SALE AND SERVICING AGREEMENT
Dated as of June 1, 1999
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1999-B
Issuer
ARCADIA RECEIVABLES FINANCE CORP.
Seller
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS................................................................................1
SECTION 1.1. DEFINITIONS.................................................................1
SECTION 1.2. USAGE OF TERMS.............................................................22
SECTION 1.3. CALCULATIONS...............................................................23
SECTION 1.4. SECTION REFERENCES.........................................................23
SECTION 1.5. NO RECOURSE................................................................23
SECTION 1.6. MATERIAL ADVERSE EFFECT....................................................23
ARTICLE II
CONVEYANCE OF RECEIVABLES.................................................................24
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES..........................................24
SECTION 2.2. CUSTODY OF RECEIVABLE FILES................................................24
SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE..................................25
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES.......................................26
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER...................................29
SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY..........................31
SECTION 2.7. NONPETITION COVENANT.......................................................32
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING DATE OR
SUBSEQUENT TRANSFER DATE.........................................................32
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND WARRANTY
RECEIVABLES......................................................................32
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES...............................................33
SECTION 3.1. DUTIES OF THE SERVICER.....................................................33
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES;
LOCKBOX AGREEMENTS...............................................................34
SECTION 3.3. REALIZATION UPON RECEIVABLES...............................................37
SECTION 3.4. INSURANCE..................................................................37
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES..............................39
SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER.....................40
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT............................42
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER...............42
SECTION 3.9. SERVICER'S CERTIFICATE.....................................................43
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER TERMINATION
EVENT............................................................................43
SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.....................................44
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SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES......................................................................45
SECTION 3.13. MONTHLY TAPE...............................................................45
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER......................................46
SECTION 3.15. FIDELITY BOND..............................................................46
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE.................................46
SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE AGREEMENT.......................48
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST AGREEMENT...................48
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS..................................................49
SECTION 4.1. TRUST ACCOUNTS.............................................................49
SECTION 4.2. COLLECTIONS................................................................53
SECTION 4.3. APPLICATION OF COLLECTIONS.................................................53
SECTION 4.4. MONTHLY ADVANCES...........................................................54
SECTION 4.5. ADDITIONAL DEPOSITS........................................................55
SECTION 4.6. DISTRIBUTIONS..............................................................55
SECTION 4.7. PRE-FUNDING ACCOUNT........................................................56
SECTION 4.8. NET DEPOSITS...............................................................57
SECTION 4.9. STATEMENTS TO NOTEHOLDERS..................................................58
SECTION 4.10. INDENTURE TRUSTEE AS AGENT.................................................59
SECTION 4.11. ELIGIBLE ACCOUNTS..........................................................59
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT...................................................59
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT.......................................59
SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT............................................60
ARTICLE VI
THE SELLER................................................................................60
SECTION 6.1. LIABILITY OF SELLER........................................................60
SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SELLER;
AMENDMENT OF CERTIFICATE OF INCORPORATION........................................61
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS...............................61
SECTION 6.4. SELLER MAY OWN NOTES.......................................................62
ARTICLE VII
THE SERVICER..............................................................................62
SECTION 7.1. LIABILITY OF SERVICER; INDEMNITIES.........................................62
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE
SERVICER OR BACKUP SERVICER......................................................63
SECTION 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND OTHERS............64
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SECTION 7.4. DELEGATION OF DUTIES.......................................................65
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN.................................65
SECTION 7.6. ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER................................66
ARTICLE VIII
SERVICER TERMINATION EVENTS...............................................................66
SECTION 8.1. SERVICER TERMINATION EVENT.................................................66
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT...............................67
SECTION 8.3. APPOINTMENT OF SUCCESSOR...................................................69
SECTION 8.4. NOTIFICATION TO NOTEHOLDERS................................................70
SECTION 8.5. WAIVER OF PAST DEFAULTS....................................................70
ARTICLE IX
TERMINATION...............................................................................70
SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION OF TRUST ESTATE..........70
ARTICLE X
MISCELLANEOUS PROVISIONS..................................................................72
SECTION 10.1. AMENDMENT..................................................................72
SECTION 10.2. PROTECTION OF TITLE TO TRUST PROPERTY......................................73
SECTION 10.3. GOVERNING LAW..............................................................75
SECTION 10.4. SEVERABILITY OF PROVISIONS.................................................75
SECTION 10.5. ASSIGNMENT.................................................................75
SECTION 10.6. THIRD-PARTY BENEFICIARIES..................................................75
SECTION 10.7. DISCLAIMER BY SECURITY INSURER.............................................75
SECTION 10.8. COUNTERPARTS...............................................................75
SECTION 10.9. INTENTION OF PARTIES.......................................................76
SECTION 10.10. NOTICES....................................................................76
SECTION 10.11. LIMITATION OF LIABILITY....................................................76
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SCHEDULES
Schedule A -- Representations and Warranties of Seller and AFL
Schedule B -- Servicing Policies and Procedures
EXHIBITS
Exhibit A -- Schedule of Initial Receivables
Exhibit B -- Form of Custodian Agreement (AFL)
Exhibit C -- Form of Spread Account Agreement
Exhibit D -- Form of Receivables Purchase Agreement
Exhibit E -- Form of Servicer's Certificate
Exhibit F -- Form of Subsequent Transfer Agreement
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THIS SALE AND SERVICING AGREEMENT, dated as of June 1,
1999, is made among Arcadia Automobile Receivables Trust, 1999-B (the
"Issuer"), Arcadia Receivables Finance Corp., a Delaware corporation, as
Seller (the "Seller"), Arcadia Financial Ltd., a Minnesota corporation, in
its individual capacity and as Servicer (in its individual capacity, "AFL";
in its capacity as Servicer, the "Servicer"), and Norwest Bank Minnesota,
National Association, a national banking association, as Backup Servicer (the
"Backup Servicer").
In consideration of the mutual agreements herein contained,
and of other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All terms defined in the Spread
Account Agreement, the Indenture or the Trust Agreement (each as defined
below) shall have the same meaning in this Agreement. Whenever capitalized
and used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally
recognized independent accountants described in Section 3.11.
ACCOUNTING DATE: With respect to a Distribution Date, the
last day of the Monthly Period immediately preceding such Distribution Date.
ACTUAL FUNDS: With respect to a Distribution Date, the sum
of (i) Available Funds for such Distribution Date, plus (ii) the portion of
the Reserve Amount, if any, deposited pursuant to Section 5.1(a) into the
Collection Account with respect to such Distribution Date.
ADDITION NOTICE: With respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.4, a notice, which shall be
given not later than 15 days prior to the related Subsequent Transfer Date,
of the Seller's designation of Subsequent Receivables to be transferred to
the Issuer and the aggregate Principal Balance of such Subsequent Receivables.
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly
Period, a Receivable which the Servicer is required to purchase pursuant to
Section 3.7 or which the Servicer has elected to purchase pursuant to Section
3.4(c).
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
AFL: Arcadia Financial Ltd., a Minnesota corporation.
AGGREGATE PRINCIPAL BALANCE: With respect to any
Determination Date, the sum of the Principal Balances (computed as of the
related Accounting Date) for all Receivables (other than (i) any Receivable
that became a Liquidated Receivable during the related Monthly Period and
(ii) any Receivable that became a Purchased Receivable as of the immediately
preceding Accounting Date).
AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing
Agreement, all amendments and supplements thereto and all exhibits and
schedules to any of the foregoing.
AMOUNT FINANCED: With respect to a Receivable, the
aggregate amount advanced under such Receivable toward the purchase price of
the Financed Vehicle and related costs, including amounts advanced in respect
of accessories, insurance premiums, service and warranty contracts, other
items customarily financed as part of retail automobile installment sale
contracts or promissory notes, and related costs. The term "Amount Financed"
shall not include any Insurance Add-On Amounts.
ANNUAL PERCENTAGE RATE OR APR: With respect to a
Receivable, the rate per annum of finance charges stated in such Receivable
as the "annual percentage rate" (within the meaning of the Federal
Truth-in-Lending Act). If after the Closing Date, the rate per annum with
respect to a Receivable as of the Closing Date is reduced as a result of (i)
an insolvency proceeding involving the Obligor or (ii) pursuant to the
Soldiers' and Sailors' Civil Relief Act of 1940, Annual Percentage Rate or
APR shall refer to such reduced rate.
ASSUMED REINVESTMENT RATE: 2.5% per annum.
AVAILABLE FUNDS: With respect to any Determination Date,
the sum of (i) the Collected Funds for such Determination Date, (ii) all
Purchase Amounts deposited in the Collection Account as of the related
Deposit Date, (iii) all Monthly Advances made by the Servicer as of the
related Deposit Date, and (iv) all net income from investments of funds in
the Trust Accounts during the related Monthly Period.
BACKUP SERVICER: Norwest Bank Minnesota, National
Association, or its successor in interest pursuant to Section 8.2, or such
Person as shall have been appointed as Backup Servicer or successor Servicer
pursuant to Section 8.3.
BASIC SERVICING FEE: With respect to any Monthly Period,
the fee payable to the Servicer for services rendered during such Monthly
Period, which shall be equal to one-twelfth of the Basic Servicing Fee Rate
multiplied by the Aggregate Principal Balance as of the Determination Date
falling in such Monthly Period.
BASIC SERVICING FEE RATE: 1.25% per annum.
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WAREHOUSE PURCHASE AGREEMENTS: Any assignment, transfer,
purchase, repurchase or reconveyance agreements by and among AFL or its
affiliates, the Seller and certain providers of warehouse financing to AFL.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of
any successor Servicer, successor Owner Trustee, successor Indenture Trustee
or successor Collateral Agent are authorized or obligated by law, executive
order or governmental decree to be closed.
CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE: June 15, 2000
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-1 HOLDBACK AMOUNT: As of any Subsequent Transfer
Date, an amount equal to 2.5% of the amount, if any, by which the applicable
"Target Original Pool Balance" specified below is greater than the Original
Pool Balance after giving effect to the transfer of Subsequent Receivables on
such Subsequent Transfer Date:
Subsequent Transfer Date Target Original Pool Balance
------------------------ ----------------------------
July 15, 1999 $552,893,699.62
August 15, 1999 $650,000,000.00
CLASS A-1 HOLDBACK SUBACCOUNT: The subaccount of the
Reserve Account, the funds in which shall consist of all Class A-1 Holdback
Amounts deposited therein during the Funding Period, other than investment
earnings thereon. Any funds in the Class A-1 Holdback Subaccount shall be
withdrawn on the Class A-1 Final Scheduled Distribution Date and distributed
as specified in Section 5.1(b).
CLASS A-1 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-1 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-1 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-1 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-1 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-1 INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-1 Monthly Interest
Distributable Amount for such Distribution Date and the Class A-1 Interest
Carryover Shortfall for such Distribution Date.
CLASS A-1 INTEREST RATE: 5.099% per annum.
CLASS A-1 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, the product of (x) the Class A-1 Interest
Rate, (y) a fraction, the numerator of
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which is the number of days elapsed from and including the most recent date
to which interest has been paid (or, in the case of the first Distribution
Date, interest accrued for 28 days, which is the number of days elapsed from
and including the Closing Date to but excluding July 15, 1999) to but
excluding such Distribution Date and the denominator of which is 360 and (z)
the outstanding principal balance of the Class A-1 Notes on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date), after giving effect to all payments of principal to
Class A-1 Noteholders on or prior to such immediately preceding Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
CLASS A-1 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-1 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-1 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-1 Prepayment Amount
at the Class A-1 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-1 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding September 13, 1999 over (ii) the amount of interest that would have
accrued on the Class A-1 Prepayment Amount over the same period at a per
annum rate of interest equal to the bond equivalent yield to maturity on the
Determination Date preceding such Distribution Date on the 0.24-year
Eurodollar Synthetic Forward ("EDSF") due September 13, 1999. Such excess
shall be discounted to present value to such Distribution Date at the yield
described in clause (ii) above.
CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE: July 15, 2002
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-2 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-2 Interest Distributable Amount
for the preceding Distribution Date, over the amount in respect of interest
on the Class A-2 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-2 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-2 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-2 INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-2 Monthly Interest
Distributable Amount for such Distribution Date and the Class A-2 Interest
Carryover Shortfall for such Distribution Date.
CLASS A-2 INTEREST RATE: 5.715% per annum.
CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, the product of (x) the Class A-2 Interest
Rate, (y) a fraction, the numerator of
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which is the number of days elapsed from and including the most recent date
to which interest has been paid (or, in the case of the first Distribution
Date, interest accrued for 28 days, which is the number of days elapsed from
and including the Closing Date to but excluding July 15, 1999) to but
excluding such Distribution Date and the denominator of which is 360 and (z)
the outstanding principal balance of the Class A-2 Notes on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date), after giving effect to all payments of principal to
Class A-2 Noteholders on or prior to such immediately preceding Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
CLASS A-2 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-2 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-2 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-2 Prepayment Amount
at the Class A-2 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-2 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding June 30, 2000 over (ii) the amount of interest that would have
accrued on the Class A-2 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 12 month EDSF due June 30, 2000.
Such excess shall be discounted to present value to such Distribution Date at
the yield described in clause (ii) above.
CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: July 15, 2003
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-3 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-3 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-3 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-3 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-3 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-3 INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-3 Monthly Interest
Distributable Amount for such Distribution Date and the Class A-3 Interest
Carryover Shortfall for such Distribution Date.
CLASS A-3 INTEREST RATE: 6.300% per annum.
CLASS A-3 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued for 28 days, which is the number of
days elapsed from and including the Closing Date to
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but excluding July 15, 1999, assuming that the last day of the month is the
30th) at the Class A-3 Interest Rate on the outstanding principal balance of
the Class A-3 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-3 Noteholders on or prior to
such immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
CLASS A-3 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-3 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-3 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-3 Prepayment Amount
at the Class A-3 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-3 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding June 30, 2001, over (ii) the amount of interest that would have
accrued on the Class A-3 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 6.625% U.S. Treasury Note due
June 30, 2001. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLASS A-4 FINAL SCHEDULED DISTRIBUTION DATE: September 15,
2004 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-4 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-4 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-4 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-4 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-4 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-4 INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-4 Monthly Interest
Distributable Amount for such Distribution Date and the Class A-4 Interest
Carryover Shortfall for such Distribution Date.
CLASS A-4 INTEREST RATE: 6.510% per annum.
CLASS A-4 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued for 28 days, which is the number of
days elapsed from and including the Closing Date to but excluding July 15,
1999, assuming that the last day of the month is the 30th) at the Class A-4
Interest Rate on the outstanding principal balance of the Class A-4 Notes on
the immediately
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preceding Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date), after giving effect to all payments of principal to
Class A-4 Noteholders on or prior to such immediately preceding Distribution
Date.
CLASS A-4 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-4 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-4 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-4 Prepayment Amount
at the Class A-4 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-4 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding June 30, 2002, over (ii) the amount of interest that would have
accrued on the Class A-4 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 6.25% U.S. Treasury Note due
June 30, 2002. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLASS A-5 FINAL SCHEDULED DISTRIBUTION DATE: March 15, 2007
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-5 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-5 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-5 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-5 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-5 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-5 INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-5 Monthly Interest
Distributable Amount for such Distribution Date and the Class A-5 Interest
Carryover Shortfall for such Distribution Date.
CLASS A-5 INTEREST RATE: 6.660% per annum.
CLASS A-5 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued for 28 days, which is the number of
days elapsed from and including the Closing Date to but excluding July 15,
1999, assuming that the last day of the month is the 30th) at the Class A-5
Interest Rate on the outstanding principal balance of the Class A-5 Notes on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments
of principal to Class A-5 Noteholders on or prior to such immediately
preceding Distribution Date.
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CLASS A-5 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect
to any transfer of Subsequent Receivables on such date, an amount equal to
the Class A-5 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded
Amount as of such Distribution Date.
CLASS A-5 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on the Class A-5 Prepayment Amount at the Class
A-5 Interest Rate during the period commencing on and including the
Distribution Date on which the Class A-5 Prepayment Amount is required to be
deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding April 30, 2003 over (ii) the amount of interest that would have
accrued on the Class A-5 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 5.75% U.S. Treasury Note due
April 30, 2003. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLOSING DATE: June 17, 1999.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase
Agreement and Assignment, dated as of June 1, 1999, between AFL and the
Seller.
COLLATERAL AGENT: The Collateral Agent named in the Spread Account
Agreement, and any successor thereto pursuant to the terms of the Spread
Account Agreement.
COLLATERAL INSURANCE: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy, pursuant to Section 3.4(e).
COLLECTED FUNDS: With respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the
Receivables during the related Monthly Period, including all Liquidation
Proceeds collected during the related Monthly Period (but excluding any
Monthly Advances and any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section
4.1(a).
COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to
the Receivables.
COMPUTER TAPE: The computer tape generated on behalf of the Seller
which provides information relating to the Receivables and which was used by
the Seller and AFL in selecting the Receivables conveyed to the Trust
hereunder.
CORPORATE TRUST OFFICE: With respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be
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administered, which office at the Closing Date is located at ▇▇▇▇▇▇ Square
North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; the telecopy
number for the Corporate Trust Administration of the Owner Trustee on the
date of the execution of this Agreement is (302) 651- 8882; with respect to
the Indenture Trustee, the principal office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered,
which office is located at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust Services--Asset Backed
Administration; the telecopy number for the Corporate Trust Services of the
Indenture Trustee on the date of execution of this Agreement is (612)
667-3539.
CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on a Receivable, an amount
equal to the excess of the Principal Balance of such Receivable immediately
prior to such order over the Principal Balance of such Receivable as so
reduced or the net present value (using as the discount rate the higher of
the contract rate or the rate of interest, if any, specified by the court in
such order) of the Scheduled Payments as so modified or restructured. A "Cram
Down Loss" shall be deemed to have occurred on the date of issuance of such
order.
CREDIT ENHANCEMENT FEE: With respect to any Distribution Date, the
amount to be paid to the Security Insurer pursuant to Section 4.6(vi) and the
amount to which the Seller is entitled pursuant to Section 4.6(vii).
CUSTODIAN: AFL and any other Person named from time to time as
custodian in any Custodian Agreement acting as agent for the Trust, which
Person must be (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in
effect between the Custodian named therein and the Trust, substantially in
the form of Exhibit B hereto, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof,
which Custodian Agreement and any amendments, supplements or modifications
thereto shall (so long as an Insurer Default shall not have occurred and be
continuing) be acceptable to the Security Insurer.
DEALER: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to AFL under an existing agreement between such
seller and AFL.
DEALER AGREEMENT: An agreement between AFL and a Dealer relating to
the sale of retail installment sale contracts and installment notes to AFL
and all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to AFL.
DEFICIENCY CLAIM AMOUNT: As defined in Section 5.2(a).
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DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date.
DEFICIENCY NOTICE: As defined in Section 5.2(a).
DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Determination Date.
DETERMINATION DATE: With respect to any Monthly Period, the sixth
Business Day immediately preceding the related Distribution Date.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum
of (i) the Actual Funds for such Distribution Date, and (ii) the Deficiency
Claim Amount, if any, received by the Indenture Trustee with respect to such
Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or if such
15th day is not a Business Day, the next succeeding Business Day, commencing
July 15, 1999, to and including the Final Scheduled Distribution Date.
