RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
between
ARCADIA RECEIVABLES FINANCE CORP.
Purchaser
and
ARCADIA FINANCIAL LTD.
Seller
dated as of
December 1, 1998
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. General . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Specific Terms. . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Usage of Terms. . . . . . . . . . . . . . . . . . . . 4
SECTION 1.4. Certain References. . . . . . . . . . . . . . . . . . 5
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.6. Action by or Consent of Noteholders . . . . . . . . . 5
SECTION 1.7. Material Adverse Effect . . . . . . . . . . . . . . . 5
ARTICLE II
CONVEYANCE OF THE INITIAL RECEIVABLES
AND THE INITIAL OTHER CONVEYED PROPERTY . . . . . . . . . . . . . . 5
SECTION 2.1. Conveyance of the Initial Receivables and the
Initial Other Conveyed Property . . . . . . . . . . . 5
SECTION 2.2. Purchase Price of Initial Receivables . . . . . . . . 6
SECTION 2.3. Conveyance of Subsequent Receivables and
Subsequent Other Conveyed Property . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 8
SECTION 3.1. Representations and Warranties of AFL . . . . . . . . 8
SECTION 3.2. Representations and Warranties of ARFC. . . . . . . . 10
ARTICLE IV
COVENANTS OF AFL. . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.1. Protection of Title of ARFC and the Trust . . . . . . 12
SECTION 4.2. Other Liens or Interests. . . . . . . . . . . . . . . 14
SECTION 4.3. Costs and Expenses. . . . . . . . . . . . . . . . . . 14
SECTION 4.4. Indemnification . . . . . . . . . . . . . . . . . . . 14
ARTICLE V
REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.1. Repurchase of Receivables Upon Breach of Warranty . . 16
SECTION 5.2. Reassignment of Purchased Receivables . . . . . . . . 17
SECTION 5.3. Waivers . . . . . . . . . . . . . . . . . . . . . . . 17
-i-
ARTICLE VI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.1. Liability of AFL . . . . . . . . . . . . . . . . . . 17
SECTION 6.2. Failure of AFL to Sell Subsequent Receivables. . . . 17
SECTION 6.3. Merger or Consolidation of AFL or ARFC . . . . . . . 18
SECTION 6.4. Limitation on Liability of AFL and Others. . . . . . 19
SECTION 6.5. AFL May Own Notes. . . . . . . . . . . . . . . . . . 19
SECTION 6.6. Amendment. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.7. Notices. . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.8. Merger and Integration . . . . . . . . . . . . . . . 20
SECTION 6.9. Severability of Provisions . . . . . . . . . . . . . 20
SECTION 6.10. Intention of the Parties . . . . . . . . . . . . . . 20
SECTION 6.11. Governing Law. . . . . . . . . . . . . . . . . . . . 21
SECTION 6.12. Counterparts . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.13 Conveyance of the Initial Receivables and the
Initial Other Conveyed Property to the Trust . . . . 21
SECTION 6.14. Nonpetition Covenant . . . . . . . . . . . . . . . . 21
SCHEDULES
Schedule A -- Schedule of Initial Receivables
Schedule B -- Representations and Warranties of AFL
-ii-
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of
December 1, 1998, executed between Arcadia Receivables Finance Corp., a
Delaware corporation, as purchaser ("ARFC"), and Arcadia Financial Ltd., a
Minnesota corporation, as seller ("AFL").
W I T N E S S E T H:
WHEREAS, ARFC has agreed to purchase from AFL and AFL, pursuant to
one or more Assignments pursuant to an Amended and Restated Receivables
Purchase Agreement and Assignment, dated as of July 21, 1998, between ARFC
and AFL (the "BOA Purchase Agreement"), has transferred to ARFC certain of
the Initial Receivables and Initial Other Conveyed Property;
WHEREAS, ARFC has agreed to purchase from AFL and AFL, pursuant to
this Agreement, is transferring to ARFC the remainder of the Initial
Receivables and Initial Other Conveyed Property; and
WHEREAS, ARFC has agreed to purchase (or has purchased) from AFL
and AFL has agreed to transfer (or has transferred) to ARFC the Subsequent
Receivables and Subsequent Other Conveyed Property in an amount set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, ARFC and AFL, intending
to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. GENERAL. The specific terms defined in this Article
include the plural as well as the singular. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Article,
Section, Schedule and Exhibit references, unless otherwise specified, refer to
Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Sale and Servicing Agreement, dated as of
December 1, 1998, by and among Arcadia Receivables Finance Corp. (as Seller),
Arcadia Financial Ltd. (in its individual capacity and as Servicer), Arcadia
Automobile Receivables Trust, 1998-E (as Issuer) (the "Trust") and Norwest Bank
Minnesota, National Association, a national banking association (as Backup
Servicer).
SECTION 1.2. SPECIFIC TERMS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"AGREEMENT" shall mean this Receivables Purchase Agreement and
Assignment and all amendments hereof and supplements hereto.
"CLOSING DATE" means December 22, 1998.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National
Association, a national banking association, as trustee and indenture
collateral agent under the Indenture, dated as of December 1, 1998, between
the Trust, the Indenture Trustee and the Indenture Collateral Agent.
"INITIAL OTHER CONVEYED PROPERTY" means all monies at any time paid
or payable on the Initial Receivables or in respect thereof after the Initial
Cutoff Date (including amounts due on or before the Initial Cutoff Date but
received by AFL after the Initial Cutoff Date), an assignment of security
interests in the Financed Vehicles, the Collection Account (including all
Eligible Investments therein and all proceeds therefrom), the Subcollection
Account, 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, rights under any Collateral
Insurance and any Force-Placed Insurance relating to the Initial Receivables,
an assignment of the rights of AFL against Dealers with respect to the
Initial Receivables under the Dealer Agreements and the Dealer Assignments,
all items contained in the Receivable Files relating to the Initial
Receivables, any and all other documents or electronic records that AFL keeps
on file in accordance with its customary procedures relating to the Initial
Receivables, the Obligors or the related Financed Vehicles, 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 Initial Receivable, and all proceeds of the
foregoing.
