdrawn by the Deal
Agent and remitted to the Collateral Agent to be applied pursuant to
Section 5.1 of this Agreement in accordance with the Monthly Debtor's
Certificate. Realized losses, if any, on amounts
39
invested in Eligible Investments shall be charged against undistributed
investment earnings on amounts on deposit in the Reserve Account.
(iv) The Debtor shall provide the Deal Agent on the date hereof and
from time to time upon request an incumbency certificate or the
substantial equivalent with respect to each officer of the Debtor that is
authorized to provide instructions relating to investments in Eligible
Investments.
SECTION 5A.2 MAINTENANCE OF ELIGIBLE INVESTMENTS.
Eligible Investments shall be maintained in such manner as may be
necessary to maintain the first priority perfected security interest in favor of
the Collateral Agent on behalf of the Secured Party.
All amounts or property credited to the Reserve Account shall be subject
to the lien of the Collateral Agent on behalf of the Secured Party, until
released or withdrawn from the Reserve Account.
SECTION 5A.3 TERMINATION OF RESERVE ACCOUNT; RELEASE OF FUNDS.
If and to the extent that all amounts owed by the Debtor to the Secured
Party hereunder, under the Note Purchase Agreement and the Note have been paid
in full, any amounts on deposit in the Reserve Account shall be released to the
Debtor. In the event that thereafter the Debtor shall request that the
Noteholder increase its Net Investment, it shall be a condition precedent
thereto that the Reserve Account be funded in an amount equal to the Required
Reserve Account Balance after giving effect to any Receivables added to the
Collateral in connection with such increase in the Net Investment.
ARTICLE VI
TERMINATION EVENTS; SERVICING TERMINATION
SECTION 6.1 TERMINATION EVENTS.
The occurrence of any one of the following events shall be a "TERMINATION
EVENT" under this Agreement:
(a) failure on the part of the Debtor to pay or disburse when due the
amounts provided for herein;
(b) failure (i) by the Debtor, to observe or perform any term, covenant,
condition or agreement set forth in Sections 3.2(a), (d), (e), (f), (g), (h),
(i), (j), (l), (m) or (n) of this Agreement or (ii) of any representation or
warranty of the Debtor, the Seller or the Servicer contained herein or, in the
Note Purchase Agreement, the Purchase Agreement or the Servicing
40
Agreement to be true and correct in all material respects on any day when made
or deemed made hereunder, or (iii) by the Debtor to observe or perform any other
term, covenant, condition or agreement provided for herein or in the Note, the
Note Purchase Agreement, the Servicing Agreement, the Purchase Agreement or the
Interest Rate Hedge Agreement (other than those terms described in subsection
6.1(a) above) which failure, (A) in the case of clause (ii) above continues for
a period of thirty (30) days after the earlier of (1) the date on which written
notice of such breach shall have been given to the Debtor, the Seller or the
Servicer, by the Company, the Deal Agent or the Collateral Agent, (2) the date
on which the Debtor became aware of such breach or (3) the date on which the
Debtor exercising reasonable care should have become aware of such breach, or
(B) in the case of clause (iii) above continues for a period of thirty (30) days
after the earlier of (1) the date on which written notice of such failure shall
have been given to the Debtor by the Company, the Deal Agent, or the Collateral
Agent, (2) the date on which the Debtor became aware of such failure or (3) the
date on which the Debtor exercising reasonable care should have become aware of
such failure;
(c) the Debtor, the Seller or the Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Debtor, the Seller or the Servicer, as the
case may be, or of or relating to all or substantially all of its property, or a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Debtor, the Seller or the Servicer,
as the case may be, and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or the Debtor, the Seller or
the Servicer shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of an applicable insolvency
or reorganization statute, make any assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations; or the Debtor, the Seller or
the Servicer, as the case may be, shall become unable for any reason to pledge
Collateral to the Collateral Agent in accordance with the provisions of this
Agreement;
(d) (i) the sum of (x) Net Investment and (y) accrued Carrying Costs
exceeds the sum of (I) the Borrowing Base and (II) the amount on deposit in the
Reserve Account for a period of 30 consecutive days; (ii) the Net Investment
PLUS the Accrued Interest Component equals or exceeds the Facility Limit or
(iii) the Net Investment at any time equals or exceeds the sum of the Principal
Balance of Eligible Loans plus the amount on deposit in the Reserve Account.
