EXHIBIT 4.3
SALE AND SERVICING
AGREEMENT
among
TRIAD AUTOMOBILE RECEIVABLES TRUST 2005-A,
Issuer,
TRIAD FINANCIAL SPECIAL PURPOSE LLC,
Depositor,
TRIAD FINANCIAL CORPORATION,
Servicer and Custodian
and
JPMORGAN CHASE BANK, N.A.,
Backup Servicer and Indenture Trustee
Dated as of May 26, 2005
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................................................ 1
Section 1.1 Definitions....................................................................... 1
Section 1.2 Other Definitional Provisions..................................................... 17
ARTICLE II CONVEYANCE OF RECEIVABLES......................................................................... 17
Section 2.1 Conveyance of Receivables......................................................... 17
Section 2.2 [Reserved]........................................................................ 18
Section 2.3 Further Encumbrance of Trust Property............................................. 18
ARTICLE III THE RECEIVABLES.................................................................................. 19
Section 3.1 Representations and Warranties.................................................... 19
Section 3.2 Repurchase upon Breach of Representations and Warranties.......................... 19
Section 3.3 Custody of Receivables Files...................................................... 20
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES....................................................... 22
Section 4.1 Duties of the Servicer............................................................ 22
Section 4.2 Collection of Receivable Payments; Modifications of Receivables; Blocked
Account Agreement................................................................. 24
Section 4.3 Realization upon Receivables...................................................... 26
Section 4.4 Insurance......................................................................... 27
Section 4.5 Maintenance of Security Interests in Vehicles..................................... 28
Section 4.6 Covenants, Representations, and Warranties of Servicer............................ 29
Section 4.7 Purchase of Receivables Upon Breach of Covenant................................... 30
Section 4.8 Total Servicing Fee; Payment of Certain Expenses by Servicer...................... 31
Section 4.9 Servicer's Certificate............................................................ 31
Section 4.10 Annual Statement as to Compliance, Notice of Servicer Termination Event........... 31
Section 4.11 Annual Independent Accountants' Report............................................ 32
Section 4.12 Access to Certain Documentation and Information Regarding Receivables............. 32
Section 4.13 Reserved.......................................................................... 33
Section 4.14 Fidelity Bond and Errors and Omissions Policy..................................... 33
ARTICLE V TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS........................................... 33
Section 5.1 Establishment of Trust Accounts................................................... 33
Section 5.2 [Reserved]........................................................................ 35
Section 5.3 Certain Reimbursements to the Servicer............................................ 35
Section 5.4 Application of Collections........................................................ 35
Section 5.5 Spread Account.................................................................... 36
Section 5.6 Additional Deposits............................................................... 36
Section 5.7 Distributions..................................................................... 36
Section 5.8 Note Distribution Account......................................................... 38
Section 5.9 Reserved.......................................................................... 39
Section 5.10 Statements to Noteholders......................................................... 39
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Section 5.11 Optional Deposits by the Insurer.................................................. 40
ARTICLE VI THE NOTE POLICY................................................................................... 40
Section 6.1 Claims Under Note Policy.......................................................... 40
Section 6.2 Preference Claims Under Note Policy............................................... 42
Section 6.3 Surrender of Note Policy.......................................................... 44
ARTICLE VII THE DEPOSITOR.................................................................................... 44
Section 7.1 Representations of Depositor...................................................... 44
Section 7.2 Organizational Existence.......................................................... 45
Section 7.3 Liability of Depositor............................................................ 45
Section 7.4 Merger or Consolidation of, or Assumption of the Obligations of, Depositor........ 45
Section 7.5 Limitation on Liability of Depositor and Others................................... 46
Section 7.6 Ownership of the Certificates or Notes............................................ 46
ARTICLE VIII THE SERVICER.................................................................................... 46
Section 8.1 Representations of Servicer....................................................... 46
Section 8.2 Liability of Servicer; Indemnities................................................ 47
Section 8.3 Merger or Consolidation of, or Assumption of the Obligations of the Servicer
or Backup Servicer................................................................ 48
Section 8.4 Limitation on Liability of Servicer, Backup Servicer and Others................... 49
Section 8.5 Delegation of Duties.............................................................. 50
Section 8.6 Servicer and Backup Servicer Not to Resign........................................ 50
ARTICLE IX DEFAULT........................................................................................... 51
Section 9.1 Servicer Termination Event........................................................ 51
Section 9.2 Consequences of a Servicer Termination Event...................................... 52
Section 9.3 Appointment of Successor.......................................................... 53
Section 9.4 Notification to Noteholders....................................................... 54
Section 9.5 Waiver of Past Defaults........................................................... 54
ARTICLE X TERMINATION........................................................................................ 54
Section 10.1 Optional Purchase of All Receivables.............................................. 54
ARTICLE XI ADMINISTRATIVE DUTIES OF THE SERVICER............................................................. 55
Section 11.1 Administrative Duties............................................................. 55
Section 11.2 Records........................................................................... 57
Section 11.3 Additional Information to be Furnished to the Issuer.............................. 57
ARTICLE XII MISCELLANEOUS PROVISIONS......................................................................... 57
Section 12.1 Amendment......................................................................... 57
Section 12.2 Protection of Title to Trust...................................................... 58
Section 12.3 Notices........................................................................... 59
Section 12.4 Assignment........................................................................ 61
Section 12.5 Limitations on Rights of Others................................................... 61
Section 12.6 Severability...................................................................... 61
Section 12.7 Separate Counterparts............................................................. 61
Section 12.8 Headings.......................................................................... 61
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Section 12.9 Governing Law..................................................................... 61
Section 12.10 Assignment to Indenture Trustee................................................... 61
Section 12.11 Nonpetition Covenants............................................................. 62
Section 12.12 Limitation of Liability of Owner Trustee and Indenture Trustee.................... 62
Section 12.13 Independence of the Servicer...................................................... 62
Section 12.14 No Joint Venture.................................................................. 63
Section 12.15 Nonpublic Personal Information.................................................... 63
SCHEDULES
Schedule A Schedule of Receivables
Schedule B Representations and Warranties
Schedule C Servicing Policies and Procedures
Schedule D Custodian Third Party Vendors
EXHIBITS
Exhibit A Form of Servicer's Certificate
Exhibit B Form of Note Guaranty Insurance Policy
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SALE AND SERVICING AGREEMENT dated as of May 26, 2005, among TRIAD
AUTOMOBILE RECEIVABLES TRUST 2005-A, a Delaware statutory trust (the "Issuer"),
TRIAD FINANCIAL SPECIAL PURPOSE LLC, a Delaware limited liability company (the
"Depositor"), and TRIAD FINANCIAL CORPORATION, a California corporation
("Triad", in its capacity as Servicer, the "Servicer", and in its capacity as
Custodian, the "Custodian"), and JPMORGAN CHASE BANK, N.A., a national banking
association organized under the laws of the United States, in its capacity as
Backup Servicer and Indenture Trustee (in such capacities, the "Backup Servicer"
and the "Indenture Trustee", respectively).
The Issuer desires to purchase the Receivables and Other Conveyed
Property;
The Depositor has purchased the Receivables and Other Conveyed
Property from Triad and is willing to sell the Receivables and Other Conveyed
Property to the Issuer;
The Servicer is willing to service the Receivables;
The Custodian is willing to take custody of the Receivable Files.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. Whenever used in this Agreement, the following
words and phrases will have the following meanings:
"Accounting Date" means, with respect to any Collection Period the
last day of such Collection Period.
"Additional Funds Available" means, with respect to any Distribution
Date, the sum of: (1) the Spread Account Draw Amount, if any, received by the
Indenture Trustee with respect to the Distribution Date; plus (2) the Insurer
Optional Deposit, if any, received by the Indenture Trustee with respect to the
Distribution Date.
"Administrative Receivable" means, so long as Triad is the Servicer,
with respect to any Collection Period, a Receivable which the Servicer is
required to purchase pursuant to Section 4.7 on the Determination Date with
respect to such Collection Period.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable prior to the end of the
preceding Collection Period and (ii) any Receivable
that became a Purchased Receivable prior to the end of the preceding Collection
Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may
be amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced at the time the
Receivable is originated in respect of accessories, insurance premiums, service
contracts, car club and warranty contracts and other items customarily financed
as part of retail automobile installment sale contracts or promissory notes, and
related costs.
"Attestation Protocol" means, the procedures, standards, guidance,
explanatory materials and exhibits with respect to the conduct of an attestation
program that are set forth in the preface, introduction and exhibits to The
Uniform Single Attestation Program for Mortgage Bankers effective for fiscal
years ended on or after December 15, 1995 or in any successor program, to the
extent such procedures, standards, guidance, explanatory materials and exhibits
are applicable to the servicing obligations set forth herein.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Auto Loan Purchase and Sale Agreement" means any agreement between
a Third-Party Lender and Triad relating to the acquisition of Receivables from a
Third Party Lender by Triad.
"Available Funds" means, for any Collection Period, the sum of (1)
the Collected Funds for the Collection Period; plus (2) all Purchase Amounts
deposited in the Collection Account with respect to the Collection Period, plus
income on investments held in the Collection Account, including earnings
transferred to the Collection Account pursuant to Section 5.1(b) hereof; plus
(3) the proceeds of any liquidation of the assets of the Issuer, other than Net
Liquidation Proceeds.
"Backup Servicer" means JPMorgan Chase Bank, N.A.
"Base Servicing Fee" means, with respect to any Collection Period,
the fee payable to the Servicer for services rendered during such Collection
Period, which will be equal to one-twelfth of the Servicing Fee Rate multiplied
by the Pool Balance as of the opening of business on the first day of such
Collection Period.
"Basic Documents" means this Agreement, the Certificate of Trust,
the Trust Agreement, the Purchase Agreement, the Insurance Agreement, the
Indenture, and the other documents and certificates delivered in connection
therewith.
"Blocked Account Agreement" means the Blocked Account Agreement with
Notice, dated as of April 29, 2005, by and among Triad, the Processing Bank,
Mellon Financial Services Corporation #1, Triad Automobile Receivables Warehouse
Trust and the Indenture Trustee, as such agreement may be amended or
supplemented from time to time, unless the Indenture Trustee will cease to be a
party thereunder, or such agreement will be terminated in accordance with its
terms, in which event "Blocked Account Agreement" will mean such other
agreement, in form and substance
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acceptable to the Controlling Party, among the Servicer, the Indenture Trustee
and the Processing Bank.
"Business Day" means a day other than a Saturday, a Sunday or other
day on which commercial banks located in the states of Delaware, California, or
New York are authorized or obligated to be closed.
"Certificate" means the trust certificate evidencing the beneficial
interest of the Certificateholder in the Trust.
"Certificateholders" means the Persons in whose name the
Certificates are registered.
"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes or the Class A-4 Notes, as the context requires.
"Class A Notes" means, collectively, the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes and the Class A-4 Notes.
"Class A Noteholders" means holders of the Class A Notes.
"Class A Noteholders' Accelerated Principal Amount" means, for any
Distribution Date, the lesser of: (1) the sum of (a) the excess, if any, of the
amount of Available Funds on the Distribution Date over the amounts payable on
the Distribution Date under clauses (i) through (x) of Section 5.7(a); plus, (b)
the amounts, if any, on deposit in the Spread Account in excess of the Spread
Account Requirement for the Distribution Date; and (2) the excess, if any, on
the Distribution Date of (a) the Pro Forma Class A Note Balance for the
Distribution Date; over (b) the Required Pro Forma Class A Note Balance for the
Distribution Date.
"Class A Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Monthly Interest
Distributable Amount for each Class of Class A Notes for such Distribution Date
and the Class A Noteholders' Interest Carryover Amount, if any, for each Class
of Class A Notes, calculated as of such Distribution Date.
"Class A Noteholders' Interest Carryover Amount" means, for any
Class of Class A Notes and any Determination Date, all or any portion of the
Class A Noteholders' Interest Distributable Amount for the Class for the
immediately preceding Distribution Date still unpaid as of the Determination
Date, plus, to the extent permitted by law, interest on the unpaid amount at the
interest rate paid on the Class of Notes from the preceding Distribution Date to
but excluding the related Distribution Date.
"Class A Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date and any Class of Class A Notes, the interest accrued
at the applicable Interest Rates during the applicable Interest Period on the
principal amount of the Notes of each Class of the Class A Notes outstanding as
of the end of the prior Distribution Date or, in the case of the first
Distribution Date, as of the Closing Date.
"Class A Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the amount, which will not be less than
zero, equal to the excess, if any, of (x) the sum of (i) the principal portion
of all Collected Funds received during the immediately preceding Collection
Period (other than with respect to Liquidated Receivables), including any full
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and partial principal prepayments during such Collection Period, (ii) the
Principal Balance of all Receivables that became Liquidated Receivables during
the related Collection Period (other than Purchased Receivables), (iii) the
principal portion of any Purchase Amounts received with respect to all
Receivables that became Purchased Receivables during the related Collection
Period, (iv) in the sole discretion of the Insurer, the Principal Balance of all
the Receivables that were required to be purchased pursuant to Sections 3.2 and
4.7, during such Collection Period but were not purchased, (v) the aggregate
amount of Cram Down Losses that occurred during the related Collection Period,
and (vi) if the Notes have been accelerated pursuant to Section 5.2 of the
Indenture, the amount of money or property collected in respect of principal
collections pursuant to Section 5.4 of the Indenture following such acceleration
by the Indenture Trustee or Controlling Party to the extent not used to pay
interest to the Class A Notes pursuant to Section 5.6 of the Indenture over (y)
the sum of the Step-Down Amount, if any, for such Distribution Date and amounts
distributed under Section 5.7(a)(iv), if any, for such Distribution Date.
"Class A Noteholders' Parity Deficit Amount" means, for any
Distribution Date, the excess, if any, of (1) the aggregate remaining principal
amount of the Class A Notes outstanding on the Distribution Date after giving
effect to all reductions in such aggregate principal amount from sources other
than the Note Policy over (2) the Pool Balance at the end of the prior
Collection Period.
"Class A Noteholders' Principal Carryover Amount" means, as of any
Determination Date, all or any portion of the Class A Noteholders' Principal
Distributable Amount from the immediately preceding Distribution Date that
remains unpaid.
"Class A Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Monthly Principal
Distributable Amount for the Distribution Date and the Class A Noteholders'
Principal Carryover Amount, if any, as of the Distribution Date.
"Class A-1 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-2 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-3 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-4 Notes" has the meaning assigned to such term in the
Indenture.
"Closing Date" means May 26, 2005.
"Collateral Insurance" has the meaning set forth in Section 4.4(a).
"Collected Funds" means, with respect to any Collection Period, the
amount of funds in the Collection Account representing collections on the
Receivables (other than Purchased Receivables) during such Collection Period,
including all Net Liquidation Proceeds collected during such Collection Period
(but excluding any Purchase Amounts).
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Collection Period" means, with respect to the first Distribution
Date, the period beginning on the close of business on April 30, 2005 and ending
on the close of business on May 31,
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2005. With respect to each subsequent Distribution Date, "Collection Period"
means the period beginning on the open of business on the first day of the
immediately preceding calendar month and ending on the close of business on the
last day of the immediately preceding calendar month. Any amount stated "as of
the close of business of the last day of a Collection Period" will give effect
to the following calculations as determined as of the end of the day on such
last day: (i) all applications of collections and (ii) all distributions.
"Collection Records" means all manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.
"Computer Tape" means the computer tapes or other electronic media
furnished by Triad to the Issuer and its assigns describing certain
characteristics of the Receivables as of the Cutoff Date.
"Contract" means a motor vehicle retail installment sale contract,
installment loan contract or note and security agreement.
"Controlling Party" means the Insurer, provided that if (i) an
Insurer Default has occurred and is continuing or (ii) all amounts payable to
the Class A Noteholders under the Indenture and the Insurer under the Insurance
Agreement have been paid in full, then the Controlling Party means the Indenture
Trustee acting at the direction of the Majority Noteholders.
"Copies" has the meaning set forth in Section 3.3(c).
"Corporate Trust Office" means (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this agreement is Wilmington Trust Company, is Rodney
Square North, 1100 N. Market Street, Wilmington, Delaware 19890, and (ii) with
respect to the Indenture Trustee and the Backup Servicer, the principal office
at which at any particular time its corporate trust business is administered,
which at the time of execution of this agreement is 4 New York Plaza, 6th Floor,
New York, New York 10004-2477, Attention: Worldwide Securities Services - Global
Debt - Triad 2005-A.
"Cram Down Loss" means, for any Receivable (other than a Purchased
Receivable or a Liquidated Receivable), if a court of appropriate jurisdiction
in an insolvency proceeding issued an order reducing the amount owed on the
Receivable or otherwise modifying or restructuring the scheduled payments to be
made on the Receivable, an amount equal to the excess of the Receivable's
Principal Balance immediately prior to the order over the Receivable's Principal
Balance as reduced.
"Cumulative Net Losses" means with respect to any Determination
Date, the aggregate principal balance of all Net Liquidation Losses for each
Collection Period from the Closing Date to and including the last day of the
related Collection Period.
"Cumulative Net Loss Ratio" means, with respect to any Determination
Date, the ratio, expressed as a percentage, computed by dividing (i) Cumulative
Net Losses as of such Determination Date by (ii) the Original Pool Balance.
"Cumulative Net Loss Trigger Event" means, with respect to any
Determination Date, the Cumulative Net Loss Ratio with respect to such
Determination Date exceeds the amounts set forth below:
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DISTRIBUTION DATE OCCURRING IN: PERCENTAGE:
- ------------------------------- -----------
June 2005 through August 2005............................................. 1.56%
September 2005 through November 2005...................................... 3.12%
December 2005 through February 2006....................................... 4.68%
March 2006 through May 2006............................................... 6.24%
June 2006 through August 2006............................................. 8.06%
September 2006 through November 2006...................................... 9.88%
December 2006 through February 2007....................................... 11.70%
March 2007 through May 2007............................................... 13.52%
June 2007 through August 2007............................................. 15.08%
September 2007 through November 2007...................................... 16.64%
December 2007 through February 2008....................................... 18.20%
March 2008 through May 2008............................................... 19.76%
June 2008 and thereafter.................................................. 20.00%
"Custodian" means Triad as custodian hereunder acting as agent for
the Indenture Trustee, or any other Person named from time to time as custodian
hereunder, which Person must be reasonably acceptable to the Controlling Party
(the Custodian as of the Closing Date is acceptable to the Insurer as of the
Closing Date).
"Cutoff Date" means April 30, 2005.
"Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to Triad under a Dealer
Agreement or pursuant to a Dealer Assignment.
"Dealer Agreement" means any agreement between a Dealer and Triad
relating to the acquisition of Receivables from the Dealer by Triad.
"Dealer Assignment" means, with respect to a Receivable, the
executed assignment executed by the Dealer conveying such Receivable to Triad.
"Delinquency Rate" means, with respect to any Determination Date, a
fraction, expressed as a percentage, (a) the numerator of which is equal to the
Aggregate Principal Balance of all Receivables, other than Liquidated
Receivables, for which 10% or more of a Scheduled Receivables Payment was 60 or
more days delinquent as of the last day of the related Collection Period and (b)
the denominator of which is equal to the Aggregate Principal Balance as of the
last day of the related Collection Period.
"Depositor" means Triad Financial Special Purpose LLC, a Delaware
limited liability company.
"Determination Date" means, with respect to any Collection Period,
the third Business Day preceding the Distribution Date in the next Collection
Period.
"Distribution Date" means, with respect to each Collection Period,
the 12th day of the following Collection Period, or, if such day is not a
Business Day, the immediately following Business Day, commencing June 13, 2005.