"INITIAL RECEIVABLES" means the Receivables listed on the Schedule of
Initial Receivables attached hereto as Schedule A.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $0.
"INSURANCE AGREEMENT" means the Insurance and Indemnity Agreement,
dated as of December 22, 1998, among the Security Insurer, the Trust, ARFC and
AFL.
"LIQUIDATED DAMAGES" means an amount equal to the sum of the Class A-1
Prepayment Premium, the Class A-2 Prepayment Premium and the Class A-3
Prepayment Premium.
-2-
"OTHER CONVEYED PROPERTY" means the Initial Other Conveyed Property
conveyed by AFL to ARFC pursuant to this Agreement together with any and all
Subsequent Other Conveyed Property conveyed by AFL to ARFC pursuant to each
Subsequent Purchase Agreement.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware
corporation, not in its individual capacity but solely as trustee of the
Trust, and any successor trustee appointed and acting pursuant to the Trust
Agreement.
"RELATED DOCUMENTS" means the Notes, the Custodian Agreement, the
Trust Agreement, the Administration Agreement, the Indenture, each Subsequent
Purchase Agreement, the Sale and Servicing Agreement, each Subsequent
Transfer Agreement, the Note Policy, the Spread Account Agreement, the
Insurance Agreement, the Lockbox Agreement and the Underwriting Agreement
among AFL, ARFC and the underwriters of the Notes. The Related Documents to
be executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
"REPURCHASE EVENT" means the occurrence of a breach of any of AFL's
representations and warranties hereunder or under any Subsequent Purchase
Agreement or any other event which requires the repurchase of a Receivable by
AFL under the Sale and Servicing Agreement.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of December 1, 1998, executed and delivered by Arcadia Receivables
Finance Corp., as Seller, Arcadia Financial Ltd., in its individual capacity and
as Servicer, Arcadia Automobile Receivables Trust, 1998-E, as Issuer, and
Norwest Bank Minnesota, National Association, as Backup Servicer.
"SCHEDULE OF INITIAL RECEIVABLES" means the schedule of all retail
installment sales contracts and promissory notes sold and transferred pursuant
to this Agreement which is attached hereto as Schedule A.
"SCHEDULE OF RECEIVABLES" means the Schedule of Initial Receivables
attached hereto as Schedule A as supplemented by each Schedule of Subsequent
Receivables attached to each Subsequent Purchase Agreement as Schedule A.
"SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"SCHEDULE OF SUBSEQUENT RECEIVABLES" means the schedule of all retail
installment sales contracts and promissory notes sold and transferred pursuant
to a Subsequent Purchase Agreement which is attached to such Subsequent Purchase
Agreement as Schedule A, which Schedule of Subsequent Receivables shall
supplement the Schedule of Initial Receivables.
-3-
"SPREAD ACCOUNT" means the Spread Account established and maintained
pursuant to the Spread Account Agreement. The Spread Account shall in no event
be deemed to be part of the Trust Property.
"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated
as of March 25, 1993, as thereafter amended and restated, among AFL, ARFC, 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.
"SUBSEQUENT OTHER CONVEYED PROPERTY" means the Subsequent Other
Conveyed Property conveyed by AFL to ARFC pursuant to each Subsequent Purchase
Agreement.
"SUBSEQUENT RECEIVABLES" means the Receivables specified in the
Schedule of Subsequent Receivables attached as Schedule A to each Subsequent
Purchase Agreement.
"TRUST" means the trust created by the Trust Agreement, the estate of
which consists of the Trust Property.
"TRUST PROPERTY" means the property and proceeds of every description
conveyed pursuant to Section 2.5 of the Trust Agreement, Sections 2.1 and 2.4 of
the Sale and Servicing Agreement and Section 2.1 hereof and pursuant to any
Subsequent Purchase Agreement and Subsequent Transfer Agreement, together with
the Trust Accounts (including all Eligible Investments therein and all proceeds
therefrom). Although ARFC has pledged the Spread Account to the Collateral
Agent pursuant to the Spread Account Agreement, the Spread Account shall not
under any circumstances be deemed to be a part of or otherwise includable in the
Trust or the Trust Property.
SECTION 1.3. 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 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 or the Sale and
Servicing 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 1.4. CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of an Accounting Date shall refer to the close of
business on such day, or as of the first day of a Monthly Period shall refer to
the opening of business on such day. All references to the last day of a
Monthly Period shall refer to the close of business on such day.
-4-
SECTION 1.5. NO RECOURSE. Without limiting the obligations of AFL
hereunder, 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 AFL, or
of any predecessor or successor of AFL.
SECTION 1.6. ACTION BY OR CONSENT OF NOTEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to Noteholders of record
as of the Record Date immediately preceding the date on which such action is
to be taken, or consent given, by Noteholders. Solely for the purposes of
any action to be taken, or consented to, by Noteholders, any Note registered
in the name of the Seller, AFL or any Affiliate thereof shall be deemed not
to be outstanding, and the related Outstanding Amount, evidenced thereby
shall not be taken into account in determining whether the requisite
Outstanding Amount necessary to effect any such action or consent has been
obtained; PROVIDED, HOWEVER, that, solely for the purpose of determining
whether the Indenture Trustee is entitled to rely upon any such action or
consent, only Notes which the Indenture Trustee knows to be so owned shall be
so disregarded.
SECTION 1.7. 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 funds available from claims under the Note Policy.
ARTICLE II
CONVEYANCE OF THE INITIAL RECEIVABLES
AND THE INITIAL OTHER CONVEYED PROPERTY
SECTION 2.1. CONVEYANCE OF THE INITIAL RECEIVABLES AND THE INITIAL
OTHER CONVEYED PROPERTY. Subject to the terms and conditions of this
Agreement, AFL hereby sells, transfers, assigns, and otherwise conveys to
ARFC without recourse (but without limitation of its obligations in this
Agreement), and ARFC hereby purchases, all right, title and interest of AFL
in and to the Initial Receivables and the Initial Other Conveyed Property.