(e) the Debtor shall enter into any merger, consolidation or conveyance
transaction regardless of the surviving entity, or the Servicer shall enter into
any merger, consolidation or conveyance transaction whereby it is not the
surviving entity;
(f) any material adverse change in the operations of the Servicer which
materially adversely affects the ability of the Servicer to service the
Receivables or to perform its obligations under the Servicing Agreement (or any
other agreement pursuant to which the Servicer is acting as servicer of the
Receivables);
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(g) there shall be a payment default by the Seller or the Debtor under any
material agreement for borrowed money to which the Seller or the Debtor is a
Party or there shall be a Servicer Event of Default under the Servicing
Agreement;
(h) the Delinquency Ratio averaged over any three consecutive Collection
Periods shall equal or exceed 10.00%;
(i) either (a) the Gross Default Ratio averaged over any three consecutive
Collection Periods shall equal or exceed 16.00% or (b) the Recovery Ratio
averaged over any three consecutive Collection Periods shall be less than 55%;
(j) the Collateral Agent shall fail for any reason to have a valid and
perfected first priority security interest in the Receivables and the proceeds
thereof;
(k) there shall be a material breach by the Seller of its obligations
under the Purchase Agreement;
(l) (i) a final judgment for the payment of money in excess of $1,000,000
shall have been rendered against the Seller by a court of competent jurisdiction
and the Seller shall not have either: (1) discharged or provided for the
discharge of such judgment in accordance with its terms, or (2) perfected a
timely appeal of such judgment and caused the execution thereof to be stayed (by
supersedeas or otherwise) during the pendency of such appeal or (ii) the Seller
shall have made payments of amounts in excess of $1,000,000 in settlement of any
litigation;
(m) the weighted average APR of the Receivables is less than 17.0%;
(n) the weighted average remaining term to maturity on the Receivables is
greater than 60 months;
(o) the Servicer's long-term debt rating falls below A-/A3 and a successor
servicer acceptable to the Deal Agent is not in place within 60 days;
(p) the long-term debt rating of any active provider of an Interest Rate
Hedge Agreement is below A-/A3 and a successor to such provider acceptable to
the Deal Agent is not in place or collateral acceptable to the Deal Agent has
not been posted, in each case, within 10 business days;
(q) the occurrence of a Wind-Down Event which is not cured within 90 days.
SECTION 6.2 WIND-DOWN EVENTS.
The occurrence and continuation of any one of the following events shall
be a "WIND-DOWN EVENT" under this Agreement:
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(a) the Liquidity Provider or the Credit Support Provider shall have
notified the Company that an event of default has occurred under the Liquidity
Agreement or the Credit Support Agreement, respectively; or
(b) the Company's Commercial Paper shall no longer be rated at least
"A-2", in the case of S&P, and at least "P-2", in the case of Moody's.
SECTION 6.3 AMORTIZATION EVENTS.
The occurrence of any one of the following events shall be an
"AMORTIZATION EVENT" under this Agreement:
(a) on any date of determination, (i) the Gross Default Ratio as measured
on a three month rolling average basis exceeds 14.0%, (ii) the Recovery Ratio as
measured on a three month rolling average is less than 58.0%, or (iii) the
Delinquency Ratio as measured on a three month rolling average basis exceeds
7.0%;
(b) the First Investors Financial Services Group, Inc. consolidated
stockholders equity falls below $15,000,000 as reported on a Form 10-Q or
Form 10-K;
(c) the due diligence (which may occur no more than twice in each calendar
year) by the Deal Agent (or its designee) uncovers Receivables representing more
than 20% of the sample which display material adverse non-compliance with the
Seller's Credit Guidelines;
(d) GECC, as Servicer, is no longer obligated to service new Loans
originated by the Seller; and
(e) there occurs any material adverse change to the Seller's Credit
Guidelines, unless such change is approved by the Deal Agent.
SECTION 6.4 REMEDIES.