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"Electronic Ledger" means the electronic master record of the motor
vehicle retail installment sale contracts, installment loan contracts and note
and security agreements of the Servicer.
"Eligible Deposit Account" means a segregated trust account with the
corporate trust department of a depository institution acceptable to the Insurer
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a foreign
bank), having corporate trust powers and acting as trustee for funds deposited
in such account, so long as any of the securities of such depository institution
and its corporate parent have a credit rating from each Rating Agency in one of
its generic rating categories which signifies investment grade and a rating of
at least A-1 by Standard & Poor's and/or P-1 by Moody's.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities, in each case denominated in United States dollars,
represented by instruments in bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia
(or any domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depository institution
authorities (including depository receipts issued by any such institution
or trust company as custodian with respect to any obligation referred to
in clause (a) above or portion of such obligation for the benefit of the
holders of such depository receipts); provided, however, that at the time
of the investment or contractual commitment to invest therein (which will
be deemed to be made again each time funds are reinvested following each
Distribution Date), the commercial paper or other short-term senior
unsecured debt obligations (other than such obligations the rating of
which is based on the credit of a Person other than such depository
institution or trust company) of such depository institution or trust
company will have a credit rating from Standard & Poor's of A-1+ and from
Moody's of P-1;
(c) commercial paper and demand notes investing solely in commercial
paper having, at the time of the investment or contractual commitment to
invest therein, a rating from Standard & Poor's of A-1+ and from Moody's
of P-1;
(d) investments in money market funds (including funds for which the
Indenture Trustee or the Owner Trustee in each of their individual
capacities or any of their respective Affiliates is investment manager,
controlling party or advisor) having a rating from Standard & Poor's of
AAA and from Moody's of Aaa;
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of
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America, in either case entered into with a depository institution or
trust company (acting as principal) referred to in clause (b) above;
(g) any other investment which would satisfy the Rating Agency
Condition and is consistent with the ratings of the Securities and which,
so long as no Insurer Default has occurred and is continuing, has been
approved by the Insurer, or any other investment that by its terms
converts to cash within a finite period, if the Rating Agency Condition is
satisfied with respect thereto; and
(h) cash.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Indenture Trustee or any of their respective
Affiliates. None of the Eligible Investments may have an "r" subscript as part
of its S&P rating. Each of the Eligible Investments must have a predetermined
fixed dollar amount that is due at maturity.
"Eligible Servicer" means, Triad Financial Corporation, as Servicer,
JPMorgan Chase Bank, N.A., as Backup Servicer, or another Person which at the
time of its appointment as Servicer or Backup Servicer, (i) is servicing a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle installment loan contracts, (ii) is legally qualified and has the
capacity to service the Receivables, (iii) has demonstrated the ability
professionally and competently to service a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle installment loan contracts
similar to the Receivables with reasonable skill and care, (iv) is qualified and
entitled to use, pursuant to a license or other written agreement, and agrees to
maintain the confidentiality of, the software which the Servicer uses in
connection with performing its duties and responsibilities under this Agreement
or otherwise has available software which is adequate to perform its duties and
responsibilities under this Agreement, and (v) so long as no Insurer Default has
occurred and is continuing, is reasonably acceptable to the Insurer.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means with respect to (i) the
Class A-1 Notes, the June 2006 Distribution Date, (ii) the Class A-2 Notes, the
January 2009 Distribution Date, (iii) the Class A-3 Notes, the March 2010
Distribution Date and (iv) the Class A-4 Notes, the June 2012 Distribution Date.
"Financed Vehicle" means an automobile or light-duty truck, together
with all accessions thereto, securing an Obligor's indebtedness under the
respective Receivable.
"Indenture" means the Indenture dated as of May 26, 2005, between
the Issuer and JPMorgan Chase Bank, N.A., as Indenture Trustee, as the same may
be amended and supplemented from time to time.
"Indenture Trustee" means JPMorgan Chase Bank, N.A., its successors
in interest and any successor trustee hereunder and under the Indenture.
"Indenture Trustee Fee" means, with respect to any Collection
Period, the fee payable to the Indenture Trustee for services rendered during
such Collection Period, which will be equal to $250.
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"Independent Accountants" has the meaning set forth in Section 4.11.
"Insolvency Event" means, with respect to a specified Person, (a)
the filing of a petition against such Person or the entry of a decree or order
for relief by a court having jurisdiction in the premises in respect of such
Person or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation or
such Person's affairs, and such petition, decree or order will remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insolvency Proceeds" has the meaning set forth in Section 10.1(b).
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of May 26, 2005, among the Insurer, the Trust, the Depositor, Triad and
the Indenture Trustee.
"Insurance Agreement Event of Default" means an "Event of Default"
as defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Insured Payment" has the meaning set forth in the Note Policy.
"Insurer" means Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance corporation incorporated under the laws of the State of
Wisconsin, or any successor thereto, as issuer of the Note Policy.
"Insurer Default" means the occurrence and continuance of any of the
following events:
(a) the Insurer failing to make a payment required under the Note
Policy in accordance with its terms;
(b) the Insurer (i) filing a petition or commencing any case or
proceeding under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (ii) making a
general assignment for the benefit of its creditors, or (iii) having an
order for relief entered against it under the United States Bankruptcy
Code or any other similar federal or
9
state law relating to insolvency, bankruptcy, rehabilitation, liquidation
or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the Wisconsin Department of
Insurance or other competent regulatory authority has entered a final and
nonappealable order, judgment or decree (i) appointing a custodian,
trustee, agent or receiver for the Insurer or for all or any material
portion of its property or (ii) authorizing the taking of possession of
all or any material portion of the property of the Insurer by a custodian,
trustee, agent or receiver.
"Insurer Optional Deposit" means, for any Distribution Date, an
amount other than an Insured Payment delivered by the Insurer, at its sole
option, for deposit into the Collection Account for any of the following
purposes: to provide funds to pay the fees or expenses of any of the Issuer's
service providers for the Distribution Date; or to include those amounts as part
of Additional Funds Available for the Distribution Date to the extent that
without them a draw would be required to be made on the Note Policy.
"Interest Period" means, with respect to any Distribution Date, (i)
with respect to the Class A-1 Notes, the period from and including the preceding
Distribution Date (or in the case of the first Distribution Date, from and
including the Closing Date) to, but excluding, such Distribution Date and (ii)
with respect to the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes, the period from and including the 12th day of the prior calendar month
(or in the case of the first Distribution Date, from and including the Closing
Date) to, but excluding, the 12th day of the calendar month in which such
Distribution Date occurs.
"Interest Rate" means, with respect to (i) the Class A-1 Notes,
3.30% per annum, (ii) the Class A-2 Notes, 3.79% per annum, (iii) the Class A-3
Notes, 4.05% per annum, and (vi) the Class A-4 Notes, 4.22% per annum (in the
case of the Class A-1 Notes, computed on the basis of a 360 day year and the
actual number of days in the related Interest Period and in the case of the
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes computed on the basis of a
360-day year consisting of twelve 30-day months).
"Investment Earnings" means, with respect to any date of
determination and Trust Account, the investment earnings on amounts on deposit
in such Trust Account on such date.
"Issuer" means Triad Automobile Receivables Trust 2005-A, a Delaware
statutory trust.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" will mean only a certificate or notification issued to a secured
party.
10
"Liquidated Receivable" means, with respect to any Collection
Period, any Receivable with respect to which any of the following has occurred:
(i) 10% or more of any Scheduled Receivable Payment is 120 days or more past
due, except Receivables with respect to which the related Financed Vehicle has
been repossessed within such 120 days; (ii) the earlier of (A) 90 days have
elapsed since the Servicer repossessed the Financed Vehicle and (B) the sale of
the related Financed Vehicle; or (iii) the Servicer has determined in good faith
that it has received all amounts it expects to recover.
"Lockbox Account" means an account maintained by the Processing Bank
pursuant to Section 4.2(d).
"Majority Noteholders" has the meaning set forth in the Indenture.
"Minimum Servicing Standards" means servicing standards identified
as "Minimum Servicing Standards" in The Uniform Single Attestation Program for
Mortgage Bankers effective for fiscal years ended on or after December 15, 1995
or in any successor program, to the extent such standards are applicable to the
servicing obligations set forth herein.
"Monthly Extension Rate" means, with respect to any Accounting Date,
the fraction, expressed as a percentage, the numerator of which is the aggregate
Principal Balance of Receivables whose payments were extended during the related
Collection Period and the denominator of which is the Aggregate Principal
Balance as of the immediately preceding Accounting Date.
"Monthly Records" means all records and data maintained by the
Servicer with respect to the Receivables, including the following with respect
to each Receivable: the account number; the originating Dealer; Obligor name;
Obligor address; Obligor home phone number; Obligor business phone number, if
any; original Principal Balance; original term; Annual Percentage Rate; current
Principal Balance; current remaining term; origination date; first payment date;
final scheduled payment date; next payment due date; new/used classification;
collateral description; days currently delinquent; number of contract extensions
(months) to date; amount of Scheduled Receivables Payment; and past due late
charges.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Losses" means, with respect to any Determination
Date, the amount, if any, by which (a) the sum of (i) the Principal Balance of
all Receivables which became Liquidated Receivables during the related
Collection Period, and (ii) the aggregate of all Cram Down Losses that occurred
during such Collection Period, exceeds (b) the Net Liquidation Proceeds received
during the related Collection Period in respect of all Liquidated Receivables.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, (1) proceeds from the disposition of the underlying Financed
Vehicle; plus (2) any related insurance proceeds; plus (3) other monies received
from the Obligor that are allocable to principal and interest due under the
Receivable; minus (4) the Servicer's reasonable out-of-pocket costs, including
repossession and resale expenses not already deducted from the proceeds, and any
amounts required to be remitted to the Obligor by law.
"Net Loss Rate" means, with respect to a Collection Period, the
fraction, expressed as a percentage, the numerator of which is equal to the
aggregate of the Net Liquidation Losses for such
11
Collection Period and the denominator of which is the Aggregate Principal
Balance as of the first day of such Collection Period.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Policy" means the financial guaranty insurance policy issued
by the Insurer to the Indenture Trustee for the benefit of the Class A
Noteholders.
"Note Pool Factor" means, for each Class of Notes as of the close of
business on any date of determination, a seven-digit decimal figure equal to the
outstanding principal amount of such Class of Notes divided by the original
principal amount of such Class of Notes.
"Note Preference Claim" has the meaning set forth in Section 6.2(b).
"Noteholders" means the holders of the Class A Notes.
"Notes" means the Class A Notes.
"Obligor" on a Receivable means the purchaser or co-purchaser(s) of
a Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman
of the board, the president, any executive vice president or any vice president,
any treasurer, assistant treasurer, secretary or assistant secretary of the
Servicer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel reasonably
acceptable to the Insurer, which opinion is satisfactory in form and substance
to the Indenture Trustee and, if such opinion or a copy thereof is required by
the provisions of this Agreement to be delivered to the Insurer, to the Insurer.
"Original Pool Balance" means, as of any date of determination,
$1,200,000,000.18 (which is the Pool Balance as of the Cutoff Date).
"Originator" means Triad.
"Other Conveyed Property" means all property conveyed by the
Depositor to the Trust pursuant to Section 2.1(b) through (h).
"Overcollateralization Target Percentage" means (a) 13.5%; provided
that, if no Spread Cap Event (as defined in the Insurance Agreement) and no
Insurance Agreement Event of Default shall have occurred on the 18th
Distribution Date, the Overcollateralization Target Percentage shall decline to
12.5%, beginning on such Distribution Date; provided further that, if no Spread
Cap Event (as defined in the Insurance Agreement) and no Insurance Agreement
Event of Default shall have occurred on the 24th Distribution Date, the
Overcollateralization Target Percentage shall decline to 11.5%, beginning on
such Distribution Date; and provided further that, if no Spread Cap Event (as
defined in the Insurance Agreement) and no Insurance Agreement Event of Default
shall have occurred on the 30th Distribution Date, the Overcollateralization
Target Percentage shall decline to 10.5%, beginning on such Distribution Date.
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"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Owner Trustee Fee" means with respect to any Collection Period, the
fee payable to the Owner Trustee for services rendered during such Collection
Period, which will be equal to $250.
"Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization or government or any agency or
political subdivision thereof.
"Policy Claim Amount" has the meaning set forth in the Note Policy.
"Pool Balance" means, as of any date of determination, the Aggregate
Principal Balance at the end of the preceding Collection Period.
"Preference Amount" has the meaning set forth in the Note Policy.
"Premium" means the premium payable to the Insurer, as specified in
the Insurance Agreement.
"Principal Balance" means, for any Receivable as of any date of
determination, (i) the Amount Financed; minus (ii) the sum of (a) that portion
of all amounts received on or prior to that date and allocable to principal
according to the Receivable's terms, and (b) any Cram Down Losses for the
Receivable accounted for as of that date.
"Processing Bank" means, initially, Mellon Bank, N.A. and its
successors in interest, and thereafter a depository institution named by the
Servicer and approved by the Insurer (so long as no Insurer Default has occurred
and is continuing) which provides a lockbox as part of its normal and customary
services at which the Lockbox Account is established and maintained as of such
date; provided, however, that upon the occurrence of a Servicer Termination
Event, the Controlling Party may, in its sole discretion, cause the Lockbox
Account to be established at another bank.
"Pro Forma Class A Note Balance" means, for any Distribution Date,
the aggregate remaining principal amount of the Class A Notes outstanding on the
Distribution Date, after giving effect to distributions to be made on such
Distribution Date under clauses (i) through (x) of Section 5.7(a).
"Purchase Agreement" means the Purchase Agreement between the
Depositor and Triad, dated as of May 26, 2005, as such Purchase Agreement may be
amended from time to time.
"Purchase Amount" means, with respect to a Receivable, the sum of
(i) the Principal Balance as of the date of purchase and (ii) an amount of
interest accrued thereon at the related Annual Percentage Rate from the end of
the prior Collection Period through the last day of the month of purchase.
"Purchased Receivable" means, with respect to any Collection Period,
a Receivable purchased as of the close of business on the last day of the
Collection Period by Triad or the Servicer
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so long as JPMorgan Chase Bank, N.A. is not acting as Servicer, as the result of
a breach of a covenant or as an exercise of its optional redemption right.
"Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor maintains a rating on the Securities, "Rating Agency"
will mean a nationally recognized statistical rating organization or other
comparable Person designated by the Issuer and reasonably acceptable to the
Insurer (so long as no Insurer Default has occurred and is continuing), notice
of which designation will be given by the Issuer to the Indenture Trustee, the
Owner Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that
each Rating Agency has been given 10 days (or such shorter period as will be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies has notified the Depositor, the Servicer, the Insurer, the
Indenture Trustee, the Owner Trustee and the Issuer in writing that such action
will not result in a reduction or withdrawal of the then current rating of the
Notes.
"Receivable" means any Contract listed on Schedule A (which Schedule
may be in the form of microfiche or a disk).
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" has the meaning set forth in the Indenture.
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Required Pro Forma Class A Note Balance" means, with respect to any
Distribution Date, a dollar amount equal to the product of (1) the difference
between (a) 100% and (b) the Overcollateralization Target Percentage for that
Distribution Date and (2) the Pool Balance as of the end of the prior Collection
Period.
"Schedule of Receivables" means the schedule of all motor vehicle
retail installment sale contracts, installment loan contracts and note and
security agreements originally held as part of the Trust which is attached as
Schedule A.
"Schedule of Representations" means the Schedule of Representations
and Warranties attached as Schedule B.
"Scheduled Receivables Payment" means, with respect to any
Collection Period for any Receivable, the amount set forth in the Receivable as
required to be paid by the Obligor in the Collection Period. If, after the
Closing Date, the Obligor's obligation under a Receivable with respect to a
Collection Period is modified so as to differ from the amount specified in the
Receivable as a result of (i) the order of a court in an insolvency proceeding
involving the Obligor, (ii) pursuant to the Servicemembers Civil Relief Act or
(iii) modifications or extensions of the Receivable permitted by Section 4.2(b),
the Scheduled Receivables Payment with respect to such Collection Period will
refer to the Obligor's payment obligation with respect to the Collection Period
as so modified.
"Securities" means, collectively, the Class A Notes and the
Certificates.
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"Service Contract" means, with respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of the Financed Vehicle.
"Servicer" means Triad as the servicer of the Receivables, and each
successor Servicer pursuant to Section 9.3.
"Servicer Termination Event" means an event specified in Section
9.1.
"Servicer's Certificate" means an Officer's Certificate delivered
pursuant to Section 4.9, substantially in the form of Exhibit A.
"Servicing Fee" has the meaning specified in Section 4.8.
"Servicing Fee Rate" means 2.25% per annum.
"Simple Interest Method" means the method of allocating a fixed
level payment on an obligation between principal and interest, pursuant to which
the portion of the payment that is allocated to interest is equal to the product
of the fixed rate of interest on the obligation multiplied by the period of time
expressed as a fraction of a year, based on the actual number of days elapsed
since the preceding payment under the obligation was made and 365 days in the
calendar year.
"Spread Account" means the account designated as such, established
and maintained pursuant to Section 5.5.
"Spread Account Draw Amount" means, for any Determination Date, the
amount, after taking into account the application on the Distribution Date of
Available Funds for the related Collection Period, equal to any shortfall in the
payment of amounts described in clauses (i) through (vi) of Section 5.7(a).
"Spread Account Initial Deposit" means $24,000,000.
"Spread Account Requirement" means, with respect to the Closing Date
and for any Distribution Date, a dollar amount equal to: the Spread Account
Initial Deposit or, if a Spread Cap Event (as such term is defined in the
Insurance Agreement) has occurred and is continuing, 3.00% of the Original Pool
Balance.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or its successor.
"Statutory Trust Statute" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
from time to time.
"Step-Down Amount" means, with respect to any Distribution Date, the
excess, if any, of (x) the Required Pro Forma Class A Note Balance over (y) the
Pro Forma Class A Note Balance on such Distribution Date, calculated for this
definition only without deduction for any Step-Down Amount (i.e., assuming that
the entire amount described in clause (x) of the definition of "Class A
Noteholders' Monthly Principal Distributable Amount" is distributed as principal
on the Class A Notes).
15
"Supplemental Servicing Fee" means, with respect to any Collection
Period, all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, prepayment fees, extension fees and liquidation
fees collected on the Receivables during the Collection Period and any expenses
incurred by the Servicer in connection with repossession and liquidation of the
Financed Vehicle.
"Third-Party Lender" means an entity that originated a loan to a
consumer or was the original assignee of a motor vehicle retail installment sale
contract from a dealer for the purchase of a motor vehicle and sold the loan or
motor vehicle retail installment sale contract to Triad pursuant to an Auto Loan
Purchase and Sale Agreement.
"Third-Party Lender Assignment" means, with respect to a Receivable,
the assignment executed by a Third-Party Lender conveying the Receivable to
Triad.
"Triad" means Triad Financial Corporation, a California corporation,
and its successors and assigns.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of April 15,
2005 among Triad, as the Administrator, the Depositor and the Owner Trustee, as
amended and restated as of May 26, 2005 as the same may be amended and
supplemented from time to time.
"Trust Officer" means, (i) in the case of the Indenture Trustee, the
chairman or vice-chairman of the board of directors, any managing director, the
chairman or vice-chairman of the executive committee of the board of directors,
the president, any vice president, assistant vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
and any assistant controller or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject, and (ii) in
the case of the Owner Trustee, any officer in the corporate trust office of the
Owner Trustee or any agent of the Owner Trustee under a power of attorney with
direct responsibility for the administration of any of the Basic Documents on
behalf of the Owner Trustee.