AFL and ARFC acknowledge that certain of the Initial Receivables and Initial
Other Conveyed Property have previously been sold, transferred, assigned and
conveyed to ARFC pursuant to the Telluride Purchase Agreement, and AFL hereby
confirms such prior sale, transfer, assignment and conveyance. It is the
intention of AFL and ARFC that the transfer and assignment contemplated by
this Agreement shall constitute a sale of the Initial Receivables and the
Initial Other Conveyed Property from AFL to ARFC, conveying good title
thereto free and clear of any Liens, and the Initial Receivables and the
Initial Other Conveyed Property shall not be part of AFL's estate in the
event of the filing of a bankruptcy petition by or against AFL under any
bankruptcy or similar law.
-5-
SECTION 2.2. PURCHASE PRICE OF INITIAL RECEIVABLES.
Simultaneously with the conveyance of the Initial Receivables and the Initial
Other Conveyed Property to ARFC, ARFC has paid or caused to be paid to or
upon the order of AFL approximately $161,911,854.77 by wire transfer of
immediately available funds (representing the proceeds to ARFC from the sale
of the Initial Receivables after (i) deducting expenses of $725,000 incurred
by ARFC in connection with such sale, (ii) depositing the Pre-Funded Amount
in the Pre-Funding Account and (iii) depositing the Reserve Amount in the
Reserve Account).
SECTION 2.3. CONVEYANCE OF SUBSEQUENT RECEIVABLES AND SUBSEQUENT
OTHER CONVEYED PROPERTY.
(a) Subject to the conditions set forth in paragraph (b) below
and the terms and conditions in the related Subsequent Purchase Agreement, in
consideration of AFL's delivery on the related Subsequent Transfer Date to or
upon the order of ARFC of an amount equal to the purchase price of the
Subsequent Receivables (as set forth in the related Subsequent Purchase
Agreement), AFL hereby agrees to sell, transfer, assign, and otherwise convey
to ARFC without recourse (but without limitation of its obligations in this
Agreement and the related Subsequent Purchase Agreement), and ARFC hereby
agrees to purchase all right, title and interest of AFL in and to the
Subsequent Receivables and the Subsequent Other Conveyed Property described
in the related Subsequent Purchase Agreement.
(b) AFL shall transfer to ARFC, and ARFC shall acquire, the
Subsequent Receivables and the Subsequent Other Conveyed Property to be
transferred on any Subsequent Transfer Date only upon the satisfaction of
each of the following conditions on or prior to such Subsequent Transfer Date:
(i) ARFC 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 the
Subsequent Receivables and the Subsequent Other Conveyed Property by AFL to
ARFC and, in turn, by ARFC to the Trust;
(iv) ARFC shall have delivered to AFL a duly executed
Subsequent Receivables Purchase Agreement and Assignment, in substantially
the form of Exhibit A hereto (the "Subsequent Purchase Agreement"), which
shall include a Schedule of Subsequent Receivables;
-6-
(v) as of each Subsequent Transfer Date, neither AFL nor ARFC
was insolvent nor will either of them have been made insolvent by such
transfer nor is either of them aware of any pending insolvency;
(vi) each Rating Agency shall have notified the Security
Insurer that following such transfer the Notes will be rated in the highest
rating category by such Rating Agency;
(vii) 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 AFL;
(viii) ARFC 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;
(ix) (A) the Receivables in the Trust, including the
Subsequent Receivables to be conveyed by AFL to ARFC and, in turn, by ARFC
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 16.14%, (2) the weighted average remaining term of
such Receivables will not be more than 67 nor less than 60 months, (3) not
more than 90% of the Aggregate Principal Balance of such Receivables will
represent used Financed Vehicles, (4) not more than 3% of the Aggregate
Principal Balance of such Receivables will be attributable to Receivables
with an Annual Percentage Rate in excess of 21%, (5) not more than 0.25% of
the Aggregate Principal Balance of such Receivables will represent loans on
Financed Vehicles in excess of $50,000.00, (6) not more than 3% of the
Aggregate Principal Balance of such Receivables will represent loans with
original terms greater than 72 months and (7) not more than 2.0% 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;
(x) AFL 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 ARFC in the Subsequent Receivables and
the Subsequent Other Conveyed Property, the Trust in the Trust Property and
the first perfected security interest of the Indenture Collateral Agent in
the Indenture Collateral;
-7-
(xi) AFL is conveying Subsequent Receivables to the Seller in
substantially the order they were originated by AFL; and
(xii) no selection procedures believed by AFL to be adverse to
the interests of the Noteholders shall have been utilized in selecting the
Subsequent Receivables.
It is the intention of AFL and ARFC that the transfer and assignment
contemplated by this Agreement and the related Subsequent Purchase Agreement
shall constitute a sale of the Subsequent Receivables and the Subsequent
Other Conveyed Property from AFL to ARFC, conveying good title thereto free
and clear of any Liens, and the Subsequent Receivables and the Subsequent
Other Conveyed Property shall not be part of AFL's estate in the event of the
filing of a bankruptcy petition by or against AFL under any bankruptcy or
similar law.
(c) AFL covenants to transfer to ARFC pursuant to paragraph (a)
above Subsequent Receivables with an aggregate Principal Balance equal to
$62,080,545.25; PROVIDED, HOWEVER, that the sole remedy of ARFC with respect
to a failure of such covenant shall be to enforce the provisions of Section
6.2 of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF AFL. AFL makes the
following representations and warranties, on which ARFC relies in purchasing
the Initial Receivables and the Initial Other Conveyed Property and in
transferring the Initial Receivables and the Initial Other Conveyed Property
to the Trust under the Sale and Servicing Agreement and on which the Security
Insurer will rely in issuing the Note Policy. Such representations are made
as of the execution and delivery of this Agreement, but shall survive the
sale, transfer and assignment of the Initial Receivables and the Initial
Other Conveyed Property hereunder and the sale, transfer and assignment
thereof by ARFC to the Trust under the Sale and Servicing Agreement. AFL and
ARFC agree that ARFC will assign to the Trust all of ARFC's rights under this
Agreement and that the Trust will thereafter be entitled to enforce this
Agreement against AFL in the Trust's own name.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties
set forth on the Schedule of Representations are true and correct.