If a Termination Event as specified in Section 6.1 shall have occurred,
the Collateral Agent, at the written direction of the Deal Agent shall, declare
by written notice to the Debtor any date as the date upon which the Note shall
become due and payable and, the Collateral Agent shall have all of the rights
and remedies provided to a secured creditor under the UCC by applicable law in
respect thereto. In addition, the Company shall have the right to cease issuing
Commercial Paper Notes. The Company may, at its option, determine that its
Carrying Costs with respect to the Net Investment after the occurrence of a
Termination Event are calculated by reference to the Base Rate PLUS 2.0%. There
shall be no Subsequent Funding upon or after the occurrence of any Termination
Event or Potential Termination Event or during the continuance of any Wind-Down
Event, Potential Wind-Down Event, Amortization Event or Potential Amortization
Event.
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If the Note is declared due and payable in accordance with this Section
6.4, the Collateral Agent shall, at the direction of the Deal Agent, do any one
or more of the following:
(a) take all necessary action to foreclose upon the Collateral;
(b) retain in satisfaction of any amounts owing from the Debtor all
amounts otherwise payable to the Debtor pursuant to this Agreement to the extent
necessary to pay in full all amounts (including principal and interest) (i) due
and payable under the Note and (ii) due and payable by the Debtor under the Note
Purchase Agreement;
(c) pursue any available remedy by proceeding at law or in equity
including complete or partial foreclosure of the lien upon the Collateral and
sale of the Collateral or any portion thereof or rights or interest therein as
may appear necessary or desirable (i) to collect amounts owed pursuant to the
Note and any other payments then due and thereafter to become due under the Note
or (ii) to enforce the performance and observance of any obligation, covenant,
agreement or provision contained in this Agreement to be observed or performed
by the Debtor; or
(d) exercise any remedies of a secured party under the Uniform Commercial
Code and take any other appropriate action to protect and enforce the rights and
remedies of the Collateral Agent on behalf of the Secured Party.
SECTION 6.5 PROCEEDS.
The proceeds from the sale, disposition or liquidation of the Receivables
pursuant to Section 6.4 above shall be treated as Collections on the Receivables
and shall be allocated and deposited in accordance with the provisions governing
allocations set forth herein.
ARTICLE VII
THE COLLATERAL AGENT
SECTION 7.1 DUTIES OF THE COLLATERAL AGENT.
The Secured Party hereby appoints First Union Capital Markets Corp. to act
on its behalf as Collateral Agent hereunder, and First Union Capital Markets
Corp. hereby accepts such appointment. The Collateral Agent, both prior to the
occurrence of a Termination Event, Amortization Event or Wind-Down Event
hereunder and after an Amortization Event or Wind-Down Event shall have been
cured or waived, shall undertake to perform such duties and only such duties as
are specifically set forth in this Agreement. The Collateral Agent shall at all
times after the occurrence of a Termination Event, Amortization Event or
Wind-Down Event which has not been cured (except in the case of a Termination
Event) or waived exercise such of the rights and powers vested in it pursuant to
this Agreement using the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs.
44
All Collections received by the Collateral Agent from the Servicer or
otherwise will, pending remittance to the Secured Party entitled thereto, be
held in trust by the Collateral Agent for the benefit of the Secured Party and
together with all other payment obligations of the Debtor hereunder owing to the
Secured Party shall be payable to the Secured Party in accordance with the
provisions of Article V hereof.
The Collateral Agent shall only resign if it shall (i) become incapable of
acting as Collateral Agent in accordance with the terms of this Agreement, (ii)
be adjudicated insolvent or bankrupt or otherwise become subject to any
bankruptcy, insolvency, reorganization or liquidation proceeding, (iii) be no
longer qualified as the Collateral Agent as such term is defined in the
agreement governing its responsibility as Collateral Agent or otherwise be
subject to replacement pursuant to or such agreement governing its
responsibility as Collateral Agent or (iv) materially breach any of the
provisions of this Agreement such Agreement or PROVIDED, FURTHER, that, without
the consent of the Company and the Deal Agent, such resignation shall not be
effective until a successor Collateral Agent acceptable to the Deal Agent shall
have accepted appointment as Collateral Agent hereunder and shall have agreed to
be bound by the terms of this Agreement.
Except as otherwise provided herein, the Collateral Agent shall not resign
from the obligations and duties hereby imposed on it except upon determination
that (i) the performance of its duties hereunder is no longer permissible under
applicable law and (ii) there is no reasonable action which the Collateral Agent
could take to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Collateral Agent shall be evidenced as to clause (i) above by an opinion of
counsel to such effect delivered to the Secured Party. Notwithstanding the
foregoing, the Collateral Agent may resign if, after demand therefor, it does
not receive payment of any compensation due from the Debtor pursuant to the
letter agreement described in Section 7.2. No resignation of the Collateral
Agent shall become effective until a successor Collateral Agent approved by the
Secured Party shall have assumed the responsibilities and obligations of the
Collateral Agent hereunder.