DRAW DATE: With respect to any Distribution Date, the third
Business Day immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with the corporate trust department of a depository institution acceptable to
the Security Insurer (so long as an Insurer Default shall not have occurred
and be continuing), or (ii) a segregated direct deposit account maintained
with a depository institution or trust company organized under the laws of
the United States of America, or any of the States thereof, or the District
of Columbia, having a certificate of deposit, short term deposit or
commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by
Moody's and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States, the obligations of which are backed by the full faith and credit of
the United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation, but only if, at the time of investment, such
obligations are assigned a rating in the highest credit rating category by
each Rating Agency;
- 10 -
(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Indenture Trustee, the Owner Trustee or any
agent of either of them acting in their respective commercial capacities);
provided that the short-term unsecured debt obligations of such depository
institution or trust company at the time of such investment, or contractual
commitment providing for such investment, are assigned a rating in the
highest credit rating category by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement (i) with
respect to any obligation described in clause (a) above, where the Indenture
Trustee has taken actual or constructive delivery of such obligation in
accordance with Section 4.1, and (ii) entered into with the corporate trust
department of a depository institution or trust company organized under the
laws of the United States or any State thereof, the deposits of which are
insured by the Federal Deposit Insurance Corporation and the short-term
unsecured debt obligations of which are rated "A-1+" by Standard & Poor's and
"P-1" by Moody's (including, if applicable, the Indenture Trustee, the Owner
Trustee or any agent of either of them acting in their respective commercial
capacities);
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any State
whose long-term unsecured debt obligations are assigned a rating in the
highest credit rating category by each Rating Agency at the time of such
investment or contractual commitment providing for such investment; PROVIDED,
HOWEVER, that securities issued by any particular corporation will not be
Eligible Investments to the extent that an investment therein will cause the
then outstanding principal amount of securities issued by such corporation
and held in the Trust Accounts to exceed 10% of the Eligible Investments held
in the Trust Accounts (with Eligible Investments held in the Trust Accounts
valued at par);
(e) commercial paper that (i) is payable in United States dollars
and (ii) is rated in the highest credit rating category by each Rating Agency;
(f) units of money market funds rated in the highest credit rating
category by each Rating Agency; provided that all Eligible Investments shall
be held in the name of the Indenture Trustee; or
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Rating Agencies and the Security
Insurer, as evidenced by the prior written consent of the Security Insurer,
as may from time to time be confirmed in writing to the Indenture Trustee by
the Security Insurer; PROVIDED, HOWEVER, that securities issued by any entity
(except as provided in paragraph (a)) will not be Eligible Investments to the
extent that an investment therein will cause the then outstanding principal
amount of securities issued by such entity and held in the Pre-Funding
Account to exceed $25 million (with Eligible Investments held in the
Pre-Funding Account valued at par), unless and for so long as such securities
are acceptable to the Rating Agencies and the Security Insurer, as evidenced
by the prior written
- 11 -
consent of the Security Insurer, as may from time to time be confirmed in
writing to the Indenture Trustee by the Security Insurer.
Eligible Investments may be purchased by or through the Indenture Trustee or
any of its Affiliates. No Eligible Investment shall have an "r" highlighter
affixed to the rating of Standard & Poor's.
ELIGIBLE SERVICER: AFL, the Backup Servicer or another Person which
at the time of its appointment as Servicer (i) is servicing a portfolio of
motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (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 sales
contracts and/or motor vehicle installment loans similar to the Receivables
with reasonable skill and care, and (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.
FINAL SCHEDULED DISTRIBUTION DATE: With respect to each class of
Notes, the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final
Scheduled Distribution Date, the Class A-3 Final Scheduled Distribution Date,
the Class A-4 Final Scheduled Distribution Date and the Class A-5 Final
Scheduled Distribution Date, respectively.
FINANCED VEHICLE: A new or used automobile or light truck, together
with all accessories thereto, securing or purporting to secure an Obligor's
indebtedness under a Receivable.
FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b).
FUNDING PERIOD: The period beginning on the Closing Date and ending
on the first to occur of (a) the Distribution Date on which the Pre-Funded
Amount (after giving effect to any reduction in the Pre-Funded Amount in
connection with the transfer of Subsequent Receivables to the Trust on such
Distribution Date) is less than $100,000, (b) the date on which an Event of
Default or a Servicer Termination Event occurs, (c) the date on which an
Insolvency Event occurs with respect to AFL and (d) the close of business on
the Distribution Date occurring in August 1999.
INDENTURE: The Indenture, dated as of June 1, 1999, among the
Trust, the Indenture Trustee and the Indenture Collateral Agent, as the same
may be amended and supplemented from time to time.
INDENTURE COLLATERAL AGENT: The Person acting as Indenture
Collateral Agent under the Indenture, its successors in interest and any
successor Indenture Collateral Agent under the Indenture.
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INDENTURE TRUSTEE: The Person acting as Trustee under the
Indenture, its successors in interest and any successor Trustee under the
Indenture.
INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).
INITIAL CUTOFF DATE: June 4, 1999.
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $455,787,399.23.
INITIAL RECEIVABLES: The Receivables listed on the Schedule of
Initial Receivables on the Closing Date.
INSOLVENCY EVENT: With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law, and such case
is not dismissed within 60 days; or (b) the filing of a decree or entry of an
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case
under any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs; or (c) the commencement
by such Person of a voluntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for
any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due, or the taking of
action by such Person in furtherance of any of the foregoing.
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the
event that the Servicer obtains Force-Placed Insurance pursuant to Section
3.4.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated
as of June 17, 1999, among the Security Insurer, the Trust, the Seller and
AFL.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the Insurance Agreement.
INSURANCE POLICY: With respect to a Receivable, any insurance
policy benefitting 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.
- 13 -
INSURER DEFAULT: The occurrence and continuance of any of the
following:
(a) the Security Insurer shall have failed to make a payment
required under the Note Policy;
(b) The Security Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law, or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (ii) made a general
assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law, or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered
a final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for the Security Insurer or for
all or any material portion of its property or (ii) authorizing the
taking of possession by a custodian, trustee, agent or receiver of the
Security Insurer (or the taking of possession of all or any material
portion of the property of the Security Insurer).
LIEN: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and
any liens that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the original certificate of title is required to be given to the Obligor, the
term "Lien Certificate" shall mean only a certificate or notification issued
to a secured party.
LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer
repossessed the related Financed Vehicle, (ii) the Servicer has determined in
good faith that all amounts it expects to recover have been received, or
(iii) all or any portion of a Scheduled Payment shall have become more than
180 days past due.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts
withdrawn from the Spread Account or the Reserve Account and drawings under
the Note Policy) net of (i) reasonable expenses incurred by the Servicer in
connection with the collection of such Receivable and the repossession and
disposition of the Financed Vehicle and (ii) amounts that are required to be
refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the
Liquidation Proceeds with respect to any Receivable shall in no event be less
than zero.
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LOCKBOX ACCOUNT: The segregated account maintained on behalf of the
Trust by the Lockbox Bank in accordance with Section 3.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13,
1992 by and among ▇▇▇▇▇▇ Trust and Savings Bank, AFL, Shawmut Bank, N.A., as
Trustee, Saturn Financial Services, Inc. and the Program Parties (as defined
therein), taken together with the Retail Lockbox Agreement, dated as of
November 13, 1992, among such parties, and the Counterpart to Agency
Agreement and Retail Lockbox Agreement, dated as of June 17, 1999, among
▇▇▇▇▇▇ Trust and Savings Bank, AFL, the Trust, the Indenture Trustee and the
Security Insurer, as such agreements may be amended from time to time, unless
the Indenture Trustee hereunder shall cease to be a Program Party thereunder,
or such agreement shall be terminated in accordance with its terms, in which
event "Lockbox Agreement" shall mean such other agreement, in form and
substance acceptable to the Security Insurer, or if an Insurer Default shall
have occurred and be continuing, to a Note Majority, among the Servicer, the
Trust, the Indenture Trustee and the Lockbox Bank.
LOCKBOX BANK: A depository institution named by the Servicer and,
so long as an Insurer Default shall not have occurred and be continuing,
acceptable to the Security Insurer, or, if an Insurer Default shall have
occurred and be continuing, to a Note Majority.
MONTHLY ADVANCE: The amount that the Servicer is required to
advance on any Receivable pursuant to Section 4.4(a).
MONTHLY PERIOD: With respect to a Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs (such
calendar month being referred to as the "related" Monthly Period with respect
to such Distribution Date). With respect to an Accounting Date, the calendar
month in which such Accounting Date occurs is referred to herein as the
"related" Monthly Period to such Accounting Date.
MONTHLY RECORDS: 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 identity of the originating Dealer;
Obligor name; Obligor address; Obligor home phone number; Obligor business
phone number; original Principal Balance; original term; Annual Percentage
Rate; current Principal Balance; current remaining term; origination date;
first payment date; final scheduled payment date; next payment due date; date
of most recent payment; new/used classification; collateral description; days
currently delinquent; number of contract extensions (months) to date; amount,
if any, of Force-Placed Insurance payable monthly; amount of the Scheduled
Payment; current Insurance Policy expiration date; and past due late charges,
if any.
MOODY'S: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor thereto.
NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.1(c).
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NOTE MAJORITY: As to each class of Notes, Holders of Notes
representing a majority of the outstanding principal balance of such class of
Notes.
NOTE POLICY: The financial guaranty insurance policy issued by the
Security Insurer to the Indenture Trustee on behalf of the Noteholders.
NOTE POOL FACTOR: With respect to any Distribution Date and each
class of Notes, an eight-digit decimal figure equal to the outstanding
principal balance of such class of Notes as of such Distribution Date (after
giving effect to all distributions on such date) divided by the original
outstanding principal balance of such class of Notes as of the Closing Date.
NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-1 Interest Distributable Amount,
the Class A-2 Interest Distributable Amount, the Class A-3 Interest
Distributable Amount, the Class A-4 Interest Distributable Amount and the
Class A-5 Interest Distributable Amount.
NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 100% of the Principal Distribution Amount.
NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the sum of the Noteholders'
Monthly Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from the immediately preceding Distribution
Date over the amount in respect of principal that is actually deposited in
the Note Distribution Account on such immediately preceding Distribution Date.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date (other than the Final Scheduled Distribution Date with
respect to any class of Notes), the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and any Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. The Noteholders' Principal Distributable Amount on the Final Scheduled
Distribution Date for any class of Notes will equal the sum of (i) the
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date, (ii) the Noteholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date, and (iii) the excess of the outstanding
principal balance of such class of Notes, if any, over the amounts in clauses
(i) and (ii). In no event may the Noteholders' Principal Distributable Amount
for any Distribution Date exceed the outstanding principal balance of the
Notes immediately prior to such Distribution Date.
NOTES: The Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class A-5 Notes.
OBLIGOR: The purchaser or the co-purchasers of the Financed Vehicle
and any other Person or Persons who are primarily or secondarily obligated to
make payments under a Receivable.
OPINION OF COUNSEL: A written opinion of counsel acceptable in form
and substance and from counsel acceptable to the Owner Trustee and, if such
opinion or a copy
- 16 -
thereof is required to be delivered to the Indenture Trustee or the Security
Insurer, to the Indenture Trustee or the Security Insurer, as applicable.
ORIGINAL POOL BALANCE: As of any date, the sum of the Initial
Cutoff Date Principal Balance plus the aggregate Principal Balance (as of the
related Subsequent Cutoff Date) of all Subsequent Receivables sold to the
Trust on any Subsequent Transfer Date.
OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable and a
Determination Date, the sum of all Monthly Advances made on any Determination
Date prior to such Determination Date relating to that Receivable which have
not been reimbursed pursuant to Section 4.6(i) or Section 4.8.
OWNER TRUSTEE: Wilmington Trust Company, acting not individually
but solely as trustee, or its successor in interest, and any successor Owner
Trustee appointed as provided in the Trust Agreement.
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof, or any other entity.
PRE-FUNDED AMOUNT: As of any date, $194,212,600.77 minus the
aggregate Principal Balance (as of the related Subsequent Cutoff Date) of all
Subsequent Receivables sold to the Trust on or prior to such date.
PRE-FUNDING ACCOUNT: The account designated as the Pre-Funding
Account in, and which is established and maintained pursuant to, Section
4.1(b).
PRINCIPAL BALANCE: With respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the terms of
the Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the amount equal to the sum of the following amounts with respect to
the related Monthly Period, in each case computed with respect to each
Receivable in accordance with the method specified in the related retail
installment sale contract or promissory note: (i) that portion of all
collections on Receivables (other than Liquidated Receivables and Purchased
Receivables) allocable to principal, including all full and partial principal
prepayments, (ii) the Principal Balance (as of the related Accounting Date)
of all Receivables that became Liquidated Receivables during the related
Monthly Period (other than Purchased Receivables), (iii) the Principal
Balance of all Receivables that became Purchased Receivables as of the
related Accounting Date, and, in the sole discretion of the Security Insurer,
provided no Insurer Default shall have occurred and be continuing, the
Principal Balance as of the related Accounting Date of all Receivables that
were required to be purchased as of the related Accounting Date but were not
so purchased, and (iv) the aggregate amount of Cram Down Losses that shall
have occurred during the related Monthly Period.
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PURCHASE AGREEMENTS: (i) The Closing Date Purchase Agreement and
(ii) one or more assignment, transfer, purchase, repurchase or reconveyance
agreements pursuant to the Warehouse Purchase Agreements, pursuant to which,
together, AFL transferred the Initial Receivables to the Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable (without regard
to any Monthly Advances that may have been made with respect to the
Receivable) as of the Accounting Date on which the obligation to purchase
such Receivable arises.
PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable
(including any Liquidated Receivable) that became a Warranty Receivable or
Administrative Receivable as of such Accounting Date (or which AFL or the
Servicer has elected to purchase as of an earlier Accounting Date, as
permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has
been deposited in the Collection Account by the Seller, AFL or the Servicer,
as applicable, on or before the related Deposit Date.
RATING AGENCY: Each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller
and (so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.
RATING AGENCY CONDITION: With respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof and that
each of the Rating Agencies shall have notified the Seller, the Servicer, the
Security Insurer, the Owner Trustee and the Indenture Trustee in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
RECEIVABLE: A retail installment sale contract or promissory note
(and related security agreement) for a new or used automobile or light truck
(and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of
calculating Noteholders' Distributable Amounts hereunder and for the purpose
of determining the obligations pursuant to Section 2.6 and 3.7 to purchase
Receivables), or (ii) any Purchased Receivable on or after the Accounting
Date immediately preceding the Deposit Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 4.5.
RECEIVABLE FILE: The documents, electronic entries, instruments and
writings listed in Section 2.2 pertaining to a particular Receivable.
REFERENCE BANKS: Three major banks in the London interbank market
selected by the Servicer.
- 18 -
REGISTRAR OF TITLES: 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.
RELATED DOCUMENTS: The Trust Agreement, the Indenture, the Notes,
the Purchase Agreements, each Subsequent Purchase Agreement, each Subsequent
Transfer Agreement, the Custodian Agreement, the Note Policy, the Spread
Account Agreement, the Insurance Agreement, the Lockbox Agreement, the
Depository Agreement, the Stock Pledge Agreement and the Underwriting
Agreement among the Seller, AFL and the underwriters of the Notes. The
Related Documents executed by any party are referred to herein as "such
party's Related Documents," "its Related Documents" or by a similar
expression.
REPURCHASE EVENTS: The occurrence of a breach of any of AFL's, the
Seller's or the Servicer's representations and warranties in this Agreement
or in the Purchase Agreement or in any Subsequent Purchase Agreement which
requires the repurchase of a Receivable by AFL or the Seller pursuant to
Section 2.6 or by the Servicer pursuant to Section 3.7.
REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies and, so long as
an Insurer Default shall not have occurred and be continuing, the Security
Insurer) so as to not affect the rating on the Notes.
REQUISITE RESERVE AMOUNT: As of the Closing Date, $1,138,490.31 and
as of any Distribution Date or Subsequent Transfer Date thereafter during the
Funding Period an amount equal to the difference between
(a) the product of (x) the weighted average of the Class A-1
Interest Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate,
the Class A-4 Interest Rate and the Class A-5 Interest Rate (based on
the outstanding principal balance of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes
on such date), divided by 360, (y) the Pre-Funded Amount on such date
and (z) the number of days until the Distribution Date in August 1999,
and
(b) the product of (x) the Assumed Reinvestment Rate, divided
by 360, (y) the Pre-Funded Amount on such date and (z) the number of
days until the Distribution Date in August 1999.
The Requisite Reserve Amount for any Subsequent Transfer Date (i) shall be
calculated after taking into account the transfer of Subsequent Receivables
to the Trust on such Subsequent Transfer Date (unless such Subsequent
Transfer Date does not coincide with a Distribution Date and does not occur
between a Distribution Date and the related Determination Date) and (ii) (A)
if such Subsequent Transfer Date does not coincide with a Distribution Date
but occurs between a Distribution Date and the related Determination Date,
shall be calculated as of the Distribution Date immediately following such
Subsequent Transfer Date as if such Subsequent Transfer Date occurred on such
Distribution Date, (B) if such Subsequent Transfer Date coincides with a
Distribution Date, shall be calculated as of such Distribution Date or (C) if
such
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Subsequent Transfer Date does not coincide with a Distribution Date and does
not occur between a Distribution Date and the related Determination Date,
shall be calculated as of the immediately preceding Distribution Date (or as
of the Closing Date, if such Subsequent Transfer Date occurs before the
Determination Date in August 1999 as if such Subsequent Transfer Date
occurred on such immediately preceding Distribution Date (or the Closing
Date).
RESERVE ACCOUNT: The account designated as the Reserve Account in,
and which is established and maintained pursuant to, Section 4.1(d),
including the Class A-1 Holdback Subaccount.
RESERVE AMOUNT: As of any date of determination, the amount on
deposit in the Reserve Account (other than the amount on deposit in the Class
A-1 Holdback Subaccount) on such date.
RESPONSIBLE OFFICER: When used with respect to the Owner Trustee,
any officer of the Owner Trustee assigned by the Owner Trustee to administer
its corporate trust affairs relating to the Trust. When used with respect to
the Indenture Trustee, any officer assigned to Corporate Trust Services (or
any successor thereto), including any Vice President, Assistant Vice
President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of the Trust. When used with
respect to any other Person that is not an individual, the President, any
Vice-President or Assistant Vice-President or the Controller of such Person,
or any other officer or employee having similar functions.
SCHEDULE OF INITIAL RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to this Agreement which is attached hereto as Exhibit A.
SCHEDULE OF RECEIVABLES: The Schedule of Initial Receivables
attached hereto as Exhibit A as supplemented by each Schedule of Subsequent
Receivables attached as Schedule A to each Subsequent Transfer Agreement.
SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties attached hereto as Schedule A.
SCHEDULE OF SUBSEQUENT RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to a Subsequent Transfer Agreement which is attached as
Exhibit A to such Subsequent Transfer Agreement, which Schedule of Subsequent
Receivables shall supplement the Schedule of Initial Receivables.
SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Monthly Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor,
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(ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii)
modifications or extensions of the Receivable permitted by Section 3.2(b),
the Scheduled Payment with respect to such Monthly Period shall refer to the
Obligor's payment obligation with respect to such Monthly Period as so
modified.
SECURITY INSURER: Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or
any successor thereto, as issuer of the Note Policy.
SELLER: Arcadia Receivables Finance Corp., a Delaware corporation,
or its successor in interest pursuant to Section 6.2.
SERVICER: Arcadia Financial Ltd., its successor in interest
pursuant to Section 8.2 or, after any termination of the Servicer upon a
Servicer Termination Event, the Backup Servicer or any other successor
Servicer.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to Section
3.14.
SERVICER TERMINATION EVENT: An event described in Section 8.1.
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached hereto as
Exhibit E.
SPREAD ACCOUNT: The Spread Account established and maintained
pursuant to the Spread Account Agreement.
SPREAD ACCOUNT ADDITIONAL DEPOSIT: With respect to any transfer of
Subsequent Receivables to the Trust pursuant to Section 2.4, the amount
required to be deposited in the Spread Account pursuant to the terms of the
Spread Account Agreement.
SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement, dated as of
March 25, 1993, as thereafter amended and restated, among the Seller, AFL,
the Security Insurer, the Collateral Agent and the trustees specified
therein, as the same may be amended, supplemented or otherwise modified in
accordance with the terms thereof.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division
of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of
March 25, 1993, as thereafter amended and restated, among the Security
Insurer, AFL and the Collateral Agent, as the same may be amended,
supplemented or otherwise modified in accordance with the terms thereof
SUBCOLLECTION ACCOUNT: The account designated as the Subcollection
Account in, and which is established and maintained pursuant to Section
4.2(a).
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SUBSEQUENT CUTOFF DATE: With respect to any Subsequent Receivables,
the date specified in the related Subsequent Transfer Agreement, which may in
no event be later than the Subsequent Transfer Date.
SUBSEQUENT PURCHASE AGREEMENT: With respect to any Subsequent
Receivables, either (i) the agreement between AFL and the Seller pursuant to
which AFL transferred the Subsequent Receivables to the Seller, the form of
which is attached to the Purchase Agreement as Exhibit A, or (ii) one or more
assignment, transfer, purchase, repurchase or reconveyance agreements
pursuant to the Warehouse Purchase Agreements, pursuant to which AFL
transferred the Subsequent Receivables to the Seller.
SUBSEQUENT RECEIVABLES: All Receivables sold and transferred to the
Trust pursuant to Section 2.4.
SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent
Receivables, the related agreement described in Section 2.4.
SUBSEQUENT TRANSFER DATE: Any date during the Funding Period on
which Subsequent Receivables are transferred to the Trust pursuant to Section
2.4.
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all
administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, collected on the Receivables during such Monthly Period.
TELERATE PAGE 3750: The display page currently so designated on the
Dow ▇▇▇▇▇ Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRUST: Arcadia Automobile Receivables Trust, 1999-B.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of June 1, 1999,
among the Seller, the Security Insurer and the Owner Trustee, as the same may
be amended and supplemented from time to time.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
WARRANTY RECEIVABLE: With respect to any Monthly Period, a
Receivable which AFL has become obligated to repurchase pursuant to Section
2.6.