(b) ORGANIZATION AND GOOD STANDING. AFL has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Minnesota, 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
-8-
all relevant times, and now has, power, authority and legal right to
acquire, own and sell the Initial Receivables and the Initial Other
Conveyed Property transferred to ARFC.
(c) DUE QUALIFICATION. AFL 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. AFL 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; AFL has full power and authority to
sell and assign the Initial Receivables and the Initial Other Conveyed
Property to be sold and assigned to and deposited with ARFC hereunder and
has duly authorized such sale and assignment to ARFC by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and AFL's Related Documents have been duly authorized by AFL by
all necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and AFL's
Related Documents have been duly executed and delivered, shall effect a
valid sale, transfer and assignment of the Initial Receivables and the
Initial Other Conveyed Property, enforceable against AFL and creditors of
and purchasers from AFL; and this Agreement and AFL's Related Documents
constitute legal, valid and binding obligations of AFL 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 Documents and the fulfillment of the
terms of this Agreement 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
articles of incorporation or bylaws of AFL, or any indenture, agreement,
mortgage, deed of trust or other instrument to which AFL 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, the Spread Account Agreement and the Sale and Servicing
Agreement, or violate any law, order, rule or regulation applicable to AFL
of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over AFL
or any of its properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to AFL's knowledge, threatened against AFL, before any court,
regulatory body,
-9-
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over AFL or its properties (i) asserting the
invalidity of this Agreement or any of the Related Documents, (ii) seeking
to prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Related
Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by AFL of its obligations under, or
the validity or enforceability of, this Agreement or any of the Related
Documents or (iv) seeking to affect adversely the federal income tax or
other federal, state or local tax attributes of, or seeking to impose
any excise, franchise, transfer or similar tax upon, the transfer and
acquisition of the Initial Receivables and the Initial Other Conveyed
Property hereunder or under the Sale and Servicing Agreement.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of AFL is
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF ARFC. ARFC makes the
following representations and warranties, on which AFL relies in selling,
assigning, transferring and conveying the Initial Receivables and the Initial
Other Conveyed Property to ARFC hereunder. Such representations are made as of
the execution and delivery of this Agreement, but shall survive the sale,
transfer and assignment of the Initial Receivables and the Initial Other
Conveyed Property hereunder and the sale, transfer and assignment thereof by
ARFC to the Trust under the Sale and Servicing Agreement.
(a) ORGANIZATION AND GOOD STANDING. ARFC has been duly organized and
is validly existing and in good standing as a corporation under the laws of
the State of Delaware, with the 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 has,
full power, authority and legal right to acquire and own the Initial
Receivables and the Initial Other Conveyed Property and to transfer the
Initial Receivables and the Initial Other Conveyed Property to the Trust
pursuant to the Sale and Servicing Agreement.
(b) DUE QUALIFICATION. ARFC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect (i) ARFC's ability to acquire the
Initial Receivables or the Initial Other Conveyed Property, (ii) the
validity or enforceability of the Initial Receivables and the Initial Other
Conveyed Property or (iii) ARFC's ability to perform its obligations
hereunder and under the Related Documents.
(c) POWER AND AUTHORITY. ARFC has the power, authority and legal
right to execute and deliver this Agreement and its Related Documents and
to carry out the terms hereof and thereof and to acquire the Initial
Receivables and the Initial Other Conveyed
-10-
Property hereunder; and the execution, delivery and performance of this
Agreement and its Related Documents and all of the documents required
pursuant hereto or thereto have been duly authorized by ARFC by all
necessary action.
(d) NO CONSENT REQUIRED. ARFC is not required to obtain the consent
of any other Person, or any consent, license, approval or authorization or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery or performance of this
Agreement and the Related Documents, except for such as have been obtained,
effected or made.
(e) BINDING OBLIGATION. This Agreement and each of its Related
Documents constitutes a legal, valid and binding obligation of ARFC,
enforceable against ARFC in accordance with its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, reorganization,
conservatorship, receivership, liquidation and other similar laws and to
general equitable principles.
(f) NO VIOLATION. The execution, delivery and performance by ARFC of
this Agreement, the consummation of the transactions contemplated by this
Agreement and the Related Documents and the fulfillment of the terms of
this Agreement and the Related Documents do not and will not conflict with,
result in any breach of any of the terms and provisions of or constitute
(with or without notice or lapse of time) a default under the certificate
of incorporation or bylaws of ARFC, or conflict with or breach any of the
terms or provisions of, or constitute (with or without notice or lapse of
time) a default under, any indenture, agreement, mortgage, deed of trust or
other instrument to which ARFC is a party or by which ARFC is bound or to
which any of its properties are subject, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other instrument
(other than the Sale and Servicing Agreement and the Indenture), or violate
any law, order, rule or regulation, applicable to ARFC or its properties,
of any federal or state regulatory body or any court, administrative
agency, or other governmental instrumentality having jurisdiction over ARFC
or any of its properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending, or, to the knowledge of ARFC, threatened against ARFC, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality having jurisdiction over ARFC or its
properties: (i) asserting the invalidity of this Agreement or any of the
Related Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Related
Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by ARFC of its obligations under, or
the validity or enforceability of, this Agreement or any of the Related
Documents or (iv) that may adversely affect the federal or state income tax
attributes of, or seeking to impose any excise, franchise, transfer or
similar tax upon, the transfer and acquisition of the Initial Receivables
and the Initial
-11-
Other Conveyed Property hereunder or the transfer of the Initial
Receivables and the Initial Other Conveyed Property to the Trust pursuant
to the Sale and Servicing Agreement.
In the event of any breach of a representation and warranty made by ARFC
hereunder, AFL covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the later of (i) the date on which
all pass-through certificates or other similar securities issued by the
Trust, or a trust or similar vehicle formed by ARFC, have been paid in full,
or (ii) all Notes or other similar securities issued by the Trust, or a trust
or similar vehicle formed by ARFC, have been paid in full. AFL and ARFC
agree that damages will not be an adequate remedy for such breach and that
this covenant may be specifically enforced by ARFC or by the Owner Trustee on
behalf of the Trust.
ARTICLE IV
COVENANTS OF AFL
SECTION 4.1. PROTECTION OF TITLE OF ARFC AND THE TRUST.
(a) At or prior to the Closing Date or each Subsequent Transfer
Date, as the case may be, AFL shall have filed or caused to be filed a UCC-1
financing statement, executed by AFL as seller or debtor, naming ARFC as
purchaser or secured party and describing the Initial Receivables and the
Initial Other Conveyed Property, with respect to this Agreement, and the
Subsequent Receivables and the Subsequent Other Conveyed Property, with
respect to each Subsequent Purchase Agreement, being sold by it to ARFC as
collateral, with the office of the Secretary of State of the State of
Minnesota and in such other locations as ARFC shall have required. From time
to time thereafter, AFL shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such
manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of ARFC under this Agreement and each
Subsequent Purchase Agreement and of the Trust under the Sale and Servicing
Agreement and each Subsequent Transfer Agreement in the Initial Receivables
and the Initial Other Conveyed Property and the Subsequent Receivables and
the Subsequent Other Conveyed Property, as the case may be, and in the
proceeds thereof. AFL shall deliver (or cause to be delivered) to ARFC, the
Owner Trustee, the Indenture Trustee 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. In the event that AFL fails to
perform its obligations under this subsection, ARFC or the Owner Trustee may
do so at the expense of AFL.
(b) AFL shall not change its name, identity, or corporate
structure in any manner that would, could or might make any financing
statement or continuation statement filed by AFL (or by ARFC or the Owner
Trustee on behalf of AFL) in accordance with paragraph (a) above seriously
misleading within the meaning of Section 9-402(7) of the UCC, unless it shall
have given ARFC, the Owner Trustee and the Security Insurer at least 60 days'
prior written notice
-12-
thereof, and shall promptly file appropriate amendments to all previously
filed financing statements and continuation statements.
(c) AFL shall give ARFC, the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing), the Indenture
Trustee and the Owner Trustee at least 60 days' prior written notice of any
relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of
any amendment of any previously filed financing or continuation statement or
of any new financing statement. AFL shall at all times maintain each office
from which it services Receivables and its principal executive office within
the United States of America.
(d) AFL shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Initial Receivables to
ARFC, and from and after the time of sale under each Subsequent Purchase
Agreement of the Subsequent Receivables to ARFC, and the conveyance of the
Initial Receivables and the Subsequent Receivables by ARFC to the Trust,
AFL's master computer records (including archives) that shall refer to an
Initial Receivable or Subsequent Receivable indicate clearly that such
Initial Receivable or Subsequent Receivable has been sold to ARFC and has
been conveyed by ARFC to the Trust. Indication of the Trust's ownership of
an Initial Receivable or Subsequent Receivable shall be deleted from or
modified on AFL's computer systems when, and only when, the Initial
Receivable or Subsequent Receivable shall become a Purchased Receivable or
shall have been paid in full.
(e) If at any time AFL shall propose to sell, grant a security
interest in, or otherwise transfer any interest in motor vehicle receivables
to any prospective purchaser, lender or other transferee, AFL shall give to
such prospective purchaser, lender, or other transferee computer tapes,
records, or print-outs (including any restored from archives) that, if they
shall refer in any manner whatsoever to any Initial Receivable or Subsequent
Receivable, shall indicate clearly that such Initial Receivable or Subsequent
Receivable has been sold to ARFC and is owned by the Trust.
SECTION 4.2. OTHER LIENS OR INTERESTS. Except for the conveyances
hereunder and under any Subsequent Purchase Agreement, AFL will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any Lien on the Initial Receivables or the Initial
Other Conveyed Property or on the Subsequent Receivables or the Subsequent
Other Conveyed Property, or any interest therein, and AFL shall defend the
right, title, and interest of ARFC and the Trust in and to the Initial
Receivables and the Initial Other Conveyed Property and the Subsequent
Receivables and the Subsequent Other Conveyed Property against all claims of
third parties claiming through or under AFL.
SECTION 4.3. COSTS AND EXPENSES. AFL shall pay all reasonable
costs and disbursements in connection with the performance of its obligations
hereunder and under each Subsequent Purchase Agreement and its Related
Documents.
-13-
SECTION 4.4. INDEMNIFICATION.
(a) AFL shall defend, indemnify and hold harmless ARFC, the Trust,
the Owner Trustee, the Security Insurer, the Indenture Trustee, the Backup
Servicer and the Noteholders from and against any and all costs, expenses,
losses, damages, claims, and liabilities, arising out of or resulting from any
breach of any of AFL's representations and warranties contained herein or in any
Subsequent Purchase Agreement.
(b) AFL shall defend, indemnify and hold harmless ARFC, the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer and the
Noteholders from and against any and all costs, expenses, losses, damages,
claims, and liabilities, arising out of or resulting from the use, ownership or
operation by AFL or any affiliate thereof of a Financed Vehicle.
(c) AFL shall defend and indemnify ARFC, the Trust, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer and
the Noteholders against any and all costs, expenses, losses, damages, claims and
liabilities arising out of or resulting from any action taken, or failed to be
taken, by it in respect of any portion of the Trust Property other than in
accordance with this Agreement, each Subsequent Purchase Agreement or the Sale
and Servicing Agreement and each Subsequent Transfer Agreement.
(d) AFL agrees to pay, and shall defend, indemnify and hold harmless
ARFC, the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer
and the Noteholders from and against any taxes that may at any time be asserted
against ARFC, the Owner Trustee, the Indenture Trustee, the Backup Servicer and
the Noteholders with respect to the transactions contemplated in this Agreement
or in any Subsequent Purchase Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible personal
property, privilege, or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale, transfer and assignment of the
Initial Receivables and the Initial Other Conveyed Property or the Subsequent
Receivables or Subsequent Other Conveyed Property to ARFC and of the Trust
Property to the Trust or the issuance and original sale of the Notes, or
asserted with respect to ownership of the Initial Receivables and Initial Other
Conveyed Property or the Subsequent Receivables or Subsequent Other Conveyed
Property or the Trust Property which shall be indemnified by AFL pursuant to
clause (e) below, or federal, state or other income taxes, arising out of
distributions on the Notes or transfer taxes arising in connection with the
transfer of the Notes) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by AFL under this Agreement or
under any Subsequent Purchase Agreement or imposed against such Persons.
(e) AFL agrees to pay, and to indemnify, defend and hold harmless
ARFC, the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer
and the Noteholders from, any taxes which may at any time be asserted against
such Persons with respect to, and as of the date of, the conveyance or ownership
of the Initial Receivables or the Initial Other Conveyed Property hereunder or
the Subsequent Receivables or Subsequent Other Conveyed Property
-14-
under each Subsequent Purchase Agreement and the conveyance or ownership of
the Trust Property under the Sale and Servicing Agreement and the Subsequent
Transfer Agreements or the issuance and original sale of the Notes,
including, without limitation, any sales, gross receipts, personal property,
tangible or intangible personal property, privilege or license taxes (but not
including any federal or other income taxes, including franchise taxes,
arising out of the transactions contemplated hereby or transfer taxes arising
in connection with the transfer of Notes) and costs and expenses in defending
against the same, arising by reason of the acts to be performed by AFL under
this Agreement or under any Subsequent Purchase Agreement or imposed against
such Persons.
(f) AFL shall defend, indemnify, and hold harmless ARFC, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer,
the Trust 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
ARFC, the Trust, the Indenture Trustee and the Noteholders through the
negligence, willful misfeasance, or bad faith of AFL in the performance of
its duties under this Agreement or under any Subsequent Purchase Agreement or
by reason of reckless disregard of AFL's obligations and duties under this
Agreement or under any Subsequent Purchase Agreement.
(g) AFL shall indemnify, defend and hold harmless ARFC, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer,
the Trust and the Noteholders from and against any loss, liability or expense
incurred by reason of the violation by AFL of federal or state securities
laws in connection with the registration or the sale of the Notes.
(h) AFL shall indemnify, defend and hold harmless ARFC, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer,
the Trust and the Noteholders from and against any loss, liability or expense
imposed upon, or incurred by, ARFC, the Owner Trustee, the Indenture Trustee,
the Trust or the Noteholders as a result of the failure of any Initial
Receivable or Subsequent Receivable, or the sale of the related Financed
Vehicle, to comply with all requirements of applicable law.
(i) AFL shall defend, indemnify, and hold harmless ARFC from and
against all costs, expenses, losses, claims, damages, and liabilities arising
out of or incurred in connection with the acceptance or performance of AFL's
trusts and duties as Servicer under the Sale and Servicing Agreement, except
to the extent that such cost, expense, loss, claim, damage, or liability
shall be due to the willful misfeasance, bad faith, or negligence (except for
errors in judgment) of ARFC.
(j) AFL shall indemnify, defend and hold harmless ARFC, the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Trust and the
Noteholders from and against any loss, liability or expense imposed upon, or
incurred by, ARFC, the Owner Trustee
-15-
and the Indenture Trustee, the Trust and the Noteholders as a result of AFL's
or ARFC's use of the name "Arcadia."
Indemnification under this Section 4.4 shall include reasonable fees
and expenses of counsel and expenses of litigation and shall survive termination
of the Trust. The indemnity obligations hereunder shall be in addition to any
obligation that AFL may otherwise have.
ARTICLE V
REPURCHASES
SECTION 5.1. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Upon the occurrence of a Repurchase Event AFL shall, unless such breach shall
have been cured in all material respects, repurchase such Receivable from the
Trust and, on or before the related Deposit Date, AFL shall pay the Purchase
Amount to the Trust pursuant to Section 4.5 of the Sale and Servicing
Agreement. It is understood and agreed that, except as set forth in Section
6.1, 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 for such breach available to ARFC, the
Security Insurer, Noteholders, or the Indenture Trustee on behalf of
Noteholders. The provisions of this Section 5.1 are intended to grant the
Owner Trustee and the Indenture Trustee a direct right against AFL to demand
performance hereunder, and in connection therewith, AFL waives any
requirement of prior demand against ARFC with respect to such repurchase
obligation. Any such purchase shall take place in the manner specified in
Section 2.6 of the Sale and Servicing Agreement. Notwithstanding any other
provision of this Agreement, any Subsequent Purchase Agreement or the Sale
and Servicing Agreement or any Subsequent Transfer Agreement to the contrary,
the obligation of AFL under this Section shall not terminate upon a
termination of AFL as Servicer under the Sale and Servicing Agreement and
shall be performed in accordance with the terms hereof notwithstanding the
failure of the Servicer or ARFC to perform any of their respective
obligations with respect to such Receivable under the Sale and Servicing
Agreement.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by AFL, AFL shall indemnify the
Owner Trustee, the Indenture Trustee, the Backup Servicer, 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
Repurchase Events.
SECTION 5.2. REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit
in the Collection Account of the Purchase Amount of any Receivable
repurchased by AFL under Section 5.1, ARFC and the Owner Trustee shall take
such steps as may be reasonably requested by AFL in order to assign to AFL
all of ARFC's and the Trust's right, title and interest in and to such
Receivable and all security and documents and all Other Conveyed Property
conveyed to ARFC and the Trust directly relating thereto, without recourse,
representation or warranty, except
-16-
as to the absence of liens, charges or encumbrances created by or arising as
a result of actions of ARFC or the Owner Trustee. Such assignment shall be a
sale and assignment outright, and not for security. If, following the
reassignment of a Purchased Receivable, in any enforcement suit or legal
proceeding, it is held that AFL may not enforce any such Receivable on the
ground that it shall not be a real party in interest or a holder entitled to
enforce the Receivable, ARFC and the Owner Trustee shall, at the expense of
AFL, take such steps as AFL deems reasonably necessary to enforce the
Receivable, including bringing suit in ARFC's or the Owner Trustee's name.
SECTION 5.3. WAIVERS. No failure or delay on the part of ARFC, or
the Owner Trustee as assignee of ARFC, in exercising any power, right or
remedy under this Agreement or under any Subsequent Purchase Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other or future exercise thereof or
the exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. LIABILITY OF AFL. AFL shall be liable in accordance
herewith only to the extent of the obligations in this Agreement or in any
Subsequent Purchase Agreement specifically undertaken by AFL and the
representations and warranties of AFL.
SECTION 6.2. FAILURE OF AFL TO SELL SUBSEQUENT RECEIVABLES. In
the event that AFL shall fail to deliver and sell to ARFC any or all of the
Subsequent Receivables required under this Agreement, AFL shall be obligated
to pay to ARFC the Liquidated Damages on the Business Day immediately
preceding the Distribution Date on which the Funding Period ends (or, if the
Funding Period does not end on a Distribution Date, on the first Distribution
Date following the end of the Funding Period).
SECTION 6.3. MERGER OR CONSOLIDATION OF AFL OR ARFC. Any
corporation or other entity (i) into which AFL or ARFC may be merged or
consolidated, (ii) resulting from any merger or consolidation to which AFL or
ARFC is a party or (iii) succeeding to the business of AFL or ARFC, in the
case of ARFC, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters
substantively identical to those contained in ARFC's certificate of
incorporation, provided that in any of the foregoing cases such corporation
shall execute an agreement of assumption to perform every obligation of AFL
or ARFC, as the case may be, under this Agreement and each Subsequent
Purchase Agreement and, whether or not such assumption agreement is executed,
shall be the successor to AFL or ARFC, as the case may be, hereunder and
under each such Subsequent Purchase Agreement (without relieving AFL or ARFC
of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution or filing of any document or any further
act by any of the parties to this Agreement or each Subsequent Purchase
Agreement. Notwithstanding the foregoing, so long as an Insurer Default
shall not have occurred and be continuing, ARFC
-17-
shall not merge or consolidate with any other Person or permit any other
Person to become the successor to ARFC's business without the prior written
consent of the Security Insurer. AFL or ARFC shall promptly inform the other
party, the Owner Trustee and the Indenture Trustee and, so long as an Insurer
Default shall not have occurred and be continuing, the Security Insurer of
such merger, consolidation or purchase and assumption. Notwithstanding the
foregoing, as a condition to the consummation of the transactions referred to
in clauses (i), (ii) and (iii) above, (x) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Sections 3.1
and 3.2 and this Agreement, or similar representation or warranty made in any
Subsequent Purchase Agreement, 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 event of default under the Insurance
Agreement, shall have occurred and be continuing, (y) AFL or ARFC, as
applicable, shall have delivered written notice of such consolidation, merger
or purchase and assumption to the Rating Agencies prior to the consummation
of such transaction and shall have delivered to the Owner Trustee and the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 6.3 and that all conditions precedent, if
any, provided for in this Agreement, or in each Subsequent Purchase
Agreement, relating to such transaction have been complied with, and (z) AFL
or ARFC, as applicable, shall have delivered to the Owner Trustee and the
Indenture Trustee 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.
SECTION 6.4. LIMITATION ON LIABILITY OF AFL AND OTHERS. AFL and
any director, officer, employee or agent 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.
AFL shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement,
any Subsequent Purchase Agreement or its Related Documents and that in its
opinion may involve it in any expense or liability.
SECTION 6.5. AFL MAY OWN NOTES. Subject to the provisions of the
Sale and Servicing Agreement, AFL and any Affiliate of AFL 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 AFL or an Affiliate thereof.
SECTION 6.6. AMENDMENT.
(a) This Agreement and any Subsequent Purchase Agreement may be
amended by AFL and ARFC, so long as an Insurer Default shall not have occurred
and be continuing, with the prior written consent of the Security Insurer and
without the consent of the
-18-
Owner Trustee, the Indenture Trustee or any of the Noteholders (A) to cure
any ambiguity or (B) to correct any provisions in this Agreement or any such
Subsequent Purchase Agreement; PROVIDED, HOWEVER, that such action shall not,
as evidenced by an Opinion of Counsel delivered to the Owner Trustee and the
Indenture Trustee, adversely affect in any material respect the interests of
any Noteholder.
(b) This Agreement may also be amended from time to time by AFL
and ARFC, so long as an Insurer Default shall not have occurred and be
continuing, with the prior written consent of the Security Insurer, the Owner
Trustee and the Indenture Trustee and a Note Majority, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Noteholders; PROVIDED, HOWEVER, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables, distributions that shall be required
to be made on any Note or the Note Interest Rate or (ii) 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, AFL
shall have furnished 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 or the Indenture Trustee, as applicable, shall furnish
written notification of the substance of such amendment or consent to each
Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Owner Trustee or the Indenture
Trustee, as applicable, may prescribe, including the establishment of record
dates. The 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.
SECTION 6.7. NOTICES. All demands, notices and communications to
AFL or ARFC hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), reputable overnight courier
or mailed by certified mail, return receipt requested, and shall be deemed to
have been given upon receipt (a) in the case of AFL, to Arcadia Financial
Ltd., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other address as shall be designated by
AFL in a written notice delivered to the other party or to the Owner Trustee
or the Indenture Trustee, as
-19-
applicable, or (b) in case of ARFC, to Arcadia Receivables Finance Corp.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇.
SECTION 6.8. MERGER AND INTEGRATION. Except as specifically
stated otherwise herein, this Agreement and the Related Documents set forth
the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement and the Related Documents. This Agreement may not be modified,
amended, waived or supplemented except as provided herein.