SECTION 7.2 COMPENSATION AND INDEMNIFICATION OF COLLATERAL AGENT.
(a) The Collateral Agent shall be compensated for its activities hereunder
and reimbursed for reasonable out-of-pocket expenses (including (i) securities
transaction charges not waived due to the Collateral Agent's receipt of a
payment from a financial institution with respect to certain Eligible
Investments, as specified by the Debtor and (ii) the compensation and expenses
of its counsel and agents) pursuant to a separate letter agreement between the
Collateral Agent and the Debtor. All such amounts shall be payable from funds
available therefor in accordance with Section 5.1(a)(ii) hereof with any
increase in such amounts to be approved by the Deal Agent. Subject to the terms
of such letter agreement, the Collateral Agent shall be required to pay the
expenses incurred by it in connection with its activities hereunder from its own
account. Notwithstanding any other provisions in this Agreement, the Collateral
Agent shall not be liable for any liabilities, costs or expenses of the Debtor
arising under any tax law, including without limitation any Federal, state or
local income or franchise taxes or any other tax
45
imposed on or measured by income (or any interest or penalties with respect
thereto or from a failure to comply therewith).
(b) The Debtor shall indemnify the Collateral Agent, its officers,
directors, employees and agents for, and hold it harmless against any loss,
liability or expense incurred without willful misconduct, gross negligence or
bad faith on its part, arising out of or in connection with (i) the acceptance
or administration of this Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under this Agreement and (ii) the
negligence, willful misconduct or bad faith of the Debtor in the performance of
its duties hereunder. All such amounts shall be payable in accordance with
Section 5.1(a)(vi) hereof. The provisions of this Section 7.2 shall survive the
termination of this Agreement.
SECTION 7.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COLLATERAL
AGENT.
The Collateral Agent agrees to make the following representations,
warranties and covenants, and further agrees that the Secured Party shall be
deemed to have relied upon such representations, warranties and covenants in
accepting their interest in the Receivables.
(a) ORGANIZATION AND GOOD STANDING. The Collateral Agent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of North Carolina, and has full corporate power, authority and legal right
to own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement.
(b) DUE AUTHORIZATION. The execution, delivery, and performance of this
Agreement have been duly authorized by the Collateral Agent by all necessary
corporate action on the part of the Collateral Agent.
(c) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Collateral Agent, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors, rights in general and except
as such enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(d) NO CONFLICT. The execution and delivery of this Agreement by the
Collateral Agent, and the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof applicable to the Collateral
Agent, will not conflict with, violate, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a default under, any Requirement of Law applicable to the Collateral Agent
or any indenture, contract, agreement, mortgage, deed of trust or other
instrument to which the Collateral Agent is a party or by which it is bound.
46
SECTION 7.4 LIABILITY OF THE COLLATERAL AGENT.
(a) The Collateral Agent shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Collateral Agent in
such capacity herein. No implied covenants or obligations shall be read into
this Agreement against the Collateral Agent and, in the absence of bad faith on
the part of the Collateral Agent, the Collateral Agent may conclusively rely on
the truth of the statements and the correctness of the opinions expressed in any
certificates or opinions furnished to the Collateral Agent and conforming to the
requirements of this Agreement.
(b) The Collateral Agent shall not be liable for an error of judgment made
in good faith by any officer of the Collateral Agent, unless it shall be proved
that the Collateral Agent shall have been negligent in ascertaining the
pertinent facts.
(c) The Collateral Agent shall not be liable with respect to any action
taken, suffered or omitted to be taken in good faith in accordance with this
Agreement or at the direction of a Secured Party relating to the exercise of any
power conferred upon the Collateral Agent under this Agreement.
(d) The Collateral Agent shall not be charged with knowledge of any
Termination Event, Wind-Down Event or Amortization Event unless an officer of
the Collateral Agent assigned to this transaction obtains actual knowledge of
such event or the Collateral Agent receives written notice of such event from
the Debtor, the Company, the Deal Agent or the Deal Agent, as the case may be.