SECTION 1.2. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any
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gender include the other gender; references to "writing" include printing,
typing, lithography, and other means of reproducing words in a visible form;
references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement; references
to Persons include their permitted successors and assigns; and the terms
"include" or "including" mean "include without limitation" or "including
without limitation."
SECTION 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months, except that calculations of interest accrued on the
Class A-1 Notes and the Class A-2 Notes shall be made on the basis of actual
days elapsed in a 360-day year. All references to the Principal Balance of a
Receivable as of an Accounting Date shall refer to the close of business on
such day.
SECTION 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
SECTION 1.5. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
officer, or director, as such, of the Seller, AFL, the Servicer, the
Indenture Trustee, the Backup Servicer or the Owner Trustee or of any
predecessor or successor of the Seller, AFL, the Servicer, the Indenture
Trustee, the Backup Servicer or the Owner Trustee.
SECTION 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is
to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account
the insurance provided by the Note Policy.
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ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES. Subject to the
terms and conditions of this Agreement, the Seller, pursuant to the mutually
agreed upon terms contained herein, hereby sells, transfers, assigns, and
otherwise conveys to the Trust, without recourse (but without limitation of
its obligations in this Agreement), all of the right, title and interest of
the Seller in and to the Initial Receivables, all monies at any time paid or
payable thereon or in respect thereof after the Initial Cutoff Date
(including amounts due on or before the Initial Cutoff Date but received by
AFL or the Seller after the Initial Cutoff Date), an assignment of security
interests of AFL in the related Financed Vehicles, the Insurance Policies and
any proceeds from any Insurance Policies relating to the Initial Receivables,
the Obligors or the related Financed Vehicles, including rebates of premiums,
all Collateral Insurance and any Force-Placed Insurance relating to the
Initial Receivables, an assignment of the rights of AFL or the Seller against
Dealers with respect to the Initial Receivables under the Dealer Agreements
and the Dealer Assignments, all items contained in the related Receivable
Files, any and all other documents that AFL keeps on file in accordance with
its customary procedures relating to the Initial Receivables, the Obligors or
the related Financed Vehicles, an assignment of the rights of the Seller
under the Purchase Agreements, property (including the right to receive
future Liquidation Proceeds) that secures an Initial Receivable and that has
been acquired by or on behalf of the Trust pursuant to liquidation of such
Receivable, all funds on deposit from time to time in the Trust Accounts and
all investments therein and proceeds thereof, and all proceeds of the
foregoing. It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement and each Subsequent Transfer Agreement shall
constitute a sale of the Receivables and other Trust Property from the Seller
to the Trust and the beneficial interest in and title to the Receivables and
the other Trust Property shall not be part of the Seller's estate in the
event of the filing of a bankruptcy petition by or against the Seller under
any bankruptcy law. In the event that, notwithstanding the intent of the
Seller, the transfer and assignment contemplated hereby and each Subsequent
Transfer Agreement is held not to be a sale, this Agreement and each
Subsequent Transfer Agreement shall constitute a grant of a security interest
to the Trust in the property referred to in this Section 2.1 or transferred
to the Trust pursuant to the related Subsequent Transfer Agreement.
SECTION 2.2. CUSTODY OF RECEIVABLE FILES.
(a) In connection with the sale, transfer and assignment of the
Receivables and the other Trust Property to the Trust pursuant to this
Agreement and each Subsequent Transfer Agreement, and simultaneously with the
execution and delivery of this Agreement, the Trust shall enter into the
Custodian Agreement with the Custodian, dated as of the Closing Date,
pursuant to which the Owner Trustee, on behalf of the Trust, shall revocably
appoint the Custodian, and the Custodian shall accept such appointment, to
act as the agent of the Trust as Custodian of the following documents or
instruments in its possession which shall be delivered to the Custodian as
agent of the Trust on or before the Closing Date (with respect to each
Initial Receivable) or the applicable Subsequent Transfer Date (with respect
to each Subsequent Receivable):
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(i) The fully executed original of the Receivable (together
with any agreements modifying the Receivable, including without
limitation any extension agreements) or a microfiche copy thereof;
(ii) Documents evidencing or related to any Insurance Policy,
or copies (including but not limited to microfiche copies) thereof;
(iii) The original credit application, or a copy thereof, of
each Obligor, fully executed by each such Obligor on AFL's customary
form, or on a form approved by AFL, for such application; and
(iv) The original certificate of title (when received) and
otherwise such documents, if any, that AFL keeps on file in accordance
with its customary procedures indicating that the Financed Vehicle is
owned by the Obligor and subject to the interest of AFL as first
lienholder or secured party (including any Lien Certificate received by
AFL), or, if such original certificate of title has not yet been
received, a copy of the application therefor, showing AFL as secured
party.
In connection with the grant of the security interest in the Trust
Estate to the Issuer Secured Parties pursuant to the Indenture, the Trust
agrees that from and after the Closing Date through the date of release of
such security interest pursuant to the terms of the Indenture, the Custodian
shall not be acting as agent of the Trust, but rather shall be acting as
agent of the Issuer Secured Parties.
The Indenture Trustee may act as the Custodian, in which case the
Indenture Trustee shall be deemed to have assumed the obligations of the
Custodian specified in the Custodian Agreement.
(b) Upon payment in full on any Receivable, the Servicer will
notify the Custodian by certification of an officer of the Servicer (which
certification shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited
in the Collection Account pursuant to Section 4.1 have been so deposited) and
shall request delivery of the Receivable and Receivable File to the Servicer.
From time to time as appropriate for servicing and enforcing any Receivable,
the Custodian shall, upon written request of an officer of the Servicer and
delivery to the Custodian of a receipt signed by such officer, cause the
original Receivable and the related Receivable File to be released to the
Servicer. The Servicer's receipt of a Receivable and/or Receivable File shall
obligate the Servicer to return the original Receivable and the related
Receivable File to the Custodian when its need by the Servicer has ceased
unless the Receivable shall be repurchased as described in Section 2.6 or 3.7.
SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As
conditions to the Owner Trustee's execution and delivery of the Notes on
behalf of the Trust on the Closing Date, the Owner Trustee shall have
received the following on or before the Closing Date:
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(a) The Schedule of Initial Receivables certified by the
President, Controller or Treasurer of the Seller;
(b) The acknowledgment of the Custodian that it holds the
Receivable File relating to each Initial Receivable;
(c) Copies of resolutions of the Board of Directors of the
Seller approving the execution, delivery and performance of this
Agreement, the Related Documents and the transactions contemplated
hereby and thereby, certified by a Secretary or an Assistant Secretary
of the Seller;
(d) Copies of resolutions of the Board of Directors of AFL
approving the execution, delivery and performance of this Agreement, the
Related Documents and the transactions contemplated hereby and thereby,
certified by a Secretary or an Assistant Secretary of AFL;
(e) Evidence that all filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to
be taken or performed by any Person in any jurisdiction (other than
those actions to be taken with respect to Subsequent Receivables
pursuant to Section 2.4) to give the Owner Trustee a first priority
perfected lien on, or ownership interest in, the Receivables and the
other Trust Property have been made, taken or performed; and
(f) An executed copy of the Spread Account Agreement and
evidence of the deposit of $1,138,490.31 in the Reserve Account.
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b) below, the
Seller, pursuant to the mutually agreed upon terms contained herein and
pursuant to one or more Subsequent Transfer Agreements, shall sell, transfer,
assign, and otherwise convey to the Trust, without recourse (but without
limitation of its obligations in this Agreement), all of the right, title and
interest of the Seller in and to the Subsequent Receivables, all monies at
any time paid or payable thereon or in respect thereof after the related
Subsequent Cutoff Date (including amounts due on or before the related
Subsequent Cutoff Date but received by AFL or the Seller after the related
Subsequent Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Subsequent Receivables, the Obligors or
the related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Subsequent
Receivables, rights of AFL or the Seller against Dealers with respect to the
Subsequent Receivables under the Dealer Agreements and the Dealer
Assignments, all items contained in the Receivable Files relating to the
Subsequent Receivables, any and all other documents that AFL keeps on file in
accordance with its customary procedures relating to the Subsequent
Receivables, the Obligors or the related Financed Vehicles, the rights of the
Seller under the related Subsequent Purchase Agreement, property (including
the right to receive future Liquidation Proceeds) that secures a Subsequent
Receivable and that has been acquired by or on
- 26 -
behalf of the Trust pursuant to liquidation of such Subsequent Receivable,
and all proceeds of the foregoing.
(b) The Seller shall transfer to the Trust the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) The Seller shall have provided the Owner Trustee, the
Indenture Trustee, the Security Insurer and the Rating Agencies with a
timely Addition Notice and shall have provided any information
reasonably requested by any of the foregoing with respect to the
Subsequent Receivables;
(ii) the Funding Period shall not have terminated;
(iii) the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) shall in its sole and
absolute discretion have given its prior written approval of the
transfer of such Subsequent Receivables to the Trust;
(iv) the Seller shall have delivered to the Owner Trustee and
the Indenture Trustee a duly executed written assignment (including an
acceptance by the Indenture Trustee and the Owner Trustee) in
substantially the form of Exhibit F (the "Subsequent Transfer
Agreement"), which shall include a Schedule of Subsequent Receivables
listing the Subsequent Receivables and shall specify the Spread Account
Additional Deposit, if any, the Requisite Reserve Amount, and the Class
A-1 Holdback Amount, if any, as of or for such Subsequent Transfer Date;
(v) the Seller shall have delivered to the Custodian the
Receivable Files relating to the Subsequent Receivables, and the
Custodian shall have delivered to the Seller, the Owner Trustee, the
Security Insurer and the Indenture Collateral Agent an acknowledgment of
receipt of such Receivable Files;
(vi) the Seller shall, to the extent required by Section 4.1,
have deposited in the Collection Account collections in respect of the
Subsequent Receivables;
(vii) as of each Subsequent Transfer Date, neither AFL nor the
Seller shall be insolvent nor shall either of them have been made
insolvent by such transfer nor shall either of them be aware of any
pending insolvency;
(viii) the applicable Spread Account Additional Deposit for
such Subsequent Transfer Date shall have been made pursuant to the
Spread Account Agreement.
(ix) the Reserve Amount on such Subsequent Transfer Date,
after taking into account any transfers of funds from the Reserve
Account to the Depositor in
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respect of the sale of the Subsequent Receivables to the Trust, shall be
no less than the Requisite Reserve Amount for such Subsequent Transfer
Date;
(x) each Rating Agency shall have notified the Security
Insurer that following such transfer the Notes will be rated in the
highest short-term or long-term rating category, as applicable, by such
Rating Agency;
(xi) such addition will not result in a material adverse tax
consequence to the Trust or the Noteholders as evidenced by an Opinion
of Counsel to be delivered by the Seller;
(xii) the Seller shall have delivered to the Owner Trustee and
the Indenture Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this paragraph (b);
(xiii) the Seller shall have delivered to the Rating Agencies
and to the Security Insurer one or more Opinions of Counsel with respect
to the transfer of the Subsequent Receivables substantially in the form
of the Opinions of Counsel delivered to such Persons on the Closing Date;
(xiv) (A) the Receivables in the Trust, including the
Subsequent Receivables to be conveyed to the Trust on the Subsequent
Transfer Date, shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cutoff Date
and the Subsequent Receivables on each related Subsequent Cutoff Date):
(1) the weighted average APR of such Receivables will not be less than
16.29%, (2) the weighted average remaining term of such Receivables will
not be greater than 68 months nor less than 60 months, (3) not more than
90% of the Aggregate Principal Balance of such Receivables will
represent loans secured by used Financed Vehicles, (4) not more than
4.00% of the Aggregate Principal Balance of such Receivables will be
attributable to Receivables with an APR in excess of 21.00%, (5) not
more than 0.25% of the Aggregate Principal Balance of such Receivables
will represent loans in excess of $50,000.00, (6) not more than 3.00% of
the Aggregate Principal Balance of such Receivables will represent loans
with original terms greater than 72 months and (7) not more than 0.25%
of the Aggregate Principal Balance of such Receivables will represent
loans secured by Financed Vehicles that previously secured a loan
originated by AFL with an obligor other than the current Obligor, and
(B) the Trust, the Owner Trustee, the Indenture Trustee and the Security
Insurer shall have received written confirmation from a firm of
certified independent public accountants as to the satisfaction of such
criteria;
(xv) the Seller shall have taken any action necessary or, if
requested by the Security Insurer, advisable to maintain the first
perfected ownership interest of the Trust in the Trust Property and the
first perfected security interest of the Indenture Collateral Agent in
the Indenture Collateral; and
(xvi) no selection procedures adverse to the interests of the
Noteholders shall have been utilized in selecting the Subsequent
Receivables.
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(c) On such Subsequent Transfer Date, if all the conditions
specified in paragraph (b) above have been satisfied, the Trust shall accept
the transfer of such Subsequent Receivables and shall pay to the Seller from
the Pre-Funding Account an amount equal to (i) the Principal Balance as of
the related Subsequent Cutoff Date of the Subsequent Receivables transferred
to the Trust as of such date, minus (ii) the Spread Account Additional
Deposit, if any, for such Subsequent Transfer Date, minus (iii) the amount,
if any, by which the Requisite Reserve Amount for such Subsequent Transfer
Date exceeds the Reserve Amount as of such Subsequent Transfer Date, and
minus (iv) the Class A-1 Holdback Amount, if any, for such Subsequent
Transfer Date.
(d) The Seller covenants to transfer to the Trust pursuant to
paragraph (a) above Subsequent Receivables with an aggregate Principal
Balance equal to approximately $194,212,600.77; PROVIDED, HOWEVER, that the
sole remedy of the Trust, the Owner Trustee, the Indenture Trustee or the
Noteholders with respect to a failure of such covenant shall be to enforce
the provisions of Sections 2.3(c) and 6.2 of the Closing Date Purchase
Agreement, Section 2.4(c) hereof (with respect to Class A-1 Holdback Amounts)
and Section 4.7(c) hereof and Section 10.01(b) of the Indenture with respect
to payment of the Class A-1 Prepayment Premium, Class A-2 Prepayment Premium,
Class A-3 Prepayment Premium, Class A-4 Prepayment Premium and Class A-5
Prepayment Premium.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its
execution of this Agreement and each Subsequent Transfer Agreement, the
Seller makes the following representations and warranties on which the Trust
relies in accepting the Receivables and the other Trust Property in trust and
on which the Owner Trustee relies in issuing on behalf of the Trust, Notes
and upon which the Security Insurer relies in issuing the Note Policy. Unless
otherwise specified, such representations and warranties speak as of the
Closing Date or Subsequent Transfer Date, as appropriate, but shall survive
the sale, transfer, and assignment of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations and
warranties set forth on the Schedule of Representations are true and
correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to
acquire, own and sell the Receivables and the other property transferred
to the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms
- 29 -
and their terms, respectively; the Seller has full power and authority
to sell and assign the Trust Property to be sold and assigned to and
deposited with the Trust by it and has duly authorized such sale and
assignment to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement and the Seller's
Related Documents have been duly authorized by the Seller by all
necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and the
related Subsequent Transfer Agreement, if any, effects a valid sale,
transfer and assignment of the Receivables and the other Trust Property,
enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement and the related Subsequent Transfer
Agreement, if any, and the Seller's Related Documents, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of the Seller enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the related Subsequent Transfer
Agreement, if any, and the Related Documents and the fulfillment of the
terms of this Agreement and the related Subsequent Transfer Agreement,
if any, and the Related Documents shall not conflict with, result in any
breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the certificate
of incorporation or by-laws of the Seller, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a
party or by which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller or
AFL, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this Agreement
or any of the Related Documents, (B) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated by
this Agreement or any of the Related Documents, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents, or
(D) seeking to adversely affect the federal income tax or other federal,
state or local tax attributes of the Notes.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇.
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(i) REGISTRATION STATEMENT. No stop order suspending the
effectiveness of the Registration Statement relating to the Notes has
been issued, and no proceeding for that purpose has been instituted or
is threatened by the Securities and Exchange Commission.
(j) FILINGS. Since the effective date of the Registration
Statement relating to the Notes, there has occurred no event required to
be set forth in an amendment or supplement to the Registration Statement
or Prospectus that has not been so set forth, and there has been no
document required to be filed under the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder that upon such filing would be deemed to be
incorporated by reference in the Prospectus that has not been so filed.
SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement or the
applicable Subsequent Transfer Agreement, as appropriate, AFL and the Seller
have entered into the Purchase Agreements or Subsequent Purchase Agreement,
as applicable, the rights of the Seller under which have been assigned by the
Seller to the Trust. Under the Purchase Agreements and each Subsequent
Purchase Agreement, if applicable, AFL has made the same representations and
warranties to the Seller with respect to the Receivables as those made by
Seller pursuant to the Schedule of Representations, upon which the Owner
Trustee has relied in accepting the Trust Property in trust and executing the
Notes and upon which the Security Insurer has relied in issuing the Note
Policy and upon which the Indenture Trustee has relied in authenticating the
Notes. Upon discovery by any of AFL, the Seller, the Servicer, the Security
Insurer, the Indenture Trustee or the Owner Trustee of a breach of any of the
representations and warranties contained in Section 2.5 that materially and
adversely affects the interests of the Noteholders, the Security Insurer or
the Trust in any Receivable (including any Liquidated Receivable), the party
discovering such breach shall give prompt written notice to the others;
PROVIDED, HOWEVER, that the failure to give any such notice shall not affect
any obligation of AFL or the Seller. As of the second Accounting Date (or, at
AFL's election, the first Accounting Date) following its discovery or its
receipt of notice of any breach of the representations and warranties set
forth on the Schedule of Representations that materially and adversely
affects the interests of the Noteholders, the Security Insurer or the Trust
in any Receivable (including any Liquidated Receivable), AFL shall, unless
such breach shall have been cured in all material respects, purchase such
Receivable from the Trust and, on or before the related Deposit Date, AFL
shall pay the Purchase Amount to the Owner Trustee pursuant to Section 4.5.
The obligations of the Seller with respect to any such breach of
representations and warranties shall be limited to taking any and all actions
necessary to enable the Owner Trustee to enforce directly the obligations of
AFL under the Purchase Agreement or Subsequent Purchase Agreement, as
applicable. It is understood and agreed that, except as set forth in this
Section 2.6, the obligation of AFL to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against AFL or the Seller for such breach
available to the Security Insurer or the Indenture Trustee on behalf of the
Noteholders.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller or AFL, AFL shall
indemnify the Owner Trustee, the
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Indenture Trustee, the Backup Servicer, the Collateral Agent, the Security
Insurer, the Trust 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.
SECTION 2.7. NONPETITION COVENANT. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), the Backup Servicer nor AFL shall petition or otherwise invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Trust 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 Trust or
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust.
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
CLOSING DATE OR SUBSEQUENT TRANSFER DATE. In the case of any Receivable in
respect of which written evidence from the Dealer selling the related
Financed Vehicle that the Lien Certificate for such Financed Vehicle showing
AFL as first lienholder has been applied for from the Registrar of Titles was
delivered to the Custodian on the Closing Date or Subsequent Transfer Date,
as appropriate, in lieu of a Lien Certificate, the Servicer shall use its
best efforts to collect such Lien Certificate from the Registrar of Titles as
promptly as practicable. If such Lien Certificate showing AFL as first
lienholder is not received by the Custodian within 180 days after the Closing
Date or Subsequent Transfer Date, as appropriate, then the representation and
warranty in Paragraph 18 of the Schedule of Representations in respect of
such Receivable shall be deemed to have been incorrect in a manner that
materially and adversely affects the Noteholders, the Security Insurer and
the Trust.
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND
WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller or AFL, the Owner
Trustee shall take any and all actions reasonably requested by the Seller,
AFL or Servicer, at the expense of the requesting party, to assign, without
recourse, representation or warranty, to the Seller, AFL or the Servicer, as
applicable, all the Trust's right, title and interest in and to such
purchased Receivable, all monies due thereon, the security interests in the
related Financed Vehicles, proceeds from any Insurance Policies, proceeds
from recourse against Dealers on such Receivables and the interests of the
Trust in certain rebates of premiums and other amounts relating to the
Insurance Policies and any documents relating thereto, such assignment being
an assignment outright and not for security; and the Seller, AFL or the
Servicer, as applicable, shall thereupon own such Receivable, and all such
security and documents, free of any further obligation to the Owner Trustee,
the Trust, the Indenture Trustee, the Security Insurer, the Indenture
Collateral Agent or the Noteholders with respect thereto.
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ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out 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 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 AFL is
the Servicer, it shall comply with the policies and procedures attached
hereto as Schedule B. The Servicer's duties shall include, without
limitation, collection and posting of all payments, responding to inquiries
of Obligors on the Receivables, investigating delinquencies, sending payment
coupons to Obligors, reporting any required tax information to Obligors,
policing the collateral, complying with the terms of the Lockbox Agreement,
accounting for collections and furnishing monthly and annual statements to
the Owner Trustee, the Indenture Trustee and the Security Insurer with
respect to distributions, monitoring the status of Insurance Policies with
respect to the Financed Vehicles and performing the other duties specified
herein. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements (and shall maintain possession of the Dealer Agreements, to the
extent it is necessary to do so), the Dealer Assignments and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments and
Insurance Policies relate to the Receivables, the Financed Vehicles or the
Obligors. To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its customary
standards, policies, and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Owner Trustee 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 shall 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 that the Servicer may forego collection efforts if
the amount subject to collection is DE MINIMIS and if it would forego
collection in accordance with its customary procedures. The Servicer is
hereby authorized to commence, in its own name or in the name of the Trust
(provided the Servicer has obtained the Owner Trustee's consent, which
consent shall not be unreasonably withheld), a legal proceeding to enforce a
Receivable pursuant to Section 3.3 or to commence or participate in any other
legal proceeding (including, without limitation, a bankruptcy proceeding)
relating to or involving a Receivable, an Obligor or a Financed Vehicle. If
the Servicer commences or participates in such a legal proceeding in its own
name, the Trust shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely for purposes of commencing or participating
in any such proceeding as a party or claimant, and the Servicer is authorized
and empowered by the Owner
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Trustee 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 Owner Trustee shall furnish the
Servicer with any powers of attorney and other documents which the Servicer
may reasonably request and which the Servicer deems necessary or appropriate
and take any other steps which the Servicer may deem necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
under this Agreement.
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due, and shall follow such collection procedures
as it follows with respect to all comparable automobile receivables that it
services for itself or others and otherwise act with respect to the
Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies and the other Trust 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, amendment
or extension of a Receivable in order to (i) change the Obligor's regular due
date to a date within the Monthly Period in which such due date occurs, (ii)
re-amortize the scheduled payments on the Receivable following a partial
prepayment of principal and (iii) grant extensions on a Receivable, provided
that the Servicer shall not be permitted to extend the monthly payments on a
Receivable more than two times in any twelve-month period, and provided
further that the aggregate period of all extensions on a Receivable shall not
exceed six months.
(c) The Servicer may grant payment extensions or deferrals on, or
other modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension,
deferral, 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) In no event may a Receivable be extended beyond the
Monthly Period immediately preceding the Final Scheduled Distribution
Date;
(ii) So long as an Insurer Default shall not have occurred and
be continuing, the Servicer shall not amend or modify a Receivable
(except as provided in Section 3.2(b)) without the consent of the
Security Insurer;
(iii) So long as an Insurer Default shall not have occurred
and be continuing, the Aggregate Principal Balance of Receivables which
have been extended during any Monthly Period (A) shall not exceed 6.5%
of the Aggregate Principal Balance
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of Receivables during such Monthly Period (computed as of the Accounting
Date immediately prior to the first day of the related Monthly Period)
and (B) shall not exceed 4.0% of the average of the Aggregate Principal
Balance of Receivables for such Monthly Period and the three prior
Monthly Periods (computed as of the Accounting Date immediately prior to
the first day of the related Monthly Period);
(iv) So long as an Insurer Default shall not have occurred and
be continuing, the Aggregate Principal Balance of Receivables for which
payment deferrals have been granted during any Monthly Period (A) shall
not exceed 3.0% of the Aggregate Principal Balance of Receivables during
such Monthly Period (computed as of the Accounting Date immediately
prior to the first day of the related Monthly Period) and (B) shall not
exceed 2.0% of the average of the Aggregate Principal Balance of
Receivables for such Monthly Period and the three prior Monthly Periods
(computed as of the Accounting Date immediately prior to the first day
of the related Monthly Period);
(v) No such extension, modification or amendment shall be
granted if such action, when aggregated with all previous extensions,
modifications and amendments of Receivables, would have the effect of
causing any Notes to be deemed to have been exchanged for other Notes
within the meaning of Section 1001 of the Internal Revenue Code of 1986,
as amended, or any proposed, temporary or final Treasury Regulations
issued thereunder; and
(vi) If an Insurer Default shall have occurred and be
continuing, the Servicer may not extend or modify any Receivable (other
than as permitted by Section 3.2(b)).
(d) The Servicer shall use its reasonable best efforts to cause
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 Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox
Agreement. Amounts received by a Lockbox Bank in respect of the Receivables
may initially be deposited into a demand deposit account maintained by the
Lockbox Bank as agent for the Trust and for other owners of automobile
receivables serviced by the Servicer. The Servicer shall use its reasonable
best efforts to cause any Lockbox 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 such payments. The Lockbox Account
shall be a demand deposit account held by the Lockbox Bank, or at the request
of the Security Insurer (unless an Insurer Default shall have occurred and be
continuing) an Eligible Account satisfying clause (i) of the definition
thereof.
Prior to the Closing Date and each Subsequent Transfer Date, as
applicable, the Servicer shall have notified each Obligor that makes its
payments on the Receivables by check to make such payments thereafter
directly to the Lockbox Bank (except in the case of Obligors that have
already been making such payments to the Lockbox Bank), and shall have
provided each such Obligor with a supply of mailing address labels in order
to enable such Obligors to make such payments directly to the Lockbox Bank
for deposit into the Lockbox Account, and the
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Servicer will continue, not less often than every three months, to so notify
those Obligors who have failed to make payments to the Lockbox Bank. If and
to the extent requested by the Security Insurer (unless an Insurer Default
shall have occurred and be continuing), the Servicer shall request each
Obligor that makes payment on the Receivables by direct debit of such
Obligor's bank account, to execute a new authorization for automatic payment
which in the judgment of the Security Insurer is sufficient to authorize
direct debit by the Lockbox Bank on behalf of the Trust. If at any time the
Lockbox Bank is unable to directly debit an Obligor's bank account that makes
payment on the Receivables by direct debit and if such inability is not cured
within 15 days or cannot be cured by execution by the Obligor of a new
authorization for automatic payment, the Servicer shall notify such Obligor
that it cannot make payment by direct debit and must thereafter make payment
by check.
Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Owner Trustee, Indenture Trustee and Noteholders
for servicing and administering the Receivables and the other Trust Property
in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue thereof.
In the event the Servicer shall for any reason no longer be acting
as such, the successor Servicer shall thereupon assume all of the rights and
obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall 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 Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under
such Lockbox Agreement. The outgoing Servicer shall, upon request of the
Owner Trustee but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such Agreement
and an accounting of amounts collected and held by the Lockbox Bank and
otherwise use its best efforts to effect the orderly and efficient transfer
of any Lockbox Agreement to the successor Servicer. In the event that the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note Majority (if an Insurer Default shall have occurred
and be continuing) elects to change the identity of the Lockbox Bank, the
outgoing Servicer, at its expense, shall cause the Lockbox Bank to deliver,
at the direction of the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) or a Note Majority (if an Insurer
Default shall have occurred and be continuing) to the Owner Trustee or a
successor Lockbox Bank, all documents and records relating to the Receivables
and all amounts held (or thereafter received) by the Lockbox Bank (together
with an accounting of such amounts) and shall otherwise use its best efforts
to effect the orderly and efficient transfer of the lockbox arrangements and
the Servicer shall notify the Obligors to make payments to the Lockbox
established by the successor.
(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Subcollection Account or to
the Lockbox Bank for deposit into the Collection Account without deposit into
any intervening account as soon as practicable, but in no event later than
the Business Day after receipt thereof.
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SECTION 3.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Servicer has
determined that payments thereunder are not likely to be resumed, as soon as
is practicable after default on such Receivable but in no event later than
the date on which all or any portion of a Scheduled Payment has become 91
days delinquent. The Servicer is authorized to follow such customary
practices and procedures as it shall deem necessary or advisable, consistent
with the standard of care required by Section 3.1, which practices and
procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private sale,
the submission of claims under an Insurance Policy and other actions by the
Servicer in order to realize upon such a Receivable. The foregoing is subject
to the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with any
repair or towards the repossession of such Financed Vehicle unless it shall
determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the related Receivable by an amount
greater than the amount of such expenses. All amounts received upon
liquidation of a Financed Vehicle shall be remitted directly by the Servicer
to the Subcollection Account without deposit into any intervening account as
soon as practicable, but in no event later than the Business Day after
receipt thereof. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle into cash proceeds, but only out of the cash proceeds of
such Financed Vehicle, any deficiency obtained from the Obligor or any
amounts received from the related Dealer, which amounts may be retained by
the Servicer (and shall not be required to be deposited as provided in
Section 3.2(e)) to the extent of such expenses. The Servicer shall pay on
behalf of the Trust any personal property taxes assessed on repossessed
Financed Vehicles; the Servicer shall be entitled to reimbursement of any
such tax from Liquidation Proceeds with respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement
shall be deemed to be an automatic assignment from the Trust to the Servicer
of the rights under such Dealer Agreement and Dealer Assignment for purposes
of collection only. If, however, in any enforcement suit or legal proceeding,
it is held that the Servicer may not enforce a Dealer Agreement or Dealer
Assignment on the grounds that it is not a real party in interest or a Person
entitled to enforce the Dealer Agreement or Dealer Assignment, the Owner
Trustee, at the Servicer's expense, or the Seller, at the Seller's expense,
shall take such steps as the Servicer deems necessary to enforce the Dealer
Agreement or Dealer Assignment, including bringing suit in its name or the
name of the Seller or of the Indenture Collateral Agent for the benefit of
the Issuer Secured Parties. All amounts recovered shall be remitted directly
by the Servicer as provided in Section 3.2(e).
SECTION 3.4. INSURANCE.
(a) The Servicer shall require that each Financed Vehicle be
insured by the Insurance Policies referred to in Paragraph 24 of the Schedule
of Representations and Warranties and shall monitor the status of such
physical loss and damage insurance coverage thereafter, in
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accordance with its customary servicing procedures. Each Receivable requires
the Obligor to maintain such physical loss and damage insurance, naming AFL
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 shall determine that an Obligor has failed to obtain or maintain
a physical loss and damage Insurance Policy covering the related Financed
Vehicle which satisfies the conditions set forth in such Paragraph 24
(including, without limitation, during the repossession of such Financed
Vehicle) the Servicer shall enforce the rights of the holder of the
Receivable under the Receivable to require the Obligor to obtain such
physical loss and damage insurance.
(b) The Servicer may, 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
insurance (such insurance being referred to herein as "Force-Placed
Insurance"). All policies of Force-Placed Insurance shall be endorsed with
clauses providing for loss payable to the Owner Trustee. Any cost incurred by
the Servicer in maintaining such Force-Placed Insurance shall only be
recoverable out of premiums paid by the Obligors or Liquidation Proceeds with
respect to the Receivable, as provided in Section 3.4(c).
(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 shall the Servicer include the amount of the premium in
the Amount Financed under the Receivable. For all purposes of this Agreement,
the Insurance Add-On Amount with respect to any Receivable having
Force-Placed Insurance 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. The Servicer shall 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 shall be applied first to any
unpaid Scheduled Payments and then to the Insurance Add-On Amount.
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 shall not be required to, purchase such
Receivable from the Trust for the Purchase Amount on any subsequent Deposit
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.
(d) The Servicer may ▇▇▇ to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment
of the rights of the Trust under such Insurance Policy to the Servicer for
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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, on behalf of the Trust,
at the Servicer's expense, or the Seller, at the Seller's expense, shall take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Indenture Collateral
Agent for the benefit of the Issuer Secured Parties.
(e) The Servicer shall maintain a vendor's single interest or other
collateral protection insurance policy with respect to all Financed Vehicles,
which policy shall by its terms insure against physical damage in the event
any Obligor fails to maintain physical loss and damage insurance with respect
to the related Financed Vehicle. Costs incurred by the Servicer in
maintaining such insurance shall be paid by the Servicer. The Servicer will
cause itself to be named as named insured and the Owner Trustee to be named a
loss payee under all such policies. The Servicer may, with the consent of the
Security Insurer, elect not to maintain such insurance policy but in such
event will be obligated to indemnify the Trust against any losses arising
from an Obligor's failure to maintain physical loss and damage insurance with
respect to the related Financed Vehicle.
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Trust, including but not limited to
obtaining the execution by the Obligors and the recording, registering,
filing, rerecording, 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 Owner 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 Owner Trustee on behalf of 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 hereby agrees that the Servicer's
designation as the secured party on the certificate of title is in its
capacity as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
the Security Insurer may (so long as an Insurer Default shall not have
occurred and be continuing) instruct the Owner Trustee and the Servicer to
take or cause to be taken, or, if an Insurer Default shall have occurred,
upon the occurrence of a Servicer Termination Event, the Owner Trustee and
the Servicer shall take or cause to be taken such action as may, in the
opinion of counsel to the Security Insurer (or, if an Insurer Default shall
have occurred and be continuing, counsel to the Owner Trustee), be necessary
to perfect or 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 Security Insurer or the Owner Trustee (as
applicable), be necessary or prudent. AFL hereby
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agrees to pay all expenses related to such perfection or re-perfection and to
take all action necessary therefor. In addition, prior to the occurrence of
an Insurance Agreement Event of Default, the Security Insurer may (unless an
Insurer Default shall have occurred and be continuing) instruct the Owner
Trustee and the Servicer to take or cause to be taken such action as may, in
the opinion of counsel to the Security Insurer, 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 Security Insurer, be necessary or prudent;
PROVIDED, HOWEVER, that (unless an Insurer Default shall have occurred and be
continuing) if the Security Insurer 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 Owner Trustee in connection
with such action shall be reimbursed to the Servicer or the Owner Trustee, as
applicable, by the Security Insurer.
SECTION 3.6. 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 Owner
Trustee relies in accepting the Receivables in trust and issuing the Notes on
behalf of the Trust, on which the Indenture Trustee relies in authenticating
the Notes and on which the Security Insurer relies in issuing the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle
securing each Receivable shall not be released in whole or in
part from the security interest granted by the Receivable, except
upon payment in full of the Receivable or as otherwise
contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair
the rights of the Trust, the Noteholders in the Receivables, the
Dealer Agreements, the Dealer Assignments, the Insurance Policies
or the other Trust Property; and
(iii) NO AMENDMENTS. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance
with Section 3.2.
(b) The Servicer represents, warrants and covenants as of the
Closing Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been
duly organized and is validly existing and in good standing
under the laws of its jurisdiction of organization, with
power, authority and legal right to own its properties and to
conduct its business as such properties are currently owned
and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right
to enter into and perform its obligations under this Agreement;
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(ii) DUE QUALIFICATION. The Servicer is duly qualified to
do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or
the conduct of its business (including the servicing of the
Receivables as required by this Agreement) requires or shall
require such qualification;
(iii) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and its
Related Documents and to carry out its terms and their terms,
respectively, and the execution, delivery and performance of
this Agreement and the Servicer's Related Documents have been
duly authorized by the Servicer by all necessary corporate
action;
(iv) BINDING OBLIGATION. This Agreement and the
Servicer's Related Documents shall constitute legal, valid and
binding obligations of the Servicer enforceable in accordance
with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability
is considered in a proceeding in equity or at law;
(v) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Servicer's Related
Documents, and the fulfillment of the terms of this Agreement
and the Servicer's Related Documents, shall not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the
Servicer, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Servicer is a party or by
which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or
other instrument, other than this Agreement, or violate any
law, order, rule or regulation applicable to the Servicer of
any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or any of its properties;
(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Servicer's knowledge,
threatened against the Servicer, before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or
any of the Related Documents, (B) seeking to prevent the
issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the
Related Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by
the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related
Documents or (D) seeking to adversely affect the federal
income tax or other federal, state or local tax attributes of
the Notes;
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(vii) 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; and
(viii) COLLATERAL INSURANCE. The Collateral Insurance is
in full force and effect.
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Servicer, the Security Insurer, the Owner Trustee or
the Indenture Trustee of a breach of any of the covenants set forth in
Sections 3.5(a) or 3.6(a), the party discovering such breach shall give
prompt written notice to the others; PROVIDED, HOWEVER, that the failure to
give any such notice shall not affect any obligation of the Servicer. As of
the second Accounting Date following its discovery or receipt of notice of
any breach of any covenant set forth in Sections 3.5(a) or 3.6(a) which
materially and adversely affects the interests of the Noteholders, the Trust
or the Security Insurer in any Receivable (including any Liquidated
Receivable) (or, at the Servicer's election, the first Accounting Date so
following), the Servicer shall, unless it shall have cured such breach in all
material respects, purchase from the Trust the Receivable affected by such
breach and, on the related Deposit Date, the Servicer shall pay the related
Purchase Amount. It is understood and agreed that the obligation of the
Servicer to purchase any Receivable (including any Liquidated Receivable)
with respect to which such a breach has occurred and is continuing shall, if
such obligation is fulfilled, constitute the sole remedy against the Servicer
for such breach available to the Security Insurer, the Noteholders, or the
Indenture Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that the
Servicer shall indemnify the Owner Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust, the Indenture Trustee 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.
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Basic Servicing Fee and any
Supplemental Servicing Fee for the related Monthly Period pursuant to Section
4.6. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed
on the Servicer, expenses incurred in connection with distributions and
reports to Noteholders and the Security Insurer and all other fees and
expenses of the Trust, including taxes levied or assessed against the Trust,
and claims against the Trust in respect of indemnification, unless such fees,
expenses or claims in respect of indemnification are expressly stated to be
for the account of AFL or not to be for the account of the Servicer). The
Servicer shall be liable for the fees and expenses of the Owner Trustee, the
Administrator, the Indenture Collateral Agent, the Indenture Trustee, the
Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and
any fees under the Lockbox Agreement) and the Independent Accountants.
Notwithstanding the foregoing, if the Servicer shall not be AFL, a successor
to AFL as Servicer permitted by Section 7.2 or an
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Affiliate of any of the foregoing, such Servicer shall not be liable for
taxes levied or assessed against the Trust or claims against the Trust in
respect of indemnification.
SECTION 3.9. SERVICER'S CERTIFICATE. No later than 10:00 a.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer, the Collateral Agent and each Rating Agency a Servicer's Certificate
executed by a Responsible Officer of the Servicer containing, among other
things, (i) all information necessary to enable the Indenture Trustee to make
any withdrawal and deposit required by Section 5.1, to give any notice
required by Section 5.2, to make the distributions required by Sections 4.6
and 4.7(b), to make the withdrawals, distributions and deliveries required by
Section 4.7(a) and to determine the amount to which the Servicer is entitled
to be reimbursed or has been reimbursed during the related Monthly Period for
Monthly Advances pursuant to Section 4.4(c), (ii) all information necessary
to enable the Indenture Trustee to send the statements to Noteholders
required by Section 4.9, (iii) a listing of all Warranty Receivables and
Administrative Receivables purchased as of the related Deposit Date,
identifying the Receivables so purchased, and (iv) all information necessary
to enable the Indenture Trustee to reconcile all deposits to, and withdrawals
from, the Collection Account for the related Monthly Period and Distribution
Date, including the accounting required by Section 4.8. Receivables purchased
by the Servicer or by the Seller or AFL on the related Deposit Date and each
Receivable which became a Liquidated Receivable or which was paid in full
during the related Monthly Period shall be identified by account number (as
set forth in the Schedule of Receivables). A copy of such certificate may be
obtained by any Noteholder (or by a Note Owner, upon certification that such
Person is a Note Owner and payment of any expenses associated with the
distribution thereof) by a request in writing to the Indenture Trustee
addressed to the Corporate Trust Office. In addition to the information set
forth in the preceding sentence, the Servicer's Certificate delivered to the
Security Insurer, the Collateral Agent and the Indenture Trustee on the
Determination Date shall also contain the following information: (a) the
Delinquency Ratio, Average Delinquency Ratio, Cumulative Default Rate and
Cumulative Net Loss Rate for such Determination Date; (b) whether any Trigger
Event has occurred as of such Determination Date; (c) whether any Trigger
Event that may have occurred as of a prior Determination Date is Deemed Cured
as of such Determination Date; (d) whether to the knowledge of the Servicer
an Insurance Agreement Event of Default has occurred, (e) if AFL shall be the
Servicer, whether a Capture Event shall have occurred and be continuing, and
(f) if AFL shall be the Servicer, whether any Capture Event specified in any
prior Servicer's Certificate has been cured by a permanent waiver, effective
in accordance with the terms of the Purchase Agreements.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
SERVICER TERMINATION EVENT.
(a) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer and each Rating Agency, on
or before March 31 (or 90 days after the end of the Servicer's fiscal year,
if other than December 31) of each year, beginning on March 31, 2000, an
officer's certificate signed by any Responsible Officer of the Servicer,
dated as of December 31 (or other applicable date) of the immediately
preceding year, stating that (i) a review of the activities of the Servicer
during the preceding 12-month period (or
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such other period as shall have elapsed from the Closing Date to the date of
the first such certificate) and of its performance under this Agreement has
been made under such officer's supervision, and (ii) to such officer's
knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has
been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent, and
each Rating Agency, promptly after having obtained knowledge thereof, but in
no event later than two 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
8.1(a). The Seller or the Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral
Agent, the Servicer or the Seller (as applicable) and each Rating Agency
promptly after having obtained knowledge thereof, but in no event later than
two Business Days thereafter, written notice in an officer's certificate of
any event which with the giving of notice or lapse of time, or both, would
become a Servicer Termination Event under any other clause of Section 8.1.
SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver
to the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer and each Rating Agency, on or before March 31 (or 90 days
after the end of the Servicer's fiscal year, if other than December 31) of
each year, beginning on March 31, 2000, with respect to the twelve months
ended the immediately preceding December 31 (or other applicable date) (or
such other period as shall have elapsed from the Closing Date to the date of
such certificate), a statement (the "Accountant's Report") addressed to the
Board of Directors of the Servicer, to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and to the Security Insurer, to the effect that
such firm has audited the financial statements of the Servicer and issued its
report thereon and that such audit was made in accordance with generally
accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as such firm considered
necessary in the circumstances, including procedures as determined by the
Independent Accountants related to (1) the documents and records concerning
the servicing of automobile installment sales contracts under pooling and
servicing agreements and sale and servicing agreements substantially similar
one to another (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements and sale and servicing agreements
covered thereby, including this Agreement); and (2) the delinquency and loss
statistics relating to the Servicer's portfolio of automobile installment
sales contracts; and except as described in the statement, disclosed no
exceptions or errors in the records relating to automobile and light truck
loans serviced for others that, in the firm's opinion, generally accepted
auditing standards requires such firm to report. The Accountants' Report
shall further state that (1) a review in accordance with agreed upon
procedures was made of three randomly selected Servicer's Certificates for
each Trust and
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(2) except as disclosed in the Report, no exceptions or errors in the
Servicer's Certificates so examined were found.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Noteholder (or by any Note Owner, upon certification that such Person is a
Note Owner and payment of any expenses associated with the distribution
thereof) by a request in writing to the Indenture Trustee addressed to the
Corporate Trust Office.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Owner Trustee, Indenture Trustee, the Backup Servicer and the Security
Insurer reasonable access to the documentation regarding the Receivables. The
Servicer shall provide such access to any Noteholder (or Note Owner) only in
such cases where the Servicer is required by applicable statutes or
regulations (whether applicable to the Servicer or to such Noteholder or Note
Owner) to permit such Noteholder (or Note Owner) to review such
documentation. In each case, such access shall be afforded without charge but
only upon reasonable request and during normal business hours. Nothing in
this Section shall derogate from the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding the
Obligors, and the failure of the Servicer to provide access as provided in
this Section as a result of such obligation shall not constitute a breach of
this Section. Any Noteholder (or Note Owner), by its acceptance of a Note (or
by acquisition of its beneficial interest therein), as applicable, shall be
deemed to have agreed to keep confidential and not to use for its own benefit
any information obtained by it pursuant to this Section, except as may be
required by applicable law.
SECTION 3.13. MONTHLY TAPE. On or before the third Business Day,
but in no event later than the fifth calendar day, of each month, the
Servicer will deliver to the Indenture Trustee and the Backup Servicer a
computer tape and a diskette (or any other electronic transmission acceptable
to the Indenture Trustee and the Backup Servicer) in a format acceptable to
the Indenture Trustee and the Backup Servicer containing the information with
respect to the Receivables as of the preceding Accounting Date necessary for
preparation of the Servicer's Certificate relating to the immediately
succeeding Determination Date and necessary to determine the application of
collections as provided in Section 4.3. The Backup Servicer shall use such
tape or diskette (or other electronic transmission acceptable to the
Indenture Trustee and the Backup Servicer) to verify the Servicer's
Certificate delivered by the Servicer (based on the information contained in
such tape or diskette), and the Backup Servicer shall certify to the Security
Insurer that it has verified the Servicer's Certificate in accordance with
this Section 3.13 and shall notify the Servicer and the Security Insurer of
any discrepancies, in each case, on or before the second Business Day
following the Determination Date. In the event that the Backup Servicer
reports any discrepancies, the Servicer and the Backup Servicer shall attempt
to reconcile such discrepancies prior to the related Deficiency Claim Date,
but in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to the
related Distribution Date. In the event that the Backup Servicer
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and the Servicer are unable to reconcile discrepancies with respect to a
Servicer's Certificate by the related Distribution Date, the Servicer shall
cause the Independent Accountants, at the Servicer's expense, to audit the
Servicer's Certificate and, prior to the third Business Day, but in no event
later than the fifth calendar day, of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected
in the Servicer's Certificate for such next succeeding Determination Date. In
addition, the Servicer shall, if so requested by the Security Insurer (unless
an Insurer Default shall have occurred and be continuing) deliver to the
Backup Servicer its Collection Records and its Monthly Records within one
Business Day of demand therefor and a computer tape containing as of the
close of business on the date of demand all of the data maintained by the
Servicer in computer format in connection with servicing the Receivables.
Other than the duties specifically set forth in this Agreement, the Backup
Servicer shall have no obligations hereunder, including, without limitation,
to supervise, verify, monitor or administer the performance of the Servicer.
The Backup Servicer shall have no liability for any actions taken or omitted
by the Servicer. The duties and obligations of the Backup Servicer shall be
determined solely by the express provisions of this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Backup
Servicer.
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an
initial term, commencing on the Closing Date and ending on September 30,
1999, which term shall be extendible by the Security Insurer for successive
quarterly terms ending on each successive December 31, March 31, June 30 and
September 30 (or, pursuant to revocable written standing instructions from
time to time to the Servicer, the Indenture Trustee and the Owner Trustee,
for any specified number of terms greater than one), until the termination of
the Trust. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive
quarterly terms for so long as such instructions are in effect) (a "Servicer
Extension Notice") shall be delivered by the Security Insurer to the Owner
Trustee, the Indenture Trustee and the Servicer. The Servicer hereby agrees
that, as of the date hereof and upon its receipt of any such Servicer
Extension Notice, the Servicer shall become bound, for the initial term
beginning on the Closing Date and for the duration of the term covered by
such Servicer Extension Notice, to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. Until such time as an
Insurer Default shall have occurred and be continuing, the Indenture Trustee
agrees that if as of the fifteenth day prior to the last day of any term of
the Servicer the Indenture Trustee shall not have received any Servicer
Extension Notice from the Security Insurer, the Indenture Trustee will,
within five days thereafter, give written notice of such non-receipt to the
Owner Trustee, the Security Insurer and the Servicer.
SECTION 3.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian
of funds and documents in respect of consumer contracts on behalf of
institutional investors.
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The
Servicer shall, and hereby agrees that it will, perform on behalf of the
Trust and the Owner Trustee the following duties of the Trust or the Owner
Trustee, as applicable, under the Indenture (references are to the applicable
Sections in the Indenture):
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(a) the direction to the Paying Agents, if any, to deposit
moneys with the Indenture Trustee (Section 3.03);
(b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Indenture Collateral and
each other instrument and agreement included in the Trust Estate
(Section 3.04);
(c) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance
and other instruments, in accordance with Section 3.05 of the Indenture,
necessary to protect the Trust Estate (Section 3.05);
(d) the delivery of the Opinion of Counsel on the Closing Date
and the annual delivery of Opinions of Counsel, in accordance with
Section 3.06 of the Indenture, as to the Trust Estate, and the annual
delivery of the Officers' Certificate and certain other statements, in
accordance with Section 3.09 of the Indenture, as to compliance with the
Indenture (Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officers' Certificate and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(g) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee
and any written instruments necessary in connection with the resignation
or removal of any co-trustee or separate trustee (Sections 6.08 and
6.10);
(h) the opening of one or more accounts in the Trust's name,
the preparation of Issuer Orders, Officers' Certificates and Opinions of
Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(i) the preparation of Trust Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(j) the preparation of all Officers' Certificates, Opinions of
Counsel and Independent Certificates with respect to any requests by the
Issuer to the Indenture Trustee or the Indenture Collateral Agent to
take any action under the Indenture (Section 11.01(a));
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(k) the preparation and delivery of Officers' Certificates and
the obtaining of Independent Certificates, if necessary, for the release
of property from the lien of the Indenture (Section 11.01(b)); and
(l) the recording of the Indenture, if applicable (Section
11.15).
In addition to the duties of the Servicer set forth above, the Servicer
shall, and hereby agrees that it will, prepare, distribute and file any
reports required by Section 313(b) of the Trust Indenture Act of 1939, as
amended, as a result of any transfer of Subsequent Receivables. Such
distribution and filing is to be effected by the Servicer's distribution and
filing of the Servicer's Certificate.
SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE AGREEMENT.
The Servicer shall, and hereby agrees that it will, perform on behalf of the
Trust and the Owner Trustee the following duties of the Trust under the
Insurance Agreement (references are to the applicable Sections in the
Insurance Agreement):
(a) the maintenance of books and records of accounts of the
Trust's assets and business and the furnishing to the Security Insurer
of reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee or the Noteholders pursuant to the
Related Documents (Section 2.02(b));
(b) the delivery to the Security Insurer and, upon request,
any Noteholder, of certificates with respect to compliance with, and
other matters under, the Related Documents (Section 2.02(c));
(c) the filing of financing statements, assignments or other
instruments, and amendments or continuation statements relating thereto
to preserve and protect fully the lien and security interest in, and all
rights of the Indenture Trustee and the Security Insurer with respect
to, the Trust Estate (Section 2.02(f));
(d) the maintenance of licenses, permits, charters and
registrations of the Trust material to the performance by the Trust of
its obligations under the Insurance Agreement and the Related Documents
(Section 2.02(g));
(e) the provision to the Security Insurer of executed original
copies of the documents executed in connection with the closing of the
offering of the Notes (Section 2.02(k)); and
(f) the taking of actions to ensure that the Trust is taxable
as a partnership for federal and state income tax purposes and not as an
association (or publicly traded partnership) taxable as a corporation
(Section 2.02(l)).
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (as defined
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in the Trust Agreement) of any actions to be taken by the Trust necessary for
compliance with such laws and prepare on behalf of the Trust and the
Administrator all notices, filings or other documents or instruments required
to be filed under such laws.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
SECTION 4.1. TRUST ACCOUNTS.
(a) The Servicer shall establish the Collection Account in the name
of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties (as defined in the Indenture). The Collection Account shall be an
Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.
(b) The Servicer shall establish the Pre-Funding Account in the
name of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties. The Pre-Funding Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Indenture Collateral
Agent and maintained with the Indenture Collateral Agent.
(c) The Servicer shall establish the Note Distribution Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties. The Note Distribution Account shall be an Eligible Account
and initially shall be a segregated trust account established with the
Indenture Collateral Agent and maintained with the Indenture Collateral Agent.
(d) The Servicer shall establish the Reserve Account (including the
Class A-1 Holdback Subaccount) in the name of the Indenture Collateral Agent
for the benefit of the Issuer Secured Parties. The Reserve Account shall be
an Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.
(e) All amounts held in the Collection Account, the Pre-Funding
Account, the Note Distribution Account and the Reserve Account (collectively,
the "Trust Accounts") shall, to the extent permitted by applicable laws,
rules and regulations, be invested, as directed in writing by the Servicer,
in Eligible Investments that, in the case of amounts held in the Collection
Account, the Note Distribution Account and the Reserve Account, mature not
later than one Business Day prior to the Distribution Date for the Monthly
Period to which such amounts relate, and, in the case of amounts held in the
Pre-Funding Account, mature in such amounts and on such dates, not later than
one Business Day prior to the last day of the Funding Period, as the Servicer
may direct in writing; PROVIDED, HOWEVER, that the amounts held in the Trust
Accounts shall be invested by the Indenture Collateral Agent on behalf of the
Trust in overnight or next-day funds in such Eligible Investments as may be
acceptable to the Rating Agencies and the Security Insurer (which initially
shall be the Indenture Collateral Agent's U.S. Government Fund
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and, from time to time, shall include such other proprietary Eligible
Investments of the Indenture Collateral Agent as shall be confirmed in
writing by the Security Insurer to the Indenture Collateral Agent) for the
period of time from the Business Day prior to the Distribution Date or the
end of the Funding Period, as applicable, until such Distribution Date or the
end of the Funding Period, as applicable. Any such written direction shall
certify that any such investment is authorized by this Section 4.1.
Investments in Eligible Investments shall be made in the name of the
Indenture Collateral Agent on behalf of the Trust, and such investments shall
not be sold or disposed of prior to their maturity. Any investment of funds
in the Trust Accounts shall be made in Eligible Investments held by a
financial institution in accordance with the following requirements:
(i) all Eligible Investments shall be held in an account with such
financial institution in the name of the Indenture Collateral Agent;
(ii) all Eligible Investments held in such account shall be
delivered to the Indenture Collateral Agent in the following manner:
(A) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i)
of the UCC (other than certificated securities) and are susceptible
of physical delivery, transferred to the Indenture Collateral Agent
by physical delivery to the Indenture Collateral Agent, indorsed
to, or registered in the name of, the Indenture Collateral Agent or
its nominee or indorsed in blank; or such additional or alternative
procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Eligible Investments to
the Indenture Collateral Agent free of any adverse claims,
consistent with changes in applicable law or regulations or the
interpretation thereof;
(B) with respect to a "certificated security" (as defined in
Section 8-102(a)(4) of the UCC), transferred:
(1) by physical delivery of such certificated security to
the Indenture Collateral Agent, provided that if the
certificated security is in registered form, it shall be
indorsed to, or registered in the name of, the Indenture
Collateral Agent or indorsed in blank;
(2) by physical delivery of such certificated security in
registered form to a "securities intermediary" (as defined in
Section 8-102(a)(14) of the UCC) acting on behalf of the
Indenture Collateral Agent if the certificated security has
been specially indorsed to the Indenture Collateral Agent by
an effective indorsement.
(C) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal
National Mortgage Association that is a book-entry security held
through the Federal Reserve System
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pursuant to Federal book entry regulations, the following
procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such property to an appropriate
book-entry account maintained with a Federal Reserve Bank by a
securities intermediary which is also a "depositary" pursuant to
applicable federal regulations and issuance by such securities
intermediary of a deposit advice or other written confirmation of
such book-entry registration to the Indenture Collateral Agent of
the purchase by the securities intermediary on behalf of the
Indenture Collateral Agent of such book-entry security; the making
by such securities intermediary of entries in its books and records
identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as
belonging to the Indenture Collateral Agent and indicating that
such securities intermediary holds such book-entry security solely
as agent for the Indenture Collateral Agent; or such additional or
alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Eligible
Investments to the Indenture Collateral Agent free of any adverse
claims, consistent with changes in applicable law or regulations or
the interpretation thereof;
(D) with respect to any "uncertificated security" (as defined
in Section 8-102(a)(18) of the UCC) that is not governed by clause (C)
above, transferred:
(1)(A) by registration to the Indenture Collateral Agent as
the registered owner thereof, on the books and records of the
issuer thereof, or
(B) by another Person (not a securities intermediary)
either becomes the registered owner of the uncertificated
security on behalf of the Indenture Collateral Agent, or
having become the registered owner acknowledges that it holds
for the Indenture Collateral Agent; or
(2) by the issuer thereof having agreed that it will
comply with instructions originated by the Indenture
Collateral Agent without further consent of the registered
owner thereof;
(E) with respect to any "security entitlement" (as defined in
Section 8-102(a)(17) of the UCC):
(1) if a securities intermediary (A) indicates by book
entry that a "financial asset" (as defined in Section
8-102(a)(9) of the UCC) has been credited to the Indenture
Collateral Agent's "securities account" (as defined in Section
8-501(a) of the UCC), (B) receives a financial asset (as so
defined) from the Indenture Collateral Agent or acquires a
financial asset for the Indenture Collateral Agent, and in
either case, accepts it for credit to the Indenture Collateral
Agent's securities account (as so defined), (C) becomes
obligated under other law, regulation or rule to credit a
financial asset to the Indenture Collateral Agent's securities
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account, or (D) has agreed that it will comply with
"entitlement orders" (as defined in Section 8-102(a)(8) of the
UCC) originated by the Indenture Collateral Agent, without
further consent by the "entitlement holder" (as defined in
Section 8-102(a)(7) of the UCC), of a confirmation of the
purchase and the making by such securities intermediary of
entries on its books and records identifying as belonging to
the Indenture Collateral Agent of (I) a specific certificated
security in the securities intermediary's possession, (II) a
quantity of securities that constitute or are part of a
fungible bulk of certificated securities in the securities
intermediary's possession, or (III) a quantity of securities
that constitute or are part of a fungible bulk of securities
shown on the account of the securities intermediary on the
books of another securities intermediary.
(F) in each case of delivery contemplated pursuant to clauses (A)
through (E) of subsection (ii) hereof, the Indenture Collateral Agent
shall make appropriate notations on its records, and shall cause the
same to be made on the records of its nominees, indicating that such
Eligible Investment is held in trust pursuant to and as provided in
this Indenture.
Any cash held by the Indenture Collateral Agent shall not be considered a
"financial asset" for purposes of this Section 4.1(e). Subject to the other
provisions hereof, the Indenture Collateral Agent shall have sole control
over each such investment and the income thereon, and any certificate or
other instrument evidencing any such investment, if any, shall be delivered
directly to the Indenture Collateral Agent or its agent, together with each
document of transfer, if any, necessary to transfer title to such investment
to the Indenture Collateral Agent in a manner which complies with this
Section 4.1. All interest, dividends, gains upon sale and other income from,
or earnings on, investments of funds in the Trust Accounts shall be deposited
in the Collection Account and distributed on the next Distribution Date
pursuant to Section 4.6. The Servicer shall deposit in the applicable Trust
Account an amount equal to any net loss on such investments immediately as
realized.
(f) On the Closing Date, the Servicer shall deposit in the
Collection Account (i) all Scheduled Payments and prepayments of Initial
Receivables received by the Servicer after the Initial Cutoff Date and on or
prior to the Business Day immediately preceding the Closing Date or received
by the Lockbox Bank after the Initial Cutoff Date and on or prior to the
second Business Day immediately preceding the Closing Date and (ii) all
Liquidation Proceeds and proceeds of Insurance Policies realized in respect
of a Financed Vehicle and applied by the Servicer after the Initial Cutoff
Date. On each Subsequent Transfer Date, the Servicer shall deposit in the
Collection Account (x) all Scheduled Payments and prepayments of the related
Subsequent Receivables received by the Servicer after the related Subsequent
Cutoff Date and on or prior to the Business Day immediately preceding the
related Subsequent Transfer Date or received by the Lockbox Bank after the
related Subsequent Cutoff Date and on or prior to the second Business Day
immediately preceding the related Subsequent Transfer Date and (y) all
Liquidation Proceeds and proceeds of Insurance Policies related in respect of
a Financed Vehicle and applied by the Servicer after the related Subsequent
Cutoff Date.
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SECTION 4.2. COLLECTIONS.
(a) The Servicer shall establish the Subcollection Account in the
name of the Indenture Trustee for the benefit of the Noteholders. The
Subcollection Account shall be an Eligible Account satisfying clause (ii) of
the definition of "Eligible Account," and shall initially be established with
the Lockbox Bank. The Servicer shall remit directly to the Subcollection
Account without deposit into any intervening account all payments by or on
behalf of the Obligors on the Receivables and all Liquidation Proceeds
received by the Servicer, in each case, as soon as practicable, but in no
event later than the Business Day after receipt thereof. Within two days of
deposit of payments into the Subcollection Account, the Servicer shall cause
the Lockbox Bank to transfer all amounts credited to the Subcollection
Account on account of such payments to the Collection Account. Amounts in the
Subcollection Account shall not be invested. Notwithstanding the foregoing,
the Servicer may utilize an alternative remittance schedule acceptable to the
Servicer if the Security Insurer consents in writing (so long as an Insurer
Default shall not have occurred and be continuing) and the Servicer provides
to the Indenture Trustee written confirmation from each Rating Agency that
such alternative remittance schedule will not result in the downgrading or
withdrawal by the Rating Agency of the rating then assigned to the Notes.
(b) Notwithstanding the provisions of subsection (a) hereof, the
Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer or
the Lockbox Bank to have resulted from mistaken deposits or postings or
checks returned for insufficient funds. The amount to be reimbursed hereunder
shall be paid to the Servicer on the related Distribution Date pursuant to
Section 4.6(iii) upon certification by the Servicer of such amounts and the
provision of such information to the Indenture Trustee and the Security
Insurer as may be necessary in the opinion of the Indenture Trustee and the
Security Insurer to verify the accuracy of such certification. In the event
that the Security Insurer has not received evidence satisfactory to it of the
Servicer's entitlement to reimbursement pursuant to this Section 4.2(b), the
Security Insurer shall (unless an Insurer Default shall have occurred and be
continuing) give the Indenture Trustee notice to such effect, following
receipt of which the Indenture Trustee shall not make a distribution to the
Servicer in respect of such amount pursuant to Section 4.6, or if the
Servicer prior thereto has been reimbursed pursuant to Section 4.6 or Section
4.8, the Indenture Trustee shall withhold such amounts from amounts otherwise
distributable to the Servicer on the next succeeding Distribution Date.
SECTION 4.3. APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Monthly Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable, payments by or on behalf
of the Obligor thereof (other than of Supplemental Servicing Fees with
respect to such Receivable, to the extent collected) shall be applied to
interest and principal with respect to such Receivable in accordance
with the terms of such Receivable. With respect to each Liquidated
Receivable, Liquidation Proceeds shall be applied to interest and
principal with respect to such Receivable in accordance with the terms
of such Receivable, and then to any Insurance Add-On Amount due and
payable with respect to
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such Receivable. The Servicer shall not be entitled to any Supplemental
Servicing Fees with respect to a Liquidated Receivable.
(b) With respect to each Receivable that has become a
Purchased Receivable on any Deposit Date, the Purchase Amount shall be
applied, for purposes of this Agreement only, to interest and principal
on the Receivable in accordance with the terms of the Receivable as if
the Purchase Amount had been paid by the Obligor on the Accounting Date.
The Servicer shall not be entitled to any Supplemental Servicing Fees
with respect to such a Receivable. Nothing contained herein shall
relieve any Obligor of any obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the
Collection Account and paid to the Servicer in accordance with Section
4.6(iii).
(d) All payments by or on behalf of an Obligor received with
respect to any Purchased Receivable after the Accounting Date
immediately preceding the Deposit Date on which the Purchase Amount was
paid by the Seller, AFL or the Servicer shall be paid to the Seller, AFL
or the Servicer, respectively, and shall not be included in the
Available Funds.
SECTION 4.4. MONTHLY ADVANCES.
(a) If with respect to a Receivable, the amount deposited into the
Collection Account during a Monthly Period in respect of such Receivable and
allocable to interest (determined in accordance with Section 4.3) is less
than an amount of interest equal to interest accrued on such Receivable (for
the number of calendar days in such Monthly Period) (calculated according to
the method specified in the related retail installment sale contract or
promissory note at the APR on the Principal Balance of such Receivable as of
the Accounting Date preceding such Distribution Date), the Servicer shall
make a Monthly Advance equal to the amount of such shortfall; PROVIDED,
HOWEVER, that the Servicer shall not be required to make a Monthly Advance
with respect to a Receivable extended pursuant to Section 3.2(b) for any
Monthly Period during which no Scheduled Payment is due according to the
terms of such extension; and PROVIDED FURTHER, that the Servicer shall not be
required to make a Monthly Advance with respect to a Receivable that is less
than 31 days delinquent.
(b) On or before each Determination Date and prior to the delivery
of the Servicer's Certificate for such Determination Date pursuant to Section
3.9, the Servicer shall deposit in the Collection Account the aggregate
amount of Monthly Advances required for the related Monthly Period in
immediately available funds (subject to Section 4.8).
(c) The Servicer shall be entitled to be reimbursed for Outstanding
Monthly Advances with respect to a Receivable pursuant to Section 4.6(i) or
pursuant to Section 4.8 from the following sources with respect to such
Receivable on any day subsequent to the Distribution Date in respect of which
such Monthly Advance was made: (i) subsequent payments by or on behalf of the
Obligor with respect to such Receivable, (ii) collections of Liquidation
Proceeds
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with respect to such Receivable if such Receivable becomes a Liquidated
Receivable and (iii) payment of any Purchase Amount with respect to such
Receivable if such Receivable becomes a Purchased Receivable. If any
Receivable shall become a Liquidated Receivable and the Servicer shall not
have been fully reimbursed for Outstanding Monthly Advances with respect to
such Receivable from the sources of funds previously described in this
paragraph, the Servicer shall be entitled to reimbursement from collections
on Receivables other than the Receivable in respect of which such Outstanding
Monthly Advance shall have been made.
SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Deposit Date,
the Servicer or AFL shall deposit in the Collection Account the aggregate
Purchase Amounts with respect to Administrative Receivables and Warranty
Receivables, respectively. All such deposits of Purchase Amounts shall be
made in immediately available funds. On or before each Draw Date, the
Indenture Trustee shall deposit in the Collection Account any amounts
delivered to the Indenture Trustee by the Collateral Agent.
SECTION 4.6. DISTRIBUTIONS. On each Distribution Date, the
Indenture Trustee shall (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) distribute the
following amounts and in the order of priority specified below. Within each
order of priority, amounts shall be deemed withdrawn first from Available
Funds, second from the Reserve Account and third from any Deficiency Claim
Amounts.
(i) first, from the Distribution Amount, (A) to the Trust for
payment of any taxes due and unpaid with respect to the Trust, to the
extent such taxes have not been previously paid by AFL or by the
Servicer pursuant to Section 3.8, and (B) then to the Servicer, the
amount of Outstanding Monthly Advances for which the Servicer is
entitled to be reimbursed pursuant to Section 4.4(c) and for which the
Servicer has not previously been reimbursed pursuant to Section 4.8;
(ii) second, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Owner Trustee, any accrued and
unpaid fees of the Owner Trustee in accordance with the Trust Agreement
and including amounts with respect to which the Administrator is
entitled to be reimbursed pursuant to the Administration Agreement; to
the Indenture Trustee, any accrued and unpaid fees of the Indenture
Trustee in accordance with the Indenture; to any Lockbox Bank,
Custodian, Backup Servicer, Collateral Agent, Indenture Collateral Agent
or Administrator (including the Owner Trustee or Indenture Trustee if
acting in any such additional capacity), any accrued and unpaid fees (in
each case, to the extent such Person has not previously received such
amount from the Servicer or AFL), to the Backup Servicer, any transition
expenses (not to exceed $100,000) in accordance with Section 8.3;
PROVIDED, HOWEVER, in the event that the rating assigned by Standard &
Poor's to the claims-paying ability of the Security Insurer is not AAA,
the accrued and unpaid fees of the Owner Trustee, the Indenture Trustee,
the Backup Servicer, the Collateral Agent, the Indenture Collateral
Agent and the Administrator shall be distributed pursuant to this clause
(ii) to the extent such fees are not in excess of the amount (the
"Servicer Fee Threshold") obtained by dividing (x) .20% of the Aggregate
Principal Balance by (y) twelve, and any accrued and unpaid fees in
excess of the Servicer Fee Threshold remaining to be distributed
pursuant to this clause
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(ii) shall not be distributed pursuant to this clause (ii) but shall be
distributed after the distributions to be made pursuant to clause (v)
below but before the distributions to be made pursuant to clause (vi)
below;
(iii) third, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Servicer, the Basic Servicing
Fee for the related Monthly Period, any Supplemental Servicing Fees for
the related Monthly Period, and any amounts specified in Section 4.2(b),
to the extent the Servicer has not reimbursed itself in respect of such
amounts pursuant to Section 4.8;
(iv) fourth, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Note Distribution Account, an
amount equal to the Noteholders' Interest Distributable Amount for such
Distribution Date;
(v) fifth, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Note Distribution Account, an
amount equal to the Noteholders' Principal Distributable Amount for such
Distribution Date;
(vi) sixth, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Security Insurer, to the
extent of any amounts owing to the Security Insurer under the Insurance
Agreement and not paid, whether or not AFL is also obligated to pay such
amounts, such amounts representing a portion of the Credit Enhancement
Fee otherwise payable on a subordinated basis to the Seller; and
(vii) seventh, any remaining Available Funds to the Collateral
Agent for deposit in the Spread Account, such amounts representing a
portion of the Credit Enhancement Fee payable on a subordinated basis to
the Seller.
SECTION 4.7. PRE-FUNDING ACCOUNT.
(a) On the Closing Date, the Indenture Trustee will deposit, on
behalf of the Seller, in the Pre-Funding Account $194,212,600.77 from the
proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Indenture Trustee in writing:
(i) to withdraw from the Pre-Funding Account the Spread
Account Additional Deposit, if any, on such Subsequent Transfer Date,
and to deliver such funds to the Collateral Agent for deposit in the
Spread Account,
(ii) to withdraw from the Pre-Funding Account the amount, if
any, by which the Requisite Reserve Amount for such Subsequent Transfer
Date exceeds the Reserve Amount, and to deposit such funds in the
Reserve Account,
(iii) to withdraw from the Pre-Funding Account the Class A-1
Holdback Amount, if any, for such Subsequent Transfer Date, and to
deposit such funds in the Class A-1 Holdback Subaccount,
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(iv) to withdraw from the Pre-Funding Account the amount, if
any, on deposit therein in excess of the remaining Pre-Funded Amount,
after giving effect to the withdrawals specified in clauses (i) - (iii)
above, and to distribute such amount to or upon the order of the Seller
upon satisfaction of the conditions set forth in Section 2.4 with
respect to such transfer, and
(v) to withdraw from the Reserve Account an amount equal to
the excess, if any, of the Reserve Amount (after giving effect to
withdrawals from the Reserve Account pursuant to Section 5.1 on the
immediately following Distribution Date, if such Subsequent Transfer
Date falls between a Determination Date and the related Distribution
Date) over the Requisite Reserve Amount for such Subsequent Transfer
Date and to distribute such amount to or upon the order of the Depositor.
(b) If (x) the Pre-Funded Amount has not been reduced to zero on
the Distribution Date on or immediately following the end of the Funding
Period or (y) the Pre-Funded Amount has been reduced to $100,000 or less on
any Distribution Date, in either case after giving effect to any reductions
in the Pre-Funded Amount on such Distribution Date pursuant to paragraph (a)
above, the Servicer shall provide written instructions to the Indenture
Trustee to withdraw from the Pre-Funding Account on such Distribution Date an
amount equal to the sum of the Class A-1 Prepayment Amount, the Class A-2
Prepayment Amount, the Class A-3 Prepayment Amount, the Class A-4 Prepayment
Amount and the Class A-5 Prepayment Amount and deposit such amount in the
Note Distribution Account. Any remaining funds on deposit in the Pre-Funding
Account shall be distributed to the Depositor. If the funds on deposit in the
Pre-Funding Account are less than the amount described above, then the
Servicer shall provide written instructions to the Indenture Trustee to
withdraw the funds on deposit in the Pre-Funding Account and deposit such
funds in the Note Distribution Account and Collection Account, pro rata in
accordance with the amount specified above.
(c) If the Pre-Funded Amount is greater than $100,000 at the end of
the Funding Period, the Seller will deposit into the Note Distribution
Account an amount equal to the sum of the Class A-1 Prepayment Premium, the
Class A-2 Prepayment Premium, the Class A-3 Prepayment Premium, the Class A-4
Prepayment Premium and the Class A-5 Prepayment Premium; PROVIDED, HOWEVER,
that the obligation of the Seller to make the deposits referred to in this
sentence is expressly limited to the extent of the amount of Liquidated
Damages (as defined in the Closing Date Purchase Agreement) paid to the
Seller by AFL and by the Seller to the Trust.
SECTION 4.8. NET DEPOSITS. Subject to payment by the Servicer of
amounts otherwise payable pursuant to Section 4.6(ii) and provided that no
Servicer Termination Event shall have occurred and be continuing with respect
to such Servicer, the Servicer may make the remittances to be made by it
pursuant to Sections 4.2, 4.4 and 4.5 net of amounts (which amounts may be
netted prior to any such remittance for a Monthly Period) to be distributed
to it pursuant to Sections 3.8, 4.2(b) and 4.6(i); PROVIDED, HOWEVER, that
the Servicer shall account for all of such amounts in the related Servicer's
Certificate as if such amounts were deposited and distributed separately;
and, PROVIDED, FURTHER, that if an error is made by the Servicer in
calculating the amount to be deposited or retained by it, with the result
that an amount less than
- 57 -
required is deposited in the Collection Account, the Servicer shall make a
payment of the deficiency to the Collection Account, immediately upon
becoming aware, or receiving notice from the Indenture Trustee, of such error.
SECTION 4.9. STATEMENTS TO NOTEHOLDERS.
(a) On each Distribution Date, the Indenture Trustee shall include
with each distribution to each Noteholder, the Servicer's Certificate (which
statement shall also have been provided to the Security Insurer and to each
Rating Agency by the Servicer) delivered on the related Determination Date
pursuant to Section 3.9, setting forth for the Monthly Period relating to
such Payment Date the following information with respect to each class of
Notes:
(i) the amount of such distribution allocable to
principal;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Reserve Account, the Class A-1 Holdback Subaccount,
the Spread Account or pursuant to a claim on the Note Policy;
(iv) the outstanding principal balance of the Notes (after
giving effect to distributions made on such Distribution Date);
(v) the Class A-1 Interest Carryover Shortfall, the Class A-2
Interest Carryover Shortfall, the Class A-3 Interest Carryover
Shortfall, the Class A-4 Interest Carryover Shortfall, the Class A-5
Interest Carryover Shortfall, and the Noteholders' Principal Carryover
Shortfall, if any, and the change in such amounts from the preceding
statement;
(vi) the amount of fees paid by the Trust with respect to
such Monthly Period;
(vii) for Payment Dates during the Funding Period, the
remaining Pre-Funded Amount, the remaining Reserve Amount and the
amount on deposit in the Class A-1 Holdback Subaccount;
(viii) for the Payment Date on or immediately following the
end of the Funding Period, the Class A-1 Prepayment Amount, the Class
A-2 Prepayment Amount, the Class A-3 Prepayment Amount, the Class A-4
Prepayment Amount, the Class A-5 Prepayment Amount, the Class A-1
Prepayment Premium, the Class A-2 Prepayment Premium, the Class A-3
Prepayment Premium, the Class A-4 Prepayment Premium and the Class A-5
Prepayment Premium, if any, and the remaining Reserve Amount that has
not been distributed pursuant to Section 4.6 or to the Depositor; and
(ix) the Note Pool Factor with respect to each class of Notes
(after giving effect to distributions made on such Payment Date).
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Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a
Note.
(b) Note Owners may obtain copies of the statements delivered by
the Indenture Trustee pursuant to subsection (a) above upon written request
to the Indenture Trustee at its Corporate Trust Office (together with a
certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof).
SECTION 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture Trustee, in
holding all funds in the Trust Accounts and in making distributions as
provided in this Agreement, shall act solely on behalf of and as agent for
the Noteholders.
SECTION 4.11. ELIGIBLE ACCOUNTS. Any account which is required to
be established as an Eligible Account pursuant to this Agreement and which
ceases to be an Eligible Account shall within five Business Days (or such
longer period, not to exceed 30 days, as to which each Rating Agency and the
Security Insurer may consent) be established as a new account which shall be
an Eligible Account and any cash and/or any investments shall be transferred
to such new account.
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to
any Determination Date shall state that the amount of Available Funds with
respect to such Determination Date is less than the sum of the amounts
payable on the related Distribution Date pursuant to clauses (i) through (vi)
of Section 4.6, then on the Draw Date immediately preceding such Distribution
Date, the Indenture Trustee, in accordance with written instructions, shall
(i) withdraw amounts on deposit in the Reserve Account, other than any funds
in the Class A-1 Holdback Subaccount (up to the amount by which the amounts
payable on the related Distribution Date pursuant to clauses (i) through (vi)
of Section 4.6 exceed the amount of Available Funds with respect to such
Determination Date) and (ii) deposit the amounts so withdrawn from the
Reserve Account into the Collection Account. On each Distribution Date, any
funds on deposit in the Reserve Account (other than funds on deposit in the
Class A-1 Holdback Subaccount) in excess of the Requisite Reserve Amount
(after giving effect to any withdrawals on the immediately preceding Draw
Date as described above) shall be paid to the Depositor.
(b) In the event that the Servicer's Certificate with respect to
the Determination Date related to the Class A-1 Final Scheduled Distribution
Date shall state that the unpaid principal balance of the Class A-1 Notes
(after giving effect to the distribution of the Available Funds pursuant to
clauses (i) - (v) of Section 4.6 for such Distribution Date), is greater than
zero, then on the Draw Date immediately preceding such Distribution Date the
Indenture
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Trustee, in accordance with written instructions, shall withdraw an amount
equal to such unpaid principal balance from funds on deposit in the Class A-1
Holdback Subaccount (or the amount of funds on deposit in the Class A-1
Holdback Subaccount, if less) and deposit such funds in the Note Distribution
Account for distribution to the Class A-1 Noteholders on such Distribution
Date. Funds in the Class A-1 Holdback Subaccount shall not be available to
pay any other amounts. Any funds remaining in the Class A-1 Holdback
Subaccount, after withdrawal of any such amount on the Class A-1 Final
Scheduled Distribution Date, shall be released to the Depositor.
SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to
any Determination Date shall state that the Deficiency Claim Amount (as
defined below) with respect to the related Distribution Date is greater than
zero, then on the Deficiency Claim Date immediately preceding such
Distribution Date, the Indenture Trustee shall deliver to the Collateral
Agent, the Security Insurer, the Fiscal Agent, if any, the Owner Trustee and
the Servicer, by hand delivery, telex or facsimile transmission, a written
notice (a "Deficiency Notice"). Such Deficiency Notice shall direct the
Collateral Agent to remit such Deficiency Claim Amount (to the extent of the
funds available to be distributed pursuant to the Spread Account Agreement)
to the Indenture Trustee for deposit in the Collection Account. The
"Deficiency Claim Amount" with respect to any Distribution Date shall equal
the excess, if any, of
(i) the amount required to be distributed pursuant to clauses
(i) - (vi) of Section 4.6 (without giving effect to the limitation of
the Distribution Amount specified in each such clause) over
(ii) the sum of (A) the Actual Funds with respect to such
Distribution Date, plus (B) if such Distribution Date is the Class A-1
Final Scheduled Distribution Date, the amount, if any, withdrawn from
the Class A-1 Holdback Subaccount and deposited in the Note Distribution
Account pursuant to Section 5.1(b).
(b) any Deficiency Notice shall be delivered by 10:00 a.m., New
York City time, on the fourth Business Day preceding such Distribution Date.
The amounts distributed by the Collateral Agent to the Indenture Trustee
pursuant to a Deficiency Notice shall be deposited by the Indenture Trustee
into the Collection Account pursuant to Section 4.5.
ARTICLE VI
THE SELLER
SECTION 6.1. LIABILITY OF SELLER.
(a) The Seller shall be liable hereunder only to the extent of
the obligations in this Agreement specifically undertaken by the Seller and the
representations made by the Seller.
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SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION.
(a) The Seller shall not merge or consolidate with any other Person
or permit any other Person to become the successor to the Seller's business
without (so long as an Insurer Default shall not have occurred and be
continuing) the prior written consent of the Security Insurer. The
certificate of incorporation of any corporation (i) into which the Seller may
be merged or consolidated, (ii) resulting from any merger or consolidation to
which the Seller shall be a party, or (iii) succeeding to the business of
Seller, shall contain provisions relating to limitations on business and
other matters substantively identical to those contained in the Seller's
certificate of incorporation. Any such successor corporation shall execute an
agreement of assumption of every obligation of the Seller under this
Agreement and each Related Document and, whether or not such assumption
agreement is executed, shall be the successor to the Seller under this
Agreement without the execution or filing of any document or any further act
on the part of any of the parties to this Agreement. The Seller shall provide
prompt notice of any merger, consolidation or succession pursuant to this
Section 6.2 to the Owner Trustee, the Indenture Trustee, the Security Insurer
and the Rating Agencies. Notwithstanding the foregoing, the Seller shall not
merge or consolidate with any other Person or permit any other Person to
become a successor to the Seller's business, unless (x) immediately after
giving effect to such transaction, no representation or warranty made
pursuant to Section 2.5 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become a Servicer Termination Event shall have occurred and be
continuing, (y) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and the Security Insurer an officer's certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.2 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Seller shall have delivered
to the Owner Trustee, the Indenture Trustee and the Security Insurer an
Opinion of Counsel, stating that, in the opinion of such counsel, either (A)
all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Trust Property and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) The Seller hereby agrees that it shall not (i) take any action
prohibited by Article XVI of its certificate of incorporation or (ii) without
the prior written consent of the Owner Trustee and the Indenture Trustee and
(so long as an Insurer Default shall not have occurred and be continuing) the
Security Insurer and without giving prior written notice to the Rating
Agencies, amend Article III, Article IX, Article XIV or Article XVI of its
certificate of incorporation.
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The
Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its
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obligations as Seller of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.