"Trust Property" means all right, title and interest of the Trust in
and to the property and rights assigned to the Trust pursuant to Section 2.1
hereof, all funds on deposit from time to time in the Trust Accounts (including
all Eligible Investments therein and all proceeds therefrom) and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust under this Agreement.
16
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
Section 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture, or, if not defined
therein, in the Trust Agreement.
(b) All terms defined in this Agreement will have the defined
meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(c) As used in this Agreement, in any instrument governed hereby and
in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly
defined in this Agreement or in any such instrument, certificate or other
document to the extent not defined, will have the respective meanings
given to them under U.S. generally accepted accounting principles as in
effect on the date of this Agreement or any such instrument, certificate
or other document, as applicable. To the extent that the definitions of
accounting terms in this Agreement or in any such instrument, certificate
or other document are inconsistent with the meanings of such terms under
U.S. generally accepted accounting principles, the definitions contained
in this Agreement or in any such instrument, certificate or other document
will control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement will refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule
and Exhibit references contained in this Agreement are references to
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" means "including without limitation."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
Conveyance of Receivables
Section 2.1 Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Depositor on the Closing Date of the Notes
and the Certificates and the other amounts to be distributed from time to time
to the order of the Depositor in accordance with the
17
terms of this Agreement, the Depositor does hereby sell, transfer, assign, set
over and otherwise convey to the Issuer, without recourse, all right, title and
interest of the Depositor in and to:
(a) the Receivables and all moneys received thereon after the Cutoff
Date;
(b) an assignment of the security interests in the Financed Vehicles
granted by Obligors pursuant to the Receivables and any other interest of
the Originator or the Depositor in such Financed Vehicles;
(c) any proceeds and the right to receive proceeds with respect to
the Receivables from claims on any physical damage, credit life or
disability insurance policies covering Financed Vehicles or Obligors and
any proceeds from the liquidation of the Receivables;
(d) the right to cause the related Dealer or Third-Party Lender to
repurchase Receivables pursuant to a Dealer Agreement or an Auto Loan
Purchase and Sale Agreement, respectively, as a result of a breach of
representation or warranty in the related Dealer Agreement or Auto Loan
Purchase and Sale Agreement, respectively;
(e) all rights, if any, to refunds for the costs of Service
Contracts on the related Financed Vehicles;
(f) the related Receivable Files;
(g) all of the Depositor's right, title and interest in its rights
and benefits, but none of its obligations or burdens, under the Purchase
Agreement, including the Depositor's rights under the Purchase Agreement,
to enforce the delivery requirements, representations and warranties and
the cure and repurchase obligations of Triad under the Purchase Agreement;
and
(h) the proceeds of any and all of the foregoing.
It is the intention of the Depositor that the transfer and
assignment contemplated by this Agreement constitutes a sale of the Receivables
and Other Conveyed Property from the Depositor to the Issuer and the beneficial
interest in and title to the Receivables and the Other Conveyed Property will
not be part of the Depositor's estate in the event of the filing of a bankruptcy
petition by or against the Depositor under any bankruptcy law. In the event
that, notwithstanding the intent of the Depositor, the transfer and assignment
contemplated hereby is held by a court of competent jurisdiction not to be a
sale, this Agreement will constitute a grant of a security interest in the
property referred to in this Section to the Issuer for the benefit of the
Indenture Trustee, the Noteholders and the Insurer.
Section 2.2 [Reserved].
Section 2.3 Further Encumbrance of Trust Property.
(a) Immediately upon the conveyance to the Trust by the Depositor of
the Trust Property, all right, title and interest of the Depositor in and
to such item of Trust Property will terminate, and all such right, title
and interest will vest in the Trust, in accordance with the Trust
Agreement and the Statutory Trust Statute.
18
(b) Immediately upon the vesting of the Trust Property in the Trust,
the Trust will have the sole right to pledge or otherwise encumber such
Trust Property. Pursuant to the Indenture, the Trust will grant a security
interest in the Trust Property to the Indenture Trustee securing the
repayment of the Notes and the Issuer's obligations to the Insurer. The
Certificates will represent the beneficial ownership interest in the Trust
Property, and the Certificateholders will be entitled to receive
distributions with respect thereto as set forth herein.
(c) Following the payment in full of the Notes and the release and
discharge of the Indenture, all covenants of the Issuer under Article III
of the Indenture will, until payment in full of the Certificates, remain
as covenants of the Issuer for the benefit of the Certificateholders,
enforceable by the Certificateholders to the same extent as such covenants
were enforceable by the Noteholders prior to the discharge of the
Indenture. Any rights of the Indenture Trustee under Article III of the
Indenture, following the discharge of the Indenture, will vest in
Certificateholders.
(d) The Indenture Trustee will, at such time as there are no Notes
outstanding and all sums due to the Indenture Trustee, the Insurer and the
Backup Servicer pursuant to the Indenture and this Agreement have been
paid, release any remaining portion of the Trust Property to the
Certificateholders.
ARTICLE III
The Receivables
Section 3.1 Representations and Warranties. The Depositor hereby conveys
its rights, title and interest in and to the representations and warranties made
by the Originator in respect of the Receivables pursuant to the Purchase
Agreement and this Agreement.
In addition, the Depositor makes the following representations and
warranties, on which the Issuer relies in accepting the Receivables and
delivering the Securities. Such representations and warranties speak as of the
Closing Date, but shall survive the transfer and assignment of the Receivables
by the Depositor to the Issuer and the pledge thereof to the Indenture Trustee
in accordance with the terms of the Indenture:
(a) Title. The Depositor shall convey to the Issuer all right, title
and interest of the Depositor in and to the Receivables, including all
right, title and interest of the Depositor in and to the security
interests in the related Financed Vehicles.
(b) All Filings Made. The Depositor has caused all filings
(including UCC filings) to be made in Delaware with respect to the sale of
the Receivables to the Issuer and the pledge contemplated in the Basic
Documents to the Indenture Trustee.
(c) Liens. The Depositor has not taken any actions to create, incur
or suffer to exist any Lien on or restriction on transferability of any
Receivable except for the Lien of the Indenture and the restrictions on
transferability imposed by this Agreement.
Section 3.2 Repurchase upon Breach of Representations and Warranties.
19
(a) The Depositor, the Servicer, the Insurer, the Indenture Trustee
or the Trust, as the case may be, will inform the other parties to this
Agreement and Triad promptly, by notice in writing, upon the discovery of
any breach of the representations and warranties referenced in Section 3.1
and in Schedule B hereto. As of the last day of the second (or, if Triad
so elects, the first) month following the discovery by Triad or receipt by
Triad of notice of such breach, unless such breach is cured by such date,
Triad will repurchase any Receivable in which the interests of the
Noteholders or the Insurer are materially and adversely affected by any
such breach as of such date. The "second month" will mean the month
following the month in which discovery occurs or notice is given, and the
"first month" will mean the month in which discovery occurs or notice is
given.
In consideration of and simultaneously with the repurchase of the
Receivable, Triad will remit to the Collection Account the Purchase Amount in
the manner specified in Section 5.6 and the Issuer and the Indenture Trustee
will execute such assignments and other documents reasonably requested by such
person in order to effect such repurchase. The Issuer and the Indenture Trustee
will take such steps in assigning such Receivable to Triad as are described in
Section 5.2 of the Purchase Agreement.
The sole remedy of the Issuer, the Owner Trustee, the Indenture
Trustee or the Noteholders with respect to a breach of representations and
warranties pursuant to Section 3.1 and the agreement contained in this Section
will be the repurchase of Receivables pursuant to this Section, subject to the
conditions contained herein or to enforce the obligation of Triad to repurchase
such Receivables pursuant to the Purchase Agreement. Neither the Owner Trustee
nor the Indenture Trustee will have a duty to conduct any affirmative
investigation as to the occurrence of any conditions requiring the repurchase of
any Receivable pursuant to this Section.
In addition to the foregoing and notwithstanding whether the related
Receivable has been purchased by Triad, Triad will indemnify the Trust, the
Indenture Trustee, the Backup Servicer, and the officers, directors, agents and
employees thereof, the Insurer and the Noteholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted against or incurred by any of them as a result
of third party claims arising out of the events or facts giving rise to such
breach.
(b) Pursuant to Section 2.1, the Depositor conveyed to the Trust all
of the Depositor's right, title and interest in its rights and benefits,
but none of its obligations or burdens, under the Purchase Agreement
including the Depositor's rights under the Purchase Agreement to enforce
the delivery requirements, representations and warranties, indemnities and
the cure or repurchase obligations of Triad thereunder. The Depositor
hereby represents and warrants to the Trust that such assignment is valid
and enforceable against the Depositor.
Section 3.3 Custody of Receivables Files.
(a) In connection with the sale, transfer and assignment of the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, the Indenture Trustee hereby revocably appoints the Custodian,
and the Custodian hereby accepts such appointment, to act as the agent of
the Indenture Trustee as custodian of the following documents or
instruments in its possession or in the possession of third party vendors
on behalf of the Custodian which will be delivered to the Custodian as
agent of the Indenture Trustee on or before the Closing Date (with respect
to each Receivable):
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(i) the fully executed original of the Contract related to
such Receivable (together with any agreements modifying the Receivable,
including any extension agreements);
(ii) the original certificate of title (when received)
indicating that the Financed Vehicle is owned by the Obligor and subject to the
interest of Triad as first lienholder or secured party (including any Lien
Certificate received by Triad) or that it has been assigned to Triad as first
lienholder or secured party, or, if such original certificate of title has not
yet been received, a copy of the application therefor, showing Triad as secured
party and otherwise such related documents, if any, that Triad keeps on file in
accordance with its customary procedures; and
(iii) in connection with Receivable Files pertaining to retail
installment sale contracts, the original credit application, or a copy thereof
(collectively, the "Receivable Files").
(b) Upon payment in full of any Receivable, the Servicer will notify
the Custodian pursuant to a certificate of an officer of the Servicer
(which certificate will include a statement to the effect that all amounts
received in connection with such payments which are required to be
deposited in the Collection Account pursuant to Section 4.1 have been so
deposited) and will request delivery of the Receivable File to the
Servicer. From time to time as appropriate for servicing and enforcing any
Receivable, the Custodian will, upon written request of an officer of the
Servicer and delivery to the Custodian of a receipt signed by such
officer, cause the related Receivable File to be released to the Servicer.
The Servicer's receipt of a Receivable File will obligate the Servicer to
return the Receivable File to the Custodian when its need by the Servicer
has ceased unless the Receivable is repurchased as described in Section
3.2 or 4.7.
(c) The Custodian, or its third-party vendor, will hold the
Receivable Files on behalf of the Indenture Trustee and will maintain such
accurate and complete accounts, records and computer systems pertaining to
each Receivable File as will enable the Indenture Trustee to comply with
the terms and conditions of this Agreement. For so long as Triad is the
Custodian, the Custodian will maintain the Receivable Files at (i) its
office located at 7711 Center Avenue, Suite 100, Huntington Beach,
California 92647, (ii) with a third-party service provider identified on
Schedule D hereto, as it may be modified from time to time by the
Custodian with the consent of the Insurer, which will not be unreasonably
withheld, or (iii) subject to the prior written consent of the Insurer, so
long as no Insurer Default has occurred and is continuing, at such other
office as will from time to time be identified to the Indenture Trustee
and the Insurer. Each Receivable will be identified on the books and
records of the Custodian in a manner that (i) indicates that the
Receivables are held by the Custodian on behalf of the Indenture Trustee
and (ii) is otherwise necessary, as reasonably determined by the
Custodian. So long as JPMorgan Chase Bank, N.A. is not the Custodian, the
Custodian will conduct, or cause to be conducted, periodic physical
inspections of the Receivable Files held by it, and of the related
accounts, records and computer systems, in such a manner as will enable
the Indenture Trustee, the Insurer and the Custodian to verify the
accuracy of the Custodian's inventory and recordkeeping. Such inspections
will be conducted at such times, in such manner and by such persons
including independent accountants, as the Insurer or the Indenture Trustee
may reasonably request and the cost of such inspections will be borne
directly by the Custodian, so long as JPMorgan Chase Bank, N.A. is not the
Custodian, and not by the Indenture Trustee, but such inspections are not
to take place more than once per year. The Custodian will promptly report
to the Insurer and the Indenture Trustee any failure on its part to hold
the Receivable Files and maintain its
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accounts, records and computer systems as herein provided and promptly
take appropriate action to remedy any such failure. Upon request, the
Custodian will, at the expense of the party making such request, make
copies or other electronic file records (e.g., diskettes, CDs, etc.) (the
"Copies") of the Receivable Files and will deliver such Copies to the
Indenture Trustee and the Indenture Trustee will hold such Copies on
behalf of the Issuer Secured Parties.
(d) The Custodian will, subject only to the Custodian's security
requirements applicable to its own employees having access to similar
records held by the Custodian, which requirements will be consistent with
the practices of an institution that maintains custody of Receivable Files
for its own account, and at such times as may be reasonably imposed by the
Custodian, permit only the Insurer and the Indenture Trustee or their duly
authorized representatives, attorneys or auditors to inspect the
Receivable Files and the related accounts, records, and computer systems
maintained by the Custodian pursuant hereto at such times as the Insurer
or the Indenture Trustee may reasonably request during normal business
hours.
(e) The Custodian will be deemed to have received proper
instructions with respect to the Receivable Files upon its receipt of
written instructions signed by a Responsible Officer of the Indenture
Trustee. Such instructions may be general or specific in terms. The
Indenture Trustee will provide a copy of any such instructions to the
Insurer.
(f) The Custodian will indemnify the Issuer, the Owner Trustee, the
Backup Servicer, the Insurer, the Noteholders and the Indenture Trustee
for any and all liabilities, obligations, losses, damage, payments, costs
or expenses of any kind whatsoever (including the fees and expenses of
counsel) that may be imposed on, incurred or asserted against such Persons
and their respective officers, directors, employees, agents, attorneys and
successors and assigns as the result of any act or omission in any way
relating to the maintenance and custody by the Custodian or any
third-party vendor of the Receivable Files; provided, however, that the
Custodian will not be liable for any portion of any such liabilities,
obligations, losses, damages, payments, costs or expenses due to the
willful misfeasance, bad faith or gross negligence of the Issuer, the
Owner Trustee, the Backup Servicer, the Insurer or the Indenture Trustee
or the officers, directors, employees and agents thereof. In no event will
the Custodian be liable to any third party for acts or omissions of the
Custodian other than as specifically set forth in this Section.
ARTICLE IV
Administration and Servicing of Receivables
Section 4.1 Duties of the Servicer.
(a) The Servicer is hereby authorized to act as agent for the Trust
and in such capacity will manage, service, administer and make collections
on the Receivables (other than Purchased Receivables after the date of
purchase thereof by Triad or the Servicer), and perform the other actions
required by the Servicer under this Agreement. The Servicer agrees that
its servicing of the Receivables will be carried out in accordance with
customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the
degree of skill and attention that the Servicer
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exercises from time to time with respect to all comparable motor vehicle
receivables that it services for itself or others. In performing such
duties, so long as Triad is the Servicer, it will substantially comply
with the policies and procedures described on Schedule C, as such policies
and procedures may be updated from time to time. The Servicer's duties
will include collection and posting of all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies,
sending payment coupons or statements to Obligors, reporting any required
tax information to Obligors, monitoring the collateral, complying with the
terms of the Blocked Account Agreement, accounting for collections and
furnishing monthly and annual statements to the Indenture Trustee and the
Insurer with respect to distributions, and performing the other duties
specified herein.
(b) The Servicer will also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the
Dealer Agreements and Auto Loan Purchase and Sale Agreements (and will
maintain possession of the Dealer Agreements and Auto Loan Purchase and
Sale Agreements, to the extent it is necessary to do so), the Dealer
Assignments, the Third-Party Lender Assignments and the Insurance
Policies, to the extent that such Dealer Agreements, Auto Loan Purchase
and Sale Agreements, Dealer Assignments, Third-Party Lender Assignments
and Insurance Policies relate to the Receivables, the Financed Vehicles or
the Obligors. To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer will follow its
customary standards, policies, and procedures and will have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing,
the Servicer is hereby authorized and empowered by the Trust to execute
and deliver, on behalf of the Trust, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge,
and all other comparable instruments, with respect to the Receivables and
with respect to the Financed Vehicles; provided, however, that
notwithstanding the foregoing, the Servicer will not, except pursuant to
an order from a court of competent jurisdiction, release an Obligor from
payment of any unpaid amount under any Receivable or waive the right to
collect the unpaid balance of any Receivable from the Obligor except in
accordance with the Servicer's customary practices.
(c) The Servicer is hereby authorized to commence, in its own name
or in the name of the Trust, a legal proceeding to enforce a Receivable
pursuant to Section 4.3 or to commence or participate in any other legal
proceeding (including a bankruptcy proceeding) relating to or involving a
Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or
participates in such a legal proceeding in its own name, the Trust will
thereupon be deemed to have automatically assigned such Receivable to the
Servicer solely for purposes of commencing or participating in any such
proceeding as a party or claimant, and the Servicer is authorized and
empowered by the Trust to execute and deliver in the Servicer's name any
notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceeding. The
Indenture Trustee and the Owner Trustee will furnish the Servicer with any
limited powers of attorney and other documents which the Servicer may
reasonably request and which the Servicer deems necessary or appropriate
and take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
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Section 4.2 Collection of Receivable Payments; Modifications of
Receivables; Blocked Account Agreement.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer will make reasonable efforts to collect
all payments called for under the terms and provisions of the Receivables
as and when the same will become due, and will follow such collection
procedures as it follows with respect to all comparable motor vehicle
receivables that it services for itself or others and otherwise act with
respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
the Auto Loan Purchase and Sale Agreements, the Third-Party Lender
Assignments, the Insurance Policies and the Other Conveyed Property in
such manner as will, in the reasonable judgment of the Servicer, maximize
the amount to be received by the Trust with respect thereto. The Servicer
is authorized in its discretion to waive any prepayment charge, late
payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Receivable (i) in order to change the Obligor's regular due
date in accordance with its servicing policies and procedures, (ii) in
order to re-amortize the Scheduled Receivables Payments on the Receivable
following a partial prepayment of principal or (iii) as may be required by
law, in accordance with its customary procedures if the Servicer believes
in good faith that such extension, modification or amendment is necessary
to avoid a default on such Receivable, will maximize the amount to be
received by the Trust with respect to such Receivable, and is otherwise in
the best interests of the Trust; provided, however, that in no event may a
Receivable be extended beyond the Collection Period immediately preceding
the last Final Scheduled Distribution Date.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 4.2(b)) in accordance with its
customary procedures if the Servicer believes in good faith that such
extension, modification or amendment is necessary to avoid a default on
such Receivable, will maximize the amount to be received by the Trust with
respect to such Receivable, and is otherwise in the best interests of the
Trust; provided, however, that:
(i) The aggregate period of all extensions on a Receivable
does not exceed eight months;
(ii) In no event may a Receivable be extended beyond the
Collection Period immediately preceding the latest Final Scheduled Distribution
Date;
(iii) The average Monthly Extension Rate for any three
consecutive Collection Periods does not exceed 4%;
(iv) The Servicer may not amend or modify a Receivable (except
as provided in Section 4.2(b) and this Section 4.2(c) or as otherwise required
by law) without the consent of the Insurer, so long as no Insurer Default has
occurred and is continuing, or the Majority Noteholders (if an Insurer Default
has occurred and is continuing; and
(v) In no event may a Receivable be extended more than once
within a twelve month period.