(e) Without limiting the generality of this Section 7.4, the Collateral
Agent shall have no duty (i) to see to any recording, filing or depositing of
this Agreement or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest in the Receivables or the
Financed Vehicles, or to see to the maintenance of any such recording or filing
or depositing or to any recording, refiling or redepositing of any thereof, (ii)
to see to any insurance of the Financed Vehicles or Obligors or to effect or
maintain any such insurance, (iii) to see to the payment or discharge of any
tax, assessment or other governmental charge or any Lien or encumbrance of any
kind owing with respect to, assessed or levied against, any part of the
Receivables, (iv) to confirm or verify the contents of any reports or
certificates of the Servicer or the Debtor delivered to the Collateral Agent
pursuant to this Agreement believed by the Collateral Agent to be genuine and to
have been signed or presented by the proper party or parties or (v) to inspect
the Financed Vehicles at any time or ascertain or inquire as to the performance
or observance of any of the Debtor's or the Servicer's representations,
warranties or covenants or the Servicer's duties and obligations as Servicer and
as custodian of books, records, files and computer records relating to the
Receivables under the Servicing Agreement.
(f) The Collateral Agent shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if there
shall be reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability shall not be
47
reasonably assured to it, and none of the provisions contained in this Agreement
shall in any event require the Collateral Agent to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer under
this Agreement.
(g) The Collateral Agent may rely and shall be protected in acting or
refraining from acting upon any resolution, officer's certificate, any Monthly
Debtor's Certificate, certificate of auditors, or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(h) The Collateral Agent may consult with counsel and any opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it under this Agreement in good faith
and in accordance with such opinion of counsel.
(i) The Collateral Agent shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement or to institute, conduct or
defend any litigation under this Agreement or in relation to this Agreement, at
the request, order or direction of the Company pursuant to the provisions of
this Agreement, unless the Company shall have offered to the Collateral Agent
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained in this Agreement,
however, shall relieve the Collateral Agent of its obligations, upon the
occurrence of a Termination Event, a Wind-Down Event or Amortization Event (that
shall not have been cured or waived), to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs.
(j) The Collateral Agent shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement.
(k) Prior to the occurrence of a Termination Event, Wind-Down Event or
Amortization Event and before the Collateral Agent has received notice of such
Termination Event, Wind-Down Event or Amortization Event and after the curing
(except with respect to a Termination Event) or waiver of any Termination Event,
Wind-Down Event or Amortization Event that may have occurred, the Collateral
Agent shall not be bound to make any investigation into the facts of matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper or document,
unless requested in writing so to do by a Secured Party; PROVIDED, HOWEVER, that
if the payment within a reasonable time to the Collateral Agent of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation shall be, in the opinion of the Collateral Agent, not reasonably
assured by the Debtor, the Collateral Agent may require reasonable indemnity
against such cost, expense or liability as a condition to so proceeding. The
reasonable expense of every such examination shall be paid by the Debtor or, if
paid by the Collateral Agent, shall be reimbursed by the Debtor upon demand.
48
(l) The Collateral Agent may execute any of the trusts or powers hereunder
or perform any duties under this Agreement either directly or by or through
agents or attorneys or a custodian. The Collateral Agent shall not be
responsible for any misconduct or negligence of any such agent or custodian
appointed with due care by it hereunder.
SECTION 7.5 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE COLLATERAL AGENT.
The Collateral Agent shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(a) the corporation formed by such consolidation or into which the
Collateral Agent is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Collateral Agent substantially as an
entirety shall be a corporation organized and existing under the laws of the
United States of America or any State or the District of Columbia and, if the
Collateral Agent is not the surviving entity, shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Secured Party in
form satisfactory to the Secured Party, the performance of every covenant and
obligation of the Collateral Agent hereunder; and
(b) the Collateral Agent has delivered to the Secured Party an officer's
certificate and an opinion of counsel each stating that such consolidation,
merger, conveyance or transfer and such supplemental agreement comply with this
Section 7.5 and that all conditions precedent herein provided for relating to
such transaction have been complied with.
SECTION 7.6 LIMITATION ON LIABILITY OF THE COLLATERAL AGENT AND OTHERS.