SECTION 6.4. SELLER MAY OWN NOTES. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become
the owner or pledgee of Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof except as otherwise specifically
provided herein or in the Related Documents. Notes so owned by or pledged to
the Seller or such Affiliate shall have an equal and proportionate benefit
under the provisions of this Agreement or any Related Document, without
preference, priority, or distinction as among all of the Notes, provided that
any Notes owned by the Seller or any Affiliate thereof, during the time such
Notes are owned by them, shall be without voting rights for any purpose set
forth in this Agreement or any Related Document. The Seller shall notify the
Owner Trustee, the Indenture Trustee and the Security Insurer promptly after
it or any of its Affiliates become the owner or pledgee of a Note.
ARTICLE VII
THE SERVICER
SECTION 7.1. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such and, in the case of AFL,
without limitation of its obligations under the Purchase Agreement) shall be
liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Servicer and the representations made by the
Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees,
and the Noteholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of any
Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any taxes that may at any time be
asserted against the Trust, the Owner Trustee, the Indenture Trustee, the
Backup Servicer, the Security Insurer or the Noteholders with respect to the
transactions contemplated in this Agreement, including, without limitation,
any sales, gross receipts, withholding, general corporation, tangible
personal property, privilege or license taxes (but not including (i) income
taxes on fees and expenses payable to the Owner Trustee, the Indenture
Trustee, the Backup Servicer or the Security Insurer, (ii) income taxes
arising out of distributions on the Notes or (iii) transfer taxes arising in
connection with transfers of Notes).
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(d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon the Trust, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer or the Noteholders through the breach of this Agreement, the
negligence, willful misfeasance, or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless the
Owner Trustee, in its individual capacity, its officers, directors, agents
and employees, from and against all costs, taxes (other than income taxes on
fees and expenses payable to the Owner Trustee), expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained in the Trust
Agreement and the Related Documents, except to the extent that such cost,
taxes (other than income taxes), expense, loss, claim, damage or liability
(A) is due to the willful misfeasance or gross negligence of the Owner
Trustee, or (B) arises from the Owner Trustee's breach of any of its
representations or warranties set forth in Section 6.2 of the Trust
Agreement; PROVIDED, HOWEVER, that amounts payable under this paragraph shall
be increased by the amount of income taxes actually paid by the Owner Trustee
in respect of any indemnity payment unless the Owner Trustee received or can
reasonably be expected to receive a tax deduction for the related loss or
cost.
(f) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer has made any indemnity payments pursuant to this
Article and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts collected to the
Servicer, without interest.
(g) AFL, in its individual capacity, hereby acknowledges that the
indemnification provisions in the Purchase Agreement benefiting the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer and the
Security Insurer are enforceable by each hereunder.
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any other
person, convey, transfer or lease substantially all its assets as an entirety
to another Person, or 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 shall be an
Eligible Servicer and shall be capable of fulfilling the duties of the
Servicer contained in this Agreement. Any corporation (i) into which the
Servicer may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Servicer shall be a party, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of the
Servicer, or (iv) succeeding to the business of the Servicer, in any of the
foregoing cases shall execute an agreement of
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assumption to perform every obligation of the Servicer under this Agreement
and, whether or not such assumption agreement is executed, shall be the
successor to the Servicer under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to
this Agreement, anything in this Agreement to the contrary notwithstanding;
PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release
the Servicer from any obligation. The Servicer shall provide notice of any
merger, consolidation or succession pursuant to this Section 7.2(a) to the
Owner Trustee, the Indenture Trustee, the Security Insurer and each Rating
Agency. Notwithstanding the foregoing, the Servicer shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Servicer's business, unless (x) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.6 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become an Insurance Agreement Event of Default shall have
occurred and be continuing, (y) the Servicer shall have delivered to the
Owner Trustee, the Indenture Trustee and the Security Insurer an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this
Section 7.2(a) and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and (z)
the Servicer shall have delivered to the Owner Trustee, the Indenture Trustee
and the Security Insurer an Opinion of Counsel, stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Owner Trustee in the
Trust Property and reciting the details of the filings or (B) no such action
shall 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 shall 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 shall 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, shall 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 shall be deemed to release the Backup
Servicer from any obligation.
SECTION 7.3. 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 shall be under any liability to the Trust, or the Noteholders,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER,
that this provision shall not protect 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, by
reason of reckless disregard of obligations and duties under this Agreement
or any violation of
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law by the Servicer, Backup Servicer or such person, as the case may be;
PROVIDED FURTHER, that this provision shall not affect any liability to
indemnify the Owner Trustee and the Indenture Trustee for costs, taxes,
expenses, claims, liabilities, losses or damages paid by the Owner Trustee or
the Indenture Trustee, each in its individual capacity. 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 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 shall not be liable for any obligation of
the Servicer contained in this Agreement, and the Owner Trustee, the
Indenture Trustee, the Seller, the Security Insurer and the Noteholders shall
look only to the Servicer to perform such obligations.
SECTION 7.4. DELEGATION OF DUTIES. The Servicer may delegate duties
under this Agreement to an Affiliate of AFL with the prior written consent of
the Security Insurer, the Indenture Trustee, the Owner Trustee and the Backup
Servicer. The Servicer also may at any time perform the specific duty of
repossession of Financed Vehicles through sub-contractors who are in the
business of servicing automotive receivables and may perform other specific
duties through such sub-contractors with the prior written consent of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing), PROVIDED, HOWEVER, that no such delegation or sub-contracting
duties by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties. So long as no Insurer Default shall have occurred and
be continuing, neither AFL or any party acting as Servicer hereunder shall
appoint any subservicer hereunder without the prior written consent of the
Security Insurer, the Indenture Trustee, the Owner Trustee and the Backup
Servicer.
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to
the provisions of Section 7.2, neither the Servicer nor the Backup Servicer
shall 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 Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or Note Majority
(if an Insurer Default shall have occurred and be 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 Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered and reasonably acceptable to the
Owner Trustee, the Indenture Trustee and the Security Insurer (unless an
Insurer Default shall have occurred and be continuing). No resignation of the
Servicer shall become effective until, so long as no Insurer Default shall
have occurred and be continuing, the Backup Servicer or an entity acceptable
to the Security Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if an Insurer Default shall have occurred and
be continuing, the Backup Servicer or a successor Servicer that is an
Eligible Servicer shall have assumed the responsibilities and obligations of
the Servicer. No resignation of the Backup Servicer shall become effective
until, so long as no Insurer Default shall have occurred and be continuing,
an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of
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the Backup Servicer or, if an Insurer Default shall have occurred and be
continuing, a Person that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Backup Servicer; PROVIDED, HOWEVER,
that 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 7.5, the Backup
Servicer may petition a court for its removal.
SECTION 7.6. ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER. The
successor Servicer, if Norwest Bank Minnesota, National Association, its
successors or assigns, shall have no obligation to perform any repurchase or
advancing obligations, if any, of the Servicer hereunder.
ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Indenture
Trustee for distribution to Noteholders any proceeds or payment required
to be so delivered under the terms of this Agreement (or, if AFL is the
Servicer, the Purchase 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 shall have occurred
and be continuing) the Security Insurer or after discovery of such
failure by a Responsible Officer of the Servicer; or
(b) Failure by the Servicer to deliver to the Indenture
Trustee, the Owner Trustee and (so long as an Insurer Default shall not
have occurred and be continuing) the Security Insurer, the Servicer's
Certificate by the fourth Business Day prior to the Distribution Date,
or failure on the part of the Servicer to observe its covenants and
agreements set forth in Section 7.2(a); or
(c) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement (or, if AFL is the Servicer, 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 Security Insurer (unless an
Insurer Default shall have occurred and be 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, shall
have been given to the Servicer by the Owner Trustee, the Indenture
Trustee or the Security Insurer (or, if an Insurer Default shall have
occurred and be continuing, any Noteholder); or
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(d) (i) The commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar law
and such case is not dismissed within 60 days; or (ii) the entry of a
decree or order for relief by a court or regulatory authority having
jurisdiction in respect of the Servicer or the Seller in an involuntary
case under the federal bankruptcy laws, as now or hereafter in effect,
or another present or future, federal or state, bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or the
Seller or of any substantial part of their respective properties or
ordering the winding up or liquidation of the affairs of the Servicer or
the Seller; or
(e) The commencement by the Servicer or the Seller of a
voluntary case under the federal bankruptcy laws, as now or hereafter in
effect, or any other present or future, federal or state, bankruptcy,
insolvency or similar law, or the consent by the Servicer or the Seller
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the Servicer or the Seller or of any substantial part of its property or
the making by the Servicer or the Seller of an assignment for the
benefit of creditors or the failure by the Servicer or the Seller
generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer or the Seller in furtherance of any of
the foregoing; or
(f) Any representation, warranty or statement of the Servicer
or the Seller made in this Agreement or any certificate, report or other
writing delivered pursuant hereto shall prove to be incorrect in any
material respect as of the time when the same shall have been made
(excluding, however, any representation or warranty set forth in Section
2.5(a)), and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust and, within 30 days
after written notice thereof shall have been given to the Servicer or
the Seller by the Owner Trustee, the Indenture Trustee or the Security
Insurer (or, if an Insurer Default shall have occurred and be
continuing, a Noteholder), the circumstances or condition in respect of
which such representation, warranty or statement was incorrect shall not
have been eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have occurred and
be continuing, the Security Insurer shall not have delivered a Servicer
Extension Notice pursuant to Section 3.14 (in which case the Servicer
Termination Event will be deemed to have occurred as of the last day of
the term of the most recent Servicer Extension Notice received); or
(h) So long as an Insurer Default shall not have occurred and
be continuing, an Insurance Agreement Event of Default shall have
occurred; or
(i) A claim is made under the Note Policy.
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing,
either the Indenture Trustee, the Owner Trustee, or a Note
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Majority), by notice given in writing to the Servicer (and to the Indenture
Trustee, the Backup Servicer and the Owner Trustee if given by the Security
Insurer or the Noteholders) may terminate all of the rights and obligations
of the Servicer under this Agreement. On or after (i) the receipt by the
Servicer of such written notice, or (ii) the receipt by the Backup Servicer
(or any alternate successor servicer appointed by the Security Insurer
pursuant to Section 8.3(b)) of written notice from the Security Insurer that
the Security Insurer is not extending the Servicer's term pursuant to Section
3.14, all authority, power, obligations and responsibilities of the Servicer
under this Agreement, whether with respect to the Notes or the Trust Property
or otherwise, shall be terminated and automatically shall pass to, be vested
in and become obligations and responsibilities of the Backup Servicer (or
such other successor Servicer appointed by the Security Insurer); PROVIDED,
HOWEVER, that the successor Servicer shall 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 Trust Property and
related documents to show the Owner Trustee as lienholder or secured party on
the related Lien Certificates, or otherwise. The terminated Servicer agrees
to cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the 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 or a successor Servicer to service the
Receivables and the other Trust Property. If requested by the Security
Insurer (unless an Insurer Default shall have occurred and be continuing),
the successor Servicer shall terminate the Lockbox Agreement and direct the
Obligors to make all payments under the Receivables directly to the successor
Servicer (in which event the successor Servicer shall process such payments
in accordance with Section 3.2(e)), or to a lockbox established by the
successor Servicer at the direction of the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), at the successor
Servicer's expense. In addition to any other amounts that are then payable to
the terminated Servicer under this Agreement, the terminated Servicer shall
then be entitled to receive out of Available Funds reimbursements for any
Outstanding Monthly Advances (in accordance with Section 4.4(c)) made during
the period prior to the notice pursuant to this Section 8.2 which terminates
the obligation and rights of the terminated Servicer under this Agreement.
The Owner Trustee, the Indenture Trustee and the successor Servicer may set
off and deduct any amounts owed by the terminated Servicer from any amounts
payable to the terminated Servicer pursuant to the preceding sentence. The
terminated Servicer shall grant the Owner Trustee, the Indenture Trustee, the
successor Servicer and the Security Insurer reasonable access to the
terminated Servicer's premises at the terminated Servicer's expense.
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SECTION 8.3. APPOINTMENT OF SUCCESSOR.
(a) On and after (i) the time the Servicer receives a notice of
termination pursuant to Section 8.2, or (ii) the resignation of the Servicer
pursuant to Section 7.5, or (iii) the receipt by the Backup Servicer (or any
alternate successor servicer appointed by the Security Insurer pursuant to
Section 8.3(b)) of written notice from the Security Insurer that the Security
Insurer is not extending the Servicer's term pursuant to Section 3.14, the
Backup Servicer (unless the Security Insurer shall have exercised its option
pursuant to Section 8.3(b) to appoint an alternate successor Servicer) shall
be the successor in all respects to the Servicer in its capacity as servicer
under this Agreement and the transactions set forth or provided for in this
Agreement, and shall be subject to all the responsibilities, restrictions,
duties, liabilities and termination provisions relating thereto placed on the
Servicer by the terms and provisions of this Agreement. The Owner Trustee and
such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. If a successor Servicer
is acting as Servicer hereunder, it shall be subject to termination under
Section 8.2 upon the occurrence of any Servicer Termination Event applicable
to it as Servicer and shall serve from term to term as provided in Section
3.14.
(b) The Security Insurer may (so long as an Insurer Default shall
not have occurred and be continuing) 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) shall have no liability to the Owner
Trustee, the Indenture Trustee, AFL, the Seller, the Person then serving as
Backup Servicer, any Noteholders, any Note Owner or any other Person if it
does so. Notwithstanding the above, if the Backup Servicer shall be legally
unable or unwilling to act as Servicer and an Insurer Default shall have
occurred and be continuing, the Backup Servicer, the Indenture Trustee, a
Note Majority or the Owner Trustee 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 shall act as successor Servicer unless it is legally unable to do
so, in which event the outgoing Servicer shall continue to act as Servicer
until a successor has been appointed and accepted such appointment. Subject
to Section 7.5, no provision of this Agreement shall be construed as
relieving the Backup Servicer of its obligation to succeed as successor
Servicer upon the termination of the Servicer pursuant to Section 8.2 or the
resignation of the Servicer pursuant to Section 7.5. If upon the termination
of the Servicer pursuant to Section 8.2 or the resignation of the Servicer
pursuant to Section 7.5, the Security Insurer appoints a successor Servicer
other than the Backup Servicer, the Backup Servicer shall not be relieved of
its duties as Backup Servicer hereunder.
(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not
resigned or been terminated hereunder, except that the Basic Servicing Fee
Rate for such successor Servicer shall be calculated on a pro rata basis at
the rate of 1.00% per annum for all loans originated under AFL's "Premier"
program and 1.50% per annum for all loans originated under AFL's "Classic"
program. If any successor Servicer is appointed as a result of the Backup
Servicer's refusal (in contravention of the terms of this Agreement) to act
as Servicer although it is legally able to do so, the Security Insurer and
such
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successor Servicer may agree on reasonable additional compensation to be paid
to such successor Servicer by the Backup Servicer, which additional
compensation shall be paid by the Backup Servicer in its individual capacity
and solely out of its own funds. If any successor Servicer is appointed for
any reason other than the Backup Servicer's refusal to act as Servicer
although legally able to do so, the Security Insurer and such successor
Servicer may agree on additional compensation to be paid to such successor
Servicer, which additional compensation shall be payable as provided in the
Spread Account Agreement. If the Backup Servicer is the successor Servicer,
the Backup Servicer shall be entitled to reimbursement, pursuant to Section
4.6(ii), of reasonable transition expenses, not in excess of $100,000,
incurred in acting as successor Servicer. In addition, any successor Servicer
shall be entitled to reimbursement, as provided in the Spread Account
Agreement, of reasonable transition expenses incurred in acting as successor
Servicer.
SECTION 8.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination of,
or appointment of a successor to, the Servicer pursuant to this Article VIII,
the Indenture Trustee shall give prompt written notice thereof to Noteholders
at their respective addresses appearing in the Note Register.
SECTION 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer (or, if
an Insurer Default shall have occurred and be continuing, a Note Majority)
may, on behalf of all Holders of Notes, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
Nothing in this Section 8.5 shall preclude the Security Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Note Majority) from
waiving any default for a period of time or subject to any contingency or
from waiving some but not all of the consequences of such default.
ARTICLE IX
TERMINATION
SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION OF
TRUST ESTATE.
(a) On each Determination Date as of which the Aggregate Principal
Balance is less than 10% of the Original Pool Balance, the Servicer and the
Seller each shall have the option to purchase the corpus of the Trust (with
the consent of the Security Insurer, if a claim has previously been made
under the Note Policy or if such purchase would result in a claim on the Note
Policy or if such purchase would result in any amount owing to the Security
Insurer remaining unpaid); PROVIDED, HOWEVER, that the amount to be paid for
such purchase (as set forth in the following sentence) shall be sufficient to
pay the full amount of principal, premium, if any, and interest then due and
payable on the Notes. To exercise such option, the Servicer or the Seller, as
the case may be, shall pay the aggregate Purchase Amounts for the
Receivables, plus
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the appraised value of any other property (including the right to receive any
future recoveries) held as part of the Trust, such appraisal to be conducted
by an appraiser mutually agreed upon by the Servicer or the Seller, as the
case may be, and the Security Insurer (or the Indenture Trustee, if an
Insurer Default shall have accrued and be continuing), and shall succeed to
all interests in and to the Trust Property. The fees and expenses related to
such appraisal shall be paid by the party exercising the option to purchase.
The party exercising such option to repurchase shall deposit the aggregate
Purchase Amounts for the Receivables and the amount of the appraised value of
any other property held as part of the Trust into the Collection Account, and
the Indenture Trustee shall distribute the amounts so deposited in accordance
with Section 4.6.
(b) Upon any sale of the assets of the Trust pursuant to Section
8.2 of the Trust Agreement, the Owner Trustee shall instruct the Indenture
Trustee in writing to deposit the proceeds from such sale after all payments
and reserves therefrom have been made (the "Insolvency Proceeds") in the
Collection Account. On the Distribution Date on which the Insolvency Proceeds
are deposited in the Collection Account (or, if such proceeds are not so
deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Owner Trustee shall instruct the Indenture
Trustee in writing to make the following deposits (after the application on
such Distribution Date of the Available Funds) from the Insolvency Proceeds:
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into
the Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Class A-1
Prepayment Premium, Class A-2 Prepayment Premium, Class A-3 Prepayment
Premium, Class A-4 Prepayment Premium and Class A-5 Prepayment Premium
(only to the extent of the amount of Liquidated Damages (as defined in
the Purchase Agreement) received by the Trust from the Seller); and
(iii) to the Note Distribution Account, the outstanding
principal balance of the Notes (after giving effect to the reduction in
the outstanding principal balance of the Notes to result from the
deposits otherwise made in the Note Distribution Account on such
Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid, first, to the Security Insurer, to the extent of any amounts owing to
the Security Insurer under the Insurance Agreement and not paid, whether or
not AFL is obligated to pay such amounts, and second to the Collateral Agent
for deposit in the Spread Account.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee and the Indenture Trustee as soon as
practicable after the Servicer has received notice thereof.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT.
(a) This Agreement may be amended by the Seller, the Servicer and
the Trust, with the prior written consent of the Indenture Trustee and the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) but without the consent of any of the Noteholders, (i) to cure
any ambiguity, (ii) to correct or supplement any provisions in this Agreement
or (iii) for the purpose of adding any provision to or changing in any manner
or eliminating any provision of this Agreement or of modifying in any manner
the rights of the Noteholders; PROVIDED, HOWEVER, that such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of the Noteholders.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Trust with the prior written consent of the
Indenture Trustee and the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) and with the consent of a Note
Majority (which consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such Note
and of any Note issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the Note)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Notes; PROVIDED, HOWEVER, that, subject
to the express rights of the Security Insurer under the Related Documents,
including its rights to agree to certain modifications of the Receivables
pursuant to Section 3.2 and its rights to cause the Indenture Collateral
Agent to liquidate the Collateral under the circumstances and subject to the
provisions of Section 5.04 of the Indenture, no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions required
to be made on any Note or the Class A-1 Interest Rate, Class A-2 Interest
Rate, Class A-3 Interest Rate, Class A-4 Interest Rate or Class A-5 Interest
Rate, (b) amend any provisions of Section 4.6 in such a manner as to affect
the priority of payment of interest, principal or premium to Noteholders, or
(c) reduce the aforesaid percentage required to consent to any such amendment
or any waiver hereunder, without the consent of the Holders of all Notes then
outstanding.
(c) Prior to the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Indenture Trustee.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be
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sufficient if such consent shall 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 the execution
thereof by Noteholders shall be subject to such reasonable requirements as
the Indenture Trustee may prescribe, including the establishment of record
dates.
(f) Prior to the execution of any amendment to this Agreement, the
Owner Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement, in addition to the Opinion of Counsel referred
to in Section 10.2(i). The Owner Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Owner Trustee's own rights,
duties or immunities under this Agreement or otherwise.