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With respect to Section 4.2(c)(iii), in the event the average of the
Monthly Extension Rates calculated with respect to three consecutive Collection
Periods exceeds 4% (which information will be set forth in the related
Servicer's Certificate), the Servicer will, so long as the Servicer is not
JPMorgan Chase Bank, N.A., acting as Backup Servicer, on the third such
Accounting Date, purchase from the Trust the Receivables with respect to which
payment had been extended (starting with the Receivables most recently so
extended) in an aggregate Principal Balance equal to the product of (i) the
excess of such average of Monthly Extension Rates over 4% and (ii) the Aggregate
Principal Balance, and pay the related Purchase Amount on the related
Determination Date; provided, however, that in the event the Backup Servicer
will be acting as Servicer hereunder, the foregoing sentence will apply only in
respect of Receivables as to which payments had been extended by such Backup
Servicer.
(d) The Servicer will use its best efforts to notify or direct
Obligors to make all payments on the Receivables, whether by check or by
direct debit of the Obligor's bank account, to be made directly to one or
more Processing Banks pursuant to a Blocked Account Agreement. The
Servicer will use its best efforts to notify or direct any Processing Bank
to deposit all payments on the Receivables in the Lockbox Account no later
than the Business Day after receipt, and to cause all amounts credited to
the Lockbox Account on account of such payments to be transferred to the
Collection Account no later than the second Business Day after receipt of
available funds with respect to such payments. The Lockbox Account will be
a demand deposit account held by the Processing Bank.
On the Closing Date, the Servicer will deposit or cause to be
deposited in immediately available funds into the Collection Account all amounts
collected with respect to the Receivables from the Cutoff Date to the fourth
(4th) Business Day preceding the Closing Date. As soon as possible thereafter
and in accordance with the provisions of this Agreement, all amounts collected
with respect to the Receivables from such date to the Closing Date will be
deposited into the Collection Account.
Notwithstanding any Blocked Account Agreement, or any of the
provisions of this Agreement relating to the Blocked Account Agreement, the
Servicer will remain obligated and liable to the Trust, the Indenture Trustee
and Noteholders for servicing and administering the Receivables and the Other
Conveyed Property in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue thereof; provided, however,
that the foregoing will not apply to any Backup Servicer for so long as a
Processing Bank is performing its obligations pursuant to the terms of a Blocked
Account Agreement.
If the Servicer is terminated, the successor Servicer will assume
all of the rights and obligations of the outgoing Servicer under the Blocked
Account Agreement subject to the terms hereof. In such event, the successor
Servicer will be deemed to have assumed all of the outgoing Servicer's interest
therein and to have replaced the outgoing Servicer as a party to each such
Blocked Account Agreement to the same extent as if such Blocked Account
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer will not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Processing Bank under such Blocked Account
Agreement. The outgoing Servicer will, upon request of the Indenture Trustee,
but at the expense of the outgoing Servicer, deliver to the successor Servicer
all documents and records relating to each such Blocked Account Agreement and an
accounting of amounts collected and held by the Processing Bank and otherwise
use its best efforts to effect the orderly and efficient transfer of any Blocked
Account Agreement to the successor Servicer. In the event that the Insurer (so
long as no
25
Insurer Default has occurred and is continuing) or the Majority Noteholders (if
an Insurer Default has occurred and is continuing) elects to change the identity
of the Processing Bank, the outgoing Servicer, at its expense, will cause the
Processing Bank to deliver, at the direction of the Insurer (so long as no
Insurer Default has occurred and is continuing) or the Majority Noteholders (if
an Insurer Default has occurred and is continuing) to the Indenture Trustee or a
successor Processing Bank, all documents and records relating to the Receivables
and all amounts held (or thereafter received) by the Processing Bank (together
with an accounting of such amounts) and will otherwise use its best efforts to
effect the orderly and efficient transfer of the lockbox arrangements and the
Servicer will notify the Obligors to make payments to the Lockbox established by
the successor.
(e) The Servicer will remit all payments by or on behalf of the
Obligors received in the form of checks with payment coupons directly by
the Servicer to the Processing Bank for deposit into the Collection
Account, in either case, and as soon as practicable, but in no event later
than the second Business Day after receipt thereof. Other payments
received by each of the Servicer, Triad and the Depositor will be
deposited into a local servicing account for processing immediately upon
receipt, and then transferred in immediately available funds to the
Lockbox Account for deposit to the Collection Account no later than the
second (2nd) Business Day after receipt of available amounts.
Section 4.3 Realization upon Receivables.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer will use commercially reasonable efforts
to repossess (or otherwise comparably convert the ownership of) and
liquidate any Financed Vehicle securing a Receivable with respect to which
the Servicer has determined that payments thereunder are not likely to be
resumed, as soon as is practicable after default on such Receivable but in
no event later than the date on which 10% or more of a Scheduled
Receivables Payment has become 91 days delinquent; provided, however, that
the Servicer may elect not to repossess a Financed Vehicle within such
time period if in its good faith judgment it determines that the proceeds
ultimately recoverable with respect to such Receivable would be increased
by forbearance. The Servicer is authorized to follow such customary
practices and procedures as it will deem necessary or advisable,
consistent with the standard of care required by Section 4.1, which
practices and procedures may include reasonable efforts to realize upon
any recourse to Dealers and Third-Party Lenders, the sale of the related
Financed Vehicle at public or private sale, the submission of claims under
an Insurance Policy and other actions by the Servicer in order to realize
upon such a Receivable. The Servicer will have the discretion to retain or
sell to a third-party any of the Liquidated Receivables. The foregoing is
subject to the provision that, in any case in which the Financed Vehicle
will have suffered damage, the Servicer will not expend funds in
connection with any repair or towards the repossession of such Financed
Vehicle unless it will determine in its discretion that such repair and/or
repossession will increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. All
amounts received upon liquidation of a Financed Vehicle will be remitted
by the Servicer to the Collection Account as soon as practicable, but in
no event later than the second Business Day after receipt of available
funds thereof. The Servicer will be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle into cash proceeds, as provided in Section 5.7(a) or out
of the cash proceeds of such Financed Vehicle, any deficiency obtained
from the Obligor or any amounts received from the related Dealer or
Third-Party Lender, which amounts in reimbursement may be retained by the
Servicer (and
26
will not be required to be deposited as provided in Section 4.2(e)) to the
extent of such expenses. The Servicer will pay on behalf of the Trust any
personal property taxes assessed on repossessed Financed Vehicles. The
Servicer will be entitled to reimbursement of any such tax from Net
Liquidation Proceeds with respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce
a Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer
Assignment or Third-Party Lender Assignment, the act of commencement will
be deemed to be an automatic assignment from the Trust to the Servicer of
the rights under such Dealer Agreement, Auto Loan Purchase and Sale
Agreement, Dealer Assignment or Third-Party Lender Assignment for purposes
of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Dealer
Agreement, Auto Loan Purchase and Sale Agreement, Dealer Assignment or
Third-Party Lender Assignment on the grounds that it is not a real party
in interest or a Person entitled to enforce the Dealer Agreement, Auto
Loan Purchase and Sale Agreement, Dealer Assignment or Third-Party Lender
Assignment, the Owner Trustee and/or the Indenture Trustee, at the
Servicer's expense, will take such steps as the Servicer deems reasonably
necessary to enforce the Dealer Agreement, Auto Loan Purchase and Sale
Agreement, Dealer Assignment or Third-Party Lender Assignment, including
bringing suit in its name or the name of the Trust and the Owner Trustee
and/or the Indenture Trustee for the benefit of the Issuer Secured
Parties. All amounts recovered will be remitted directly by the Servicer
as provided in Section 4.2(e).
Section 4.4 Insurance.
(a) The Servicer will require, in accordance with its customary
servicing policies and procedures, that each Financed Vehicle be insured
by the related Obligor under the Insurance Policies referred to in
Paragraph 24 of the Schedule of Representations and Warranties. Each
Receivable requires the Obligor to maintain such physical loss and damage
insurance, naming Triad and its successors and assigns as additional
insureds, and permits the holder of such Receivable to obtain physical
loss and damage insurance at the expense of the Obligor if the Obligor
fails to maintain such insurance. If the Servicer determines that an
Obligor has failed to obtain or maintain a physical loss and damage
Insurance Policy covering the related Financed Vehicle as described in
Paragraph 24 (including during the repossession of such Financed Vehicle)
the Servicer may enforce the rights of the holder of the Receivable under
the Receivable to require the Obligor to obtain such physical loss and
damage insurance in accordance with its customary servicing policies and
procedures. The Servicer may, at its sole option, maintain a vendor's
single interest or other collateral protection insurance policy with
respect to all Financed Vehicles ("Collateral Insurance") which policy by
its terms insures against physical loss and damage in the event any
Obligor fails to maintain physical loss and damage insurance with respect
to the related Financed Vehicle. The parties acknowledge that the Servicer
does not now have, nor does it intend to obtain, Collateral Insurance. All
policies of Collateral Insurance will be endorsed with clauses providing
for loss payable to the Servicer. Costs incurred by the Servicer in
maintaining such Collateral Insurance will be paid by the Servicer.
(b) The Servicer may, at its sole option, if an Obligor fails to
obtain or maintain a physical loss and damage Insurance Policy, obtain
insurance with respect to the related Financed Vehicle and advance on
behalf of such Obligor, as required under the terms of the insurance
policy, the premiums for such "force-placed" insurance. The parties hereto
27
acknowledge that the Servicer does not now have, nor does it intend to
obtain, force-placed insurance. All policies of force-placed insurance
will be endorsed with clauses providing for loss payable to the Servicer.
Any cost incurred by the Servicer in maintaining such force-placed
insurance will only be recoverable out of premiums paid by the Obligors or
Net Liquidation Proceeds with respect to the Receivable, as provided in
Section 4.4(c).
In connection with any force-placed insurance obtained hereunder,
the Servicer may, in the manner and to the extent permitted by applicable law,
require the Obligors to repay the entire premium to the Servicer. In no event
will the Servicer include the amount of the premium in the Amount Financed under
the Receivable. "Insurance add-on amounts," which are the premiums charged to
Obligors in the event that the Servicer obtains force-placed insurance, with
respect to any Receivable will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable, and
amounts allocable thereto will not be available for distribution on the Notes
and the Certificates. The Servicer will retain and separately administer the
right to receive payments from Obligors with respect to insurance add-on amounts
or rebates of force-placed insurance premiums. If an Obligor makes a payment
with respect to a Receivable having force-placed insurance, but the Servicer is
unable to determine whether the payment is allocable to the Receivable or to the
insurance add-on amount, the payment will be applied first to any unpaid
Scheduled Receivables Payments and then to the insurance add-on amount. Net
Liquidation Proceeds on any Receivable will be used first to pay the Principal
Balance and accrued interest on such Receivable and then to pay the related
insurance add-on amount. If an Obligor under a Receivable with respect to which
the Servicer has placed force-placed insurance fails to make scheduled payments
of such insurance add-on amount as due, and the Servicer has determined that
eventual payment of the insurance add-on amount is unlikely, the Servicer may,
but will not be required to, purchase such Receivable from the Trust for the
Purchase Amount on any subsequent Determination Date. Any such Receivable, and
any Receivable with respect to which the Servicer has placed force-placed
insurance which has been paid in full (excluding any insurance add-on amounts)
will be assigned to the Servicer.
(c) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement will be deemed to be an automatic
assignment of the rights of the Trust under such Insurance Policy to the
Servicer for purposes of collection only. If, however, in any enforcement
suit or legal proceeding it is held that the Servicer may not enforce an
Insurance Policy on the grounds that it is not a real party in interest or
a holder entitled to enforce the Insurance Policy, the Owner Trustee
and/or the Indenture Trustee, at the Servicer's expense, will take such
steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Trust and the Owner
Trustee and/or the Indenture Trustee for the benefit of the Noteholders.
(d) The Servicer will cause itself and may cause the Indenture
Trustee to be named as named insured under all policies of Collateral
Insurance.
Section 4.5 Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer will take such steps on behalf of the Trust as are
necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle, including
28
obtaining the execution by the Obligors and the recording, registering,
filing, re-recording, re-filing, and re-registering of all security
agreements, financing statements and continuation statements as are
necessary to maintain the security interest granted by the Obligors under
the respective Receivables. The Indenture Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest on behalf of the Trust as necessary
because of the relocation of a Financed Vehicle or for any other reason.
In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle's
certificate of title, or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to perfect a security interest in the related Financed Vehicle in
favor of the Trust, the Servicer agrees that Triad's designation as the
secured party on the certificate of title is in its capacity as Servicer
as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
the Insurer may (so long as no Insurer Default has occurred and is
continuing) instruct the Indenture Trustee and the Servicer to take or
cause to be taken, or, if an Insurer Default has occurred and is
continuing, upon the occurrence of a Servicer Termination Event, the
Indenture Trustee and the Servicer will take or cause to be taken such
action as may, in the opinion of counsel to the Controlling Party, be
necessary to perfect or re-perfect the security interests in the Financed
Vehicles securing the Receivables in the name of the Trust by amending the
title documents of such Financed Vehicles or by such other reasonable
means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent.
Triad hereby agrees to pay all expenses related to such perfection
or reperfection and to take all action necessary therefor. In addition, prior to
the occurrence of an Insurance Agreement Event of Default, the Controlling Party
may instruct the Servicer to take or cause to be taken such action as may, in
the opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of the Trust, including by amending the title documents
of such Financed Vehicles or by such other reasonable means as may, in the
opinion of counsel to the Controlling Party, be necessary or prudent; provided,
however, that if the Controlling Party requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default, the
out-of-pocket expenses of the Servicer or the Indenture Trustee in connection
with such action will be reimbursed to the Servicer or the Indenture Trustee, as
applicable, by the Controlling Party. Triad hereby appoints the Indenture
Trustee as its attorney-in-fact to execute certificates of title or any other
documents, prepared by the Servicer, in the name and stead of Triad (it being
understood that and agreed that the Indenture Trustee has no obligation to take
such steps with respect to any perfection or reperfection, except as pursuant to
the Basic Documents to which it is a party and for which Triad has paid all
expenses) and the Indenture Trustee hereby accepts such appointment.
(c) Upon the occurrence of a Servicer Termination Event, at the
option of the Controlling Party, Triad shall be terminated as Custodian
and all original receivable contracts and related title documents must be
transferred to a successor custodian acceptable to the Controlling Party.
Section 4.6 Covenants, Representations, and Warranties of Servicer. By its
execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Issuer relies in
accepting the Receivables, on which the Indenture Trustee relies in
authenticating the Notes and on which the Insurer relies in issuing the Note
Policy.
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(a) The Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each
Receivable will not be released in whole or in part from the security interest
granted by the Receivable, except upon payment in full of the Receivable or as
otherwise contemplated herein;
(ii) No Impairment. The Servicer will do nothing to impair the
rights of the Trust or the Noteholders in the Receivables, the Dealer
Agreements, the Auto Loan Purchase and Sale Agreements, the Dealer Assignments,
the Third-Party Lender Assignments, the Insurance Policies or the Other Conveyed
Property except as otherwise expressly provided herein;
(iii) No Amendments. The Servicer will not extend or otherwise
amend the terms of any Receivable, except in accordance with Section 4.2; and
(iv) Restrictions on Liens. The Servicer will not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a contingency or
otherwise) the creation, incurrence or existence of any Lien or restriction on
transferability of the Receivables except for the Lien in favor of the Indenture
Trustee for the benefit of the Noteholders and Insurer, and the restrictions on
transferability imposed by this Agreement or (ii) sign or file under the UCC of
any jurisdiction any financing statement which names Triad or the Servicer as a
debtor, or sign any security agreement authorizing any secured party thereunder
to file such financing statement, with respect to the Receivables, except in
each case any such instrument solely securing the rights and preserving the Lien
of the Indenture Trustee, for the benefit of the Noteholders and the Insurer.
(b) The Servicer represents, warrants and covenants as of the
Closing Date as to itself that the representations and warranties set
forth on the Schedule of Representations attached hereto as Schedule B are
true and correct, provided that such representations and warranties
contained therein and herein will not apply to any entity other than
Triad.
Section 4.7 Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Insurer, the Trust or a Responsible
Officer of the Indenture Trustee of a breach of any of the representations,
warranties and covenants set forth in Sections 4.5(a) or 4.6, the party
discovering such breach will give prompt written notice to the others; provided,
however, that the failure to give any such notice will not affect any obligation
of Triad as Servicer under this Section 4.7. As of the second Accounting Date
following its discovery or receipt of notice of any breach of any
representation, warranty or covenant set forth in Sections 4.5(a) or 4.6 which
materially and adversely affects the interests of the Noteholders or the Insurer
in any Receivable (including any Liquidated Receivable) (or, at Triad's
election, the first Accounting Date so following) or the related Financed
Vehicle, Triad will, unless such breach has been cured in all material respects,
purchase from the Trust the Receivable affected by such breach and, on the
related Determination Date, Triad will pay the related Purchase Amount. It is
understood and agreed that the obligation of Triad to purchase any Receivable
(including any Liquidated Receivable) with respect to which such a breach has
occurred and is continuing will, if such obligation is fulfilled, constitute the
sole remedy against Triad for such breach available to the Insurer, the
Noteholders, the Owner Trustee or the Indenture Trustee; provided, however, that
Triad will indemnify the Trust, the Backup Servicer, the Insurer, the Owner
Trustee, the Indenture Trustee and the Noteholders from and against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the
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events or facts giving rise to such breach. The indemnification provided
pursuant to this section will survive the removal or resignation of the
Indenture Trustee and or the Backup Servicer. In no event shall JPMorgan Chase
Bank, N.A., in its capacity as the Backup Servicer or successor Servicer, be
obligated to repurchase any Receivable pursuant to this Section 4.7.
Section 4.8 Total Servicing Fee; Payment of Certain Expenses by Servicer.
On each Distribution Date, the Servicer will be entitled to receive out of the
Collection Account the Base Servicing Fee and any Supplemental Servicing Fee for
the related Collection Period (together, the "Servicing Fee") pursuant to
Section 5.7. The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed on
the Servicer, expenses incurred in connection with distributions and reports
made by the Servicer to Noteholders or the Insurer and, to the extent not
provided for pursuant to Section 5.7, all other fees and out-of-pocket expenses
of the Owner Trustee, the Backup Servicer, and the Indenture Trustee, except
taxes levied or assessed against the Trust, the Owner Trustee, the Backup
Servicer or the Indenture Trustee, and claims against the Trust, the Owner
Trustee, the Backup Servicer or the Indenture Trustee in respect of
indemnification, which taxes and claims in respect of indemnification against
the Trust are expressly stated to be for the account of Triad). The Servicer
will, to the extent not provided for pursuant to Section 5.7, be liable for the
fees and out-of-pocket expenses of the Owner Trustee, the Backup Servicer, the
Indenture Trustee, the Custodian, the Processing Bank (and any fees under the
Blocked Account Agreement) and the Independent Accountants except taxes levied
or assessed against such parties. Notwithstanding the foregoing, if the Servicer
is not Triad, a successor to Triad as Servicer including the Backup Servicer
permitted by Section 9.3 will not be liable for taxes levied or assessed against
the Trust or claims against the Trust in respect of indemnification, or the fees
and expenses referred to above.