The directors, officers, employees or agents of the Collateral Agent shall
not be under any liability to the Collateral Agent, any Secured Party or any
other Person hereunder or pursuant to any document delivered hereunder, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement;
PROVIDED, HOWEVER, that this provision shall not protect the directors,
officers, employees and agents of the Collateral Agent against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. Except as provided in Section 7.4, the
Collateral Agent shall not be under any liability to any Secured Party or any
other Person for any action taken or for refraining from the taking of any
action in its capacity as Collateral Agent pursuant to this Agreement whether
arising from express or implied duties under this Agreement; PROVIDED, HOWEVER,
that this provision shall not protect the Collateral Agent against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. The Collateral Agent may rely in good faith
on any document of any kind PRIMA FACIE properly executed and submitted by any
Person respecting any matters arising hereunder. The Collateral Agent shall not
be under any obligation to appear in, prosecute
49
or defend any legal action which is not incidental to its duties to administer
the Collections and the Collection Account in accordance with this Agreement
which in its reasonable opinion may involve it in any expense or liability.
SECTION 7.7 INDEMNIFICATION OF THE SECURED PARTY.
The Collateral Agent shall indemnify and hold harmless the Company from
and against any loss, liability, expense, damage or injury suffered or sustained
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the duties of the Collateral Agent or by reason of reckless
disregard of obligations and duties of the Collateral Agent hereunder or by
reason of the acts, omissions or alleged acts or omissions of the Collateral
Agent pursuant to this Agreement. The provisions of this indemnity shall run
directly to and be enforceable by an injured party subject to the limitations
hereof.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES, ETC.
Except where telephonic instructions or notices are authorized herein to
be given, all notices, demands, instructions and other communications required
or permitted to be given to or made upon any party hereto shall be in writing
and shall be sent by facsimile transmission with a confirmation of the receipt
thereof and shall be deemed to be given for purposes of this Agreement on the
day that the receipt of such facsimile transmission is confirmed in accordance
with the provisions of this Section 8.1. Unless otherwise specified in a notice
sent or delivered in accordance with the foregoing provisions of this Section
8.1, notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses indicated below, and, in the case of telephonic instructions or
notices, by calling the telephone number or numbers indicated for such party
below:
If to the Company:
Variable Funding Capital Corporation
c/o First Union National Bank
301 South College Street
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Conduit Administration
Telephone: (704) 383-3766
Telecopy: (704) 383-6036
(with a copy to the Deal Agent)
50
If to the Debtor:
First Investors Auto Capital Corporation
675 Bering Drive
Suite 710
Houston, Texas 77057
Attention: Bennie H. Duck
Vice President and Treasurer
Telephone: (713) 977-2600
Telecopy: (713) 977-0657
If to the Collateral Agent:
First Union Capital Markets Corp.
301 South College
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Bennett S. Cole
Telephone: (704) 383-3766
Telecopy: (704) 374-3254
If to the Deal Agent:
First Union Capital Markets Corp.
301 South College Street
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Conduit Administration
Telephone: (704) 383-3766
Telecopy: (704) 383-6036
If to the Seller:
First Investors Financial Services, Inc.
675 Bering Drive, Suite 710
Houston, Texas 77057
Attention: Bennie H. Duck
Vice President and Treasurer
Telephone: (713) 977-2600
Telecopy: (713) 977-0657
SECTION 8.2 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the Company, the Debtor, the
Collateral Agent, the Secured Party, the Seller and their respective successors
and assigns and shall inure to the
51
benefit of the Debtor, the Servicer, the Collateral Agent, the Secured Party,
the Seller and the Company and their respective successors and permitted assigns
including any Liquidity Provider; PROVIDED that the Debtor shall not assign any
of its rights or obligations hereunder without the prior written consent of the
Collateral Agent acting upon written instruction of the Secured Party. In
addition, the Debtor hereby acknowledges that the Company may at any time and
from time to time assign all or a portion of its rights hereunder to the
Liquidity Provider pursuant to the Liquidity Agreement. Except as expressly
permitted hereunder or in the agreements establishing the Company's commercial
paper program, the Company shall not assign any of its rights or obligations
hereunder without the prior written consent of the Debtor.
SECTION 8.3 SEVERABILITY CLAUSE.