SECTION 6.9. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement.
SECTION 6.10. INTENTION OF THE PARTIES. The execution and
delivery of this Agreement and of each Subsequent Purchase Agreement shall
constitute an acknowledgment by AFL and ARFC that they intend that each
assignment and transfer herein and therein contemplated constitute a sale and
assignment outright, and not for security, of the Initial Receivables and the
Initial Other Conveyed Property and the Subsequent Receivables and Subsequent
Other Conveyed Property, as the case may be, conveying good title thereto
free and clear of any Liens, from AFL to ARFC, and that the Initial
Receivables and the Initial Other Conveyed Property and the Subsequent
Receivables and Subsequent Other Conveyed Property shall not be a part of
AFL's estate in the event of the bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal
or state bankruptcy or similar law, or the occurrence of another similar
event, of, or with respect to, AFL. In the event that such conveyance is
determined to be made as security for a loan made by ARFC, the Trust or the
Noteholders to AFL, the parties intend that AFL shall have granted to ARFC a
security interest in all of AFL's right, title and interest in and to the
Initial Receivables and the Initial Other Conveyed Property and the
Subsequent Receivables and Subsequent Other Conveyed Property, as the case
may be, conveyed pursuant to Section 2.1 hereof or pursuant to any Subsequent
Purchase Agreement, and that this Agreement and each Subsequent Purchase
Agreement shall constitute a security agreement under applicable law.
SECTION 6.11. GOVERNING LAW. This Agreement shall be 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 6.12. COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement 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.
-20-
SECTION 6.13. CONVEYANCE OF THE INITIAL RECEIVABLES AND THE
INITIAL OTHER CONVEYED PROPERTY TO THE TRUST. AFL acknowledges that ARFC
intends, pursuant to the Sale and Servicing Agreement, to convey the Initial
Receivables and the Initial Other Conveyed Property, together with its rights
under this Agreement, to the Trust on the date hereof. AFL acknowledges and
consents to such conveyance and waives any further notice thereof and
covenants and agrees that the representations and warranties of AFL contained
in this Agreement and the rights of ARFC hereunder are intended to benefit
the Security Insurer, the Owner Trustee, the Indenture Trustee, the Trust,
and the Noteholders. In furtherance of the foregoing, AFL covenants and
agrees to perform its duties and obligations hereunder, in accordance with
the terms hereof for the benefit of the Security Insurer, the Owner Trustee,
the Indenture Trustee, the Trust, and the Noteholders and that,
notwithstanding anything to the contrary in this Agreement, AFL shall be
directly liable to the Owner Trustee and the Trust (notwithstanding any
failure by the Servicer, the Backup Servicer or ARFC to perform its duties
and obligations hereunder or under the Sale and Servicing Agreement) and that
the Owner Trustee may enforce the duties and obligations of AFL under this
Agreement against AFL for the benefit of the Security Insurer, the Trust, and
the Noteholders.
SECTION 6.14. NONPETITION COVENANT. Neither ARFC 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 (or, in
the case of AFL, against ARFC) 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
ARFC) or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust (or ARFC).
-21-
IN WITNESS WHEREOF, the parties have caused this Receivables
Purchase Agreement and Assignment to be duly executed by their respective
officers as of the day and year first above written.
ARCADIA RECEIVABLES FINANCE CORP.,
as Purchaser
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President and Chief
Financial Officer
ARCADIA FINANCIAL LTD., as Seller
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
-22-
SCHEDULE A
SCHEDULE OF INITIAL RECEIVABLES
[Available in transactional files.]
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF 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
B-1
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.
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, as applicable, AFL 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 Sale and Servicing
Agreement.
10. COMPUTER TAPE. The Computer Tape made available by AFL to
ARFC, the Owner Trustee and the Indenture 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
Financed Vehicle, or copies
B-2
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 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 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 ARFC; immediately prior
to the conveyance of the Receivables to ARFC pursuant to this Agreement or
any Subsequent Purchase Agreement, as applicable, ARFC or AFL had good and
indefeasible title thereto, free and clear of any Lien, and immediately upon
the transfer thereof, ARFC shall have good and indefeasible title to and will
be the sole owner of each Receivable, free of any Lien. No Dealer has a
participation in, or other right to receive, proceeds of any Receivable. AFL
has not 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 ARFC pursuant to this Agreement or any Subsequent Purchase
Agreement, as applicable. Immediately after the sale, transfer and
assignment thereof by ARFC 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
B-3
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.
19. 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 Other Conveyed Property have been made, taken or performed.
20. NO IMPAIRMENT. AFL has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under a Receivable or otherwise to impair the rights of ARFC, the Trust, the
Indenture Trustee, the Security Insurer 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 AFL 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 Cutoff Date or any Subsequent Transfer
Date, as applicable, no Financed Vehicle had been repossessed.
24. INSURANCE. As of the date hereof or as of the date of any
Subsequent Purchase Agreement, 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 relate 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
B-4
under a policy of Force-Placed Insurance on the Initial Cutoff Date or any
Subsequent Cutoff Date, as applicable.
25. PAST DUE. At the 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.
27. FINAL SCHEDULED MATURITY DATE. No Receivable has a final
maturity later than February 28, 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 6 months but not more than 84 months; (C) each Initial Receivable
had an original principal balance of at least $3,104.80 and not more than
$50,853.05; (D) each Initial Receivable had a remaining Principal Balance as
of the Initial Cutoff Date of at least $547.78 and not more than $50,853.05;
(E) each Initial Receivable has an Annual Percentage Rate of at least 7.74%
and not more than 23.45%; (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 March
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) 13.07% 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 86.93% of the Initial Receivables was
attributable to loans for the purchase of used Financed Vehicles; (K) not
more than 2.51% 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)
0.03% of such Receivables represented loans in excess of $50,000.00; (M) not
more than 0.31% of the Aggregate Principal Balance of such Receivables
represented loans with original terms greater than 72 months; and (N) not
more than 2.76% 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.
B-5