EXHIBIT 4.3
SALE AND SERVICING AGREEMENT
Dated as of September 1, 1999
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1999-C
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
ARTICLE I
DEFINITIONS..............................................................................................1
SECTION 1.1. DEFINITIONS................................................................................1
SECTION 1.2. USAGE OF TERMS............................................................................20
SECTION 1.3. CALCULATIONS..............................................................................20
SECTION 1.4. SECTION REFERENCES........................................................................20
SECTION 1.5. NO RECOURSE...............................................................................20
SECTION 1.6. MATERIAL ADVERSE EFFECT...................................................................21
ARTICLE II
CONVEYANCE OF RECEIVABLES...............................................................................22
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES.........................................................22
SECTION 2.2. CUSTODY OF RECEIVABLE FILES...............................................................22
SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE.................................................23
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES......................................................24
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER..................................................27
SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.........................................29
SECTION 2.7. NONPETITION COVENANT......................................................................30
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING DATE OR
SUBSEQUENT TRANSFER DATE.......................................................................30
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND WARRANTY
RECEIVABLES....................................................................................30
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES.............................................................30
SECTION 3.1. DUTIES OF THE SERVICER....................................................................30
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES;
LOCKBOX AGREEMENTS.............................................................................32
SECTION 3.3. REALIZATION UPON RECEIVABLES..............................................................34
SECTION 3.4. INSURANCE.................................................................................35
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.............................................37
SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER....................................38
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT...........................................40
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER..............................40
SECTION 3.9. SERVICER'S CERTIFICATE....................................................................40
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER TERMINATION
EVENT..........................................................................................41
SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT...................................................42
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES....................................................................................43
SECTION 3.13. MONTHLY TAPE.............................................................................43
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER....................................................44
SECTION 3.15. FIDELITY BOND............................................................................44
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE...............................................44
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SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE AGREEMENT.....................................46
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST AGREEMENT.................................46
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS................................................................47
SECTION 4.1. TRUST ACCOUNTS............................................................................47
SECTION 4.2. COLLECTIONS...............................................................................50
SECTION 4.3. APPLICATION OF COLLECTIONS................................................................51
SECTION 4.4. MONTHLY ADVANCES..........................................................................52
SECTION 4.5. ADDITIONAL DEPOSITS.......................................................................53
SECTION 4.6. DISTRIBUTIONS.............................................................................53
SECTION 4.7. PRE-FUNDING ACCOUNT.......................................................................54
SECTION 4.8. NET DEPOSITS..............................................................................55
SECTION 4.9. STATEMENTS TO NOTEHOLDERS.................................................................55
SECTION 4.10. INDENTURE TRUSTEE AS AGENT...............................................................56
SECTION 4.11. ELIGIBLE ACCOUNTS........................................................................57
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT.................................................................57
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT......................................................57
SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT...........................................................57
ARTICLE VI
THE SELLER..............................................................................................58
SECTION 6.1. LIABILITY OF SELLER.......................................................................58
SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SELLER;
AMENDMENT OF CERTIFICATE OF INCORPORATION......................................................58
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS..............................................59
SECTION 6.4. SELLER MAY OWN NOTES......................................................................59
ARTICLE VII
THE SERVICER............................................................................................59
SECTION 7.1. LIABILITY OF SERVICER; INDEMNITIES........................................................59
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE
SERVICER OR BACKUP SERVICER....................................................................61
SECTION 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND OTHERS...........................62
SECTION 7.4. DELEGATION OF DUTIES......................................................................62
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN................................................62
SECTION 7.6. ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER...............................................63
ARTICLE VIII
SERVICER TERMINATION EVENTS.............................................................................63
SECTION 8.1. SERVICER TERMINATION EVENT................................................................63
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT..............................................65
SECTION 8.3. APPOINTMENT OF SUCCESSOR..................................................................66
SECTION 8.4. NOTIFICATION TO NOTEHOLDERS...............................................................67
SECTION 8.5. WAIVER OF PAST DEFAULTS...................................................................67
ARTICLE IX
TERMINATION.............................................................................................68
SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION OF TRUST ESTATE.........................68
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ARTICLE X
MISCELLANEOUS PROVISIONS................................................................................69
SECTION 10.1. AMENDMENT................................................................................69
SECTION 10.2. PROTECTION OF TITLE TO TRUST PROPERTY....................................................70
SECTION 10.3. GOVERNING LAW............................................................................72
SECTION 10.4. SEVERABILITY OF PROVISIONS...............................................................72
SECTION 10.5. ASSIGNMENT...............................................................................72
SECTION 10.6. THIRD-PARTY BENEFICIARIES................................................................72
SECTION 10.7. DISCLAIMER BY SECURITY INSURER...........................................................73
SECTION 10.8. COUNTERPARTS.............................................................................73
SECTION 10.9. INTENTION OF PARTIES.....................................................................73
SECTION 10.10. NOTICES.................................................................................73
SECTION 10.11. LIMITATION OF LIABILITY.................................................................74
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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 September 1,
1999, is made among Arcadia Automobile Receivables Trust, 1999-C (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,
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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.
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BASIC SERVICING FEE RATE: 1.25% per annum.
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: September 15,
2002 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
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: 6.25% 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 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 23 days, which is the
number of days elapsed from and including the Closing Date to but excluding
October 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
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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-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 0.75 year Eurodollar
Synthetic Forward ("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-2 FINAL SCHEDULED DISTRIBUTION DATE: December 15, 2003
(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: 6.90% 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 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 23 days, which is the
number of days elapsed from and including the Closing Date to but excluding
October 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
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Amount is required to be deposited in the Note Distribution Account pursuant
to Section 4.7 to but excluding September 30, 2001 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 6.375% United
States Treasury Note due September 30, 2001. 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: June 15, 2007
(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: 7.20% 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 23 days, which is the number of days
elapsed from and including the Closing Date to but excluding October 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
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but excluding February 28, 2003, 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 5.50% U.S. Treasury Note due
February 28, 2003. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLOSING DATE: September 22, 1999.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase
Agreement and Assignment, dated as of September 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 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 (▇▇▇) ▇▇▇-▇▇▇▇.
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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).
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.
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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 October 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;
(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
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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 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.
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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 and the Class A-3 Final Scheduled Distribution Date.
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 December 1999.
INDENTURE: The Indenture, dated as of September 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.
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: September 7, 1999.
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INITIAL CUTOFF DATE PRINCIPAL BALANCE: $438,524,038.29.
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 September 22, 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.
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
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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.
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
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Counterpart to Agency Agreement and Retail Lockbox Agreement, dated as of
September 22, 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).
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.
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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 and the Class A-3 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 and the Class
A-3 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 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.
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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, $161,475,961.71 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.
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.
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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.
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
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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,
$1,579,199.77 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 and the Class
A-3 Interest Rate (based on the outstanding principal balance of the
Class A-1 Notes, the Class A-2 Notes and the Class A-3 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 December 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 December 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 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 December 1999 as if such Subsequent Transfer Date occurred on such
immediately preceding Distribution Date (or the Closing Date).
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RESERVE ACCOUNT: The account designated as the Reserve Account
in, and which is established and maintained pursuant to, Section 4.1(d).
RESERVE AMOUNT: As of any date of determination, the amount on
deposit in the Reserve Account 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, (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.
- 18 -
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).
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.
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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-C.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of September 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.
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.
WARRANTY RECEIVABLE: With respect to any Monthly Period, a
Receivable which AFL has become obligated to repurchase pursuant to Section 2.6.
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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 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. 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
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Receivable) or the applicable Subsequent Transfer Date (with respect to each
Subsequent Receivable):
(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.
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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:
(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 $1,579,199.77 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
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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 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, and the Requisite Reserve
Amount, 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;
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(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 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 16.13%, (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;
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(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.
(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, and 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.
(d) The Seller covenants to transfer to the Trust
pursuant to paragraph (a) above Subsequent Receivables with an aggregate
Principal Balance equal to approximately $161,475,961.71; 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, 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 and Class A-3 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.
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(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 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
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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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
(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
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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 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
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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.
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
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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 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;
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(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 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
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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 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
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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.
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
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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 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
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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 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
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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 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
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(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;
(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,
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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;
(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
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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
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
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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 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
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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 (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.
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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 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 December 31,
1999, which term shall be extendible by the Security Insurer for successive
quarterly terms ending on each successive March 31, June 30, September 30 and
December 31 (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")
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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):
(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
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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));
(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));
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(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 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.
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(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 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 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
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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
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;
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(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
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.
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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.
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
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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 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).
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(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 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.
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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 (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;
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(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 $161,475,961.71
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
amount, if any, on deposit therein in excess of the remaining
Pre-Funded Amount, after giving effect to the withdrawals specified in
clauses (i) - (ii) 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
(iv) 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
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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 and the Class A-3 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 and the Class A-3 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 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;
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(iii) the amount of such distribution payable out
of amounts withdrawn from the Reserve Account, 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, 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 and the remaining Reserve Amount;
(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-1 Prepayment Premium, the Class A-2 Prepayment
Premium and the Class A-3 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).
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.
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ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT. 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, (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 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.
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 Actual Funds with respect to such
Distribution Date, plus (B) if such Distribution Date.
(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.
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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.
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
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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
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.
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(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).
(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.
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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 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
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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 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
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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 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
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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
(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
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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 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
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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.
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
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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 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.
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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 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 and Class A-3
Prepayment Premium (only to
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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.
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,
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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 or Class A-3 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 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
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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.
(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
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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
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).
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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.
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
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Indenture Trustee is the Backup Servicer or the Collateral Agent, at MAC
▇▇▇▇▇-▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
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: (▇▇▇) ▇▇▇-▇▇▇▇, 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 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-C
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: Assistant Vice President
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee
By /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Assistant Vice President
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.
▇-▇-▇
▇▇. ▇▇▇▇▇▇▇▇▇▇▇ 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 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
S-A-3
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 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.
▇-▇-▇
▇▇. 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 scheduled maturity later than December 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 $3,999.00 and not more
than $62,999.96; (D) each Initial Receivable had a remaining Principal Balance
as of the Initial Cutoff Date of at least $572.71 and not more than $62,999.96;
(E) each Initial Receivable has an Annual Percentage Rate of at least 8.00% and
not more than 24.90%; (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 December 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)
14.79% 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
85.21% 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.
S-A-5
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
S-B-1
(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.
IV. CHARGE OFFS
S-B-2
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.
S-B-3