Any provisions of this Agreement which are prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 8.4 AMENDMENTS; GOVERNING LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER (I)
MAY NOT BE CHANGED ORALLY BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE
PARTY AGAINST WHICH ENFORCEMENT IS SOUGHT AND (II) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NORTH CAROLINA. THE
PARTIES HEREUNDER AGREE THAT THEY WILL NOT AMEND, MODIFY, WAIVE, OR TERMINATE
ANY PROVISION OF THIS AGREEMENT WITHOUT THE WRITTEN CONSENT OF EACH PARTY.
SECTION 8.5 NO BANKRUPTCY PETITION AGAINST THE COMPANY.
The Debtor and each of the other parties hereto covenant and agree that,
and each such Person agrees that they shall cause any successor Servicer
appointed pursuant to Section 4.1 to covenant and agree that, prior to the date
which is one year and one day after the payment in full of all Commercial Paper
issued by the Company it will not institute against, or join any other Person in
instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
SECTION 8.6 SETOFF.
The Debtor hereby irrevocably and unconditionally waives all right of
setoff that it may have under contract (including this Agreement), applicable
law or otherwise with respect to any funds or monies of the Debtor at any time
held by or in the possession of the Collateral Agent or the Reserve Account
Bank.
52
SECTION 8.7 NO RECOURSE.
Except as otherwise expressly provided in this Agreement, it is understood
and agreed that the Debtor shall not be liable for amounts due under this
Agreement, the Note, or the Note Purchase Agreement, except to the extent of the
Collateral. The preceding sentence shall not relieve the Debtor from any
liability hereunder with respect to its representations, warranties, covenants
and other payment and performance obligations herein described.
SECTION 8.8 FURTHER ASSURANCES.
The Debtor agrees to do such further acts and things and to execute and
deliver to the Secured Party, the Deal Agent or the Collateral Agent such
additional assignments, agreements, powers and instruments as are required by
the Collateral Agent or the Deal Agent to carry into effect the purposes of this
Agreement or to better assure and confirm unto the Collateral Agent or the Deal
Agent its rights, powers and remedies hereunder.
SECTION 8.9 OTHER COSTS, EXPENSES AND RELATED MATTERS.
The Debtor agrees, upon receipt of a written invoice, to pay or cause to
be paid, and to save the Collateral Agent and the Secured Party harmless against
liability for the payment of, all reasonable out-of-pocket expenses (including,
without limitation, attorneys', accountant's and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or employees of the
Collateral Agent) incurred by or on behalf of the Collateral Agent (a) in
connection with the negotiation, execution, delivery and preparation of this
Agreement and any documents or instruments delivered pursuant hereto and the
transactions contemplated hereby (including, without limitation, the perfection
or protection of the Collateral Agent's interest in the Collateral) and (b) from
time to time (i) relating to any amendments, waivers or consents under this
Agreement, (ii) arising in connection with the Collateral Agent's or the Secured
Party's or their agent's enforcement or preservation of rights (including,
without limitation, the perfection and protection of the Collateral Agent's
security interest in the Collateral under this Agreement), or (iii) arising in
connection with any audit, dispute, disagreement, litigation or preparation for
litigation involving this Agreement.
SECTION 8.10 REPORTING.
Notwithstanding anything herein to the contrary, any report, agreement, notice,
certificate or other document required to be delivered to both the Collateral
Agent and the Deal Agent may, during any time that the Deal Agent and the
Collateral Agent are First Union Capital Markets Corp., be delivered to the Deal
Agent alone and any such delivery to the Deal Agent shall be deemed to be
delivery, in accordance with the provisions of this Agreement, to the Collateral
Agent. The Deal Agent agrees to provide a copy of any report, agreement, notice,
certificate or other document it receives under this section to the appropriate
personnel of the Collateral Agent.
53
SECTION 8.11 COUNTERPARTS.
This Agreement may be executed in any number of copies, and by the
different parties hereto on the same or separate counterparts, each of which
shall be deemed to be an original instrument.
SECTION 8.12 HEADINGS.
Section headings used in this Agreement are for convenience of reference
only and shall not affect the construction or interpretation of this Agreement.
[remainder of page intentionally left blank]
54
IN WITNESS WHEREOF, the Debtor, the Deal Agent, the Collateral Agent and
the Seller have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the day and year first above written.