SECTION 10.2. PROTECTION OF TITLE TO TRUST PROPERTY.
(a) The Servicer shall execute and file such financing statements
and cause to be executed and filed such continuation and other statements,
all in such manner and in such places as may be required by law fully to
preserve, maintain and protect the interest of the Trust, the Owner Trustee
and the Indenture Collateral Agent in the Trust Property and in the proceeds
thereof. The Servicer shall deliver (or cause to be delivered) to the Owner
Trustee, the Indenture Collateral Agent and the Security Insurer file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing.
(b) Neither the Seller, the Servicer nor the Trust shall change its
name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed by the
Seller in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless it shall have given the Owner
Trustee, the Indenture Trustee and the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) at least 60 days'
prior written notice thereof, and shall promptly file appropriate amendments
to all previously filed financing statements and continuation statements.
(c) Each of the Seller, the Servicer and the Trust shall give the
Owner Trustee, the Indenture Trustee and the Security Insurer at least 60
days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The
Servicer shall at all times maintain each office from which it services
Receivables and its principal executive office within the United States of
America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection
Account in respect of such Receivable.
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(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Trust, the Servicer's master computer records (including any backup archives)
that refer to any Receivable indicate clearly (with reference to the
particular trust) that the Receivable is owned by the Trust. Indication of
the Trust's ownership of a Receivable shall be deleted from or modified on
the Servicer's computer systems when, and only when, the Receivable has been
paid in full or repurchased by the Seller or Servicer.
(f) If at any time the Seller or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender or
other transferee computer tapes, records or print-outs (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 by the Seller or Servicer.
(g) The Servicer shall permit the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer and their respective
agents, at any time to inspect, audit and make copies of and abstracts from
the Servicer's records regarding any Receivables or any other portion of the
Trust Property.
(h) The Servicer shall furnish to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and the Security Insurer at any time upon
request a list of all Receivables 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. Upon request, the Servicer shall
furnish a copy of any list to the Seller. The Owner Trustee shall hold any
such list and Schedule of Receivables for examination by interested parties
during normal business hours at the Corporate Trust Office upon reasonable
notice by such Persons of their desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Owner Trustee,
the Indenture Trustee and the Security Insurer simultaneously with the
execution and delivery of this Agreement and of each amendment thereto and
upon the occurrence of the events giving rise to an obligation to give notice
pursuant to Section 10.2(b) or (c), an Opinion of Counsel either (a) stating
that, in the opinion of such Counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Owner Trustee and the Indenture
Collateral Agent in the Receivables and the other Trust Property, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (b) stating that, in the opinion
of such counsel, no such action is necessary to preserve and protect such
interest.
(j) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and the Security Insurer, within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning more than
three months after the Closing Date, an Opinion of Counsel, either (a)
stating that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and
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protect the interest of the Trust and the Indenture Collateral Agent in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (b) stating that, in
the opinion of such counsel, no action shall be necessary to preserve and
protect such interest.
SECTION 10.3. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of laws thereof and the obligations,
rights and remedies of the parties under this Agreement shall be determined
in accordance with such laws.
SECTION 10.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Notes
or the rights of the Holders thereof.
SECTION 10.5. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 7.2 or Section 8.2
(and as provided in the provisions of the Agreement concerning the
resignation of the Servicer and the Backup Servicer), this Agreement may not
be assigned by the Seller or the Servicer without the prior written consent
of the Owner Trustee, the Indenture Trustee and the Security Insurer (or, if
an Insurer Default shall have occurred and be continuing, the Owner Trustee,
the Indenture Trustee and a Note Majority).
SECTION 10.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Security Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this
Agreement, and shall be entitled to rely upon and directly to enforce such
provisions of this Agreement so long as no Insurer Default shall have
occurred and be continuing. Nothing in this Agreement, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement. Except as expressly stated otherwise herein or in the Related
Documents, any right of the Security Insurer to direct, appoint, consent to,
approve of, or take any action under this Agreement, shall be a right
exercised by the Security Insurer in its sole and absolute discretion.
SECTION 10.7. DISCLAIMER BY SECURITY INSURER. The Security Insurer
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Note Policy) upon delivery of a written
notice to the Owner Trustee and the Indenture Trustee.
SECTION 10.8. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
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SECTION 10.9. INTENTION OF PARTIES. The execution and delivery of
this Agreement shall constitute an acknowledgment by the Seller, that it is
intended that the assignment and transfer herein contemplated constitute a
sale and assignment outright, and not for security, of the Receivables and
the other Trust Property, conveying good title thereto free and clear of any
Liens, from the Seller to the Trust, and that the Receivables and the other
Trust Property shall not be a part of the Seller's estate in the event of the
insolvency, receivership, conservatorship or the occurrence of another
similar event, of, or with respect to, the Seller. In the event that such
conveyance is determined to be made as security for a loan made by the Trust
to the Seller, the Seller intends that it shall have granted to the Owner
Trustee a first priority security interest in all of the Seller's right,
title and interest in and to the Trust Property conveyed to the Trust
pursuant to Sections 2.1 and 2.4 of this Agreement, and that this Agreement
shall constitute a security agreement under applicable law.
SECTION 10.10. NOTICES. All demands, notices and communications
under this Agreement shall be in writing, personally delivered, sent by
facsimile or mailed by certified mail-return receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of AFL, the
Seller or the Servicer, at the following address: Arcadia Receivables Finance
Corp., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, with copies to: Arcadia Financial Ltd., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇- 2435, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, (b) in
the case of the Owner Trustee, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Administration, (c) in
the case of the Indenture Trustee and, for so long as the Indenture Trustee
is the Backup Servicer or the Collateral Agent, at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust
Services--Asset Backed Administration, (d) in the case of each Rating Agency,
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (for ▇▇▇▇▇'▇) and ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (for Standard & Poor's), Attention: Asset-Backed
Surveillance, and (e) in the case of the Security Insurer, Financial Security
Assurance Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Surveillance Department, Telex No.: (▇▇▇) ▇▇▇-▇▇▇▇, Confirmation: (212)
826-0100, Telecopy Nos.: (▇▇▇) ▇▇▇-▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇ (in each case in
which notice or other communication to Financial Security refers to an Event
of Default, a claim on the Note Policy or with respect to which failure on
the part of Financial Security to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication
should also be sent to the attention of the General Counsel and the
Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register, and any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Noteholder receives such notice.
SECTION 10.11. LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Trust under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of
the Trust is made and
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intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (c) nothing herein contained shall be construed as creating
any liability on Wilmington Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement
and by any person claiming by, through or under them and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under this Agreement or any related documents.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Issuer, the Seller, AFL, the Servicer and
the Backup Servicer have caused this Sale and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1999-B
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Administrative Account Manager
SELLER:
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and Chief Financial
Officer
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President and Chief
Financial Officer
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
------------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Corporate Trust Officer
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Corporate Trust Officer
SCHEDULE A
REPRESENTATIONS AND WARRANTIES OF SELLER AND AFL
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and such Dealer had all necessary
licenses and permits to originate Receivables in the state where such Dealer
was located, was fully and properly executed by the parties thereto, was
purchased by AFL from such Dealer under an existing Dealer Agreement with AFL
and was validly assigned by such Dealer to AFL, (B) contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral security, and
(C) is fully amortizing and provides for level monthly payments (provided
that the payment in the first Monthly Period and the final Monthly Period of
the life of the Receivable may be minimally different from the level payment)
which, if made when due, shall fully amortize the Amount Financed over the
original term.
2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by
a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.
3. COMPLIANCE WITH LAW. All requirements of applicable federal,
state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.
4. ORIGINATION. Each Receivable was originated in the United States.
5. BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law
and (B) as such Receivable may be modified by the application after the
Initial Cutoff Date or any Subsequent Cutoff Date, as the case may be, of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties
to each Receivable had full legal capacity to execute and deliver such
Receivable and all other documents related thereto and to grant the security
interest purported to be granted thereby.
S-A-1
6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America or any State or any agency, department, subdivision or
instrumentality thereof.
7. OBLIGOR BANKRUPTCY. At the Initial Cutoff Date or each
Subsequent Cutoff Date, as applicable, no Obligor had been identified on the
records of AFL as being the subject of a current bankruptcy proceeding.
8. SCHEDULE OF RECEIVABLES. The information set forth in the
Schedule of Receivables has been produced from the Electronic Ledger and was
true and correct in all material respects as of the close of business on the
Initial Cutoff Date or each Subsequent Cutoff Date, as applicable.
9. MARKING RECORDS. By the Closing Date or by each Subsequent
Transfer Date, the Seller will have caused the portions of the Electronic
Ledger relating to the Receivables to be clearly and unambiguously marked to
show that the Receivables constitute part of the Trust Property and are owned
by the Trust in accordance with the terms of the Agreement.
10. COMPUTER TAPE. The Computer Tape made available by the Seller
to the Owner Trustee on the Closing Date or on each Subsequent Transfer Date
was complete and accurate as of the Initial Cutoff Date or Subsequent Cutoff
Date, as applicable, and includes a description of the same Receivables that
are described in the Schedule of Receivables.
11. ADVERSE SELECTION. No selection procedures adverse to the
Noteholders were utilized in selecting the Receivables from those receivables
owned by AFL which met the selection criteria contained in the Sale and
Servicing Agreement.
12. CHATTEL PAPER. The Receivables constitute chattel paper within
the meaning of the UCC as in effect in the States of Minnesota and New York.
13. ONE ORIGINAL. There is only one original executed copy of each
Receivable.
14. RECEIVABLE FILES COMPLETE. There exists a Receivable File
pertaining to each Receivable and such Receivable File contains (a) a fully
executed original of the Receivable, (b) a certificate of insurance,
application form for insurance signed by the Obligor, or a signed
representation letter from the Obligor named in the Receivable pursuant to
which the Obligor has agreed to obtain physical damage insurance for the
related financial vehicle, or copies thereof, (c) the original Lien
Certificate or application therefor and (d) a credit application signed by
the Obligor, or a copy thereof. Each of such documents which is required to
be signed by the Obligor has been signed by the Obligor in the appropriate
spaces. All blanks on any form have been properly filled in and each form has
otherwise been correctly prepared. The complete Receivable File for each
Receivable currently is in the possession of the Custodian.
15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been
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waived, altered or modified in any respect since its origination, except by
instruments or documents identified in the Receivable File. No Receivable has
been modified as a result of application of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or pursuant to transfers of the Notes.
17. GOOD TITLE. No Receivable has been sold, transferred, assigned
or pledged by AFL to any Person other than the Seller or by the Seller to any
Person other than the Trust; immediately prior to the conveyance of the
Receivables pursuant to the Purchase Agreement, AFL was the sole owner of and
had good and indefeasible title thereto, free and clear of any Lien;
immediately prior to the conveyance of the Receivables to the Trust pursuant
to this Agreement or any Subsequent Purchase Agreement, as applicable, the
Seller was the sole owner thereof and had good and indefeasible title
thereto, free of any Lien and, upon execution and delivery of this Agreement
or any Subsequent Purchase Agreement, as applicable, by the Seller, the Trust
shall have good and indefeasible title to and will be the sole owner of such
Receivables, free of any Lien. No Dealer has a participation in, or other
right to receive, proceeds of any Receivable. Neither AFL nor the Seller has
taken any action to convey any right to any Person that would result in such
Person having a right to payments received under the related Insurance
Policies or the related Dealer Agreements or Dealer Assignments or to
payments due under such Receivables.
18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable created
or shall create a valid, binding and enforceable first priority security
interest in favor of AFL in the Financed Vehicle. The Lien Certificate and
original certificate of title for each Financed Vehicle show, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of the
Closing Date or any Subsequent Transfer Date, as applicable, and will show
AFL named as the original secured party under each Receivable as the holder
of a first priority security interest in such Financed Vehicle. With respect
to each Receivable for which the Lien Certificate has not yet been returned
from the Registrar of Titles, AFL has received written evidence from the
related Dealer that such Lien Certificate showing AFL as first lienholder has
been applied for. AFL's security interest has been validly assigned by AFL to
the Seller and by the Seller to the Owner Trustee pursuant to this Agreement
or any Subsequent Transfer Agreement, as applicable. Immediately after the
sale, transfer and assignment thereof to the Trust, each Receivable will be
secured by an enforceable and perfected first priority security interest in
the Financed Vehicle in favor of the Trust as secured party, which security
interest is prior to all other liens upon and security interests in such
Financed Vehicle which now exist or may hereafter arise or be created
(except, as to priority, for any lien for taxes, labor or materials affecting
a Financed Vehicle). As of the Initial Cutoff Date or each Subsequent Cutoff
Date, as applicable, there were no Liens or claims for taxes, work, labor or
materials affecting a Financed Vehicle which are or may be Liens prior or
equal to the lien of the related Receivable.
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▇▇. ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give the Trust a
first priority perfected lien on, or ownership interest in, the Receivables
and the proceeds thereof and the other Trust Property have been made, taken
or performed.
20. NO IMPAIRMENT. Neither AFL nor the Seller has done anything to
convey any right to any Person that would result in such Person having a
right to payments due under the Receivable or otherwise to impair the rights
of the Trust, the Indenture Trustee and the Noteholders in any Receivable or
the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another
Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
23. NO DEFAULT. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the Initial Cutoff Date or any Subsequent
Cutoff Date, as applicable, no Financed Vehicle had been repossessed.
24. INSURANCE. As of the Closing Date or as of any Subsequent
Transfer Date, as applicable, each Financed Vehicle is covered by a
comprehensive and collision insurance policy (i) in an amount at least equal
to the lesser of (a) its maximum insurable value or (b) the principal amount
due from the Obligor under the related Receivable, (ii) naming AFL as loss
payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive
and collision coverage. Each Receivable requires the Obligor to maintain
physical loss and damage insurance, naming AFL and its successors and assigns
as additional insured parties, and each Receivable permits the holder thereof
to obtain physical loss and damage insurance at the expense of the Obligor if
the Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the Cutoff Date.
25. PAST DUE. At Initial Cutoff Date or any Subsequent Cutoff Date,
as applicable, no Receivable was more than 30 days past due.
26. REMAINING PRINCIPAL BALANCE. At the Initial Cutoff Date or any
Subsequent Cutoff Date, as applicable, each Receivable had a remaining
principal balance equal to or greater than $500.00, and the Principal Balance
of each Receivable set forth in the Schedule of Receivables is true and
accurate in all material respects.
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27. FINAL SCHEDULED MATURITY DATE. No Receivable has a final
scheduled maturity later than August 31, 2006.
28. CERTAIN CHARACTERISTICS. (A) Each Initial Receivable had a
remaining maturity, as of the Initial Cutoff Date, of at least 3 months but
not more than 84 months; (B) each Initial Receivable had an original maturity
of at least 12 months but not more than 84 months; (C) each Initial
Receivable had an original principal balance of at least $3,800.00 and not
more than $61,115.23; (D) each Initial Receivable had a remaining Principal
Balance as of the Initial Cutoff Date of at least $526.88 and not more than
$61,115.23; (E) each Initial Receivable has an Annual Percentage Rate of at
least 7.00% and not more than 23.99%; (F) no Initial Receivable was more than
30 days past due as of the Initial Cutoff Date; (G) no funds have been
advanced by the Seller, the Servicer, any Dealer, or anyone acting on behalf
of any of them in order to cause any Receivable to qualify under clause (F)
above; (H) no Initial Receivable has a final scheduled payment date on or
before September 1, 1999; (I) the Principal Balance of each Receivable set
forth in Schedule of Receivables is true and accurate in all material
respects as of the Initial Cutoff Date; (J) 13.31% of the Initial
Receivables, by principal balance as of the Initial Cutoff Date, was
attributable to loans for the purchase of new Financed Vehicles and 86.69% of
the Initial Receivables was attributable to loans for the purchase of used
Financed Vehicles; (K) not more than 4.00% of the Principal Balance of the
Initial Receivables as of the Initial Cutoff Date had an Annual Percentage
Rate in excess of 21.00%; (L) not more than 0.25% of such Receivables
represented loans in excess of $50,000.00; (M) not more than 3.00% of the
Aggregate Principal Balance of such Receivables represented loans with
original terms greater than 72 months; and (N) not more than 0.25% of the
Aggregate Principal Balance of such Receivables represented loans secured by
Financed Vehicles that previously secured a loan originated by AFL with an
obligor other than the current Obligor.
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SCHEDULE B
SERVICING POLICIES AND PROCEDURES
NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE.
I. PAST DUE PAYMENT COLLECTIONS
A. Past due payment notices are generated and sent on the 9th and 15th
day of delinquency.
B. The collection officer will make at least one phone call by day 10.
C. The collection officer will write a personalized collection letter by
day 15 and will have made at least two collection phone calls.
D. The collection officer will make at least two (2) more phone calls and
write at least one (1) more letter between days 15 and 30.
E. The collection officer will send a final demand letter on or about 31
days past due. The letter will allow 10 days to bring the account
current.
F. The collection officer will recommend either repossession, or some
form of reasonable forbearance (e.g., one extension in exchange for a
partial payment for cooperative debtors).
All phone calls and correspondence will require a brief handwritten
comment in the credit file. The date of each comment and the officer's
initials will be documented.
II. PAYMENT EXTENSIONS
Extensions of monthly payments must be granted only after careful
consideration and analysis. The extension is not to be used to mask
delinquencies, but rather assist in the collection and correction of
verifiable and legitimate customer problems. All extensions or modifications
require the prior approval of the Branch Manager. In the absence of the
Branch Manager, the Executive Vice President's or the President's approval is
required.
Possible qualifications for extensions to cooperative and
trustworthy customers include:
(a) Medical problems - verifiable;
(b) Temporary work loss - verifiable;
(c) Pending insurance claim - verifiable; or
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(d) Bankruptcy trustee cram down.
III. REPOSSESSIONS
Repossessions of the collateral is only to be pursued after
exhausting all other collection efforts. Once the decision is made to attempt
repossession, the following process is to be utilized:
(a) Decision on repossession.
(b) If the customer is cooperative, attempt repossession by Servicer
personnel. If uncooperative or unable to locate, utilize a third party
collection agency.
(c) Once secured, complete an inventory of personal belongings and brief
condition report on the vehicle. Return the property to the customer
and obtain a signed statement of inventory receipt.
(d) If the repossession is involuntary, notify the police department in
the city where the repossession occurred.
(e) Notify the originating dealership of repossession as soon as possible
and request a refund of all rebateable dealer adds.
(f) Send written notification to the customer regarding a 10-day notice to
redeem the loan.
(g) Decide on proper method of liquidation and plan for sale after the
10-day redemption period has expired.
(h) If consignment, set 21-day maximum term with the dealership, after
which time, if unsold, the vehicle is returned to the Servicer.
If wholesale, contact the appropriate auction company to make
arrangements for immediate sale.
If private sale, place advertisements in the proper media and attempt
to liquidate within one week.
(i) After the collateral is liquidated, send the debtor a letter stating
the amount of deficiency. Continued collection efforts will take the
form of voluntary payments or involuntary payments via judgment,
garnishment, and levy.
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IV. CHARGE OFFS
It is the responsibility of the collection officer to diligently
pursue any and all deficiencies which result from problem accounts. All
avenues of potential collection will be pursued, ranging from cash
settlements to amortized deficiency notes to judgment and garnishment.
A complete list of all charge offs will be maintained. The list
will be categorized into "active" and "dead" accounts. A brief action plan
will be shown for each active account. Accounts will only be designated as
"dead" with the recommendation of the collection officer and approval of the
Executive Vice President. The "dead" designation will only be granted for
those accounts which hold no potential for recovery (e.g., discharged Chapter
7).
Active charge off action plans will be presented at least monthly
to the Executive Vice President. Decisions regarding pursuit of legal action
and incurring potential legal fees will need prior approval by the Executive
Vice President.
V. DEFICIENCY COLLECTIONS
(a) Establish the exact amount of the deficiency, using the repossession
worksheet. This includes all fees and per diem interest.
(b) Attempt verbal and/or written negotiations with the debtor to settle
the deficiency.
(c) Send a certified letter to the debtor and cosigner(s) stating that we
need $X by ___________, 19__ (7-10 days), or we will begin legal
action. If no reasonable response is received move to (d).
(d) Complete a General Claim Form. Send the form to [applicable local
court].
(e) We should receive notification of the court's decision within one
week. If we receive notice of judgment, it is possible that the debtor
will pay the court and the court will then pay the Servicer. As this
usually does not happen, proceed to exercise on the judgment as
follows:
(1) File both the Transcript of Judgment and the Affidavit of
Identification of Judgment Debtor with [appropriate office].
(2) Order a Writ of Execution from [appropriate office].
(3) "Service" of the Writ of Execution is handled by the Sheriff or
an Attorney.
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