Section 4.9 Servicer's Certificate. No later than 11:00 a.m. New York City
time on each Determination Date, the Servicer will deliver (facsimile delivery
being acceptable; and in the case of the Servicer's Certificate to be delivered
to the Indenture Trustee, the Depositor and the Backup Servicer, an e-mail in a
computer file, the format of which will be agreed upon between the Servicer and
such parties) to the Indenture Trustee, the Owner Trustee, the Backup Servicer,
the Insurer and each Rating Agency a Servicer's Certificate containing among the
other things set forth in Exhibit A, (i) all information necessary to enable the
Indenture Trustee to give any notice required by Section 6.1 and to make the
distributions required by Section 5.7, (ii) a listing of all Purchased
Receivables and Administrative Receivables purchased as of the related
Accounting Date, (iii) all information necessary to enable the Indenture Trustee
to send the statements to Noteholders and the Insurer required by Section 5.10,
(iv) the Delinquency Rate, Net Loss Rate and Cumulative Net Loss Ratio for such
Determination Date, and (v) whether to the knowledge of the Servicer an
Insurance Agreement Event of Default, a Spread Cap Event (as defined in the
Insurance Agreement) or a Trigger Event (as defined in the Insurance Agreement)
has occurred. Receivables purchased by the Servicer or by Triad on the related
Accounting Date and each Receivable that became a Liquidated Receivable or that
was paid in full during the related Collection Period will be identified by
account number (as set forth in the Schedule of Receivables).
Section 4.10 Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer will deliver to the Indenture Trustee, the Owner
Trustee, the Backup Servicer, the Insurer and each Rating Agency, on or
before April 30 (or 120 days after the end of the Servicer's fiscal year,
if other than December 31) of each year, beginning on April 30, 2006, an
Officer's Certificate, dated as of December 31 (or other applicable date)
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of such year, stating that (i) a review of the activities of the Servicer
during the preceding 12-month period (or such other period as has elapsed
from the Closing Date to the date of the first such certificate) and of
its performance under this Agreement has been made under such officer's
supervision, and (ii) to such officer's knowledge, based on such review,
the Servicer has fulfilled all its obligations under this Agreement
throughout such period, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default known to such officer
and the nature and status thereof.
(b) The Servicer will deliver to the Indenture Trustee, the Owner
Trustee, the Backup Servicer, the Insurer, and each Rating Agency,
promptly after having obtained knowledge thereof, but in no event later
than two (2) Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time,
or both, would become a Servicer Termination Event under Section 9.1.
Section 4.11 Annual Independent Accountants' Report.
The Servicer will cause a firm of independent certified public
accountants (the "Independent Accountants"), who may also render other services
to the Servicer or to its Affiliates, to deliver to the Indenture Trustee, the
Owner Trustee, the Backup Servicer, the Insurer and each Rating Agency, on or
before April 30 (or 120 days after the end of the Servicer's fiscal year, if
other than December 31) of each year, beginning on April 30, 2006 with respect
to the twelve months ended the immediately preceding December 31 (or other
applicable date) (or such other period as has elapsed from the Closing Date to
the date of such certificate), a report (the "Accountant's Report") addressed to
the board of directors of the Servicer to the effect that such firm has examined
the Servicer's assertion that the Servicer has complied with its Minimum
Servicing Standards and that such examination (1) was conducted in accordance
with the Attestation Protocol, (2) included examining, on a test basis, evidence
regarding Servicer's Compliance with its Minimum Servicing Standards. The
Accountant's Report shall include an opinion that the Servicer's assertion with
respect to compliance with its Minimum Servicing Standards is fairly stated in
all material respects or shall report the exceptions that do not permit such
opinion. The Accountant's Report required by this Section 4.11 may be replaced
at the election of the Servicer by any similar report or certification using
standards other than the Minimum Servicing Standards or the Attestation Protocol
that are now or in the future in use by servicers of retail installment sale
contracts or direct purchase money loans or that otherwise comply with any rule,
regulation, "no action" letter or similar guidance promulgated by the Securities
and Exchange Commission. Except to the extent otherwise required by applicable
law, the Servicer is not required to deliver the report hereunder if Triad is
reported solely as a consolidated subsidiary and there are no separate audits of
the books and records of Triad; provided, however, the Servicer is required to
notify the Indenture Trustee in writing that there are no separate audits of the
books and records of Triad and that therefore the Servicer will not be
delivering the report. Notwithstanding this Section 4.11, if the Backup Servicer
is then acting as the successor Servicer, it shall only be required to provide a
copy of its annual SAS 70 report and its audited financial statements.
Section 4.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer will upon reasonable prior notice provide to
representatives of the Indenture Trustee, the Owner Trustee, the Backup Servicer
and the Insurer reasonable access to the documentation regarding the
Receivables. In each case, such access will be afforded without charge but only
upon reasonable request and during normal business hours. Any expense incident
to the exercise by the Indenture Trustee, Owner Trustee, Backup Servicer or the
Insurer will be borne by the Servicer to the
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extent such visits and examinations are not more frequent than once in any
twelve-month period, or a Servicer Termination Event has occurred and is
continuing. Nothing in this Section will affect the obligation of the Servicer
to observe any applicable law prohibiting disclosure of information regarding
the Obligors, and the failure of the Servicer to provide access as provided in
this Section 4.12 as a result of such obligation will not constitute a breach of
this Section 4.12.
Section 4.13 Reserved.
Section 4.14 Fidelity Bond and Errors and Omissions Policy. The Servicer
will not be required to maintain an errors and omissions policy. The Servicer
will maintain a fidelity bond of a type and in an amount customary for servicers
engaged in the business of servicing motor vehicle receivables.
ARTICLE V
Trust Accounts; Distributions; Statements to Noteholders
Section 5.1 Establishment of Trust Accounts.
(a) (i) The Indenture Trustee, on behalf of the Noteholders and the
Insurer, will establish and maintain in its own name one or more Eligible
Deposit Accounts (collectively, the "Collection Account"), bearing a
designation clearly indicating that the funds deposited therein are held
for the benefit of the Indenture Trustee on behalf of the Noteholders and
the Insurer. The Collection Account will initially be established with the
Indenture Trustee.
(ii) The Indenture Trustee, on behalf of the Noteholders, will
establish and maintain in its own name an Eligible Deposit Account (the "Note
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Indenture Trustee on behalf of
the Noteholders and the Insurer. The Note Distribution Account will initially be
established with the Indenture Trustee.
(iii) The Indenture Trustee, on behalf of the Noteholders,
will establish and maintain in its own name an Eligible Deposit Account (the
"Spread Account"), bearing a designation clearly indicating that the funds
deposited therein are held in trust for the benefit of the Indenture Trustee on
behalf of the Noteholders and the Insurer. The Spread Account will initially be
established with the Indenture Trustee.
(iv) Funds on deposit in the Collection Account, the Note
Distribution Account (but only to the extent of deposits therein for more than
one Business Day), and the Spread Account (collectively, the "Trust Accounts")
will be invested by the Indenture Trustee (or any custodian with respect to
funds on deposit in any such account) in Eligible Investments selected in
writing by the Servicer (pursuant to standing instructions or otherwise). All
such Eligible Investments will be held by or on behalf of the Indenture Trustee
for the benefit of the Noteholders and the Insurer, as applicable. Funds on
deposit in any Trust Account will be invested in Eligible Investments that will
mature so that such funds will be available at the close of business on the
Business Day immediately preceding the following Distribution Date. However, if
each of the Rating Agencies confirms that it would not affect the ratings
assigned to the Notes and the Insurer consents, funds on deposit in the Spread
Account may be invested in Eligible Investments that will
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mature so that funds will be available on the following Distribution Date. All
Eligible Investments will be held to maturity.
(b) All investment earnings of moneys deposited in the Trust
Accounts will be deposited (or caused to be deposited) by the Indenture
Trustee in the Collection Account, and any loss resulting from such
investments will be charged to the applicable Trust Account. The Servicer
will not direct the Indenture Trustee to make any investment of any funds
held in any of the Trust Accounts unless the security interest granted and
perfected in such account will continue to be perfected in such
investment, in either case without any further action by any Person.
(c) The Indenture Trustee will not in any way be held liable by
reason of any insufficiency in any of the Trust Accounts resulting from
any loss on any Eligible Investment included therein except for losses
attributable to the Indenture Trustee's negligence or bad faith or its
failure to make payments on such Eligible Investments issued by the
Indenture Trustee, in its commercial capacity as principal obligor and not
as trustee, in accordance with their terms.
(d) If (i) the Servicer fails to give investment directions in
writing for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 1:00 p.m. New York City Time (or such other time as may be
agreed by the Issuer and Indenture Trustee) on any Business Day; or (ii) a
Default or Event of Default has occurred and is continuing with respect to
the Notes but the Notes have not been declared due and payable, or, if
such Notes will have been declared due and payable following an Event of
Default, amounts collected or receivable from the Trust Property are being
applied as if there had not been such a declaration; then the Indenture
Trustee will, to the fullest extent practicable, invest and reinvest funds
in the Trust Accounts in the investment described in clause (d) of the
definition of Eligible Investments.
(e) (i) The Indenture Trustee will possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts
and in all proceeds thereof and all such funds, investments, proceeds and
income will be part of the Owner Trust Estate. Except as otherwise
provided herein, the Trust Accounts will be under the sole dominion and
control of the Indenture Trustee for the benefit of the Noteholders and
the Insurer. If, at any time, any of the Trust Accounts ceases to be an
Eligible Deposit Account, the Indenture Trustee (or the Servicer on its
behalf) will within ten Business Days (or such longer period as to which
each Rating Agency and the Insurer may consent) establish a new Trust
Account as an Eligible Deposit Account and will transfer any cash and/or
any investments to such new Trust Account. In connection with the
foregoing, the Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Indenture Trustee, the Servicer will
notify the Indenture Trustee in writing promptly upon any of such Trust
Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees that:
(A) any Trust Account Property that is held in deposit
accounts will be held solely in the Eligible Deposit Accounts; and, except as
otherwise provided herein, each such Eligible Deposit Account will be subject to
the exclusive custody and control of the Indenture Trustee, and the Indenture
Trustee will have sole signature authority with respect thereto;
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(B) any Trust Account Property that constitutes
"securities entitlements" will be delivered to the Indenture Trustee in
accordance with the UCC and will be held, pending maturity or disposition,
solely by the Indenture Trustee or a securities intermediary (as such term is
defined in Section 8-102(14) of the UCC) acting solely for the Indenture
Trustee; and
(C) the "securities intermediary's jurisdiction," for
purposes of Section 8-110 of the UCC, shall be the State of New York.
(f) The Servicer will have the power, revocable by the Insurer or,
with the consent of the Insurer, by the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts
for the purpose of permitting the Servicer and the Indenture Trustee to
carry out its respective duties hereunder.
Section 5.2 [Reserved].
Section 5.3 Certain Reimbursements to the Servicer. The Servicer will be
entitled to be reimbursed from amounts on deposit in the Collection Account with
respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. To the
extent that such amounts are owed to the Processing Bank, the Servicer will
cause such amounts to be returned to the Processing Bank. The amount to be
reimbursed hereunder will be paid to the Servicer on the related Distribution
Date pursuant to Section 5.7(a)(i) upon certification by the Servicer of such
amounts and the provision of such information to the Indenture Trustee and the
Insurer as may be necessary in the opinion of the Insurer to verify the accuracy
of such certification; provided, however, that the Servicer must provide such
clarification within 12 months of such mistaken deposit, posting, or returned
check. In the event that the Insurer has not received evidence satisfactory to
it of the Servicer's entitlement to reimbursement pursuant to this Section 5.3,
the Insurer will (unless an Insurer Default has occurred and is continuing) give
the Indenture Trustee notice in writing to such effect, following receipt of
which the Indenture Trustee will not make a distribution to the Servicer in
respect of such amount pursuant to Section 5.7, or if the Servicer prior thereto
has been reimbursed pursuant to Section 5.7, the Indenture Trustee will withhold
such amounts from amounts otherwise distributable to the Servicer on the next
succeeding Distribution Date. The Servicer will additionally be entitled to
receive from amounts on deposit in the Collection Account with respect to a
Collection Period any amounts paid by Obligors that were collected in the
Lockbox Account but that do not relate to (i) principal and interest payments
due on the Receivables and (ii) any Supplemental Servicing Fees.
Section 5.4 Application of Collections. All collections for the Collection
Period will be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor (other than Supplemental Servicing Fees
with respect to such Receivable, to the extent collected) will be applied to
interest and principal in accordance with the Simple Interest Method.
All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder will be deposited in the Collection
Account and paid to the Servicer in accordance with Section 5.7(a).
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Section 5.5 Spread Account.
(a) On or prior to the Closing Date, the Depositor will deposit an
amount equal to the Spread Account Initial Deposit into the Spread Account
from the proceeds of the Notes. On each Distribution Date, to the extent
of funds available therefor pursuant to the priority of payments, amounts
will be deposited into the Spread Account in accordance with Section
5.7(a)(ix) until the amount on deposit therein is equal to the Spread
Account Requirement.
(b) In the event that the Servicer's Certificate with respect to any
Determination Date states that there is a Spread Account Draw Amount, then
on the related Distribution Date, the Indenture Trustee will withdraw such
Spread Account Draw Amount from the Spread Account to the extent of funds
on deposit therein and deposit such amount into the Collection Account for
distribution in accordance with Section 5.7(a).
(c) After considering all required distributions made on a
Distribution Date, amounts on deposit in the Spread Account on that
Distribution Date that are in excess of the Spread Account Requirement for
that Distribution Date will be applied by the Indenture Trustee in
accordance with Section 5.7(a)(vii), then 5.7(a)(x) through (xii).
Section 5.6 Additional Deposits.
(a) The Servicer and Triad, as applicable, will deposit or cause to
be deposited in the Collection Account on the Determination Date on which
such obligations are due the aggregate Purchase Amount with respect to
Purchased Receivables.
(b) The proceeds of any sale of the assets of the Trust described in
Section 10.1 will be deposited in the Collection Account on the date of
such sale.
(c) If the Indenture Trustee receives any Additional Funds Available
of the type described in clause (2) of the definition thereof it will
deposit them into the Collection Account and on each Distribution Date it
will transfer any such funds to the Note Distribution Account.
Section 5.7 Distributions.
(a) On each Distribution Date, unless payments are required to be
made in accordance with Article V of the Indenture, the Indenture Trustee
will (based solely on the information contained in the Servicer's
Certificate delivered with respect to the related Determination Date)
distribute the following amounts from Available Funds on deposit in the
Collection Account unless otherwise specified, to the extent of the
sources of funds stated to be available therefor, and in the following
order of priority:
(i) to the Servicer, the Servicing Fee for the related
Collection Period, and, to the extent the Servicer has not reimbursed itself or
to the extent not retained by the Servicer, other amounts relating to mistaken
deposits, postings or checks returned for insufficient funds, and to the extent
available, any amounts paid by the Obligors during the preceding Collection
Period that were collected in the Collection Account but that do not relate to
principal payments or interest payments, such as late fees, prepayment charges
and other administrative charges;
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(ii) to the Owner Trustee, the Indenture Trustee and the
Backup Servicer, the Owner Trustee Fee, the Indenture Trustee Fee, and any
accrued and unpaid servicer transition expenses of any incoming servicer then
due to the Indenture Trustee, the Backup Servicer or any other successor
servicer, up to a maximum amount of $200,000 in the aggregate;
(iii) to the Note Distribution Account, the Class A
Noteholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, to make a payment of
principal on the Class A Notes to the extent necessary to reduce the Class A
Note principal balance to the Pool Balance;
(v) to the Note Distribution Account, to make a payment of the
remaining principal balance of any of the Class A Notes on their Final Scheduled
Distribution Date;
(vi) to the Insurer, any unpaid amounts owed to the Insurer
under the Insurance Agreement with respect to unpaid Premiums and unreimbursed
Insured Payments;
(vii) to the Insurer, so long as no Insurer Default has
occurred and is continuing, any other unpaid amounts owed to the Insurer under
the Insurance Agreement;
(viii) to the Note Distribution Account, to make a payment of
the Class A Noteholders' Principal Distributable Amount;
(ix) to the Spread Account, any amount required to increase
the amount in the Spread Account to the Spread Account Requirement; (x) to the
Insurer, if an Insurer Default has occurred or is continuing, the amounts
described under clause (vii) above;
(xi) to the Note Distribution Account, to make a payment of
the Class A Noteholders' Accelerated Principal Amount, provided that if a
Cumulative Net Loss Trigger Event or an Insurance Agreement Event of Default has
occurred and is continuing, all remaining Available Funds shall be applied to
pay principal on the Class A Notes until they have been paid in full, in either
case, for payment to the Class A Noteholders; and
(xii) to the Note Distribution Account, to make a payment of
all remaining amounts to the Certificateholders.
(b) On each Distribution Date, the Indenture Trustee will (based
solely on the information contained in the Servicer's Certificate
delivered with respect to the related Determination Date, unless the
Insurer has notified the Indenture Trustee in writing of any errors or
deficiencies with respect thereto) distribute from the Collection Account
the Additional Funds Available, if any, plus the Policy Claim Amount, if
any, in each case then on deposit in the Collection Account, and deposit
in the Note Distribution Account any excess of the Scheduled Payments (as
defined in the Note Policy) due on such Distribution Date over the amount
of all Available Funds previously deposited in the Note Distribution
Account with respect to the related Distribution Date, which amount will
be applied solely to the payment of amounts then due and unpaid on the
Class A Notes in accordance with the priorities set forth in Section
5.8(a).
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(c) In the event that the Collection Account is maintained with an
institution other than the Indenture Trustee, the Servicer will instruct
and cause such institution to make all deposits and distributions pursuant
to Sections 5.7(a) and 5.7(b) on the related Distribution Date.
Section 5.8 Note Distribution Account.
(a) On each Distribution Date (based solely on the information
contained in the Servicer's Certificate) the Indenture Trustee will
distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and
unpaid on the Notes for principal and interest in the following amounts:
- From amounts transferred pursuant to Section 5.7(a)(iii), accrued
and unpaid interest on the Class A Notes; provided that if such amount is
insufficient to pay the entire amount of accrued and unpaid interest then
due on each Class of Class A Notes, the amount in the Note Distribution
Account will be applied to the payment of such interest on each Class of
Class A Notes pro rata on the basis of the amount of accrued and unpaid
interest due on each Class of Class A Notes.
- From amounts transferred pursuant to Section 5.7(a)(iv), (v),
(viii), and (xi), in the following order of priority:
(1) to the holders of the Class A-1 Notes, the total amount
paid out on each Distribution Date until the outstanding principal
balance of the Class A-1 Notes has been reduced to zero;
(2) to the holders of the Class A-2 Notes, the total amount
paid out on each Distribution Date until the outstanding principal
balance of the Class A-2 Notes has been reduced to zero;
(3) to the holders of the Class A-3 Notes, the total amount
paid out on each Distribution Date until the outstanding principal
balance of the Class A-3 Notes has been reduced to zero; and
(4) to the holders of the Class A-4 Notes, the total amount
paid out on each Distribution Date until the outstanding principal
balance of the Class A-4 Notes is reduced to zero.
provided, that after the acceleration of the Notes following the occurrence of
an Event of Default under the Indenture, payments of principal on the Notes will
be made, instead of as provided above after payment of all amounts owing to the
Indenture Trustee pursuant to Section 6.7 of the Indenture, first to the Class
A-1 Notes until the Class A-1 Notes have been paid in full, and second to the
other Classes of Class A Notes pro rata until they are paid in full.
(b) On each Distribution Date, the Indenture Trustee will post on
its website at www.jpmorgan.com/sfr, which posting will be accessible to
each Noteholder and to the Insurer, the statement provided to the
Indenture Trustee by the Servicer pursuant to Section 5.10 hereof on such
Distribution Date.
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(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Noteholder, such tax will reduce
the amount otherwise distributable to the Noteholder in accordance with
this Section 5.8. The Indenture Trustee is hereby authorized and directed
to retain from amounts otherwise distributable to the Noteholders
sufficient funds for the payment of any withholding tax attributable to
the Trust (but such authorization will not prevent the Indenture Trustee
from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a
Noteholder will be treated as cash distributed to such Noteholder at the
time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S.
Noteholder), the Indenture Trustee may in its sole discretion withhold
such amounts in accordance with this Section 5.8(c). In the event that a
Noteholder wishes to apply for a refund of any such withholding tax, the
Indenture Trustee will reasonably cooperate with such Noteholder in making
such claim so long as such Noteholder agrees to reimburse the Indenture
Trustee for any out-of-pocket expenses (including legal fees and expenses)
incurred.
(d) Distributions required to be made to Noteholders on any
Distribution Date will be made to each Noteholder of record on the related
Record Date either by wire transfer, or by check mailed to such
Noteholder, as provided in Section 2.7 of the Indenture.
(e) Subject to Section 5.1 and this Section 5.8, monies received by
the Indenture Trustee hereunder need not be segregated in any manner
except to the extent required by law and may be deposited under such
general conditions as may be prescribed by law, and the Indenture Trustee
will not be liable for any interest thereon.
Section 5.9 Reserved.
Section 5.10 Statements to Noteholders.
(a) On each Distribution Date, the Indenture Trustee will make
available to each Noteholder and to the Insurer and the Rating Agencies a
statement setting forth at least the following information (which will be
included in the Servicer's Certificate delivered to the Indenture Trustee)
to the extent applicable:
(i) the amount of such distribution allocable to principal of
each Class of Notes;
(ii) the amount of such distribution allocable to interest on
or with respect to each Class of Notes;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account or pursuant to a claim on the Note Policy;
(iv) the Pool Balance as of the close of business on the last
day of the preceding Collection Period;
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(v) the aggregate outstanding principal amount of each Class
of the Notes and the Note Pool Factor for each such Class after giving effect to
payments allocated to principal reported under Section 5.10(a)(i);
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and/or due but unpaid with respect to
such Collection Period or prior Collection Periods, as the case may be;
(vii) the Class A Noteholders' Interest Carryover Amount and
the Class A Noteholders' Principal Carryover Amount, if any;
(viii) the Delinquency Rate with respect to such Distribution
Date;
(ix) the Net Loss Rate and Cumulative Net Loss Ratio with
respect to such Distribution Date; and
(x) the aggregate Purchase Amounts for Receivables, if any,
that were repurchased by Triad or the Servicer on or prior to the related
Determination Date.
Each amount set forth pursuant to Section 5.10(a)(i), (ii), (iii), (vi) and
(vii) will be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or Class thereof).
(b) The Indenture Trustee will make the statements referred to in
Section 5.10(a) (and, at its option, any additional files containing the
same information in an alternative format) available each month via the
Indenture Trustee's internet website, which is presently located at
www.jpmorgan.com/sfr. Persons that are entitled to receive such statements
but are unable to use the above website are entitled to have a paper copy
mailed to them via first class mail by calling the Indenture Trustee at
(212) 623-5600. The Indenture Trustee will have the right to change the
way the statements referred to in Section 5.10(a) are distributed in order
to make such distribution more convenient and/or more accessible to the
parties entitled to receive such statements. The Indenture Trustee will
provide notification of any such change to all parties entitled to receive
such statements in the manner described in Section 12.3, Section 11.4 of
the Indenture or Section 11.5 of the Indenture, as appropriate.
Section 5.11 Optional Deposits by the Insurer. The Insurer will at any
time, and from time to time, with respect to a Distribution Date, have the
option (but will not be required, except in accordance with the terms of the
Note Policy) to deliver an Insurer Optional Deposit to the Indenture Trustee for
deposit into the Collection Account.
ARTICLE VI
The Note Policy
Section 6.1 Claims Under Note Policy.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date states that there is a Policy Claim Amount, the
Indenture Trustee will furnish to the Insurer no later than 12:00 noon New
York City time on the Business Day after the related Determination Date a
completed Notice (as attached as a form to the Note Policy) specifying the
amount of the Policy Claim Amount, provided, that if such Notice is
received after 12:00
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noon, New York City time, on such Business Day, it will be deemed to be
received before 12:00 noon, New York City time, on the following Business
Day. If any such Notice is not in proper form or is otherwise insufficient
for the purpose of making a claim under the Note Policy, it will be deemed
not to have been received for purposes of making such claim, and the
Insurer will promptly so advise the Indenture Trustee in writing and the
Indenture Trustee may submit an amended or corrected Notice. If such an
amended or corrected Notice is in proper form and is otherwise sufficient
for the purpose of making a claim under the Note Policy, it will be deemed
to have been timely received on the Business Day of such resubmission;
provided, that if such notice is received after 12:00 noon, New York City
time, it shall be deemed to be received before 12:00 noon, New York City
time, on the following Business Day.
(b) Any notice delivered by the Indenture Trustee to the Insurer
pursuant to Section 6.1(a) will specify the Policy Claim Amount claimed
under the Note Policy and will constitute a "Notice" under the Note
Policy. In accordance with the provisions of the Note Policy, the Insurer
is required to pay to the Indenture Trustee the Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the
later of (i) the Distribution Date on which the related Policy Claim
Amount is due for payment under the Indenture or (ii) the second Business
Day following actual receipt in New York, New York on a Business Day by
the Insurer of a Notice, appropriately completed and executed by the
Indenture Trustee; provided, that if such Notice is received after 12:00
noon, New York City time, on such Business Day, it will be deemed to be
received before 12:00 noon, New York City time, on the following Business
Day. The Indenture Trustee will deposit amounts paid by the Insurer
pursuant to a claim submitted under this Section 6.1 into the Note
Distribution Account for payment to Holders (as defined in the Note
Policy) on the related Distribution Date (or, if funds are received from
the Insurer after the related Distribution Date, for payment to Holders
promptly after such receipt). Any payment made by the Insurer under the
Note Policy will be applied solely to the payment of the Class A Notes,
and for no other purpose. Amounts payable in respect of any Policy Claim
Amounts due under the Note Policy, unless otherwise stated therein, will
be distributed by the Insurer to, or at the direction of, the Indenture
Trustee, by wire transfer of immediately available funds. The Insurer's
payment obligations under the Note Policy with respect to particular
Policy Claim Amounts will be discharged to the extent funds equal to the
applicable Policy Claim Amounts are paid by the Insurer to, or at the
direction of, the Indenture Trustee in accordance with the Indenture
Trustee's request, whether or not such funds are properly applied by the
Indenture Trustee. Payment of Policy Claim Amounts will be made only at
the time set forth in the Note Policy, and no accelerated Insured Payments
(as defined in the Note Policy) will be made except to the extent that the
Insurer has specified an earlier date for payment at its sole option. The
Note Policy does not insure against loss of any prepayment or other
acceleration payment which at any time may become due in respect of any
Insured Obligation (as defined in the Note Policy), other than at the sole
option of the Insurer, nor against any risk other than Nonpayment (as
defined in the Note Policy), including failure of the Indenture Trustee to
remit any Policy Claim Amounts or Scheduled Payments due to Holders.
Notwithstanding anything to the contrary set forth in the Note Policy, in
no event will the aggregate amount paid by the Insurer thereunder exceed
the Maximum Insured Amount (as defined in the Note Policy).
(c) The Indenture Trustee will (i) receive as attorney-in-fact of
each Holder any Policy Claim Amount from the Insurer and (ii) deposit the
same in the Note Distribution
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Account for distribution to Noteholders. Any and all Policy Claim Amounts
disbursed by the Indenture Trustee from claims made under the Note Policy
will not be considered payment by the Trust with respect to such Class A
Notes, and will not discharge the obligations of the Trust with respect
thereto. The Insurer will, upon any payment pursuant to the Note Policy,
in furtherance and not in limitation of its equitable right of subrogation
and its rights under the Insurance Agreement, to the extent it makes any
payment with respect to the Class A Notes, become subrogated to the rights
of any Holders to receive any and all amounts due in respect of the
Insured Obligations as to which such payment was made. The Insurer will be
a co-beneficiary of the Indenture Trustee's lien under the Indenture.
Subject to and conditioned upon any payment with respect to the Class A
Notes by or on behalf of the Insurer, the Indenture Trustee will assign to
the Insurer all rights to the payment of interest or principal with
respect to the Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option,
vote, right, power or the like with respect to the Notes to the extent
that it has made payment pursuant to the Note Policy. To evidence such
subrogation, the Note Registrar will note the Insurer's rights as subrogee
upon the register of Holders. The foregoing subrogation will in all cases
be subject to the rights of the Holders to receive all Scheduled Payments
(as defined in the Note Policy) in respect of the Class A Notes.
(d) The Indenture Trustee will keep a complete and accurate record
of all funds deposited into the Note Distribution Account with respect to
the Note Policy and the allocation of such funds to payment of interest on
and principal paid in respect of any Class A Note. The Insurer will have
the right to inspect such records at reasonable times upon one Business
Day's prior notice to the Indenture Trustee.
(e) Only the Indenture Trustee on behalf of the Holders will be
entitled to make a claim for Policy Claim Amounts and Preference Amounts
under the Note Policy. Notwithstanding any other provision of this
Agreement or any Basic Document, the Noteholders are not entitled to
institute proceedings directly against the Insurer.
Section 6.2 Preference Claims Under Note Policy.
(a) In the event that the Indenture Trustee has received a certified
copy of a final, nonappealable order of an appropriate court or other body
exercising jurisdiction that any interest on or principal of the Class A
Notes which has become due for payment under the Indenture or this
Agreement, the nonpayment of which would have been covered by the Note
Policy, and which was made to a Holder by or on behalf of the Issuer has
been deemed a preferential transfer and recoverable, or theretofore
recovered, from such Holder pursuant to Title 11 of the United States Code
in accordance with an Order (such amount, a "Preference Amount"), the
Indenture Trustee will so notify the Insurer, will comply with the
provisions of the Note Policy to obtain payment by the Insurer of such
avoided payment, and will, at the time it provides notice to the Insurer,
notify Holders by mail that, in the event that any Holder's payment is so
recoverable, such Holder will be entitled to payment pursuant to the terms
of the Note Policy. The Insurer will pay any Preference Amount when due to
be paid pursuant to an Order (as defined below), but in any event no
earlier than the fifth Business Day following actual receipt by the
Insurer of (i) a certified copy of a final, nonappealable order of a court
or other body exercising jurisdiction to the effect that a Holder is
required to return such Preference Amount paid during the term of the Note
Policy because the payments of such amounts were avoided as a preferential
transfer or otherwise rescinded or required to
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be restored by the Indenture Trustee or such Holder (the "Order"), (ii) an
opinion of counsel satisfactory to the Insurer stating that the Order has
been entered and is final and not subject to any stay, (iii) an
assignment, in form and substance satisfactory to the Insurer, duly
executed and delivered by such Holder and the Indenture Trustee,
irrevocably assigning to the Insurer all rights and claims of the
Indenture Trustee and such Holder relating to or arising under the
Indenture or otherwise with respect to such Preference Amount, (iv)
appropriate instruments in form satisfactory to the Insurer to effect the
appointment of the Insurer as agent for such Holder in any legal
proceeding related to such Preference Amount, and (v) a Notice
appropriately completed and executed by the Indenture Trustee in the form
attached as Exhibit B to the Note Policy; provided, that (I) if such
documents are received by the Insurer after 12:00 noon, New York City
time, on such Business Day, they will be deemed to be received before
12:00 noon, New York City time, on the following Business Day and (II) the
Insurer will not be obligated to pay any Preference Amount in respect of
principal (other than the Class A Noteholders' Parity Deficit Amount)
prior to the Final Scheduled Distribution Date for the relevant class of
Class A Notes. Such payment will be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the
Order, and not to the Indenture Trustee or the Holder directly, unless the
Indenture Trustee or the relevant Holder has made a payment of the
Preference Amounts to the court or such receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which
case the Insurer will pay the Indenture Trustee, or as directed by the
Indenture Trustee, to the extent of the payment of the Preference Amount,
subject to the delivery of (a) the items referred to in clauses (i), (ii),
(iii), (iv) and (v) above to the Insurer and (b) evidence satisfactory to
the Insurer that payment has been made to such court or receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the
Order; provided, further, that any Preference Amount that constitutes
interest will be limited to the amount of interest on the outstanding
principal amount of the Class A Notes (calculated at the Interest Rate for
the relevant class of Class A Notes) accrued as of the last day of the
applicable interest accrual period with respect to the Class A Notes and
will not, in any event, include any interest on the Class A Notes accrued
after such date or any interest on such interest amount; provided,
further, that in no event will the Insurer be obligated to make any
payment (i) in respect to any Preference Amount to the extent that such
payment, when added to all prior payments of Policy Claim Amounts, would
exceed the Maximum Insured Amount (as defined in the Note Policy) or (ii)
prior to the time the Insurer would have been required to pay a Policy
Claim Amount pursuant to Section 3 of the Policy.
(b) The Indenture Trustee will promptly notify the Insurer of any
proceeding or the institution of any action (of which a Responsible
Officer of the Indenture Trustee has actual knowledge) seeking the
avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Note
Preference Claim") of any payment made to a Holder that has been deemed a
preferential transfer and recoverable, or theretofore recovered, from such
Holder pursuant to Title 11 of United States Code in accordance with an
Order. Each Holder, by its purchase of Class A Notes, and the Indenture
Trustee hereby agree that so long as no Insurer Default has occurred and
is continuing, the Insurer may at any time during the continuation of any
proceeding relating to a Note Preference Claim direct all matters relating
to such Note Preference Claim, including (i) the direction of any appeal
of any order relating to any Note Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal at the
expense of the Insurer, but subject to reimbursement as provided in the
Insurance Agreement. In addition, and without limitation of the foregoing,
as set forth in Section 6.1(c), the Insurer
43
will be subrogated to, and each Holder and the Indenture Trustee hereby
delegate and assign, to the fullest extent permitted by law, the rights of
the trustee and each Holder in the conduct of any proceeding with respect
to a Note Preference Claim, including all rights of any party to an
adversary proceeding action with respect to any court order issued in
connection with any such Note Preference Claim.
Section 6.3 Surrender of Note Policy. Indenture Trustee will surrender the
Note Policy to the Insurer for cancellation upon the expiration of such policy
in accordance with the terms thereof.
ARTICLE VII
The Depositor
Section 7.1 Representations of Depositor. The Depositor makes the
following representations on which the Insurer will be deemed to have relied in
executing and delivering the Note Policy and on which the Issuer is deemed to
have relied in acquiring the Receivables and on which the Indenture Trustee and
Backup Servicer may rely. The representations are true and correct as of the
execution and delivery of this Agreement and as of the Closing Date, in the case
of Receivables, and will survive the sale of the Receivables to the Issuer and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor has been duly
organized and is validly existing as a limited liability company in good
standing under the laws of the State of Delaware, with power and authority
to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, limited liability company power, authority
and legal right to acquire, own and sell the Receivables and the Other
Conveyed Property transferred to the Trust.
(b) Due Qualification. The Depositor is duly qualified to do
business as a foreign limited liability company in good standing and has
obtained all necessary licenses and approvals in all jurisdictions where
the failure to do so would materially and adversely affect the Depositor's
ability to transfer the Receivables and the Other Conveyed Property to the
Trust pursuant to this Agreement, or the validity or enforceability of the
Receivables and the Other Conveyed Property or to perform the Depositor's
obligations under the Basic Documents to which it is a party.
(c) Power and Authority. The Depositor has the power and authority
to execute and deliver the Basic Documents to which it is a party and to
carry out their respective terms; the Depositor has full power and
authority to sell and assign the Receivables and the Other Conveyed
Property to be sold and assigned to and deposited with the Trust by it and
has duly authorized such sale and assignment to the Trust by all necessary
action; and the execution, delivery and performance of the Basic Documents
to which it is a party have been duly authorized by the Depositor by all
necessary action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Depositor and creditors of and
purchasers from the Depositor; and the Basic Documents to which it is a
party, when duly executed and delivered, will constitute legal, valid and
binding
44
obligations of the Depositor enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by the Basic Documents and the fulfillment of the terms of the Basic
Documents to which the Depositor is a party will not conflict with, result
in any breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the limited
liability company agreement or operating agreement of the Depositor, or
any material indenture, agreement, mortgage, deed of trust or other
instrument to which the Depositor is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than the Basic
Documents, or violate any law, order, rule or regulation applicable to the
Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Depositor's best knowledge, threatened against the
Depositor, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Depositor or its properties (A) asserting the invalidity of any of the
Basic Documents, (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by this Agreement
or any of the Basic Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of,
any of the Basic Documents.
(g) True Sale. The Receivables are being transferred with the
intention of removing them from the Depositor's estate pursuant to Section
541 of the Bankruptcy Code, as the same may be amended from time to time.
Section 7.2 Organizational Existence. During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a limited liability company under the laws of Delaware and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or will be necessary to protect the validity and
enforceability of the Basic Documents and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
Section 7.3 Liability of Depositor. The Depositor will be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Depositor under this Agreement.
Section 7.4 Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person (a) into which the Depositor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Depositor will be a party or (c) which may succeed to the properties and assets
of the Depositor substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Depositor under this Agreement, will be the successor to the Depositor hereunder
without the execution or filing of any
45
document or any further act by any of the parties to this Agreement; provided,
however, that the Depositor will have delivered to the Owner Trustee, the Backup
Servicer, the Indenture Trustee and the Insurer an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Issuer and the
Indenture Trustee, respectively, in the Receivables and reciting the details of
such filings or (B) no such action will be necessary to preserve and protect
such interest.
Section 7.5 Limitation on Liability of Depositor and Others. The Depositor
and any director or officer or employee or agent of the Depositor may rely in
good faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Depositor will not be under any obligation to
appear in, prosecute or defend any legal action that will not be incidental to
its obligations under this Agreement, and that in its opinion may involve it in
any expense or liability.
Section 7.6 Ownership of the Certificates or Notes. The Depositor may in
its individual or any other capacity become the owner or pledgee of Certificates
or Notes with the same rights as it would have if it were not the Depositor,
except as expressly provided herein or in any Basic Document. Notes or
Certificates so owned by the Depositor will have an equal and proportionate
benefit under the provisions of the Basic Documents, without preference,
priority, or distinction as among all of the Notes or Certificates.
ARTICLE VIII
The Servicer
Section 8.1 Representations of Servicer. The Servicer makes the following
representations on which the Insurer is deemed to have relied in executing and
delivering the Note Policy and on which the Issuer is deemed to have relied in
acquiring the Receivables and on which the Indenture Trustee and the Backup
Servicer may rely. The representations are true and correct as of the execution
and delivery of this Agreement and as of the Closing Date, in the case of the
Receivables, and will survive the sale of the Receivables to the Issuer and the
pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Representations and Warranties. The representations and
warranties set forth on the Schedule of Representations attached hereto as
Schedule B are true and correct;
(b) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
California, with corporate power, authority and legal right to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to enter into and
perform its obligations under the Basic Documents to which it is a party;
(c) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business of servicing the
Receivables as required by this Agreement requires or will require such
qualification;
46
(d) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver the Basic Documents to which it is a
party and to carry out their respective terms, and the execution, delivery
and performance of the Basic Documents to which it is a party have been
duly authorized by the Servicer by all necessary corporate action;
(e) Binding Obligation. The Basic Documents to which the Servicer is
a party constitute legal, valid and binding obligations of the Servicer
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(f) No Violation. The consummation of the transactions contemplated
by the Basic Documents, and the fulfillment of the terms of the Basic
Documents, will not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of the
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Servicer is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than the Basic
Documents, or violate any law, order, rule or regulation applicable to the
Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or any of its properties;
(g) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Servicer or its properties (A) asserting the invalidity of any of the
Basic Documents, (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by any of the
Basic Documents, or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, any of the Basic
Documents or (D) seeking to adversely affect the federal income tax or
other federal, state or local tax attributes of the Securities;
(h) No Consents. The Servicer is not required to obtain the consent
of any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement which has not already been obtained.
Section 8.2 Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) will be liable hereunder
only to the extent of the obligations in this Agreement specifically
undertaken by the Servicer and the representations made by the Servicer.
47
(b) The Servicer will defend, indemnify and hold harmless the Trust,
the Depositor, the Indenture Trustee, the Owner Trustee, the Backup
Servicer, the Insurer, their respective officers, directors, agents and
employees, and the Noteholders from and against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel and expenses of litigation (i) arising out of
or resulting from the use, ownership or operation by the Servicer or any
Affiliate thereof of any Financed Vehicle or (ii) to the extent that such
cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon the Trust, the Indenture Trustee, the Depositor, the Owner
Trustee, the Backup Servicer, the Insurer or the Noteholders by reason of
the breach of this Agreement by the Servicer, the negligence (other than
errors in judgment), misfeasance, or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(c) Indemnification under this Section 8.2 will include, without
limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer has made any indemnity payments pursuant to
this Section 8.2 and the recipient thereafter collects any of such amounts
from others, the recipient will promptly repay such amounts collected to
the Servicer, without interest.
(d) The Servicer will pay, reimburse and indemnify the Indenture
Trustee and the Backup Servicer in accordance with Section 6.7 of the
Indenture.
Section 8.3 Merger or Consolidation of, or Assumption of the Obligations
of the Servicer or Backup Servicer.
(a) The Servicer will not merge or consolidate with any other
person, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the
successor to the Servicer's business unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the successor or
surviving entity will be capable of fulfilling the duties of the Servicer
contained in this Agreement and, subject to Section 4.6 of the Insurance
Agreement, will be acceptable to the Controlling Party, and, if an Insurer
Default has occurred or is continuing, will be an Eligible Servicer. Any
corporation (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Servicer will
be a party, (iii) which acquires by conveyance, transfer, or lease
substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases will execute an
agreement of assumption to perform every obligation of the Servicer under
this Agreement and, whether or not such assumption agreement is executed,
will be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of
the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein will be
deemed to release the Servicer from any obligation. The Servicer will
provide notice of any merger, consolidation or succession pursuant to this
Section 8.3 to the Owner Trustee, the Depositor, the Indenture Trustee,
the Noteholders, the Insurer and each Rating Agency. Notwithstanding the
foregoing, the Servicer will not merge or consolidate with any other
Person or permit any other Person to become a successor to the Servicer's
business, unless (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 4.6 will have been
breached (for purposes hereof, such representations and warranties will be
true and correct as of the date of the consummation of such transaction)
and no Servicer Termination Event has
48
occurred and is continuing other than in connection with a change in
control as provided in the Insurance Agreement, (y) the Servicer will have
delivered to the Owner Trustee, the Indenture Trustee, Backup Servicer,
the Rating Agencies and the Insurer an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 8.3
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) the Servicer
will have delivered to the Owner Trustee, the Indenture Trustee, the
Rating Agencies and the Insurer an Opinion of Counsel, stating in the
opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and
filed that are necessary to preserve and protect the interest of the Trust
in the Receivables and the Other Conveyed Property and reciting the
details of the filings or (B) no such action will be necessary to preserve
and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be merged
or consolidated, (ii) resulting from any merger or consolidation to which
the Backup Servicer will be a party, (iii) which acquires by conveyance,
transfer or lease substantially all of the assets of the Backup Servicer,
or (iv) succeeding to the business of the Backup Servicer, in any of the
foregoing cases will execute an agreement of assumption to perform every
obligation of the Backup Servicer under this Agreement and, whether or not
such assumption agreement is executed, will be the successor to the Backup
Servicer under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; provided,
however, that nothing contained herein will be deemed to release the
Backup Servicer from any obligation.
Section 8.4 Limitation on Liability of Servicer, Backup Servicer and
Others.
(a) Neither the Servicer, the Backup Servicer nor any of the
directors or officers or employees or agents of the Servicer or Backup
Servicer will be liable to the Trust or the Noteholders, except as
provided in this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement; provided, however,
that this provision will not protect the Servicer, the Backup Servicer or
any such person against any liability that would otherwise be imposed by
reason of a breach of this Agreement or willful misfeasance, bad faith or
negligence (excluding errors in judgment) in the performance of duties;
provided further that this provision will not affect any liability of
Triad to indemnify the Indenture Trustee and the Owner Trustee for costs,
taxes, expenses, claims, liabilities, losses or damages paid by the
Indenture Trustee and the Owner Trustee, in their individual capacities
pursuant to the Purchase Agreement. The Servicer, the Backup Servicer and
any director, officer, employee or agent of the Servicer or Backup
Servicer may rely in good faith on the written advice of counsel or on any
document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising under this Agreement.
(b) The Backup Servicer will not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer file, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer
must rely in order to perform its obligations hereunder, and the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Depositor and the
Insurer and the Noteholders will look only to the Servicer to perform such
obligations. The Backup Servicer,
49
the Indenture Trustee, the Owner Trustee and the Custodian will have no
responsibility and will not be in default hereunder or incur any liability
for any failure, error, malfunction or any delay in carrying out any of
their respective duties under this Agreement if such failure or delay
results from the Backup Servicer acting in accordance with information
prepared or supplied by a Person other than the Backup Servicer (or
contractual agents of the Backup Servicer) or the failure of any such
other Person to prepare or provide such information. The Backup Servicer
will have no responsibility, will not be in default and will incur no
liability for (i) any act or failure to act of any third party (other than
its contractual agents), including the Servicer or the Controlling Party,
(ii) any inaccuracy or omission in a notice or communication received by
the Backup Servicer from any third party (other than its contractual
agents), (iii) the invalidity or unenforceability of any Receivable under
applicable law, (iv) the breach or inaccuracy of any representation or
warranty made with respect to any Receivable, or (v) the acts or omissions
of any successor Backup Servicer. The provisions of this Section 8.4(b)
will not limit the Backup Servicer's obligations pursuant to Section 4.14.
(c) The parties expressly acknowledge and consent to JPMorgan Chase
Bank, N.A. acting in the possible dual capacity of Backup Servicer or
successor Servicer and in the capacity as Indenture Trustee. JPMorgan
Chase Bank, N.A. may, in such dual or other capacity, discharge its
separate functions fully, without hindrance or regard to conflict of
interest principles, duty of loyalty principles or other breach of
fiduciary duties to the extent that any such conflict or breach arises
from the performance by JPMorgan Chase Bank, N.A. of express duties set
forth in the this Agreement in any of such capacities, all of which
defenses, claims or assertions are hereby expressly waived by the other
parties hereto and the Noteholders except in the case of gross negligence
and willful misconduct by JPMorgan Chase Bank, N.A.
Section 8.5 Delegation of Duties. The Servicer may delegate duties under
this Agreement to an Affiliate of Triad with the prior written consent of the
Insurer (unless an Insurer Default has occurred and is continuing). The Servicer
also may at any time perform through sub-contractors the specific duties of (i)
repossession of Financed Vehicles, (ii) tracking Financed Vehicles' Lien
Certificates and (iii) pursuing the collection of deficiency balances or other
amounts due on certain Liquidated Receivables, in each case, without the consent
of the Insurer and may perform other specific collection and repossession duties
through such sub-contractors in accordance with Servicer's customary servicing
policies and procedures; provided, however, that no such delegation or
sub-contracting of duties by the Servicer will relieve the Servicer of its
responsibility with respect to such duties. So long as no Insurer Default has
occurred and is continuing neither Triad nor any party acting as Servicer
hereunder will appoint any subservicer hereunder without the prior written
consent of the Insurer.
Section 8.6 Servicer and Backup Servicer Not to Resign. Subject to Section
8.3, neither the Servicer nor the Backup Servicer may resign from the
obligations and duties imposed on it by this Agreement as Servicer or Backup
Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would have a
material adverse effect on the Servicer or the Backup Servicer, as the case may
be, and the Insurer (so long as an Insurer Default has not occurred) or the
Majority Noteholders (if an Insurer Default has occurred and is continuing) does
not elect to waive the obligations of the Servicer or the Backup Servicer, as
the case may be, to perform the duties which render it legally unable to act or
to delegate those duties to another Person. Any such determination permitting
the resignation of the Servicer or Backup
50
Servicer will be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Indenture Trustee, the Owner Trustee and the Insurer (unless
an Insurer Default has occurred and is continuing). No resignation of the
Servicer will become effective until, so long as no Insurer Default has occurred
and is continuing, the Backup Servicer or an entity acceptable to the Insurer
has assumed the responsibilities and obligations of the Servicer or, if an
Insurer Default has occurred and is continuing, the Backup Servicer or a
successor Servicer that is an Eligible Servicer has assumed the responsibilities
and obligations of the Servicer. No resignation of the Backup Servicer will
become effective until, so long as no Insurer Default has occurred and is
continuing, an entity acceptable to the Insurer has assumed the responsibilities
and obligations of the Backup Servicer or, if an Insurer Default has occurred
and is continuing, a Person that is an Eligible Servicer has assumed the
responsibilities and obligations of the Backup Servicer; provided, however, that
(i) in the event a successor Backup Servicer is not appointed within 60 days
after the Backup Servicer has given notice of its resignation and has provided
the Opinion of Counsel required by this Section 8.6, the Backup Servicer may
petition a court for its removal, (ii) the Backup Servicer may resign with the
written consent of the Insurer and (iii) notwithstanding anything to the
contrary, if JPMorgan Chase Bank, N.A. resigns or is removed as the Indenture
Trustee under the Indenture it will no longer be the Backup Servicer.
ARTICLE IX
Default
Section 9.1 Servicer Termination Event. For purposes of this Agreement,
each of the following will constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver to the Indenture Trustee
for distribution to Noteholders any proceeds or payment required to be so
delivered under this Agreement that continues unremedied for a period of
two Business Days (one Business Day with respect to payment of Purchase
Amounts) after written notice is received by the Servicer from the
Indenture Trustee or (unless an Insurer Default has occurred and is
continuing) the Insurer or after discovery of such failure by a
Responsible Officer of the Servicer;
(b) Failure by the Servicer to deliver the Servicer's Certificate by
the Determination Date;
(c) Failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer set forth in this
Agreement or, if the Servicer is Triad, failure of Triad duly to perform
any other covenants or agreements of Triad set forth in the Purchase
Agreement which failure (i) materially and adversely affects the rights of
Noteholders (determined without regard to the availability of funds under
the Note Policy), or of the Insurer (unless an Insurer Default has
occurred and is continuing), and (ii) continues unremedied for a period of
30 days after the date on which written notice of such failure, requiring
the same to be remedied, has been given to the Servicer by the Indenture
Trustee, the Issuer or the Insurer (or, if an Insurer Default has occurred
and is continuing, by any Noteholder);
(d) An Insolvency Event has occurred with respect to the Servicer;
51
(e) Any representation, warranty or statement of the Servicer made
in this Agreement or any certificate, report or other writing delivered
pursuant hereto will prove to be incorrect in any material respect as of
the time when the same will have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
Trust, the Insurer or the Noteholders' interests and, within 30 days after
knowledge thereof by the Servicer or after written notice thereof will
have been given to the Servicer by the Indenture Trustee or the Insurer
(or, if an Insurer Default has occurred and is continuing, a Noteholder),
the circumstances or conditions in respect of which such representation,
warranty or statement was incorrect will not have been eliminated or
otherwise cured;
(f) So long as no Insurer Default has occurred and is continuing, an
Insurance Agreement Event of Default occurs;
(g) A claim is made under the Note Policy; or
(h) The occurrence of a Trigger Event under the Insurance Agreement.
Section 9.2 Consequences of a Servicer Termination Event. If a Servicer
Termination Event has occurred and is continuing, the Insurer may (or, if an
Insurer Default has occurred and is continuing, the Indenture Trustee (to the
extent it has knowledge thereof) may, and will at the direction of the Majority
Noteholders), by notice given in writing to the Servicer (and to the Indenture
Trustee if given by the Insurer) terminate all of the rights and obligations of
the Servicer under this Agreement; provided that if no Insurer Default has
occurred and is continuing, neither the Indenture Trustee nor the Majority
Noteholders may deliver such notice, and termination will be in the Insurer's
sole and absolute discretion. On or after the receipt by the Servicer of such
written notice all authority, power, obligations and responsibilities of the
Servicer under this Agreement, whether with respect to the Notes, the
Certificates or the Other Conveyed Property or otherwise, automatically will
pass to, be vested in and become obligations and responsibilities of the Backup
Servicer (or such other successor Servicer appointed by the Controlling Party);
provided, however, that the successor Servicer will have no liability with
respect to any obligation which was required to be performed by the terminated
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and the Other Conveyed Property and related
documents to show the Trust as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Servicer agrees to cooperate with the
Controlling Party and the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that will at the time be held by the terminated Servicer for
deposit, or have been deposited by the terminated Servicer, in the Collection
Account or thereafter received with respect to the Receivables and the delivery
to the successor Servicer of all Receivable Files, Monthly Records and
Collection Records and a computer tape in readable form as of the most recent
Business Day containing all information necessary to enable the successor
Servicer to service the Receivables and the Other Conveyed Property. If
requested by the Controlling Party, the successor Servicer will terminate the
Blocked Account Agreement and direct the Obligors to make all payments under the
Receivables directly to the successor Servicer (in which event the successor
Servicer will process such payments in accordance
52
with Section 4.2(e)), or to a lockbox established by the successor Servicer at
the direction of the Controlling Party, at the successor Servicer's expense. The
terminated Servicer will grant the Indenture Trustee, the successor Servicer and
the Controlling Party reasonable access to the terminated Servicer's premises at
the terminated Servicer's expense.
Section 9.3 Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 9.2, or upon the resignation of the
Servicer pursuant to Section 8.6, the Backup Servicer (unless the
Controlling Party will have exercised its option pursuant to Section
9.3(b) to appoint an alternate successor Servicer) will be the successor
in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for in this
Agreement, and will be subject to all the rights, responsibilities,
restrictions, duties, liabilities and termination provisions relating
thereto placed on the Servicer by the terms and provisions of this
Agreement except as otherwise stated herein. The Indenture Trustee and
such successor will take such action, consistent with this Agreement, as
will be necessary to effectuate any such succession. If a successor
Servicer is acting as Servicer hereunder, it will be subject to
termination under Section 9.2 upon the occurrence of any Servicer
Termination Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a Person other
than the Person serving as Backup Servicer at the time, and (without
limiting its obligations under the Note Policy) will have no liability to
the Indenture Trustee, Triad, the Depositor, the Person then serving as
Backup Servicer, any Noteholders or any other Person if it does so.
Notwithstanding the above, if the Backup Servicer will be legally unable
or unwilling to act as Servicer, and an Insurer Default has occurred and
is continuing, the Backup Servicer, the Indenture Trustee or the Majority
Noteholders may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending appointment
pursuant to the preceding sentence, the Backup Servicer, subject to
Section 8.6(iii), will act as successor Servicer unless it is legally
unable to do so, in which event the outgoing Servicer will continue to act
as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 8.6, no provision of this Agreement will
be construed as relieving the Backup Servicer of its obligation to succeed
as successor Servicer upon the termination of the Servicer pursuant to
Section 9.2 or the resignation of the Servicer pursuant to Section 8.6. If
upon the termination of the Servicer pursuant to Section 9.2 or the
resignation of the Servicer pursuant to Section 8.6, the Controlling Party
appoints a successor Servicer other than the Backup Servicer, the Backup
Servicer will not be relieved of its duties as Backup Servicer hereunder.
(c) Any successor Servicer will be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if the Servicer
had not resigned or been terminated hereunder. The Insurer, if the Class A
Notes are outstanding and no Insurer Default has occurred and is
continuing, and such successor Servicer may agree on additional
compensation to be paid to such successor Servicer, which additional
compensation will be payable as provided herein and will in no event
exceed $150,000 in the aggregate and which will be deemed to be part of
the "Servicing Fee" described in Section 4.8. The Backup Servicer will not
be liable for any Servicing Fee, additional compensation or other amounts
to be paid to such successor
53
Servicer in connection with its assumption and performance of the
servicing duties described herein.
Section 9.4 Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer, the Indenture Trustee will give
prompt written notice thereof to each Noteholder and to the Rating Agencies.
Section 9.5 Waiver of Past Defaults. So long as no Insurer Default has
occurred and is continuing, the Insurer (or, if an Insurer Default has occurred
and is continuing, the Majority Noteholders) may, on behalf of all Noteholders,
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any such waiver of a past default, such
default will cease to exist, and any Servicer Termination Event arising
therefrom will be deemed to have been remedied for every purpose of this
Agreement. No such waiver will extend to any subsequent or other default or
impair any right consequent thereto.
ARTICLE X
Termination
Section 10.1 Optional Purchase of All Receivables.
(a) On any Distribution Date after the last day of any Collection
Period as of which the Pool Balance will be less than or equal to 10% of
the Original Pool Balance, the Servicer will have the option to purchase
the Owner Trust Estate, other than the Trust Accounts (with the consent of
the Insurer if such purchase would result in a claim on the Note Policy or
would result in any amount owing to the Insurer under the Insurance
Agreement remaining unpaid); provided, however, that the amount to be paid
for such purchase (as set forth in the following sentence) will be
sufficient to pay the full amount of principal, premium, if any, and
interest due and payable on the Notes on such Distribution Date. To
exercise such option, the Servicer will deposit at least two Business Days
prior to such Distribution Date pursuant to Section 5.6 in the Collection
Account an amount equal to the aggregate Purchase Amount for the
Receivables (other than Receivables that became Liquidated Receivables on
or before the last day of the Collection Period preceding such
Distribution Date), plus the appraised value of any other property held by
the Trust (other than the Trust Accounts), such value to be determined by
an appraiser mutually agreed upon by the Servicer, the Insurer and the
Indenture Trustee, and will succeed to all interests in and to the Trust.
(b) Upon any sale of the assets of the Trust pursuant to Section 8.1
of the Trust Agreement, the Servicer will instruct the Indenture Trustee
to deposit the proceeds from such sale after all payments and reserves
therefrom (including the expenses of such sale) have been made (the
"Insolvency Proceeds") in the Collection Account.
(c) Notice of any termination of the Trust will be given by the
Servicer to the Owner Trustee, the Indenture Trustee, the Backup Servicer,
the Insurer and the Rating Agencies as soon as practicable after the
Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the
54
rights of the Noteholders hereunder and the Trust will succeed to the
rights of, and assume the obligations of, the Indenture Trustee pursuant
to this Agreement.
ARTICLE XI
Administrative Duties of the Servicer
Section 11.1 Administrative Duties.
(a) Duties with Respect to the Basic Documents. The Servicer will
perform all its duties and the duties of the Issuer under the Basic
Documents. In addition, the Servicer will consult with the Owner Trustee
as the Servicer deems appropriate regarding the duties of the Issuer under
the Basic Documents. The Servicer will monitor the performance of the
Issuer and will advise the Owner Trustee when action is necessary to
comply with the Issuer's duties under the Basic Documents. The Servicer
will prepare for execution by the Issuer or will cause the preparation by
other appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it will be the duty of the
Issuer to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Servicer will take all necessary action
that is the duty of the Issuer to take pursuant to the Indenture,
including pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 4.1,
5.4, 7.3, 8.3, 9.2, 9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in the
Basic Documents, the Servicer will perform such calculations and will prepare
for execution by the Issuer or the Owner Trustee or will cause the preparation
by other appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it will be the duty of the Issuer or
the Owner Trustee to prepare, file or deliver pursuant to any of the Basic
Documents or under state and federal tax and securities laws, and at the request
of the Owner Trustee will take all appropriate action that it is the duty of the
Issuer to take pursuant to any of the Basic Documents. In accordance with the
directions of the Issuer or the Owner Trustee, the Servicer will administer,
perform or supervise the performance of such other activities in connection with
the Collateral (including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or the Owner
Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in any of the Basic Documents to
the contrary, the Servicer will be responsible for promptly notifying the Owner
Trustee and the Indenture Trustee in the event that any withholding tax is
imposed on the Issuer's payments (or allocations of income) to an Owner (as
defined in the Trust Agreement) as contemplated in this Agreement. Any such
notice will be in writing and specify the amount of any withholding tax required
to be withheld by the Owner Trustee or the Indenture Trustee pursuant to such
provision.
(iii) Notwithstanding anything in the Basic Documents to the
contrary, the Servicer will be responsible for performance of any duties of the
Issuer set forth in any amended Trust Agreement (as contemplated by Section 2.12
of the Trust Agreement) with respect to, among other things, accounting and
reports to Certificateholders (as defined in the Trust Agreement); provided,
however, that once prepared by the Servicer the Owner Trustee will retain
responsibility
55
for the distribution of the Schedule K-1s upon request of the Certificateholders
in order to enable the Certificateholders to prepare its federal and state
income tax returns.
(iv) The Servicer will perform the duties of the Servicer
specified in Section 9.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Servicer under any of the Basic
Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions with
or otherwise deal with any of its Affiliates; provided, however, that the terms
of any such transactions or dealings will be in accordance with any directions
received from the Issuer and will be, in the Servicer's opinion, no less
favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer will prepare and file, on behalf of
the Trust, all tax returns, tax elections, financial statements and such
annual or other reports attributable to the activities engaged in by the
Issuer as are necessary for preparation of tax reports, including forms
1099. All tax returns will be signed by the Servicer unless applicable law
requires a Certificateholder to sign such documents.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer will
not take any action pursuant to this Article XI unless within a reasonable
time before the taking of such action, the Servicer will have notified the
Owner Trustee and the Indenture Trustee of the proposed action and the
Owner Trustee and, with respect to items (A), (B), (C) and (D) below, the
Indenture Trustee and, so long as no Insurer Default has occurred and is
continuing, the Insurer will not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer
and the compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the Receivables);
(C) the amendment, change or modification of any of the
Basic Documents;
(D) the appointment of successor Note Registrars,
successor Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee of its
obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(e) Exceptions. Except as expressly set forth herein, the Servicer,
in its capacity hereunder, will not be obligated to, and will not, (1)
make any payments to the Noteholders or Certificateholders under the Basic
Documents, (2) sell the Trust Estate pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer
not to take
56
on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(f) The Backup Servicer or any successor Servicer will not be
responsible for any obligations or duties of the Servicer under this
Section 11.1.
Section 11.2 Records. The Servicer will maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records will be accessible for inspection by the Issuer at
any time during normal business hours upon reasonable prior notice.
Section 11.3 Additional Information to be Furnished to the Issuer. The
Servicer will furnish to the Issuer and, so long as no Insurer Default has
occurred and is continuing, the Insurer, from time to time such additional
information regarding the Collateral as the Issuer and, so long as no Insurer
Default has occurred and is continuing, the Insurer, will reasonably request.
ARTICLE XII
Miscellaneous Provisions
Section 12.1 Amendment.
(a) This Agreement may be amended from time to time by the parties
hereto, with the consent of the Indenture Trustee (which consent may not
be unreasonably withheld) and with the prior written consent of the
Insurer (which consent will not be unreasonably withheld; provided that no
Insurer Default has occurred and is continuing) but without the consent of
any of the Noteholders, to cure any ambiguity, to correct or supplement
any provisions in this Agreement, to comply with any changes in the Code,
or to make any other provisions with respect to matters or questions
arising under this Agreement which will not be inconsistent with the
provisions of this Agreement or the Insurance Agreement; provided,
however, that such action will not, as evidenced by an Opinion of Counsel
delivered to Owner Trustee and the Indenture Trustee, adversely affect in
any material respect the interests of any Noteholder; provided further
that if an Insurer Default has occurred and is continuing, such action
will not materially adversely affect the interests of the Insurer.
(b) This Agreement may also be amended from time to time by the
parties hereto, with the consent of the Insurer, the consent of the
Indenture Trustee, and the consent of the Holders of Notes evidencing not
less than a majority of the outstanding principal amount of the Notes for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders; provided, however, that no such
amendment will (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables
or distributions that will be required to be made for the benefit of the
Noteholders or (b) reduce the aforesaid percentage of the outstanding
principal amount of the Notes, the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all
the outstanding Notes of each class affected thereby; provided, further,
that if an Insurer Default has occurred and is continuing, such action
will not materially adversely affect the interest of the Insurer.
57
(c) The party requesting such amendment will furnish written
notification of the substance of such amendment or consent to the Rating
Agencies before the execution thereof and the Indenture Trustee will
furnish written notification of the substance of such amendment or consent
to each Noteholder promptly after the execution thereof.
(d) It will not be necessary for the consent of Noteholders pursuant
to this Section 12.1 to approve the particular form of any proposed
amendment or consent, but it will be sufficient if such consent will
approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of any action by Noteholders will be subject
to such reasonable requirements as the Indenture Trustee or the Owner
Trustee, as applicable, may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Owner Trustee, the Indenture Trustee, the Insurer and Backup Servicer will
be entitled to receive and conclusively rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by
this Agreement and the Opinion of Counsel referred to in Section 12.2(h)
has been delivered. The Owner Trustee, the Backup Servicer and the
Indenture Trustee may, but will not be obligated to, enter into any such
amendment which affects the Issuer's, the Owner Trustee's, the Backup
Servicer's or the Indenture Trustee's, as applicable, own rights, duties
or immunities under this Agreement or otherwise.
Section 12.2 Protection of Title to Trust.
(a) Triad will cause to be executed and filed such financing
statements and continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer and the interests of the Indenture Trustee in
the Receivables and in the proceeds thereof. Triad will deliver (or cause
to be delivered) to the Insurer, the Owner Trustee and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document filed
as provided above, as soon as available following such filing.
(b) Neither the Depositor nor the Servicer will change its name,
identity, corporate structure or jurisdiction of formation or take any
action that would, could or might make any financing statement or
continuation statement filed in accordance with Section 12.2(a)
ineffective to continue the first priority perfected security interest in
that portion of the trust estate in which a security interest may be
perfected by filing under the applicable Uniform Commercial Code. If any
refiling is required, the Depositor or Servicer, as the case may be, will
promptly give notice and file new financing statements or amendments
thereto or continuation statements thereof. Promptly upon such filing, the
Depositor or the Servicer, as the case may be, will deliver an Opinion of
Counsel in form and substance reasonably satisfactory to the Insurer,
stating either (A) all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the Indenture Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no such
action will be necessary to preserve and protect such interest.
(c) The Servicer will at all times maintain each office from which
it will service Receivables, and its principal executive office, within
the United States of America.
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(d) The Servicer will maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing (and the nature of each)
and (ii) reconciliation between payments or recoveries on (or with respect
to) each Receivable and the amounts from time to time deposited in the
Collection Account in respect of such Receivable.
(e) The Servicer will maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup
archives) that refer to a Receivable will indicate clearly the interest of
the Trust in such Receivable and that such Receivable is owned by the
Trust. Indication of the Trust's interest in a Receivable will be deleted
from or modified on the Servicer's computer systems when, and only when,
the related Receivable will have been paid in full or repurchased.
(f) If at any time the Servicer proposes to sell, grant a security
interest in or otherwise transfer any interest in motor vehicle
receivables to any prospective purchaser, lender or other transferee, the
Servicer will give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored
from backup archives) that, if they refer in any manner whatsoever to any
Receivable, indicate clearly that such Receivable has been sold and is
owned by the Trust unless such Receivable has been paid in full or
repurchased.
(g) Upon request, the Servicer will furnish to the Insurer, the
Owner Trustee or to the Indenture Trustee, within five Business Days, a
list of all Receivables (by contract number and name of Obligor) then held
as part of the Trust, together with a reconciliation of such list to the
Schedule of Receivables and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the
Trust.
(h) The Servicer will deliver to the Insurer, the Owner Trustee and
the Indenture Trustee promptly after the execution and delivery of the
Agreement and, if required pursuant to Section 12.1, of each amendment, an
Opinion of Counsel stating that, in the opinion of such counsel, in form
and substance reasonably satisfactory to the Insurer, either (A) all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Trust and the Indenture Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (B) no such action will be necessary to
preserve and protect such interest. Each Opinion of Counsel referred to in
this paragraph (h) will specify any action necessary (as of the date of
such opinion) to be taken in the following year to preserve and protect
such interest.
Section 12.3 Notices. All demands, notices and communications hereunder
will be in writing and will be deemed to have been duly given to the addressee
if mailed, by first-class registered mail, postage prepaid service, confirmed
facsimile transmission, or a nationally recognized express courier, as follows:
If to the Depositor: Triad Financial Special Purpose LLC
7711 Center Avenue, Suite 390
Huntington Beach, California 92647
59
Attention: Chief Financial Officer
If to the Servicer: Triad Financial Corporation
7711 Center Avenue, Suite 100
Huntington Beach, California 92647
Attention: Chief Financial Officer
If to the Issuer or
Owner Trustee: Wilmington Trust Company
Rodney Square North,
1100 N. Market Street
Wilmington, Delaware 19890
Attn: Corporate Trust Administration
If to the Indenture Trustee: JPMorgan Chase Bank, N.A.
4 New York Plaza, 6th Floor
New York, New York 10004-2477
Attention: Worldwide Securities
Services - Global Debt - Triad
2005-A
If to the Insurer: Ambac Assurance Corporation
One State Street Plaza
19th Floor
New York, New York 10004
In each case in which notice or other communication to the Insurer refers to a
Servicer Termination Event, a claim on the Note Policy, or with respect to which
failure on the part of the Insurer to respond will be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of General Counsel and will be marked to indicate
"URGENT MATERIAL ENCLOSED."
If to Moody's: Moody's Investors Service, Inc.
ABS Monitoring Department
99 Church Street
New York, New York 10007
If to Standard & Poor's: Standard & Poor's Ratings Group
55 Water Street
New York, New York 10041
Attention: Asset Backed Surveillance
Department
Any such demand, notice or communication hereunder will be deemed to have been
received on the date delivered to or received at the premises of the addressee
as evidenced by the date noted on the return receipt.
Subject to Section 5.10(b) hereof, any notice required or permitted
to be mailed to a Noteholder will be given by first class mail, postage prepaid,
at the address of such Holder as shown
60
in the Note Register. Any notice so mailed within the time prescribed in the
Agreement will be conclusively presumed to have been duly given, whether or not
the Noteholder receives such notice.
Section 12.4 Assignment. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 7.4 and 8.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Depositor or the Servicer without the prior written consent of
the Trust, the Backup Servicer, the Indenture Trustee and the Insurer (or if an
Insurer Default has occurred and is continuing the of Noteholders evidencing not
less than 66-2/3% of the principal amount of the outstanding Notes).
Section 12.5 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto, the Indenture
Trustee, the Owner Trustee and the Noteholders, as third-party beneficiaries.
The Insurer and its successors and assigns will be a third-party beneficiary to
the provisions of this Agreement, and will be entitled to rely upon and directly
enforce such provisions of this Agreement so long as no Insurer Default has
occurred and is continuing. Except as expressly stated otherwise herein, any
right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, will be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Owner Trustee. Except as
provided in this Agreement, no other Person will have any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 12.6 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will, 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 will not invalidate or render unenforceable
such provision in any other jurisdiction.
Section 12.7 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered will be an original, but all such counterparts will together
constitute but one and the same instrument.
Section 12.8 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and will not define or limit any of
the terms or provisions hereof.
Section 12.9 Governing Law. THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
WILL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.10 Assignment to Indenture Trustee. The Depositor hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and/or the assignment of any or all
of the Issuer's rights and obligations hereunder to the Indenture Trustee.
61
Section 12.11 Nonpetition Covenants.
(a) Notwithstanding any termination of this Agreement, the Servicer,
the Backup Servicer, the Indenture Trustee and the Depositor will not,
prior to the date that is one year and one day after the termination of
this Agreement, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any
federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any termination of this Agreement, the Issuer,
the Servicer, the Backup Servicer and the Indenture Trustee will not,
prior to the date that is one year and one day after the termination of
this Agreement with respect to the Depositor, acquiesce to, petition or
otherwise invoke or cause the Depositor to invoke the process of any court
or government authority for the purpose of commencing or sustaining a case
against the Depositor under any federal or state bankruptcy, insolvency or
similar law, appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or other similar official of the Depositor or any
substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Depositor.
Section 12.12 Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the
Issuer and in no event will Wilmington Trust Company in its individual
capacity or, except as expressly provided in the Trust Agreement, as Owner
Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all
of which recourse will be had solely to the assets of the Issuer. For all
purposes of this Agreement, in the performance of its duties or
obligations hereunder or in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee will be subject to, and
entitled to the benefits of, the terms and provisions of Articles V, VI
and VII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by JPMorgan Chase Bank, N.A.,
not in its individual capacity but solely as Indenture Trustee and Backup
Servicer and in no event will JPMorgan Chase Bank, N.A. have any liability
for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse will
be had solely to the assets of the Issuer.
(c) In no event will JPMorgan Chase Bank, N.A., in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Statutory Trust Statute, common law, or the
Trust Agreement.
Section 12.13 Independence of the Servicer. For all purposes of this
Agreement, the Servicer will be an independent contractor and will not be
subject to the supervision of the Issuer, the
62
Indenture Trustee and Backup Servicer or the Owner Trustee with respect to the
manner in which it accomplishes the performance of its obligations hereunder.
Unless expressly authorized by this Agreement, the Servicer will have no
authority to act for or represent the Issuer or the Owner Trustee in any way and
will not otherwise be deemed an agent of the Issuer or the Owner Trustee.
Section 12.14 No Joint Venture. Nothing contained in this Agreement (i)
will constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) will be construed to
impose any liability as such on any of them or (iii) will be deemed to confer on
any of them any express, implied or apparent authority to incur any obligation
or liability on behalf of the others.
Section 12.15 Nonpublic Personal Information. In the course of carrying
out their duties under this Agreement, the Indenture Trustee, the Backup
Servicer, the Issuer and the Depositor shall develop or receive certain
information regarding the "consumers" and "customers" of the Servicer, including
but not limited to "nonpublic personal information," (as those terms are defined
in Title V of the Gramm-Leach-Bliley Act and the privacy regulations adopted
thereunder). Notwithstanding any other provision of the Agreement, with respect
to nonpublic personal information about the customers and consumers of the
Servicer, each of the Indenture Trustee, the Backup Servicer, the Issuer and the
Depositor agrees as follows: (i) except as may be reasonably necessary in the
ordinary course of business to carry out the activities to be performed by the
Indenture Trustee, the Backup Servicer, the Issuer or the Depositor under this
Agreement or as may be required by law or legal process, it will not disclose
any such nonpublic personal information to any third party; (ii) it will not use
any such nonpublic personal information other than to carry out the purposes for
which it was disclosed to the Indenture Trustee, the Backup Servicer, the Issuer
or the Depositor, as applicable, unless such other use is expressly permitted by
a written agreement executed by the Servicer or required by law or legal
process; (iii) it shall restrict disclosure of the information solely to those
of its employees with a need to know and will advise employees who receive the
information of the obligation of confidentiality hereunder; and (iv) it will
take all reasonable measures, including without limitation such measures as it
takes to safeguard its own confidential information, to ensure the security and
confidentiality of all such nonpublic personal information, to protect against
anticipated threats or hazards to the security or integrity of such nonpublic
personal information and to protect against unauthorized access to or use of
such nonpublic personal information. The Servicer shall have access (during
normal business hours, upon reasonable prior notice) to review such books and
records of the Indenture Trustee, the Backup Servicer, Issuer and the Depositor
as may be necessary to assess compliance with the requirements of this Section
12.15. All costs and expenses of such a review shall be borne solely by the
Servicer, unless the results of such review indicate a breach of this Section
12.15 by the Indenture Trustee, the Backup Servicer, the Issuer or the
Depositor. The Indenture Trustee, the Backup Servicer, the Issuer or the
Depositor, as applicable, shall promptly notify the Servicer if it receives any
complaint or notice concerning a violation of privacy rights or becomes aware of
a breach of customer data security. Upon termination of this Agreement, the
Indenture Trustee, the Backup Servicer, the Issuer and the Depositor shall
return or destroy all nonpublic personal information, without retaining any
copies of such documents and records.
[Signature page to follow]
63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
TRIAD AUTOMOBILE RECEIVABLES TRUST 2005-A
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee of the Trust
By: /s/ Rachel L. Simpson
------------------------------------
Name: Rachel L. Simpson
Title: Financial Services Officer
TRIAD FINANCIAL SPECIAL PURPOSE LLC, as
Depositor
By: /s/ Mike L. Wilhelms
------------------------------------
Name: Mike L. Wilhelms
Title: Chief Financial Officer
TRIAD FINANCIAL CORPORATION, as Servicer
and Custodian
By: /s/ Mike L. Wilhelms
------------------------------------
Name: Mike L. Wilhelms
Title: Senior Vice President
and Chief Financial Officer
JPMORGAN CHASE BANK, N.A., as Backup
Servicer
By: /s/ Michael A. Smith
------------------------------------
Name: Michael A. Smith
Title: Vice President
Acknowledged and accepted by
JPMORGAN CHASE BANK, N.A.,
not in its individual capacity but solely as Indenture Trustee
By: /s/ Michael A. Smith
----------------------
Name: Michael A. Smith
Title: Vice President
[Signature Page to Sale and Servicing Agreement]
SCHEDULE A
SCHEDULE OF RECEIVABLES
[See Schedule A to the Purchase Agreement]
SCH-A-1
SCHEDULE B
REPRESENTATIONS AND WARRANTIES
[See Schedule B to the Purchase Agreement]
SCH-B-1
SCHEDULE C
SERVICING POLICIES AND PROCEDURES
Note: Applicable Time Periods Will Vary by State
[See Attached]
SCH-C-1
SCHEDULE D
CUSTODIAN THIRD PARTY VENDORS
Arcus Data Security Inc., an Iron Mountain Company
FDI Computer Consulting, Inc.
A-1
EXHIBIT A
SERVICER'S CERTIFICATE
[See Attached]
B-1
EXHIBIT B
FORM OF NOTE GUARANTY INSURANCE POLICY
[Please see Tab 12]
C-1