FIRST INVESTORS AUTO CAPITAL CORPORATION,
as Debtor
By: /s/ BENNIE H. DUCK
Name: Bennie H. Duck
Title: Vice President and Treasurer
FIRST INVESTORS FINANCIAL SERVICES, INC.,
as Seller
By: /s/ BENNIE H. DUCK
Name: Bennie H. Duck
Title: Vice President and Treasurer
FIRST UNION CAPITAL MARKETS CORP.,
as Collateral Agent and Deal Agent
By: /s/ DARRELL R. BABER
Name: DARRELL R. BABER
Title: DIRECTOR
EXHIBIT A
NOTE
$25,000,000 January 1, 1998
Reference is hereby made to that certain Note Purchase Agreement dated as
of January 1, 1998 (as amended, supplemented or otherwise modified in accordance
with the terms thereof and in effect from time to time, the "NOTE PURCHASE
AGREEMENT") by and between First Investors Auto Capital Corporation, a Delaware
corporation (the "ISSUER"), and Variable Funding Capital Corporation, a Delaware
corporation (the "COMPANY"), and to that certain Security Agreement dated as of
January 1, 1998 (as amended, supplemented or otherwise modified and in effect
from time to time, the "SECURITY AGREEMENT") by and among the Issuer, First
Investors Financial Services, Inc., as seller, and First Union Capital Markets
Corp., as deal agent and collateral agent. All capitalized terms used but not
defined herein shall have the meanings assigned thereto in the Note Purchase
Agreement or the Security Agreement.
FOR VALUE RECEIVED, the Issuer hereby promises to pay to the order of
First Union Capital Markets Corp., as Deal Agent as agent for the Company and
the Investors, at the principal office of the Deal Agent at One First Union
Center, Charlotte, North Carolina 28288, a principal sum equal to TWENTY-FIVE
MILLION DOLLARS ($25,000,000.00), in lawful money of the United States of
America and in immediately available funds.
The date and amount of each Funding extended by the Company to the Issuer
under the Note Purchase Agreement, and each payment of principal thereof, shall
be recorded by the Company on its books and, prior to any transfer of this Note
(or, at the discretion of the Company, at any other time), endorsed by the
Company on the schedule attached hereto or any continuation thereof. Although
the stated principal amount of this Note is as stated above, this Note shall be
enforceable only with respect to the Issuer's obligation to pay the principal
hereof only to the extent of the unpaid principal amount of the Fundings
outstanding under the Note Purchase Agreement at the time such enforcement shall
be sought.
Interest on the outstanding principal amount of this Note shall accrue at
the rate or rates necessary for the payment to the holder hereof, on the dates
provided for in the Security Agreement, of Carrying Costs payable to the holder
hereof on such date or dates, and shall be payable in accordance with the
priorities set forth in the Security Agreement.
Principal in an amount equal to the Targeted Monthly Principal Payment
will be due and payable on each Remittance Date, and such amounts shall be
payable in accordance with the priorities set forth in Section 5.1 of the
Security Agreement. On each Remittance Date, principal in an amount equal to the
principal balance of each Receivable determined during the prior Collection
Period to be an Ineligible Receivable shall be due and payable hereunder.
The entire outstanding principal amount of this Note and accrued interest
thereon will be due and payable on the Remittance Date occurring in the calendar
month following the third calendar month in which the latest maturing Receivable
(determined as of the Termination Date) is scheduled to mature (without regard
to extensions subsequently granted on any Receivable by the Issuer or any
servicing agent).
After the occurrence of a Termination Event, the holder hereof may (with
the prior written consent of the Deal Agent, subject to the terms of the
Security Agreement) declare all amounts due hereunder to be immediately due and
payable.
The Issuer's obligation to make payments hereunder shall be a limited
recourse obligation of the Issuer, payable solely from the Collateral.
The Issuer shall pay all costs of collection of any amount due hereunder
when incurred, including without limitation, reasonable attorney's fees and
expenses, and including all costs and expenses actually incurred in connection
with the pursuit by the holder of any of its rights or remedies referred to
herein or in the Security Agreement or the protection of or realization upon
collateral, and all such costs shall be payable in accordance with Section
5.1(a)(vii) of the Security Agreement.
The Issuer waives presentment, notice of dishonor, protest and other
notice or formality with respect to this Note.
THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA.
FIRST INVESTORS AUTO CAPITAL
CORPORATION
By: _____________________________
Name:
Title: