Exhibit 10.1
EXECUTION COPY
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SALE AND SERVICING AGREEMENT
by and between
USAA AUTO OWNER TRUST 2001-2,
as Issuer,
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
Dated as of November 1, 2001
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Table of Contents
Page
ARTICLE I DEFINITIONS AND USAGE.......................................................................1
ARTICLE II TRUST PROPERTY..............................................................................1
SECTION 2.1 Conveyance of Trust Property; Intent of the Parties.........................................1
SECTION 2.2 Representations and Warranties of the Seller as to the Receivables..........................1
SECTION 2.3 Repurchase upon Breach......................................................................5
SECTION 2.4 Custody of Receivable Files.................................................................5
SECTION 2.5 Duties of Servicer as Custodian.............................................................6
SECTION 2.6 Instructions; Authority to Act..............................................................7
SECTION 2.7 Custodian's Indemnification.................................................................7
SECTION 2.8 Effective Period and Termination............................................................7
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES AND TRUST PROPERTY..............................7
SECTION 3.1 Duties of Servicer..........................................................................7
SECTION 3.2 Collection of Receivable Payments...........................................................8
SECTION 3.3 Realization Upon Receivables................................................................8
SECTION 3.4 Allocations of Collections..................................................................9
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles......................................9
SECTION 3.6 Covenants of Servicer.......................................................................9
SECTION 3.7 Purchase of Receivables Upon Breach........................................................10
SECTION 3.8 Servicer Fees..............................................................................10
SECTION 3.9 Servicer's Certificate.....................................................................10
SECTION 3.10 Annual Statement as to Compliance; Notice of Event of Servicing Termination................11
SECTION 3.11 Annual Independent Certified Public Accountant's Report....................................11
SECTION 3.12 Access to Certain Documentation and Information Regarding Receivables......................12
SECTION 3.13 Servicer Expenses..........................................................................12
SECTION 3.14 Insurance..................................................................................12
ARTICLE IV DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS...........12
SECTION 4.1 Accounts...................................................................................12
SECTION 4.2 Collections................................................................................14
SECTION 4.3 Application of Collections.................................................................14
SECTION 4.4 Advances...................................................................................14
SECTION 4.5 Additional Deposits........................................................................15
SECTION 4.6 Distributions..............................................................................15
SECTION 4.7 Reserve Account............................................................................19
SECTION 4.8 Net Deposits...............................................................................21
SECTION 4.9 Statements to Noteholders and Certificateholders...........................................21
ARTICLE V THE SELLER.................................................................................22
SECTION 5.1 Representations and Warranties of Seller...................................................22
SECTION 5.2 Liability of Seller; Indemnities...........................................................23
SECTION 5.3 Merger or Consolidation of, or Assumption of the Obligations of Seller.....................24
SECTION 5.4 Limitation on Liability of Seller and Others...............................................24
SECTION 5.5 Seller May Own Notes or Certificates.......................................................24
ARTICLE VI THE SERVICER...............................................................................25
SECTION 6.1 Representations of Servicer................................................................25
SECTION 6.2 Indemnities of Servicer....................................................................26
SECTION 6.3 Merger or Consolidation of, or Assumption of the Obligations of Servicer...................27
SECTION 6.4 Limitation on Liability of Servicer and Others.............................................27
SECTION 6.5 Delegation of Duties.......................................................................28
SECTION 6.6 Servicer Not to Resign as Servicer.........................................................28
SECTION 6.7 Servicer May Own Notes or Certificates.....................................................29
ARTICLE VII SERVICING TERMINATION......................................................................29
SECTION 7.1 Events of Servicing Termination............................................................29
SECTION 7.2 Appointment of Successor Servicer..........................................................30
SECTION 7.3 Repayment of Advances......................................................................31
SECTION 7.4 Notification to Noteholders and Certificateholders.........................................31
SECTION 7.5 Waiver of Past Events of Servicing Termination.............................................31
ARTICLE VIII TERMINATION................................................................................32
SECTION 8.1 Optional Purchase of All Receivables.......................................................32
SECTION 8.2 Succession Upon Satisfaction and Discharge of Indenture....................................32
ARTICLE IX MISCELLANEOUS PROVISIONS...................................................................32
SECTION 9.1 Amendment..................................................................................32
SECTION 9.2 Protection of Title to Trust Property......................................................34
SECTION 9.3 Governing Law..............................................................................36
SECTION 9.4 Notices....................................................................................36
SECTION 9.5 Severability of Provisions.................................................................36
SECTION 9.6 Assignment.................................................................................36
SECTION 9.7 Further Assurances.........................................................................37
SECTION 9.8 No Waiver; Cumulative Remedies.............................................................37
SECTION 9.9 Third-Party Beneficiaries..................................................................37
SECTION 9.10 Actions by Noteholders or Certificateholders...............................................37
SECTION 9.11 Limitation of Liability of Owner Trustee and Indenture Trustee.............................37
SECTION 9.12 Savings Clause.............................................................................38
Schedule A Schedule of Receivables...................................................................A-1
Schedule B Location of Receivable Files .............................................................B-1
Appendix A Definitions and Usage....................................................................AA-1
SALE AND SERVICING AGREEMENT, dated as of November 1, 2001 (as from time
to time amended, supplemented or otherwise modified and in effect, this
"Agreement"), by and between USAA AUTO OWNER TRUST 2001-2 (the "Issuer"), a
Delaware business trust, and USAA FEDERAL SAVINGS BANK, a federally chartered
savings association, as seller (the "Seller") and servicer (the "Servicer").
WHEREAS, the Issuer desires to purchase a portfolio of receivables and
related property consisting of motor vehicle installment loan contracts
originated by USAA Federal Savings Bank in the ordinary course of its
business;
WHEREAS, the Seller is willing to sell such portfolio of receivables and
related property to the Issuer; and
WHEREAS, the Servicer is willing to service such receivables on behalf of
the Issuer;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein are defined
in Appendix A hereto, which also contains rules as to usage that shall be
applicable herein.
ARTICLE II
TRUST PROPERTY
SECTION 2.1 Conveyance of Trust Property; Intent of the Parties. In
consideration of the Issuer's delivery to, or upon the order of, the Seller of
the Notes and the Certificates, the Seller does hereby irrevocably transfer,
assign and otherwise convey to the Issuer (i) without recourse (subject to the
obligations herein) all right, title and interest of the Seller, whether now
owned or hereafter acquired, in and to the Trust Property and (ii) funds in
the amount of the Reserve Initial Deposit. The transfer, assignment and
conveyance made hereunder shall not constitute and is not intended to result
in an assumption by the Issuer of any obligation of the Seller to the Obligors
or any other Person in connection with the Receivables and the other Trust
Property or any agreement, document or instrument related thereto. The Seller
and the Issuer intend that the transfer, assignment and conveyance of the
Trust Property pursuant to this Section 2.1 shall be a sale, and not a secured
borrowing, for accounting purposes.
SECTION 2.2 Representations and Warranties of the Seller as to the
Receivables. The Seller makes the following representations and warranties as
to the Receivables on which the Issuer shall be deemed to have relied in
accepting the Receivables. Such representations and warranties speak as of the
Closing Date, but shall survive the transfer, assignment and
conveyance of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(i) Schedule of Receivables. The information set forth in Schedule A to
this Agreement with respect to each Receivable is true and correct
in all material respects, and no selection procedures adverse to the
Securityholders have been used in selecting the Receivables from all
receivables owned by the Seller which meet the selection criteria
specified herein and in the Agreement.
(ii) No Sale or Transfer. No Receivable has been sold, transferred,
assigned or pledged by the Seller to any Person other than the
Issuer.
(iii)Good Title. Immediately prior to the transfer and assignment of the
Receivables to the Issuer herein contemplated, the Seller had good
and marketable title to each Receivable free and clear of all Liens
and rights of others; and, immediately upon the transfer thereof,
the Issuer, has either (i) good and marketable title to each
Receivable, free and clear of all of all Liens and rights of others,
and the transfer has been perfected under applicable law or (ii) a
first priority perfected security interest in each Receivable.
(iv) Receivable Files. The Receivable Files shall be kept at one or more
of the locations specified in Schedule B hereto.
(v) Characteristics of Receivables. Each Receivable (a) has been
originated for the retail financing of a Financed Vehicle by an
Obligor located in one of the States of the United States or the
District of Columbia; (b) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof
are adequate for realization against the collateral of the benefits
of the security; and (c) provides for fully amortizing level
scheduled monthly payments (provided that the payment in the last
month in the life of the Receivable may be different from the level
scheduled payment) and for accrual of interest at a fixed rate
according to the simple interest method.
(vi) Compliance with Law. Each Receivable and each sale of the related
Financed Vehicle complied at the time it was originated or made, and
complies on and after the Cut-off Date, in all material respects
with all requirements of applicable federal, state, and local laws,
and regulations thereunder, including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Federal Trade Commission Act, the
▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, Federal Reserve Board Regulations B and
Z, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and any other consumer credit, equal
opportunity, and disclosure laws applicable to such Receivable and
sale.
(vii)Binding Obligation. Each Receivable constitutes the legal, valid,
and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in all material respects in
accordance with its terms, subject, as to enforcement, to
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applicable bankruptcy, insolvency, reorganization, liquidation and
other similar laws and equitable principles relating to or affecting
the enforcement of creditors' rights.
(viii) No Government Obligor. No Receivable is due from the United States
of America or any state or from any agency, department,
instrumentality or political subdivision of the United States of
America or any state or local municipality and no Receivable is due
from a business except to the extent that such receivable has a
personal guaranty.
(ix) Security Interest in Financed Vehicle. Immediately prior to the sale
and assignment thereof to the Trust as herein contemplated, each
Receivable was secured by a validly perfected first priority
security interest in the Financed Vehicle in favor of the Seller as
secured party or all necessary and appropriate action with respect
to such Receivable had been taken to perfect a first priority
security interest in the related Financed Vehicle in favor of the
Seller as secured party, which security interest is assignable and
has been so assigned by the Seller to the Trust.
(x) Receivables in Force. No Receivable has been satisfied,
subordinated, or rescinded, nor has any Financed Vehicle been
released from the Lien granted by the related Receivable in whole or
in part.
(xi) No Waiver. No provision of a Receivable has been waived in such a
manner that such Receivable fails either to meet all of the
representations and warranties made by the Seller herein with
respect thereto pursuant to this Section 2.2.
(xii)No Amendments. No Receivable has been amended except pursuant to
either instruments included in the Receivable Files or instruments
to be included in the Receivable Files pursuant to Section 13.2 and
no such amendment has caused such Receivable either to fail to meet
all of the representations and warranties made by the Seller herein
with respect thereto pursuant to this Section 2.2.
(xiii) No Defenses. As of the Cut-off Date, there are no rights of
rescission, setoff, counterclaim, or defense, and the Seller has no
knowledge of the same being asserted or threatened, with respect to
any Receivable.
(xiv)No Liens. As of the Cut-off Date, the Seller has no knowledge of any
Liens or claims that have been filed, including Liens for work,
labor, materials or unpaid taxes relating to a Financed Vehicle,
that would be Liens prior to, or equal or coordinate with, the Lien
granted by the Receivable.
(xv) No Default. Except for payment defaults continuing for a period of
not more than 30 days as of the Cut-off Date, the Seller has no
knowledge that a default, breach, violation, or event permitting
acceleration under the terms of any Receivable exists; the Seller
has no knowledge that a continuing condition that with notice or
lapse of time would constitute a default, breach, violation, or
event permitting
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acceleration under the terms of any Receivable exists; and the
Seller has not waived any of the foregoing.
(xvi)Insurance. Each Receivable requires that the Obligor thereunder
obtain comprehensive and collision insurance covering the Financed
Vehicle.
(xvii) Lawful Assignment. No Receivable has been originated in, or is
subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under the Agreement is
unlawful, void or voidable.
(xviii) All Filings Made. No filings (other than UCC filings which have
been made) or other actions are necessary in any jurisdiction to
give the Issuer a first priority perfected security interest in the
Receivables and to give the Indenture Trustee a first priority
perfected security interest in the Receivables.
(xix)One Original. With respect to any Receivable for which an original
executed copy exists, there is no more than one original executed
copy of such Receivable which, immediately prior to the delivery
thereof to the Servicer, as custodian for the Indenture Trustee, was
in the possession of the Seller.
(xx) Security. Each Receivable is secured by a new or used automobile or
light-duty truck.
(xxi)Maturity of Receivables. Each Receivable has a remaining maturity,
as of the Cut-off Date, of not less than 6 months nor greater than
72 months and, (i) with respect to Receivables secured by new
Financed Vehicles, an original maturity of at least 12 months and
not more than 72 months and (ii) with respect to Receivables secured
by used Financed Vehicles, an original maturity of at least 9 months
and not more than 60 months. No Receivable has a scheduled maturity
later than September 27, 2007.
(xxii) Annual Percentage Rate. Each Receivable is a fully-amortizing
fixed rate simple interest contract that provides for level
scheduled monthly payments (except for the last payment, which may
be minimally different from the level payments) over its respective
remaining term, and has an Annual Percentage Rate that equals or
exceeds 6.55%, is not secured by any interest in real estate, and
has not been identified on the computer files of the Seller as
relating to Obligors who have requested a reduction in the periodic
finance charges, as of the Cut-off Date, by application of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
(xxiii) No Repossessions. Each Receivable is secured by a Financed
Vehicle that, as of the Cut-off Date, has not been repossessed
without reinstatement of such Receivable.
(xxiv) Obligor Not Subject to Bankruptcy Proceedings. Each Receivable has
been entered into by an Obligor who has not been identified on the
computer files of the Seller as being a debtor in any bankruptcy
proceeding as of the Cut-off Date.
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(xxv)No Overdue Payments. No Receivable has any payment that is more
than 30 days past due as of the Cut-off Date.
(xxvi) Tangible Chattel Paper. The Receivables constitute "tangible
chattel paper" within the meaning of UCC Section 9-102.
(xxvii) Remaining Principal Balance. Each Receivable had a remaining
principal balance, as of the Cut-off Date, of at least $501.31.
SECTION 2.3 Repurchase upon Breach. The Seller, the Servicer, the Issuer
or the Owner Trustee, as the case may be, shall inform the other parties to
this Agreement, the Indenture Trustee and the Seller promptly, in writing,
upon the discovery of any breach of the Seller's representations and
warranties made by the Seller pursuant to Section 2.2. Unless the breach shall
have been cured by the last day of the second Collection Period following
written notice to the Indenture Trustee of such breach, the Indenture Trustee
shall enforce the obligation of the Seller under this Section 2.3 to
repurchase any Receivable, the Issuer's interest in which is materially and
adversely affected by the breach as of such last day (or, at the Seller's
option, the last day of the first Collection Period following the discovery).
In consideration of the purchase of the Receivable, the Seller shall remit the
Purchase Amount (less any Liquidation Proceeds deposited, or to be deposited,
in the Collection Account with respect to such Receivable pursuant to Section
3.3), in the manner specified in Section 4.5. The sole remedy of the Issuer,
the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach of the Seller's representations
and warranties pursuant to Section 2.2 shall be to require the Seller to
repurchase such Receivables pursuant to this Section 2.3. The obligation of
the Seller to repurchase under this Section 2.3 shall not be solely dependent
upon the actual knowledge of the Seller of any breached representation or
warranty. Neither the Owner Trustee nor the Indenture Trustee shall have any
duty to conduct an affirmative investigation as to the occurrence of any
condition requiring the repurchase of any Receivable pursuant to this Section
2.3 or the eligibility of any Receivable for purposes of this Agreement.
SECTION 2.4 Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer, upon
the execution and delivery of this Agreement, hereby revocably appoints the
Servicer, and the Servicer hereby accepts such appointment, to act as the
agent of the Issuer and the Indenture Trustee as custodian of the following
documents or instruments, which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Issuer pursuant to the Indenture, with
respect to each Receivable:
(i) The original executed Receivable or, if no such original exists,
a copy thereof.
(ii) The original credit application fully executed by the Obligor
or a photocopy thereof or a record thereof on a computer file, diskette
or on microfiche.
(iii) The notice of recorded Lien or such documents that the
Servicer or the Seller shall keep on file, in accordance with its
customary procedures, evidencing the first priority perfected security
interest of the Seller in the Financed Vehicle.
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(iv) Any and all other documents (including any computer file,
diskette or microfiche) that the Servicer or the Seller shall keep on
file, in accordance with its customary procedures, relating to a
Receivable, an Obligor (to the extent relating to a Receivable), or a
Financed Vehicle.
The Servicer acknowledges that it holds the documents and instruments
relating to the Receivables for the benefit of the Issuer and the Indenture
Trustee. The Issuer and the Indenture Trustee shall have no responsibility to
monitor the Servicer's performance as custodian and shall have no liability in
connection with the Servicer's performance of such duties hereunder.
SECTION 2.5 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Receivable Files for the
benefit of the Issuer and the Indenture Trustee and maintain such accurate and
complete accounts, records, and computer systems pertaining to each Receivable
File as shall enable the Servicer and the Issuer to comply with the terms and
conditions of this Agreement, and the Indenture Trustee to comply with the
terms and conditions of the Indenture. In performing its duties as custodian
the Servicer shall act with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to the receivable files
relating to all comparable automotive receivables that the Servicer services
for itself or others. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Receivable Files held by it under this Agreement, and
of the related accounts, records, and computer systems, in such a manner as
shall enable the Issuer or the Indenture Trustee to identify all Receivables
Files and such related accounts, records and computer systems and verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report
to the Issuer and the Indenture Trustee any failure on its part to hold the
Receivable Files and maintain its accounts, records, and computer systems as
herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or any
periodic review by the Issuer, the Owner Trustee or the Indenture Trustee of
the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at its offices specified in Schedule B-1 to this
Agreement, or at such other office as shall be specified to the Issuer and the
Indenture Trustee by 30 days' prior written notice. The Servicer shall make
available to the Issuer and the Indenture Trustee or their duly authorized
representatives, attorneys, or auditors, the Receivable Files, and the related
accounts, records, and computer systems maintained by the Servicer during
normal business hours as the Issuer or the Indenture Trustee shall reasonably
request, which does not unreasonably interfere with the Servicer's normal
operations.
(c) Release of Documents. Upon written instructions from the Indenture
Trustee, the Servicer shall release or cause to be released any document in
the Receivable Files to the Indenture Trustee, the Indenture Trustee's agent
or the Indenture Trustee's designee, as the case may be, at such place or
places as the Indenture Trustee may reasonably designate, as soon as is
reasonably practicable, to the extent it does not unreasonably interfere with
the Servicer's normal operations. The Servicer shall not be responsible for
any loss occasioned by the failure of the Indenture Trustee or its agent or
designee to return any document or any delay in doing so.
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SECTION 2.6 Instructions; Authority to Act. All instructions from the
Indenture Trustee shall be in writing and signed by an Authorized Officer of
the Indenture Trustee, and the Servicer shall be deemed to have received
proper instructions with respect to the Receivable Files upon its receipt of
such written instructions.
SECTION 2.7 Custodian's Indemnification. The Servicer, as custodian,
shall indemnify the Issuer, the Owner Trustee and the Indenture Trustee for
any and all liabilities, obligations, losses, compensatory damages, payments,
costs, or expenses of any kind whatsoever that may be imposed on, incurred, or
asserted against the Issuer, the Owner Trustee or the Indenture Trustee as the
result of any improper act or omission in any way relating to the maintenance
and custody by the Servicer as custodian of the Receivable Files; provided,
however, that the Servicer shall not be liable (i) to the Issuer for any
portion of any such amount resulting from the willful misfeasance, bad faith,
or negligence of the Indenture Trustee, the Owner Trustee or the Issuer, (ii)
to the Owner Trustee for any portion of any such amount resulting from the
willful misfeasance, bad faith, or negligence of the Indenture Trustee, the
Owner Trustee or the Issuer and (iii) to the Indenture Trustee for any portion
of any such amount resulting from the willful misfeasance, bad faith, or
negligence of the Indenture Trustee, the Owner Trustee or the Issuer.
SECTION 2.8 Effective Period and Termination. The Servicer's appointment
as custodian shall become effective as of the Cut-off Date and shall continue
in full force and effect until terminated pursuant to this Section 2.8. If the
Bank shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of the Servicer shall have
been terminated under Section 7.1, the appointment of the Servicer as
custodian hereunder may be terminated by the Indenture Trustee, or by the
holders of Notes evidencing not less than a majority of the principal amount
of the Notes Outstanding (or if no Notes are Outstanding, by holders of
Certificates evidencing not less than a majority of the Certificate Balance),
in the same manner as the Indenture Trustee or such Securityholders may
terminate the rights and obligations of the Servicer under Section 7.1. As
soon as practicable after any termination of such appointment, the Servicer
shall deliver to the Indenture Trustee or the Indenture Trustee's agent the
Receivable Files and the related accounts and records maintained by the
Servicer at such place or places as the Indenture Trustee may reasonably
designate.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES AND TRUST PROPERTY
SECTION 3.1 Duties of Servicer. The Servicer shall manage, service,
administer, and make collections on the Receivables with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to all comparable new or used automobile and light-duty truck
receivables that it services for itself. The Servicer's duties shall include
collection and posting of all payments, responding to inquiries of Obligors on
such Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting tax information to Obligors, accounting for collections,
furnishing monthly and annual statements to the Owner Trustee and the
Indenture Trustee with respect to distributions, and making Advances pursuant
to Section 4.4. The Servicer shall follow its customary standards, policies
and procedures in performing its
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duties as Servicer. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered to execute and deliver, on behalf
of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Noteholders, the Certificateholders, or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables. If the Servicer shall commence a
legal proceeding to enforce a Receivable, the Issuer (in the case of a
Receivable other than a Purchased Receivable) shall thereupon be deemed to
have automatically assigned, solely for the purpose of collection, such
Receivable to the Servicer. If in any enforcement suit or legal proceeding it
shall be held that the Servicer may not enforce a Receivable on the ground
that it shall not be a real party in interest or a holder entitled to enforce
the Receivable, the Issuer shall, at the Servicer's expense and direction,
take steps to enforce the Receivable, including bringing suit in its name or
the names of the Indenture Trustee, the Noteholders, the Certificateholders,
or any of them. The Issuer shall furnish the Servicer with any powers of
attorney and other documents reasonably necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder.
SECTION 3.2 Collection of Receivable Payments. 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
new or used automobile and light-duty truck receivables that it services for
itself. The Servicer shall not change the amount of or reschedule the due date
of any scheduled payment of a Receivable to a date more than 30 days from the
original due date of such scheduled payment, change the annual percentage rate
of or extend any Receivable or change any material term of a Receivable,
except as provided by the terms of the Receivable or of this Agreement or as
required by law or court order; provided, however, that the Servicer may
extend any Receivable that is in default or with respect to which default is
reasonably foreseeable and that would be acceptable to the Servicer with
respect to comparable new or used automobile and light-duty truck receivables
that it services for itself, if (a) the amount on deposit in the Reserve
Account is greater than zero at the time of the extension, (b) the total
credit-related extensions granted on the Receivable will not exceed four
months in the aggregate, (c) the total number of credit-related extensions
granted on the Receivable will not exceed two, and (d) the maturity of such
Receivable will not be extended beyond September 27, 2007. If, as a result of
inadvertently rescheduling or extending payments, such rescheduling or
extension breaches any of the terms of the proviso to the preceding sentence,
then the Servicer shall be obligated to purchase such Receivable pursuant to
Section 3.7. For the purpose of such purchases pursuant to Section 3.7, notice
shall be deemed to have been received by the Servicer at such time as shall
make purchase mandatory as of the last day of the Collection Period during
which the discovery of such breach occurred.
SECTION 3.3 Realization Upon Receivables. On behalf of the Issuer, the
Servicer shall use reasonable efforts, consistent with its customary
standards, policies and procedures, to repossess or otherwise convert the
ownership of the Financed Vehicle securing any Receivable as to which the
Servicer shall have determined to be a Defaulted Receivable or otherwise (and
shall specify any such Defaulted Receivable to the Indenture Trustee no later
than the Determination Date following the Collection Period in which the
Servicer shall have made such determination). The Servicer shall follow such
customary standards, policies and procedures as it
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shall deem necessary or advisable in its servicing of comparable receivables,
which may include selling the Financed Vehicle at public or private sale. The
Servicer shall be entitled to recover from proceeds all reasonable expenses
incurred by it in the course of converting the Financed Vehicle into cash
proceeds. The Liquidation Proceeds (net of such expenses) realized in
connection with any such action with respect to a Receivable shall be
deposited by the Servicer in the Collection Account in the manner specified in
Section 4.2 and shall be applied to reduce (or to satisfy, as the case may be)
the Purchase Amount of the Receivable, if such Receivable is to be repurchased
by the Seller pursuant to Section 2.3, or is to be purchased by the Servicer
pursuant to Section 3.7. The foregoing shall be subject to the provision that,
in any case in which the Financed Vehicle shall have suffered damage, the
Servicer shall not be required to expend funds in connection with the repair
or the repossession of such Financed Vehicle unless it shall determine in its
discretion that such repair and/or repossession will increase the Liquidation
Proceeds by an amount greater than the amount of such expenses.
SECTION 3.4 Allocations of Collections. If an Obligor is obligated under
one or more Receivables and also under one or more other assets owned by the
Bank or assigned by the Bank to third parties, then any payment on any such
asset received from or on behalf of such Obligor shall, if identified as being
made with respect to a particular item or asset, be applied to such item, and
otherwise shall be allocated by the Bank in accordance with its customary
standards, policies and procedures.
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, in accordance with its customary procedures, take such steps
as are necessary to maintain perfection of the security interest created by
each Receivable in the related Financed Vehicle. The Issuer hereby authorizes
the Servicer to take such steps as are necessary to re-perfect such security
interest on behalf of the Issuer and the Indenture Trustee in the event of the
relocation of a Financed Vehicle or for any other reason, in either case, when
the Servicer has knowledge of the need for such re-perfection. In the event
that the assignment of a Receivable to the Issuer 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 transfer to the Issuer a
perfected security interest in the related Financed Vehicle, the Servicer
hereby agrees that the Servicer's listing as the secured party on the
certificate of title is deemed to be in its capacity as agent of the Issuer
and the Indenture Trustee and further agrees to hold such certificate of title
as the agent and custodian of the Issuer and the Indenture Trustee; provided
that the Servicer shall not, nor shall the Issuer or the Indenture Trustee
have the right to require that the Servicer, make any such notation on the
related Financed Vehicles' certificate of title or fulfill any such additional
administrative requirement of the laws of the state in which a Financed
Vehicle is located.
SECTION 3.6 Covenants of Servicer. The Servicer shall not (i) release the
Financed Vehicle securing each such Receivable from the security interest
granted by such Receivable in whole or in part except in the event of payment
in full by or on behalf of the Obligor thereunder, (ii) impair the rights of
the Trust in the Receivables, or (iii) increase the number of payments under a
Receivable, increase the Amount Financed under a Receivable or extend or
forgive payments on a Receivable, except as provided in Section 3.2. In the
event that at the end of the scheduled term of any Receivable, the outstanding
principal amount thereof is such that the final
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payment to be made by the related Obligor is larger than the regularly
scheduled payment of principal and interest made by such Obligor, the Servicer
may permit such Obligor to pay such remaining principal amount in more than
one payment of principal and interest; provided that the last such payment
shall be due on or prior to the Collection Period immediately preceding the
Class B Final Scheduled Payment Date.
SECTION 3.7 Purchase of Receivables Upon Breach. (a) The Seller, the
Servicer or the Owner Trustee, as the case may be, promptly shall inform the
other parties to this Agreement, in writing, upon the discovery of any breach
pursuant to Section 3.2, 3.5 or 3.6. Unless the breach shall have been cured
by the last day of the second Collection Period following such discovery (or,
at the Servicer's election, the last day of the first following Collection
Period), the Servicer shall purchase any Receivable materially and adversely
affected by such breach as determined by the Indenture Trustee (which shall
include any Receivable as to which a breach of Section 3.6 has occurred) at
the Purchase Amount (less any Liquidation Proceeds deposited, or to be
deposited, in the Collection Account with respect to such Receivable pursuant
to Section 3.3). In consideration of the purchase of such Receivable, the
Servicer shall remit the Purchase Amount in the manner specified in Section
4.5. For purposes of this Section 3.7, the Purchase Amount shall consist in
part of a release by the Servicer of all rights of reimbursement with respect
to Outstanding Advances on the Receivable. The sole remedy of the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach pursuant to Section 3.2, 3.5 or
3.6 shall be to require the Servicer to purchase Receivables pursuant to this
Section 3.7.
(b) With respect to all Receivables purchased pursuant to this Section
3.7, the Issuer shall assign to the Servicer or the Seller, as applicable,
without recourse, representation or warranty, all of the Issuer's right, title
and interest in and to such Receivables and all security and documents
relating thereto.
SECTION 3.8 Servicer Fees. The Servicer shall be entitled to any interest
earned on the amounts deposited in the Collection Account during each
Collection Period plus all late fees, prepayment charges and other
administrative fees and expenses or similar charges, if any, allowed by
applicable law and the terms of the Receivables during each Collection Period
(the "Supplemental Servicing Fee"). The Servicer also shall be entitled to the
Servicing Fee, as provided herein.
SECTION 3.9 Servicer's Certificate. On or prior to the Determination Date
for each Payment Date, the Servicer shall deliver to the Owner Trustee, each
Note Paying Agent and Certificate Paying Agent, the Indenture Trustee and the
Seller, with a copy to the Rating Agencies, a Servicer's Certificate
containing all information (including all specific dollar amounts) necessary
to make the transfers and distributions pursuant to Sections 4.3, 4.4, 4.5,
4.6 and 4.7 for the Collection Period preceding the date of such Servicer's
Certificate, together with the written statements to be furnished by the Owner
Trustee to Certificateholders pursuant to Section 4.9 and by the Indenture
Trustee to the Noteholders pursuant to Section 4.9 hereof and Section 6.6 of
the Indenture. Receivables purchased or to be purchased by the Servicer or the
Seller shall be identified by the Servicer by the Seller's account number with
respect to such Receivable (as specified in the Schedule of Receivables).
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SECTION 3.10 Annual Statement as to Compliance; Notice of Event of
Servicing Termination. (a) The Servicer shall deliver to the Owner Trustee,
the Indenture Trustee and each Rating Agency on or before March 31 of each
year beginning March 31, 2002, an Officer's Certificate, with respect to the
preceding 12-month period (or such shorter period in the case of the first
such certificate), stating that (i) a review of the activities of the Servicer
during the preceding 12-month period (or such shorter period in the case of
the first such certificate) and of its performance under this Agreement has
been made under such officer's supervision and (ii) to the best of 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. A copy of
such Officer's Certificate and the report referred to in Section 3.11 may be
obtained by any Certificateholder by a request in writing to the Owner
Trustee, or by any Noteholder or Person certifying that it is a Note Owner by
a request in writing to the Indenture Trustee, in either case addressed to the
applicable Corporate Trust Office. Upon the telephone request of the Owner
Trustee, the Indenture Trustee shall promptly furnish the Owner Trustee a list
of Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency promptly after having obtained knowledge
thereof, but in no event later than five (5) 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 an Event of Servicing
Termination under Section 7.1. The Seller shall deliver to the Owner Trustee,
the Indenture Trustee and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than five (5) 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 an Event of
Servicing Termination under clause (a)(ii) of Section 7.1.
SECTION 3.11 Annual Independent Certified Public Accountant's Report. The
Servicer shall cause a firm of independent certified public accountants, who
may also render other services to the Servicer or to the Seller, to deliver to
the Owner Trustee and the Indenture Trustee on or before March 31 of each year
beginning March 31, 2002 with respect to the prior calendar year (or such
shorter period in the case of the first such report) a report addressed to the
board of directors of the Servicer and to the Owner Trustee and the Indenture
Trustee, to the effect that such firm has examined the automobile and
light-duty truck receivable servicing functions of the Servicer for such
period, including the Servicer's procedures and records relating to servicing
of the Receivables under this Agreement and that, on the basis of such
examination, such firm is of the opinion that such servicing has been
conducted during such period in compliance with this Agreement except for (a)
such exceptions as such firm believes to be immaterial and (b) such other
exceptions as shall be set forth in such firm's report. In addition, such
report shall state that such firm has compared the mathematical calculations
of each amount set forth in the Servicer's Certificates forwarded by the
Servicer pursuant to Section 3.9 during the period covered by such report
(which shall be the preceding calendar year or such shorter period in the case
of the first such report) with the Servicer's computer reports which were the
source of such amounts and that on the basis of such comparison, such firm is
of the opinion that such amounts are in agreement, except for such exceptions
as such firm believes to be immaterial and such other exceptions as shall be
set forth in such statement. In addition, such report shall set forth the
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procedures performed in conjunction with the examination and shall contain an
opinion of such firm as to the accuracy of the amounts set forth in the
Servicer's Certificates delivered pursuant to Section 3.9 in such period.
The report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 3.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to the Certificateholders, the
Indenture Trustee and the Noteholders access to the Receivable Files in such
cases where the Certificateholders, the Indenture Trustee or the Noteholders
shall be required by applicable statutes or regulations to review such
documentation. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Servicer. Nothing in this Section 3.12 shall affect the
obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section 3.12.
SECTION 3.13 Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of the Owner Trustee and the Indenture Trustee,
independent accountants, taxes imposed on the Servicer and expenses incurred
in connection with distributions and reports to Noteholders and
Certificateholders.
SECTION 3.14 Insurance. The Servicer, in accordance with its customary
servicing procedures and underwriting standards, shall require that each
Obligor shall have obtained and shall maintain comprehensive and collision
insurance covering the related Financed Vehicle as of the execution of the
Receivable. The Servicer shall enforce its rights under the Receivables to
require the Obligors to maintain comprehensive and collision insurance, in
accordance with the Servicer's customary practices and procedures with respect
to comparable new or used automobile and light-duty truck receivables that it
services for itself or others.
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO
NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1 Accounts. (a) The Servicer shall, prior to the Closing Date,
cause to be established and maintained an Eligible Deposit Account in the name
"JPMorgan Chase Bank as Indenture Trustee, as secured party from USAA Auto
Owner Trust 2001-2", initially at the corporate trust department of the
Indenture Trustee, which shall be designated as the "Collection Account". The
Collection Account shall be under the sole dominion and control of the
Indenture Trustee; provided, that the Servicer may make deposits to and direct
the Indenture Trustee in writing to make withdrawals from the Collection
Account in accordance with the terms of the Basic Documents. The Collection
Account will be established and maintained pursuant to an account agreement
which specifies New York law as the governing law. In addition, the
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Collection Account shall be established and maintained at an Institution which
agrees in writing that for so long as the Notes are outstanding it will comply
with entitlement orders (as defined in Article 8 of the UCC) originated by the
Indenture Trustee without further consent of the Issuer. All monies deposited
from time to time in the Collection Account shall be held by the Indenture
Trustee as secured party for the benefit of the Noteholders and, after payment
in full of the Notes, as agent of the Issuer and as part of the Trust
Property. All deposits to and withdrawals from the Collection Account shall be
made only upon the terms and conditions of the Basic Documents.
If the Servicer is required to remit collections pursuant to the first
sentence of Section 4.2, all amounts held in the Collection Account shall, to
the extent permitted by applicable law, rules and regulations, be invested, as
directed in writing by the Servicer, by the bank or trust company then
maintaining the Collection Account in specified Permitted Investments that
mature not later than the Business Day immediately prior to the Payment Date
for the Collection Period to which such amounts relate and such Permitted
Investments shall be held to maturity. All interest and other income (net of
losses and investment expenses) on funds on deposit in the Collection Account
shall be withdrawn from the Collection Account at the written direction of the
Servicer and shall be paid to the Servicer. The Indenture Trustee shall not be
liable for investment losses in Permitted Investments made in accordance with
directions from the Servicer. In the event that the Collection Account is no
longer to be maintained at the corporate trust department of the Indenture
Trustee, the Servicer shall, with the Indenture Trustee's or Issuer's
assistance as necessary, cause an Eligible Deposit Account to be established
as the Collection Account within ten (10) Business Days (or such longer period
not to exceed thirty (30) calendar days as to which each Rating Agency may
consent).
(b) The Servicer shall, prior to the Closing Date, establish and maintain
an administrative subaccount within the Collection Account at the bank or
trust company then maintaining the Collection Account, which subaccount shall
be designated as the "Principal Distribution Account". The Principal
Distribution Account is established and maintained solely for administrative
purposes.
(c) The Servicer shall, prior to the Closing Date, cause an Eligible
Deposit Account to be established and maintained, in the name "USAA Auto Owner
Trust 2001-2 Certificate Distribution Account", initially at the corporate
trust department of the Owner Trustee, which shall be designated as the
"Certificate Distribution Account". The Certificate Distribution Account shall
be under the sole dominion and control of the Owner Trustee. All monies
deposited from time to time in the Certificate Distribution Account pursuant
to this Agreement and the Indenture shall be held by the Owner Trustee as part
of the Trust Property and shall be applied as provided in the Basic Documents.
In the event that the Certificate Distribution Account is no longer to be
maintained at the corporate trust department of the Owner Trustee, the
Servicer shall cause an Eligible Deposit Account to be established as the
Certificate Distribution Account within ten (10) Business Days (or such longer
period not to exceed thirty (30) calendar days as to which each Rating Agency
may consent). The Certificate Distribution Account will be established and
maintained pursuant to an account agreement which specifies New York law as
the governing law.
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SECTION 4.2 Collections. The Servicer shall remit to the Collection
Account within two (2) Business Days of the receipt thereof (i) all payments
by or on behalf of the Obligors (but excluding Purchased Receivables) and (ii)
all Liquidation Proceeds, both as collected during the Collection Period;
provided that the Bank, so long as it is acting as the Servicer and no Event
of Servicing Termination has occurred and is continuing, may make remittances
of collections on a less frequent basis than that specified in the immediately
preceding sentence. It is understood that such less frequent remittances may
be made only on the specific terms and conditions set forth below in this
Section 4.2 and only for so long as such terms and conditions are fulfilled.
Accordingly, notwithstanding the provisions of the first sentence of this
Section 4.2, the Servicer shall remit collections received during a Collection
Period to the Collection Account in immediately available funds on the
Business Day preceding the related Payment Date but only for so long as the
Monthly Remittance Condition is satisfied. The Owner Trustee or the Indenture
Trustee shall not be deemed to have knowledge of any event or circumstance in
the definition of Monthly Remittance Condition that would require remittance
by the Servicer to the Collection Account within two (2) Business Days of
receipt as aforesaid unless the Owner Trustee or the Indenture Trustee has
received notice of such event or circumstance from the Seller or the Servicer
in an Officer's Certificate or from the holders of Notes evidencing not less
than 25% of the principal amount of the Notes Outstanding or from the
Certificateholders of Certificates evidencing not less than 25% of the
Certificate Balance or a Trustee Officer in the Corporate Trust Office with
knowledge hereof or familiarity herewith has actual knowledge of such event or
circumstance. For purposes of this Article IV the phrase "payments by or on
behalf of Obligors" shall mean payments made by Persons other than the
Servicer or by other means.
SECTION 4.3 Application of Collections. For the purposes of this
Agreement, as of the close of business on the last day of each Collection
Period, all collections for the Collection Period with respect to each
Receivable (other than a Purchased Receivable) shall be applied by the
Servicer as follows:
Each payment on a Receivable shall be applied first to the amount of
interest accrued on such Receivable to the date of receipt, then to
reduce the scheduled principal amount outstanding on the Receivable
to the extent of the remaining scheduled payment and then to any
outstanding fees under the terms of the Receivable. Amounts paid by
the Seller or the Servicer in respect of Repurchased Receivables
shall be allocated first to any interest accrued on the related
Receivable and then to the Principal Balance of the related
Receivable.
SECTION 4.4 Advances. (a) As of each Determination Date, the Servicer
shall make a payment with respect to each Receivable (other than a Defaulted
Receivable) equal to the excess, if any, of (x) the product of the Principal
Balance of such Receivable as of the first day of the related Collection
Period and one-twelfth of the Annual Percentage Rate on such Receivable
(calculated on the basis of a 360-day year of twelve 30-day months), over (y)
the interest actually received by the Servicer with respect to such Receivable
from the Obligor or from payment of the Purchase Amount during or with respect
to such Collection Period. The Servicer shall deposit all such Advances into
the Collection Account in immediately available funds no later than, 11:00
a.m. New York City time, on the Determination Date. Notwithstanding the
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foregoing, the Servicer may elect not to make any Advance with respect to a
Receivable to the extent that the Servicer, in its sole discretion, shall
determine that such Advance is not recoverable from subsequent payments on
such Receivable or from withdrawals from the Reserve Account. To the extent
that the amount set forth in clause (y) above with respect to a Receivable is
greater than the amount set forth in clause (x) above with respect thereto,
such excess amount shall be distributed to the Servicer pursuant to Section
4.6(b). In addition, in the event that a Receivable becomes a Defaulted
Receivable, Outstanding Advances in respect of that Receivable shall be
reimbursed to the extent of interest Collections with respect to such
Receivable and, if such amounts are insufficient, from amounts on deposit in
the Reserve Account, and if such amounts are not sufficient, from amounts on
deposit in the Collection Account. The Servicer shall not make any advance
with respect to principal of Receivables.
(b) The Servicer shall deposit in the Collection Account the aggregate
Advances on the Receivables pursuant to Section 4.4(a). To the extent that the
Servicer fails to make an Advance pursuant to Section 4.4(a) on the date
required, the Servicer shall so notify the Issuer and the Indenture Trustee in
writing specifying the amount of the Advance and the Receivable to which such
Advance related, and the Trustee shall withdraw such amount (or, if
determinable, such portion of such amount as does not represent advances for
delinquent interest) from the Reserve Account and deposit such amount in the
Collection Account.
SECTION 4.5 Additional Deposits. (a) The Seller and the Servicer shall
deposit in the Collection Account the aggregate Purchase Amounts with respect
to Purchased Receivables pursuant to Sections 2.3 and 3.7, respectively, and
the Servicer shall deposit therein all amounts to be paid under Section 8.1.
All such deposits with respect to a Collection Period shall be made, in
immediately available funds, on the Business Day preceding the Payment Date
related to such Collection Period.
(b) The Indenture Trustee, in accordance with the written instructions of
the Servicer, shall, on the Payment Date relating to each Collection Period,
make withdrawals from the Reserve Account (i) first, in an amount equal to the
Reserve Account Excess Amount and (ii) second, in an amount equal to the
amount (if positive) calculated by the Servicer pursuant to the second
sentence of Section 4.6(b).
SECTION 4.6 Distributions. (a) On each Payment Date, the Indenture
Trustee shall cause the transfer and distribution of the amounts set forth in
the Servicer's Certificate for such Payment Date from the Collection Account
to the Servicer, in immediately available funds, for repayment of Outstanding
Advances pursuant to Section 4.4(a).
(b) The Servicer shall on or before each Determination Date calculate the
Available Collections, the Reserve Account Excess Amount, the Available Funds,
the Servicing Fee and all unpaid Servicing Fees from prior Collection Periods,
if any, the Accrued Class A Note Interest, the Accrued Class B Certificate
Interest and the Regular Principal Distribution Amount. In addition, the
Servicer shall calculate on or before each Determination Date the difference,
if any, between the Total Required Payment and the Available Funds and,
pursuant to Section 4.5(b), the Indenture Trustee shall withdraw funds from
the Reserve Account in an amount equal to the lesser of such difference (if
positive) or the balance of such Reserve Account.
15
(c) On each Payment Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on or before the related Determination Date pursuant to Section
3.9), to make the following withdrawals from the Collection Account and make
deposits, distributions and payments, to the extent of Available Funds for
such Payment Date (plus funds, if any, deposited in the Collection Account
from the Reserve Account pursuant to Section 4.5(b)), in the following order
of priority:
(i) first, to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(ii) second, to the Noteholders, the Accrued Class A Note Interest
for such Payment Date; provided that if there are not sufficient funds
available to pay the entire amount of the Accrued Class A Note Interest,
the amounts available shall be applied to the payment of such interest on
the Class A Notes on a pro rata basis;
(iii) third, to the Noteholders, the Priority Note Principal
Payment, if any, for such Payment Date to be distributed in the same
priority as described under Section 4.6(d) of this Agreement;
(iv) fourth, to the Certificate Distribution Account, the Accrued
Class B Certificate Interest for such Payment Date;
(v) fifth, to the Principal Distribution Account, the Regular
Principal Distribution Amount (less any amounts distributed under clause
(iii) above) for such Payment Date;
(vi) sixth, if such Payment Date is a Final Scheduled Payment Date
for any Class, to the Principal Distribution Account, the amount
necessary to reduce the remaining principal amount of such Class to zero;
(vii) seventh, to the Reserve Account, the amount, if any, required
to reinstate the amount in the Reserve Account up to the Specified
Reserve Balance for such Payment Date;
(viii) eighth, to the Indenture Trustee and the Owner Trustee, all
amounts due for fees, expenses and indemnification pursuant to Section
6.7 of the Indenture or Section 7.1 of the Trust Agreement, respectively,
and not previously paid; and
(ix) ninth, to the Seller, any remaining Available Funds for such
Payment Date.
Notwithstanding the foregoing in this Section 4.6(c),
(A) if the Class A Notes have been accelerated after an Event
of Default specified in Section 5.1(iii) of the Indenture, then the
Available Funds shall instead be applied in the following order of
priority:
(1) to the Indenture Trustee and the Owner Trustee, all
amounts due for fees, expenses and indemnification under
Section 6.7 of the
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Indenture and Section 7.1 of the Trust Agreement, respectively,
and not previously paid;
(2) to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(3) to the Noteholders, the Accrued Class A Note Interest
for such Payment Date; provided that if there are not
sufficient funds available to pay the entire amount of the
Accrued Class A Note Interest, the amounts available shall be
applied to the payment of such interest on the Class A Notes on
a pro rata basis;
(4) to the Noteholders, the Priority Note Principal
Payment, if any, for such Payment Date to be distributed in the
same manner as described under Section 4.6(d) of this
Agreement;
(5) to the Certificate Distribution Account, the Accrued
Class B Certificate Interest for such Payment Date;
(6) first, to the holders of the Class A-1 Notes in
reduction of principal until the principal amount of the Class
A-1 Notes has been paid in full and then to the holders of the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes on
a pro rata basis in reduction of principal until the principal
amount of such Class A Notes has been paid in full;
(7) to the Certificate Distribution Account, the
Certificate Balance of the Class B Certificates; and
(8) to the Seller, any remaining Available Funds for such
Payment Date; and
(B) if the Class A Notes have been accelerated after an Event
of Default specified in Section 5.1(i), (ii), (iv) or (v) of the
Indenture, then the Available Funds shall instead be applied in the
following order of priority:
(1) to the Indenture Trustee and the Owner Trustee, all
amounts due for fees, expenses and indemnification under
Section 6.7 of the Indenture and Section 7.1 of the Trust
Agreement, respectively, and not previously paid;
(2) to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(3) to the Noteholders, the Accrued Class A Note Interest
for such Payment Date; provided that if there are not
sufficient funds available to pay the entire amount of the
Accrued Class A Note
17
Interest, the amounts available shall be applied to the payment
of such interest on the Class A Notes on a pro rata basis;
(4) first, to the holders of the Class A-1 Notes in
reduction of principal until the principal amount of the Class
A-1 Notes has been paid in full and then to the holders of the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes on
a pro rata basis in reduction of principal until the principal
amount of such Class A Notes has been paid in full;
(5) to the Certificate Distribution Account, the sum of
(x) the Accrued Class B Certificate Interest for such Payment
Date and (y) the Certificate Balance of the Class B
Certificates; and
(6) to the Seller, any remaining Available Funds for such
Payment Date.
(d) If the Notes have not been accelerated because of an Event of
Default, then on each Payment Date the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on or before the related Determination Date pursuant to Section
3.9), to withdraw the funds deposited in the Principal Distribution Account on
such Payment Date and make distributions and payments in the following order
of priority:
(i) first, to the holders of the Class A-1 Notes on a pro rata
basis in reduction of principal until the principal amount of
the Class A-1 Notes has been paid in full;
(ii) second, to the holders of the Class A-2 Notes on a pro rata
basis in reduction of principal until the principal amount of
the Class A-2 Notes has been paid in full;
(iii)third, to the holders of the Class A-3 Notes on a pro rata
basis in reduction of principal until the principal amount of
the Class A-3 Notes has been paid in full;
(iv) fourth, to the holders of the Class A-4 Notes on a pro rata
basis in reduction of principal until the principal amount of
the Class A-4 Notes has been paid in full; and
(v) fifth, to the Certificate Distribution Account in reduction of
the Certificate Balance of the Class B Certificates until the
Certificate Balance of the Class B Certificates has been
reduced to zero.
Any funds remaining on deposit in the Principal Distribution Account shall be
paid to the Indenture Trustee and the Owner Trustee to the extent, if any, of
amounts due to them hereunder that are unpaid and then to the Seller, as
applicable.
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If the Notes have been accelerated because of an Event of Default, then
on each Payment Date the Servicer shall instruct the Indenture Trustee (based
on the information contained in the Servicer's Certificate delivered on or
before the related Determination Date pursuant to Section 3.9), to withdraw
the funds deposited in the Principal Distribution Account on such Payment Date
and pay them to the holders of the Class A-1 Notes until the principal amount
of the Class A-1 Notes has been paid in full and then to the holders of the
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes on a pro rata basis in
reduction of principal until the principal amount of the Notes has been paid
in full.
SECTION 4.7 Reserve Account. (a) (i) The Servicer shall, prior to the
Closing Date, cause to be established and maintained an Eligible Deposit
Account in the name "JPMorgan Chase Bank as Indenture Trustee, as secured
party from USAA Auto Owner Trust 2001-2", initially at the corporate trust
department of the Indenture Trustee, which shall be designated as the "Reserve
Account" (the Reserve Account, together with the Collection Account (including
the Principal Distribution Account), the "Trust Accounts"). The Reserve
Account shall be under the sole dominion and control of the Indenture Trustee;
provided, that the Servicer may make deposits to the Reserve Account in
accordance with the Basic Documents. The Reserve Account will be established
and maintained pursuant to an account agreement which specifies New York law
as the governing law. In addition, the Reserve Account shall be established
and maintained at an institution which agrees in writing that for so long as
the Notes are outstanding it will comply with entitlement orders (as defined
in Article 8 of the UCC) originated by the Indenture Trustee without further
consent of the Issuer. On the Closing Date, the Seller shall deposit the
Reserve Initial Deposit into the Reserve Account. The Reserve Account and all
amounts, securities, investments, financial assets and other property
deposited in or credited to the Reserve Account (such amounts, the "Reserve
Account Property") shall be held by the Indenture Trustee as secured party for
the benefit of the Noteholders and, after payment in full of the Notes, as
agent of the Owner Trustee and as part of the Trust Property, and all deposits
to and withdrawals from there from shall be made only upon the terms and
conditions of the Basic Documents.
The Reserve Account Property shall, to the extent permitted by applicable
law, rules and regulations, be invested, as directed in writing by the Seller,
by the bank or trust company then maintaining the Reserve Account in Permitted
Investments that mature not later than the next Payment Date or such later
date that satisfies the Rating Agency Condition, and such Permitted
Investments shall be held to maturity. If JPMorgan Chase Bank is the Indenture
Trustee, in the absence of written direction, all funds shall be invested in
the JPMorgan Funds. All interest and other income (net of losses and
investment expenses) on funds on deposit in the Reserve Account shall be
deposited therein. The Indenture Trustee shall not be liable for investment
losses in Permitted Investments made in accordance with directions from the
Servicer. In the event the Reserve Account is no longer to be maintained at
the corporate trust department of the Indenture Trustee, the Seller shall,
with the Indenture Trustee's or Owner Trustee's assistance as necessary, cause
an Eligible Deposit Account to be established as the Reserve Account within
ten (10) Business Days (or such longer period not to exceed thirty (30)
calendar days as to which each Rating Agency may consent).
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(ii) With respect to Reserve Account Property:
(A) any Reserve Account Property that is a "financial
asset" as defined in Section 8-102(a)(9) of the UCC shall be
physically delivered to, or credited to an account in the name
of, the institution maintaining the Reserve Account in
accordance with such institution's customary procedures such
that such institution establishes a "securities entitlement" in
favor of the Indenture Trustee with respect thereto; and
(B) any Reserve Account Property that is held in deposit
accounts shall be held solely in the name of the Indenture
Trustee at one or more depository institutions having the
Required Rating and each such deposit account shall be subject
to the exclusive custody and control of the Indenture Trustee
and the Indenture Trustee shall have sole signature authority
with respect thereto.
(iii) Except for any deposit accounts specified in clause (ii)(B)
above, the Reserve Account shall only be invested in securities or in
other assets which the institution maintaining the Reserve Account agrees
to treat as "financial assets" as defined in Section 8-102(a)(9) of the
UCC.
(b) If the Servicer pursuant to Section 4.4 determines on or before any
Determination Date that it is required to make an Advance and does not do so
from its own funds, the Servicer shall promptly instruct the Indenture Trustee
in writing to withdraw funds, in an amount specified by the Servicer, from the
Reserve Account and deposit them in the Collection Account to cover any
shortfall. Such payment shall be deemed to have been made by the Servicer
pursuant to Section 4.4 for purposes of making distributions pursuant to this
Agreement, but shall not otherwise satisfy the Servicer's obligation to
deliver the amount of the Advances to the Indenture Trustee, and the Servicer
shall within two (2) Business Days replace any funds in the Reserve Account so
used.
(c) Following the payment in full of the aggregate principal amount of
the Notes and the Certificate Balance and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders, the Indenture Trustee and the Owner
Trustee and the termination of the Trust, any remaining Reserve Account
Property shall be distributed to the Seller.
(d) The Seller shall be permitted to sell, transfer, convey or assign in
any manner its rights in the Reserve Account under Section 4.7(c), together
with its rights to receive amounts under Section 4.6(c)(viii) of this
Agreement and Sections 5.4(b)(v) and 8.2(c) and (d) of the Indenture in
accordance with the priority of payments, provided that each of the following:
(i) the Rating Agency Condition is satisfied with respect to such
action;
(ii) such action shall not, as evidenced by an Opinion of Counsel,
cause the Issuer to be characterized as an association (or a publicly
traded partnership) taxable as a corporation for federal income tax
purposes; and
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(iii) the transferee or assignee agrees in writing to take positions
for federal income tax purposes consistent with the federal income tax
positions taken previously by the Seller.
SECTION 4.8 Net Deposits. For so long as (i) the Bank shall be the
Servicer and (ii) the Servicer shall be entitled pursuant to Section 4.2 to
remit collections on a monthly basis rather than within two (2) Business Days
of receipt, the Bank may make the remittances pursuant to Sections 4.2 and 4.5
above, net of amounts to be distributed to the Bank pursuant to Section
4.6(c). Nonetheless, the Servicer shall account for all of the above described
remittances and distributions except for the Supplemental Servicing Fee in the
Servicer's Certificate as if the amounts were deposited and/or transferred
separately.
SECTION 4.9 Statements to Noteholders and Certificateholders. On the
Business Day prior to each Payment Date, the Servicer shall provide to the
Indenture Trustee (with copies to the Rating Agencies and each Note Paying
Agent) for the Indenture Trustee to make available to each Noteholder of
record as of the most recent Record Date and to the Owner Trustee (with copies
to the Rating Agencies and to each Certificate Paying Agent) for the Owner
Trustee to forward to each Certificateholder of record as of the most recent
Record Date a statement based on information in the Servicer's Certificate
furnished pursuant to Section 3.9, setting forth for the Collection Period
relating to such Payment Date the following information as to the Notes and
the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal allocable
to the Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest allocable
to the Notes and the Certificates;
(iii) the amount of such distribution allocable to draws from the
Reserve Account, if any;
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(v) the Specified Reserve Balance as of such Payment Date;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and the amount of any unpaid
Servicing Fees and the change in such amount from that of the prior
Payment Date;
(vii) the amounts of the Class A Noteholders' Interest Carryover
Shortfall and the Class B Certificateholders' Interest Carryover
Shortfall, if any, on such Payment Date and the change in such amounts
from the preceding Payment Date;
(viii) the aggregate outstanding principal amount of each Class of
Notes, the Note Pool Factor for each Class of Notes, the Certificate
Balance and the Certificate Pool Factor as of such Payment Date;
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(ix) the amount of any previously due and unpaid payment of
principal of the Notes or of the Certificate Balance, as applicable, and
the change in such amount from that of the prior Payment Date;
(x) the balance of the Reserve Account on such Payment Date, after
giving effect to distributions made on such Payment Date and the change
in such balance from the preceding Payment Date;
(xi) the amount of the aggregate Realized Losses, if any, with
respect to the related Collection Period;
(xii) the aggregate Purchase Amount of Receivables repurchased by
the Seller or purchased by the Servicer, if any, with respect to the
related Collection Period;
(xiii) the amount of Advances, if any, on such Payment Date;
(xiv) the aggregate Collections for the related Collection Period;
and
(xv) the aggregate Principal Balance of the Receivables that became
designated as Defaulted Receivables during the related Collection Period.
In addition, such statements may be posted by the Indenture Trustee on
its website at ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇\absmbs.
Each amount set forth on the Payment Date statement pursuant to clauses
(i), (ii), (vi), (vii) and (ix) above shall be expressed as a dollar amount
per $1,000 of original principal amount of a Note or original Certificate
Balance of a Certificate, as applicable.
ARTICLE V
THE SELLER
SECTION 5.1 Representations and Warranties of Seller. The Seller makes
the following representations and warranties on which the Issuer is deemed to
have relied in acquiring the Trust Property. The representations and
warranties speak as of the execution and delivery of this Agreement and shall
survive the conveyance of the Trust Property to the Issuer and the pledge
thereof by the Issuer to the Indenture Trustee pursuant to the Indenture:
(a) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a federally chartered savings association in good
standing under the laws of the United States of America, with power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, power, authority, and legal right to acquire and own
the Receivables.
(b) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their
22
terms; the Seller has full power and authority to sell and assign the property
to be sold and assigned to the Trust 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 other Basic Documents to
which it is a party shall have been duly authorized, executed and delivered by
the Seller by all necessary corporate action.
(c) Binding Obligations. This Agreement constitutes a legal, valid, and
binding obligation of the Seller enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights in general and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(d) No Violation. The consummation of the transactions contemplated by
this Agreement and the other Basic Documents to which the Seller is a party
and the fulfillment of the terms hereof and thereof do not (i) 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 charter or
bylaws of the Seller, or conflict with or breach any of the material terms or
provisions of, or constitute (with or without notice or lapse of time) a
default under, any indenture, agreement, or other instrument to which the
Seller is a party or by which it is bound, (ii) result in the creation or
imposition of any lien upon any of its properties pursuant to the terms of any
such indenture, agreement, or other instrument, or (iii) violate any law or,
to the best of the Seller's knowledge, any 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 its properties.
(e) No Proceedings. There are no proceedings or investigations pending,
or, to the best of the Seller's knowledge, threatened, before any court,
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Seller or its properties (i) asserting the
invalidity of this Agreement, any of the other Basic Documents or the
Securities, (ii) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by this Agreement or the
other Basic Documents, (iii) 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, any
of the other Basic Documents or the Securities or (iv) relating to the Seller
and which might adversely affect the federal income tax attributes of the
Securities.
SECTION 5.2 Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement, and hereby agrees to the
following:
(a) The Seller shall indemnify, defend, and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against any taxes that may at
any time be asserted against any such Person with respect to, and as of the
date of, the conveyance of the Receivables to the Issuer or the issuance and
original sale of the Notes and the Certificates, including any sales, gross
receipts, general corporation, tangible personal property, privilege, or
license taxes (but, in the case of the Issuer, not including any taxes
asserted with respect to ownership of the
23
Receivables or federal or state income taxes arising out of the transactions
contemplated by this Agreement and the other Basic Documents) and costs and
expenses in defending against the same.
(b) The Seller shall indemnify, defend, and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders from and against any loss, liability or expense incurred by
reason of (i) the Seller's willful misfeasance, bad faith, or negligence in
the performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's violation of federal or State securities laws in connection with the
registration or the sale of the Notes or the Certificates.
(c) Indemnification under this Section 5.2 shall survive the resignation
or removal of the Owner Trustee or the Indenture Trustee and the termination
of this Agreement and shall include, without limitation, reasonable fees and
expenses of counsel and expenses of litigation. If the Seller shall have made
any indemnity payments pursuant to this Section 5.2 and the Person to or on
behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 5.3 Merger or Consolidation of, or Assumption of the Obligations
of Seller. Any Person (i) into which the Seller may be merged or consolidated,
(ii) resulting from any merger, conversion, or consolidation to which the
Seller shall be a party, or (iii) succeeding to the business of the Seller,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Seller under this Agreement, will 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 notice of any merger, conversion,
consolidation, or succession pursuant to this Section 5.3 to the Rating
Agencies.
SECTION 5.4 Limitation on Liability of Seller and Others. The Seller and
any 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 hereunder.
The Seller shall not be under any obligation to appear in, prosecute, or
defend any legal action that shall not be incidental to its obligations under
this Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 5.5 Seller May Own Notes or Certificates. The Seller, and any
Affiliate of the Seller, may in its individual or any other capacity become
the owner or pledgee of Notes or Certificates with the same rights as it would
have if it were not the Seller or an Affiliate thereof, except as otherwise
expressly provided herein or in the other Basic Documents. Except as set forth
herein or in the other Basic Documents, Notes and Certificates so owned by or
pledged to the Seller or any such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement and the other
Basic Documents, without preference, priority, or distinction as among all of
the Notes and Certificates.
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ARTICLE VI
THE SERVICER
SECTION 6.1 Representations of Servicer. The Servicer makes the following
representations on which the Issuer is deemed to have relied in acquiring the
Trust Property. The representations speak as of the execution and delivery of
this Agreement and shall survive the conveyance of the Trust Property to the
Issuer and the pledge thereof by the Issuer pursuant to the Indenture:
(a) Organization and Good Standing. The Servicer has been duly organized
and is validly existing as a federally chartered savings association or
corporation and is in good standing under the laws of the United States of
America or its state of incorporation, with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, power, authority, and legal right to acquire, own, sell, and service the
Receivables and to hold the Receivable Files as custodian on behalf of the
Indenture Trustee.
(b) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their terms; and the execution, delivery, and
performance of this Agreement and the other Basic Documents to which it is a
party shall have duly authorized, executed and delivered by the Servicer by
all necessary corporate action.
(c) Binding Obligations. This Agreement constitutes a legal, valid, and
binding obligation of the Servicer enforceable in accordance with their terms
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization, liquidation or other similar laws and equitable principles
relating to or affecting the enforcement of creditors' rights in general and
by general principles of equity regardless of whether such enforceability is
considered in a proceeding in equity or law.
(d) No Violation. The consummation of the transactions contemplated by
this Agreement and the other Basic Documents to which the Servicer is a party
and the fulfillment of the terms hereof do not conflict with, result in any
breach of any of the terms and provisions of, nor constitute (i) (with or
without notice or lapse of time) a default under, the articles of association
or bylaws of the Servicer, or conflict with or breach any of the material
terms or provisions of, or constitute (with or without notice or lapse of
time) a default under, any indenture, agreement, or other instrument to which
the Servicer is a party or by which it shall be bound, (ii) result in the
creation or imposition of any lien upon any of its properties pursuant to the
terms of any such indenture, agreement, or other instrument or (iii) violate
any law or, to the best of the Servicer's knowledge, any order, rule, or
regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its properties.
(e) No Proceedings. There are no proceedings or investigations pending,
or to the best of the Servicer's knowledge, threatened, before any court,
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its
25
properties (i) asserting the invalidity of this Agreement, any of the other
Basic Documents or the Securities, (ii) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by this
Agreement and the other Basic Documents, (iii) 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, any of the other Basic Documents or the Securities, or (iv)
relating to the Servicer and which might adversely affect the federal income
tax attributes of the Securities.
(f) Fidelity Bond. The Servicer maintains a fidelity bond in such form
and amount as is customary for banks acting as custodian of funds and
documents in respect of retail automotive installment sales contracts.
SECTION 6.2 Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement, and hereby agrees to the
following:
(a) The Servicer shall defend, indemnify and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Seller from and against any and all costs,
expenses, losses, damages, claims and liabilities, arising out of or resulting
from the use, ownership or operation by the Servicer or any Affiliate thereof
of a Financed Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee and the Indenture Trustee from and against any taxes that
may at any time be asserted against any such Person with respect to the
transactions contemplated herein or in the other Basic Documents, if any,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege, or license taxes (but, in the case of
the Issuer, not including any taxes asserted with respect to, and as of the
date of, the conveyance of the Receivables to the Issuer or the issuance and
original sale of the Notes and the Certificates, or asserted with respect to
ownership of the Receivables, or federal or state income taxes arising out of
the transactions contemplated by this Agreement and the other Basic Documents)
and costs and expenses in defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Seller 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 any such Person through, the negligence, willful misfeasance, or bad
faith of the Servicer in the performance of its duties under this Agreement or
any other Basic Document to which it is a party, or by reason of reckless
disregard of its obligations and duties under this Agreement or any other
Basic Document to which it is a party.
(d) The Servicer shall indemnify, defend, and hold harmless the Owner
Trustee and the Indenture Trustee, as applicable, from and against all costs,
expenses, losses, claims, damages, and liabilities arising out of or incurred
in connection with the acceptance or performance of the trusts and duties
contained herein and in the other Basic Documents, if any, except to the
extent that such cost, expense, loss, claim, damage, or liability: (i) shall
be due to
26
the willful misfeasance, bad faith, or negligence (except for errors in
judgment) of the Owner Trustee or the Indenture Trustee, as applicable; (ii)
in the case of the Owner Trustee, shall arise from the Owner Trustee's breach
of any of its representations or warranties set forth in Section 6.9 of the
Trust Agreement or, in the case of the Indenture Trustee, from the Indenture
Trustee's breach of any of its representations or warranties set forth in the
Indenture; or (iii) in the case of the Indenture Trustee, shall arise out of
or be incurred in connection with the performance by the Indenture Trustee of
the duties of a Successor Servicer hereunder.
(e) Indemnification under this Section 6.2 by the Bank (or any successor
thereto pursuant to Section 7.2) as Servicer, with respect to the period such
Person was the Servicer, shall survive the termination of such Person as
Servicer or a resignation by such Person as Servicer as well as the
termination of this Agreement or the resignation or removal of the Owner
Trustee or the Indenture Trustee and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have
made any indemnity payments pursuant to this Section 6.2 and the Person to or
on behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Servicer, without interest.
SECTION 6.3 Merger or Consolidation of, or Assumption of the Obligations
of Servicer. Any Person (i) into which the Servicer may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Servicer shall be a party, (iii) succeeding to the business of the
Servicer or (iv) 50% or more of the equity of which is owned, directly or
indirectly, by the United Services Automobile Association, which Person in any
of the foregoing cases executes an agreement of assumption to perform every
obligation of the Servicer under this Agreement, will be the successor to the
Servicer under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties to this Agreement. The
Servicer shall provide notice of any merger, conversion, consolidation or
succession pursuant to this Section 6.3 to the Rating Agencies and the
Indenture Trustee.
SECTION 6.4 Limitation on Liability of Servicer and Others. (a) Neither
the Servicer nor any of the directors or officers or employees or agents of
the Servicer shall be under any liability to the Issuer, the Noteholders or
the Certificateholders, except as provided under this Agreement, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or for errors in judgment; provided, however, that this provision
shall not protect the Servicer or any such Person against any liability that
would otherwise be imposed by reason of willful misfeasance or bad faith in
the performance of duties or by reason of reckless disregard of obligations
and duties under this Agreement, or by reason of negligence in the performance
of its duties under this Agreement. The Servicer and any director, officer or
employee or agent of the Servicer may rely in good faith on any Opinion of
Counsel or on any Officer's Certificate of the Seller or certificate of
auditors believed to be genuine and to have been signed by the proper party in
respect of any matters arising under this Agreement.
(b) Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute, or defend any legal action that shall
not be incidental to its duties to service the Receivables in accordance with
this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may undertake any
27
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties to this Agreement and the
interests of the Noteholders and Certificateholders under this Agreement. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Issuer,
and the Servicer shall be entitled to be reimbursed therefor. Any amounts due
the Servicer pursuant to this subsection shall be payable on a Payment Date
from the Available Collections on deposit in the Collection Account only after
all payments required to be made on such date to the Noteholders, the
Certificateholders and the Servicer have been made, and deposits of any amount
required to be deposited into the Reserve Account pursuant to Section
4.6(c)(vi) to maintain the amount on deposit therein (exclusive of investment
income and earnings on amounts on deposit therein) at the Specified Reserve
Balance on such date have been made.
(c) The Servicer and any director or officer or employee or agent of the
Servicer shall be indemnified by the Trust and held harmless against any loss,
liability, or expense including reasonable attorneys' fees and expenses
incurred in connection with any legal action relating to the performance of
the Servicer's duties under this Agreement, other than (i) any loss or
liability otherwise reimbursable pursuant to this Agreement; (ii) any loss,
liability, or expense incurred solely by reason of the Servicer's willful
misfeasance, negligence, or bad faith in the performance of its duties
hereunder or by reason of reckless disregard of its obligations and duties
under this Agreement; and (iii) any loss, liability, or expense for which the
Issuer is to be indemnified by the Servicer under this Agreement. Any amounts
due the Servicer pursuant to this subsection shall be payable on a Payment
Date from the Available Collections on deposit in the Collection Account only
after all payments required to be made on such date to the Noteholders, the
Certificateholders and the Servicer have been made, and deposits of any amount
required to be deposited into the Reserve Account pursuant to Section
4.6(c)(vi) to maintain the amount on deposit therein (exclusive of investment
income and earnings on amounts on deposit therein) at the Specified Reserve
Balance on such date have been made.
SECTION 6.5 Delegation of Duties. The Servicer may at any time perform
specific duties as servicer under this Agreement through sub-contractors;
provided that no such delegation or subcontracting shall relieve the Servicer
of its responsibilities with respect to such duties as to which the Servicer
shall remain primarily responsible and the Servicer shall be solely
responsible for the fees of any such sub-contractors.
SECTION 6.6 Servicer Not to Resign as Servicer. Subject to the provisions
of Section 6.3, the Servicer shall not resign from its obligations and duties
under this Agreement except upon determination that the performance of its
duties under this Agreement shall no longer be permissible under applicable
law. Notice of any such determination permitting the resignation of the
Servicer shall be communicated to the Owner Trustee and the Indenture Trustee
at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time) and
any such determination shall be evidenced by an Opinion of Counsel to such
effect delivered to the Owner Trustee and the Indenture Trustee concurrently
with or promptly after such notice. No such resignation shall become effective
until the Indenture Trustee or a Successor Servicer shall have (i) taken the
actions required by Section 7.1(b) and (ii) assumed the responsibilities and
obligations of the Servicer in accordance with Section 7.2.
28
SECTION 6.7 Servicer May Own Notes or Certificates. The Servicer, and any
Affiliate of the Servicer, may, in its individual or any other capacity,
become the owner or pledgee of Notes or Certificates with the same rights as
it would have if it were not the Servicer or an Affiliate thereof, except as
otherwise expressly provided herein or in the other Basic Documents. Except as
set forth herein or in the other Basic Documents, Notes and Certificates so
owned by or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority or distinction as among all of the Notes and
Certificates.
ARTICLE VII
SERVICING TERMINATION
SECTION 7.1 Events of Servicing Termination. (a) If any one of the
following events ("Events of Servicing Termination") occur and be continuing:
(i) Any failure by the Servicer (or, so long as the Seller is the
Servicer, the Seller) to deliver to the Owner Trustee or the Indenture
Trustee any proceeds or payment required to be so delivered under the
terms of the Notes and the Certificates and this Agreement that shall
continue unremedied for a period of five (5) Business Days after written
notice of such failure is received by the Servicer or the Seller, as the
case may be, from the Owner Trustee or the Indenture Trustee or after
discovery of such failure by an officer of the Servicer or the Seller, as
the case may be; or
(ii) Failure on the part of the Servicer (or, so long as the Seller
is the Servicer, the Seller) duly to observe or to perform in any
material respect any other covenants or agreements, as the case may be,
set forth in the Notes, the Certificates or in this Agreement, which
failure shall (A) materially and adversely affect the rights of
Noteholders or Certificateholders and (B) continue unremedied for a
period of ninety (90) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given (1) to
the Servicer or the Seller, as the case may be, by the Owner Trustee or
the Indenture Trustee, or (2) to the Owner Trustee, the Indenture
Trustee, the Seller and the Servicer by the Noteholders of Notes
evidencing not less than 25% of the principal amount of the Notes or, if
no Notes are outstanding, by Certificateholders of Certificates
evidencing not less than 25% of the Certificate Balance; or
(iii) The entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, or liquidator for the Servicer in
any insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings, or for the winding up or liquidation
of its respective affairs, and the continuance of any such decree or
order unstayed and in effect for a period of sixty (60) consecutive days;
or
(iv) The consent by the Servicer to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer of or relating to substantially all of its
29
property; or the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntary suspend payment of its
obligations or become insolvent;
then the Indenture Trustee shall promptly notify each Rating Agency, and in
each and every case, so long as an Event of Servicing Termination shall not
have been remedied, either the Indenture Trustee or the holders of Notes
evidencing not less than a majority of the principal amount of the Notes
Outstanding (or, if no Notes are Outstanding, Certificates evidencing not less
than a majority of the Certificate Balance), by notice then given in writing
to the Servicer (and to the Indenture Trustee and the Owner Trustee if given
by the Noteholders and to the Owner Trustee if given by the
Certificateholders) (with a copy to the Rating Agencies) may terminate all of
the rights and obligations of the Servicer under this Agreement. On or after
the receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Notes, the
Certificates or the Trust Property or otherwise, shall pass to and be vested
in the Indenture Trustee or such Successor Servicer as may be appointed under
Section 7.2; and, without limitation, the Indenture Trustee and the Owner
Trustee are hereby authorized and empowered to execute and deliver, on behalf
of the predecessor 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 related documents, or otherwise.
(b) Upon termination of the Servicer under Section 7.1(a), the
predecessor Servicer shall cooperate with the Indenture Trustee, the Owner
Trustee and such Successor Servicer in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the Indenture Trustee or such Successor Servicer for
administration of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received with respect
to a Receivable and the delivery of the Receivable Files and the related
accounts and records maintained by the Servicer. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Receivable Files to the Successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 7.1 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses.
SECTION 7.2 Appointment of Successor Servicer. (a) Upon the Servicer's
receipt of notice of termination pursuant to Section 7.1 or the Servicer's
resignation in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation,
until the later of (x) the date 45 days from the delivery to the Indenture
Trustee and the Owner Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Servicer's resignation or
termination hereunder, the Issuer shall appoint a Successor Servicer, and the
30
Successor Servicer shall accept its appointment by a written assumption in
form acceptable to the Owner Trustee and the Indenture Trustee (with a copy to
each Rating Agency). In the event that a Successor Servicer has not been
appointed at the time when the predecessor Servicer has ceased to act as
Servicer in accordance with this Section 7.2, the Indenture Trustee without
further action shall automatically be appointed the Successor Servicer. The
Indenture Trustee may resign as the Servicer by giving written notice of such
resignation to the Issuer and in such event shall be released from such duties
and obligations, such release not to be effective until the date a Successor
Servicer enters into a written assumption as provided in this Section. Upon
delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer in accordance with this Section.
Notwithstanding the above, if the Indenture Trustee shall be legally unable so
to act or if, within 30 days after the delivery of its notice of resignation,
the Issuer shall not have obtained a Successor Servicer, the Indenture Trustee
shall appoint, or petition a court of competent jurisdiction to appoint, any
established institution, having a net worth of not less than $100,000,000 and
whose regular business shall include the servicing of automotive receivables,
as the successor to the Servicer under this Agreement; provided that the
Rating Agency Condition shall be satisfied in connection with such
appointment.
(b) Upon appointment, the Successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties, and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, by the terms and provisions of this
Agreement.
(c) In connection with such appointment, the Indenture Trustee may make
such arrangements for the compensation of such Successor Servicer out of
payments on Receivables as it and such Successor Servicer shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the predecessor Servicer under this Agreement. The Indenture Trustee
and such Successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
SECTION 7.3 Repayment of Advances. If the identity of the Servicer shall
change, the predecessor Servicer shall be entitled to receive to the extent of
available funds reimbursement for Outstanding Advances pursuant to Section 4.3
and 4.4, in the manner specified in Section 4.6, with respect to all Advances
made by the predecessor Servicer.
SECTION 7.4 Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to
this Article VII, the Indenture Trustee shall give prompt written notice
thereof to Noteholders, and the Owner Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses of record and to
each Rating Agency.
SECTION 7.5 Waiver of Past Events of Servicing Termination. The holders
of Notes evidencing not less than a majority of the principal amount of the
Notes (or, if no Notes are outstanding, holders of Certificates evidencing not
less than a majority of the Certificate Balance) may, on behalf of all
Noteholders and Certificateholders, waive any Event of Servicing Termination
hereunder and its consequences, except an event resulting from the failure to
make any required deposits to or payments from any of the Trust Accounts or
the Certificate
31
Distribution Account in accordance with this Agreement, which shall require
the unanimous vote of all Holders of Outstanding Securities. Upon any such
waiver of a past Event of Servicing Termination, such Event of Servicing
Termination shall cease to exist, and shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other event or impair any right consequent thereon. The Issuer
shall provide written notice of any such waiver to the Rating Agencies.
ARTICLE VIII
TERMINATION
SECTION 8.1 Optional Purchase of All Receivables. As of the last day of
any Collection Period as of which the Pool Factor shall be equal to or less
than the Optional Purchase Percentage, the Servicer shall have the option to
purchase the Trust Property from the Trust. To exercise such option, the
Servicer shall deposit pursuant to Section 4.5 in the Collection Account an
amount equal to the aggregate Purchase Amount for the Receivables, and shall
succeed to all interests in and to the Trust. Notwithstanding the foregoing,
the Servicer shall not be permitted to exercise such option unless the amount
to be deposited in the Collection Account pursuant to the preceding sentence
is greater than or equal to the sum of the outstanding principal amount of the
Notes and the Certificate Balance and all accrued but unpaid interest
(including any over due interest) thereon. The amount deposited in the
Collection Account pursuant to this Section 8.1 shall be used on the next
Payment Date to make payments in full to Noteholders and Certificateholders in
the manner set forth in Article IV. The purchase of the Trust Property
pursuant to this Section shall not be permitted unless either (i) the
Servicer's long-term unsecured debt is rated at the time of such purchase at
least Baa3 by ▇▇▇▇▇'▇ or (ii) the Servicer provides to the Indenture Trustee
and the Owner Trustee an Opinion of Counsel in form reasonably satisfactory to
the Indenture Trustee and the Owner Trustee and in form and substance
satisfactory to ▇▇▇▇▇'▇ to the effect that such purchase will not constitute a
fraudulent transfer of assets of the Servicer under applicable state and
federal law; provided that this sentence may be deleted or modified with the
consent of ▇▇▇▇▇'▇ and without the consent of any Securityholder, the
Indenture Trustee or the Owner Trustee.
SECTION 8.2 Succession Upon Satisfaction and Discharge of Indenture.
Following the satisfaction and discharge of the Indenture and the payment in
full of the principal of and interest on the Notes, to the extent permitted by
applicable law, the Indenture Trustee will continue to carry out its
obligations hereunder as agent for the Owner Trustee, including without
limitation making distributions from the Collection Account in accordance with
Section 4.6 and making withdrawals from the Reserve Account in accordance with
Section 4.5(b) and Section 4.7.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 Amendment. (a) This Agreement may be amended by the Seller,
the Servicer and the Issuer, with the consent of the Indenture Trustee and the
Owner Trustee to the
32
extent that their respective rights or obligations may be affected thereby
(which consent may not be unreasonably withheld), but without the consent of
any of the Noteholders or the Certificateholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement, or to add any
provisions to or change or eliminate any provisions or to modify the rights of
the Noteholders or Certificateholders; provided, however, that such action
shall not, as evidenced by either an Opinion of Counsel or an Officer's
Certificate delivered to the Owner Trustee and the Indenture Trustee,
materially and adversely affect the interests of any Noteholder or
Certificateholder and the Rating Agency Condition shall be satisfied.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer and the Issuer, with the consent of the Indenture Trustee and the
Owner Trustee to the extent that their respective rights or obligations may be
affected thereby (which consent may not be unreasonably withheld) and with the
consent of (i) the Noteholders of Notes evidencing not less than a majority of
the principal amount of each Class of Notes and (ii) the Certificateholders of
Certificates evidencing not less than a majority of the Certificate Balance
(which consent of any holder of a Note or holder of a Certificate given
pursuant to this Section 9.1 or pursuant to any other provision of this
Agreement shall be conclusive and binding on such Note or Certificate, as the
case may be, and on all future holders of such Note or holders of such
Certificate, as the case may be, and of any Note or Certificate, as
applicable, issued upon the transfer thereof or in exchange thereof or in lieu
thereof whether or not notation of such consent is made upon such Note or the
Certificate), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (A) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, or change the
allocation or priority of, collections of payments on Receivables or
distributions that shall be required to be made on any Note or Certificate or
change any Note Interest Rate or any Certificate Rate or the amount required
to be on deposit in the Reserve Account, without the consent of all
Noteholders or Certificateholders or (B) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the holders
of all Notes and holders of all Certificates. Notwithstanding the foregoing,
the Seller may decrease the Specified Reserve Balance upon satisfaction of the
Rating Agency Condition without the consent of any other party hereto or any
Noteholder or Certificateholder.
(c) Prior to the execution of any such amendment the Servicer will
provide written notification of the substance of such amendment to each Rating
Agency.
(d) Promptly after the execution of any such amendment, the Servicer
shall furnish written notification of the substance of such amendment to each
Certificateholder, the Indenture Trustee and each Rating Agency and the
Indenture Trustee will provide notification of the substance of such amendment
to each Noteholder. It shall not be necessary for the consent of Noteholders
or the Certificateholders pursuant to this Section 9.1 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 and
Certificateholders provided for in this Agreement) and of evidencing the
authorization of the execution thereof by Noteholders and Certificateholders
shall be subject to
33
such reasonable requirements as the Owner Trustee and the Indenture Trustee
may prescribe, including the establishment of record dates pursuant to the
Note Depository Agreement.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture 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 and the Opinion of Counsel referred
to in Section 9.2(i)(1). The Owner Trustee or the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment which affects such
Owner Trustee's or Indenture Trustee's own rights, duties or immunities under
this Agreement or otherwise.
SECTION 9.2 Protection of Title to Trust Property. (a) The Seller shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
Issuer and the Indenture Trustee for the benefit of the Noteholders in the
Receivables and in the proceeds thereof. The Seller shall deliver (or cause to
be delivered) to the Owner Trustee and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing.
(b) Neither the Seller nor the Servicer 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 9-506 of the UCC, unless it shall have given the Owner Trustee and the
Indenture Trustee at least 10 days' prior written notice thereof, with a copy
to the Rating Agencies, and shall have promptly filed appropriate amendments
to all previously filed financing statements or continuation statements.
(c) The Seller and the Servicer shall give the Owner Trustee and the
Indenture Trustee at least 10 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 and shall promptly file any such amendment or new
financing statement. The Servicer shall at all times maintain each office from
which it shall service 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 and the Reserve Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of conveyance under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any back-up
archives) that refer to a Receivable shall indicate clearly, by numerical code
or otherwise, that such Receivable is owned by the Issuer and has been pledged
to the Indenture Trustee pursuant to the Indenture. Indication of the Issuer's
and
34
the Indenture Trustee's interest in a Receivable shall not be deleted from or
modified on the Servicer's computer systems until, and only until, the
Receivable shall have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose 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 back-up
archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been conveyed to
and is owned by the Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer, upon receipt of reasonable prior notice, shall permit
the Owner Trustee, the Indenture Trustee and their respective agents at any
time during normal business hours to inspect, audit, and make copies of and to
obtain abstracts from the Servicer's records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee and the
Indenture Trustee, within five (5) Business Days, a list of all Receivables
(by contract number and name of Obligor) then owned by the Issuer, together
with a reconciliation of such list to the Schedule of Receivables and to each
of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this Agreement and
of each amendment thereto, an Opinion of Counsel either (A) stating that,
in the opinion of such Counsel and subject to customary qualifications
and assumptions, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and
protect the interest of the Issuer and the Indenture Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) stating
that, in the opinion of such Counsel, no such action shall be necessary
to preserve and protect such interest; and
(2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cut-off Date, an Opinion of Counsel, dated as of a date during
such 120-day period, either (A) stating that, in the opinion of such
counsel and subject to customary qualifications and assumptions, all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of
the Issuer and the Indenture Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) stating that, in the opinion of such
Counsel, no such action shall be necessary to preserve and protect such
interest.
Each Opinion of Counsel referred to in clause (i)(1) or (i)(2) above
shall specify any action necessary (as of the date of such opinion) to be
taken in the following year to preserve and protect such interest.
35
(j) For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed 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 9.3 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 9.4 Notices. All demands, notices, and communications under this
Agreement shall be in writing, personally delivered, sent by telecopier, over
night courier or mailed by certified mail, return receipt requested, and shall
be deemed to have been duly given upon receipt (a) in the case of the Seller
or the Servicer, to the agent for service as specified in Section 9.11 hereof,
or at such other address as shall be designated by the Seller or the Servicer
in a written notice to the Owner Trustee and the Indenture Trustee, (b) in the
case of the Owner Trustee, at the Corporate Trust Office of the Owner Trustee,
(c) in the case of the Indenture Trustee, at the Corporate Trust Office of the
Indenture Trustee, (d) in the case of ▇▇▇▇▇'▇ Investors Service, Inc., at the
following address: ▇▇▇▇▇'▇ Investors Service, Inc., ABS Monitoring Department,
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and (e) in the case of Standard &
Poor's Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., at the
following address: Standard & Poor's Rating Services, a division of The McGraw
Hill Companies, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Asset Backed Surveillance Department. Any notice required or
permitted to be mailed to a Noteholder or Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Person as shown in
the Note Register or the Certificate Register, as applicable. 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 or
Certificateholder shall receive such notice.
SECTION 9.5 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,
the Certificates or the rights of the holders thereof.
SECTION 9.6 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.3 and 7.2 and as provided
in the provisions of this Agreement concerning the resignation of the
Servicer, this Agreement may not be assigned by the Seller or the Servicer
unless (i)(A) the Rating Agency Condition is satisfied and (B) the Indenture
Trustee and the Owner Trustee have consented thereto, which consent shall not
be unreasonably withheld or (ii) the Owner Trustee, the Indenture Trustee, the
Noteholders of Notes evidencing not less than 66 2/3% of the principal amount
of the Notes Outstanding and the Certificateholders of Certificates evidencing
not less than 66 2/3% of the Certificate Balance consent thereto. Any transfer
or assignment with respect to the Servicer of all its rights, obligations and
duties will not become effective until a successor Servicer has assumed the
Servicer's rights, duties and
36
obligations under this Agreement. In the event of a transfer or assignment
pursuant to clause (ii) above, the Rating Agencies shall be provided with
notice of such transfer or assignment.
SECTION 9.7 Further Assurances. The Seller and the Servicer agree to do
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Owner Trustee or
the Indenture Trustee more fully to effect the purposes of this Agreement,
including, without limitation, the execution of any financing statements or
continuation statements relating to the Receivables for filing under the
provisions of the UCC of any applicable jurisdiction.
SECTION 9.8 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Owner Trustee, the Indenture Trustee,
the Noteholders or the Certificateholders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
therein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
SECTION 9.9 Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Noteholders, the
Certificateholders, the Indenture Trustee and the Owner Trustee and their
respective successors and permitted assigns and each of the Indenture Trustee
and the Owner Trustee may enforce the provisions hereof as if they were
parties thereto. Except as otherwise provided in this Article IX, no other
Person will have any right or obligation hereunder. The parties hereto hereby
acknowledge and consent to the pledge of this Agreement by the Issuer to the
Indenture Trustee for the benefit of the Noteholders pursuant to the
Indenture.
SECTION 9.10 Actions by Noteholders or Certificateholders. (a) Wherever
in this Agreement a provision is made that an action may be taken or a notice,
demand, or instruction given by Noteholders or Certificateholders, such
action, notice, or instruction may be taken or given by any Noteholder or
Certificateholder, as applicable, unless such provision requires a specific
percentage of Noteholders or Certificateholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Noteholder or Certificateholder shall bind such
Noteholder or Certificateholder and every subsequent holder of such Note or
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done
by the Owner Trustee, the Indenture Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Note or
Certificate.
SECTION 9.11 Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by First Union Trust Company, National
Association not in its individual capacity but solely in its capacity as Owner
Trustee of the Issuer and in no event shall First Union Trust Company,
National Association in its individual capacity or, except as expressly
provided in the Trust Agreement, as Owner Trustee of the Issuer have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the
37
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all
purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI and VII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by JPMorgan Chase Bank, not in its individual
capacity but solely as Indenture Trustee, and in no event shall JPMorgan Chase
Bank have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 9.12 Savings Clause. It is the intention of the Seller and the
Issuer that the transfer of the Trust Property contemplated herein constitute
an absolute transfer of the Trust Property, conveying good title to the Trust
Property from the Seller to the Issuer. However, in the event that such
transfer is deemed to be a pledge, the Seller hereby grants to the Issuer a
first priority security interest in all of the Seller's right, title and
interest in, to and under the Trust Property, and all proceeds thereof, to
secure a loan in an amount equal to all amounts payable under the Notes and
the Certificates, and in such event, this Agreement shall constitute a
security agreement under applicable law.
38
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
USAA AUTO OWNER TRUST 2001-2,
as Issuer
By: First Union Trust Company, National
Association,not in its individual capacity
but solely as Owner Trustee
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Vice President
Accepted and agreed:
JPMorgan Chase Bank,
not in its individual capacity
but solely as Indenture Trustee
By: /s/ Wen ▇▇▇ ▇▇▇▇
Name: Wen ▇▇▇ ▇▇▇▇
Title: Assistant Vice President
First Union Trust Company, National Association,
not in its individual capacity
but solely as Owner Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Vice President
SCHEDULE A
SCHEDULE OF RECEIVABLES
Delivered to Indenture Trustee at Closing
A-1
SCHEDULE B
Location of Receivable Files
c/o USAA Federal Savings Bank
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B-1
AA-1
EXECUTION
COPY
Appendix A
DEFINITIONS AND USAGE
The following rules of construction and usage shall be applicable to any
agreement or instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings
when used in any agreement or instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto unless
otherwise defined therein.
(b) As used herein, in any agreement or instrument governed hereby and in
any certificate or other document made or delivered pursuant thereto,
accounting terms not defined in this Appendix or in any such agreement,
instrument, certificate or other document, and accounting terms partly defined
in this Appendix or in any such agreement, instrument, certificate or other
document, to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles as in effect on the
date of such agreement or instrument. To the extent that the definitions of
accounting terms in this Appendix or in any such agreement, instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Appendix or in any such instrument, certificate or other document shall
control.
The words "hereof," "herein," "hereunder" and words of similar import
when used in an agreement or instrument refer to such agreement or instrument
as a whole and not to any particular provision or subdivision thereof;
references in an agreement or instrument to "Article," "Section" or another
subdivision or to an attachment are, unless the context otherwise requires, to
an article, section or subdivision of or an attachment to such agreement or
instrument; and the term "including" and its variations means "including
without limitation."
The definitions contained in this Appendix are equally applicable to both
the singular and plural forms of such terms and to the masculine as well as to
the feminine and neuter genders of such terms.
Any agreement, instrument or statute defined or referred to below or in
any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver
or consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
Definitions
"Accrued Class A Note Interest" shall mean, with respect to any Payment
Date, the sum of the Class A Noteholders' Monthly Accrued Interest for such
Payment Date and the Class A Noteholders' Interest Carryover Shortfall for
such Payment Date.
"Accrued Class B Certificate Interest" shall mean, with respect to any
Payment Date, the sum of the Class B Certificateholders' Monthly Accrued
Interest for such Payment Date and the Class B Certificateholders' Interest
Carryover Shortfall for such Payment Date.
"Act" shall have the meaning specified in Section 11.3(a) of the
Indenture.
"Administration Agreement" shall mean the Administration Agreement, dated
as of November 1, 2001, by and among the Administrator, the Issuer and the
Indenture Trustee.
"Administrator" shall mean the Bank, in its capacity as administrator
under the Administration Agreement, or any successor Administrator thereunder.
"Advance" shall mean the amount of interest, as of a Determination Date,
which the Servicer is required to advance on the Receivables pursuant to
Section 4.4(a) of the Sale and Servicing Agreement.
"Affiliate" shall mean, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any Person shall mean the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling"
and "controlled" shall have meanings correlative to the foregoing.
"Amount Financed" shall mean, with respect to a Receivable, the amount
advanced under the Receivable toward the purchase price of the Financed
Vehicle and any related costs.
"Annual Percentage Rate" or "APR" of a Receivable shall mean the annual
rate of finance charges stated in the Receivable.
"Applicable Tax State" shall mean, as of any date of determination, each
State as to which any of the following is then applicable: (a) a State in
which the Owner Trustee maintains its Corporate Trust Office and (b) the State
of Texas.
"Authenticating Agent" shall have the meaning specified in Section 2.14
of the Indenture or 3.14 of the Trust Agreement, as applicable.
"Authorized Officer" shall mean, (i) with respect to the Issuer, any
officer within the Corporate Trust Office of the Owner Trustee, including any
vice president, assistant vice president, secretary, assistant secretary or
any other officer of the Owner Trustee customarily performing functions
similar to those performed by any of the above designated officers and, for so
long as the Administration Agreement is in full force and effect, any officer
of the Administrator who is authorized to act for the Administrator in matters
relating to the Issuer and to be acted upon by the Administrator pursuant to
the Administration Agreement; and (ii) with respect to the Indenture Trustee
or the Owner Trustee, any officer within the Corporate Trust Office of the
Indenture Trustee or the Owner Trustee, as the case may be, including any vice
president, assistant vice president, secretary, assistant secretary or any
other officer of the Indenture Trustee or the Owner Trustee, as the case may
be, customarily performing functions similar to those performed by any of the
above designated officers and also, with respect to a
2
particular matter, any other officer to whom such matter is referred because
of such officer's knowledge of and familiarity with the particular subject and
shall also mean, with respect to the Owner Trustee, any officer of the
Administrator.
"Available Collections" shall mean, for any Payment Date, the sum of the
following amounts with respect to the Collection Period preceding such Payment
Date: (i) all payments collected with respect to Receivables; (ii) all
Liquidation Proceeds attributable to Receivables which were designated as
Defaulted Receivables in prior Collection Periods in accordance with the
Servicer's customary servicing procedures; (iii) all Advances made by the
Servicer of interest due on the Receivables; (iv) the Purchase Amount received
with respect to each Receivable that became a Purchased Receivable during such
Collection Period; and (v) partial prepayments of any refunded item included
in the principal balance of a Receivable, such as extended warranty protection
plan costs, or physical damage, credit life, disability insurance premiums, or
any partial prepayment which causes a reduction in the Obligor's periodic
payment to an amount below the Scheduled Payment as of the Cut-off Date;
provided however, that in calculating the Available Collections the following
will be excluded: (i) amounts received on any Receivable to the extent that
the Servicer has previously made an unreimbursed Advance on such Receivable
and the amount received exceeds the accrued and unpaid interest on such
Receivable; (ii) amounts received on any of the Receivables to the extent that
the Servicer has previously made an unreimbursed Advance on a Receivable which
is not recoverable from collections on the particular Receivable; (iii) all
payments and proceeds (including Liquidation Proceeds) of any Receivables the
Purchase Amount of which has been included in the Available Funds in a prior
Collection Period; (iv) Liquidation Proceeds with respect to a Receivable
attributable to accrued and unpaid interest thereon (but not including
interest for the then current Collection Period) but only to the extent of any
unreimbursed Advances; and (v) amounts constituting the Supplemental Servicing
Fee.
"Available Funds" shall mean, for any Payment Date, the sum of the
Available Collections for such Payment Date and the Reserve Account Excess
Amount for such Payment Date.
"Average Delinquency Ratio" shall mean, for any Payment Date, the average
of the Delinquency Ratios for the preceding three Collection Periods.
"Average Delinquency Trigger Percentage" shall mean 1.25%.
"Average Net Loss Ratio" shall mean, for any Payment Date, the average of
the Net Loss Ratios for the preceding three Collection Periods.
"Average Net Loss Trigger Percentage" shall mean 1.25%.
"Bank" shall mean USAA Federal Savings Bank, a federally chartered
savings association.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11 U.S.C.
101 et seq., as amended.
3
"Basic Documents" shall mean the Certificate of Trust, the Trust
Agreement, the Sale and Servicing Agreement, the Indenture, the Administration
Agreement, the Note Depository Agreement and the other documents and
certificates delivered in connection therewith.
"Book-Entry Certificate" shall mean, a beneficial interest in any of the
Class B Certificates issued in book-entry form as described in Section 3.2 of
the Trust Agreement.
"Book-Entry Note" shall mean a beneficial interest in any of the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes,
in each case issued in book-entry form.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions or trust companies located in the State of
New York or the State of Texas are authorized or obligated by law, regulation
or executive order to remain closed.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code ss. 3801 et seq., as amended.
"Certificates" shall mean the Class B Certificates.
"Certificate Balance" shall mean, as the context so requires, (i) with
respect to all the Class B Certificates, an amount equal to, initially, the
Initial Certificate Balance of the Class B Certificates and, thereafter, an
amount equal to the Initial Certificate Balance of the Class B Certificates,
reduced by all amounts distributed to Class B Certificateholders and allocable
to principal or (ii) with respect to any Class B Certificate, an amount equal
to, initially, the initial denomination of such Class B Certificate and,
thereafter, an amount equal to such initial denomination, reduced by all
amounts distributed in respect of such Class B Certificate and allocable to
principal; provided, that, unless all of the Certificates are owned by the
Seller or an Affiliate of the Seller, in determining whether the holders of
Class B Certificates evidencing the requisite portion or percentage of the
Certificate Balance have given any request, demand, authorization, direction,
notice, consent, or waiver hereunder or under any Basic Document, Class B
Certificates owned by the Issuer, any other obligor upon the Class B
Certificates, the Seller, the Servicer or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed to be excluded from the
Certificate Balance except that, in determining whether the Indenture Trustee
and Owner Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent, or waiver, only Class B
Certificates that a Trustee Officer of the Indenture Trustee, if applicable,
and an Authorized Officer of the Owner Trustee with direct responsibility for
the administration of the Trust Agreement, if applicable, knows to be so owned
shall be so disregarded. Class B Certificates so owned that have been pledged
in good faith may be regarded as included in the Certificate Balance if the
pledgee establishes to the satisfaction of the Indenture Trustee or the Owner
Trustee, as applicable, the pledgee's right so to act with respect to such
Class B Certificates and that the pledgee is not the Issuer, any other obligor
upon the Certificates, the Seller, the Servicer or any Affiliate of any of the
foregoing Persons.
"Certificate Distribution Account" shall mean the account established and
maintained as such pursuant to Section 4.1(c) of the Sale and Servicing
Agreement.
4
"Certificate Owner" shall mean, with respect to any Book-Entry
Certificate, the Person who is the beneficial owner of the Book-Entry
Certificate, as reflected on the books of the Clearing Agency or on the books
of a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificateholder" or "holder of a Certificate" shall mean a Person in
whose name a Certificate is registered in the Certificate Register.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B to the Trust Agreement filed for the Trust pursuant to Section
3810(a) of the Business Trust Statute.
"Certificate Paying Agent" shall mean any paying agent or co-paying agent
appointed pursuant to Section 3.10 of the Trust Agreement and shall initially
be the Owner Trustee.
"Certificate Pool Factor" shall mean, as of the close of business on the
last day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance of the Class B Certificates (after giving effect to any
reductions therein to be made on the immediately following Payment Date)
divided by the Initial Certificate Balance of the Class B Certificates. Each
Certificate Pool Factor will be 1.0000000 as of the Closing Date; thereafter,
each Certificate Pool Factor will decline to reflect reductions in the
Certificate Balance of the Class B Certificates.
"Certificate Register" and "Certificate Registrar" shall have the
respective meanings specified in Section 3.5 of the Trust Agreement. "Class"
shall mean (i) a class of Notes, which may be the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes or the Class A-4 Notes or (ii) the Class B
Certificates.
"Class A Notes" shall mean, collectively, the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes and the Class A-4 Notes.
"Class A Noteholders' Interest Carryover Shortfall" shall mean, for any
Payment Date, the excess of the Accrued Class A Note Interest for the
preceding Payment Date over the amount in respect of interest that is actually
paid to Noteholders of Class A Notes on such preceding Payment Date, plus
interest on the amount of interest due but not paid to Noteholders of Class A
Notes on the preceding Payment Date, to the extent permitted by law, at the
respective Note Interest Rates borne by such Class A Notes for the related
Interest Period.
"Class A Noteholders' Monthly Accrued Interest" shall mean, with respect
to any Payment Date, the aggregate interest accrued for the related Interest
Period on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and
the Class A-4 Notes. at the respective Note Interest Rate for such Class in
accordance with its terms on the outstanding principal amount of the Notes of
each such Class on the immediately preceding Payment Date or the Closing Date,
as the case may be, after giving effect to all payments of principal to the
holders of the Notes of such Class on or prior to such preceding Payment Date.
5
"Class A-1 Final Scheduled Payment Date" shall mean the December 16, 2002
Payment Date.
"Class A-1 Noteholder" shall mean the Person in whose name a Class A-1
Note is registered on the Note Register.
"Class A-1 Notes" shall mean the $191,000,000 aggregate initial principal
amount Class A-1 1.9825% Asset Backed Notes issued by the Trust pursuant to
the Indenture, substantially in the form of Exhibit A-1 to the Indenture.
"Class A-1 Rate" shall mean 1.9825% per annum. Interest with respect to
the Class A-1 Notes shall be computed on the basis of actual days elapsed in
the applicable Interest Period divided by 360 for all purposes of the Basic
Documents.
"Class A-2 Final Scheduled Payment Date" shall mean the May 17, 2004
Payment Date.
"Class A-2 Noteholder" shall mean the Person in whose name a Class A-2
Note is registered on the Note Register.
"Class A-2 Notes" shall mean the $ 166,000,000 aggregate initial
principal amount Class A-2 2.42% Asset Backed Notes issued by the Trust
pursuant to the Indenture, substantially in the form of Exhibit A-2 to the
Indenture.
"Class A-2 Rate" shall mean 2.42% per annum. Interest with respect to the
Class A-2 Notes shall be computed on the basis of a 360-day year consisting of
twelve 30-day months for all purposes of the Basic Documents.
"Class A-3 Final Scheduled Payment Date" shall mean the February 15, 2006
Payment Date.
"Class A-3 Noteholder" shall mean the Person in whose name a Class A-3
Note is registered on the Note Register.
"Class A-3 Notes" shall mean the $249,000,000 aggregate initial principal
amount Class A-3 3.20% Asset Backed Notes issued by the Trust pursuant to the
Indenture, substantially in the form of Exhibit A-3 to the Indenture.
"Class A-3 Rate" shall mean 3.20% per annum. Interest with respect to the
Class A-3 Notes shall be computed on the basis of a 360-day year consisting of
twelve 30-day months for all purposes of the Basic Documents.
"Class A-4 Final Scheduled Payment Date" shall mean the April 16, 2007
Payment Date.
"Class A-4 Noteholder" shall mean the Person in whose name a Class A-4
Note is registered on the Note Register.
6
"Class A-4 Notes" shall mean the $91,125,000 aggregate initial principal
amount Class A-4 3.91% Asset Backed Notes issued by the Trust pursuant to the
Indenture, substantially in the form of Exhibit A-4 to the Indenture.
"Class A-4 Rate" shall mean 3.91% per annum. Interest with respect to the
Class A-4 Notes shall be computed on the basis of a 360-day year consisting of
twelve 30-day months for all purposes of the Basic Documents.
"Class B Certificateholder" shall mean the Person in whose name a Class B
Certificate is registered in the Certificate Register.
"Class B Certificateholders' Interest Carryover Shortfall" shall mean,
with respect to any Payment Date, the excess of the Accrued Class B
Certificate Interest for the preceding Payment Date over the amount in respect
of interest that is actually paid to Class B Certificateholders on such
preceding Payment Date, plus thirty (30) days of interest on such excess, to
the extent permitted by law, at the Class B Rate.
"Class B Certificateholders' Monthly Accrued Interest" shall mean, with
respect to any Payment Date, thirty (30) days of interest (or, in the case of
the first Payment Date, interest accrued from and including the Closing Date
to but excluding such Payment Date) at the Class B Rate on the Certificate
Balance on the immediately preceding Payment Date or the Closing Date, as the
case may be, after giving effect to all distributions allocable to the
reduction of the Certificate Balance made on or prior to such preceding
Payment Date.
"Class B Certificates" shall mean the $17,875,027 aggregate initial
principal balance Class B 4.38% Asset Backed Certificates evidencing the
beneficial interest of a Class B Certificateholder in the property of the
Trust, substantially in the form of Exhibit A to the Trust Agreement;
provided, however, that the Owner Trust Estate has been pledged to the
Indenture Trustee to secure payment of the Notes and that the rights of the
Class B Certificateholders to receive distributions on the Class B
Certificates are subordinated to the rights of the Noteholders as described in
the Sale and Servicing Agreement, the Indenture and the Trust Agreement.
"Class B Final Scheduled Payment Date" shall mean the April 15, 2008
Payment Date.
"Class B Rate" shall mean 4.38% per annum. Interest with respect to the
Class B Certificates shall be computed on the basis of a 360-day year
consisting of twelve 30-day months for all purposes of the Basic Documents.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" shall mean November 20, 2001.
7
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Collateral" shall have the meaning specified in the Granting Clause of
the Indenture.
"Collection Account" shall mean the account or accounts established and
maintained as such pursuant to Section 4.1(a) of the Sale and Servicing
Agreement.
"Collection Period" shall mean, with respect to the first Payment Date,
the period from and including the Cut-off Date to and including November 30,
2001 and, with respect to each subsequent Payment Date, the calendar month
preceding the calendar month in which the Payment Date occurs.
"Collections" shall mean all amounts collected by the Servicer (from
whatever source) on or with respect to the Receivables.
"Commission" shall mean the Securities and Exchange Commission.
"Computer Tape" shall mean the computer tape generated by the Seller
which provides information relating to the Receivables and which was used by
the Seller in selecting the Receivables conveyed to the Trust hereunder.
"Corporate Trust Office" shall mean, (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
One ▇▇▇▇▇▇ Square, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such
other address as the Owner Trustee may designate from time to time by notice
to the Certificateholders and the Depositor, or the principal corporate trust
office of any successor Owner Trustee (the address of which the successor
Owner Trustee will notify the Certificateholders and the Depositor); and (ii)
with respect to the Indenture Trustee, the principal corporate trust office of
the Indenture Trustee located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders and the Issuer, or
the principal corporate trust office of any successor Indenture Trustee (the
address of which the successor Indenture Trustee will notify the Noteholders
and the Issuer).
"Cut-off Date" shall mean November 1, 2001.
"Default" shall mean any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Defaulted Receivable" shall mean a Receivable (i) that the Servicer
determines is unlikely to be paid in full or (ii) with respect to which at
least 5% of a Scheduled Payment is 120 or more days delinquent as of the end
of a calendar month.
"Definitive Certificates" shall have the meaning specified in Section
3.12 of the Trust Agreement.
"Definitive Notes" shall have the meaning specified in Section 2.11 of
the Indenture.
8
"Delinquency Ratio" shall mean, for any Collection Period, the ratio,
expressed as a percentage, of (a) the Principal Balance of all outstanding
Receivables other than Purchased Receivables and Receivables that are 60 or
more days delinquent as of the end of such Collection Period, determined in
accordance with the Servicer's customary practices, or Receivables as to which
the related Financial Vehicle has been repossessed but not sold, to (b) the
Pool Balance as of the last day of such Collection Period.
"Depositor" shall mean the Seller in its capacity as Depositor under the
Trust Agreement.
"Determination Date" shall mean, with respect to any Collection Period,
the second Business Day immediately preceding the Payment Date following such
Collection Period.
"Eligible Deposit Account" shall mean either (i) a segregated account
with an Eligible Institution or (ii) a segregated trust account with the
corporate trust department of a depository institution organized under the
laws of the U.S. or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each
Rating Agency in one of its generic rating categories which signifies
investment grade.
"Eligible Institution" shall mean either (i) the corporate trust
department of the Indenture Trustee or the related Trustee, as applicable; or
(ii) a depository institution organized under the laws of the U.S. or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), (1) which has either (A) a long-term unsecured debt rating of
at least "AA-" by Standard & Poor's and "Baa3" by Moody's or (B) a short-term
unsecured debt rating or certificate of deposit rating of "A-1+" by Standard &
Poor' and "P-1" by Moody's and (2) whose deposits are insured by the FDIC.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Event of Default" shall have the meaning specified in Section 5.1 of the
Indenture.
"Event of Servicing Termination" shall mean an event specified in Section
7.1 of the Sale and Servicing Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Executive Officer" shall mean, with respect to any corporation, the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation and, with respect to any partnership, any
general partner thereof.
"Expenses" shall have the meaning assigned to such term in Section 7.2 of
the Trust Agreement.
"Final Scheduled Payment Date" shall mean, with respect to (i) the Class
A-1 Notes, the Class A-1 Final Scheduled Payment Date, (ii) the Class A-2
Notes, the Class A-2 Final
9
Scheduled Payment Date, (iii) the Class A-3 Notes, the Class A-3 Final
Scheduled Payment Date, (iv) the Class A-4 Notes, the Class A-4 Final
Scheduled Payment Date, and (v) the Class B Certificates, the Class B Final
Scheduled Payment Date.
"Financed Vehicle" shall mean a new or used automobile or light-duty
truck, together with all accessions thereto, securing an Obligor's
indebtedness under the respective Receivable.
"Grant" shall mean to mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and to ▇▇▇▇▇ ▇ ▇▇▇▇ upon
and a security interest in and right of set-off against, and to deposit, set
over and confirm pursuant to the Indenture. A Grant of the Collateral or of
any other agreement or instrument shall include all rights, powers and options
(but none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect of the Collateral and all other
monies payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 7.2 of the Trust Agreement.
"Indenture" shall mean the Indenture, dated as of November 1, 2001, by
and between the Trust and the Indenture Trustee.
"Indenture Trustee" shall mean JPMorgan Chase Bank, a New York banking
corporation, not in its individual capacity but solely as Indenture Trustee
under the Indenture, or any successor Indenture Trustee under the Indenture.
"Indenture Trust Estate" shall mean all money, instruments, rights and
other property that are subject or intended to be subject to the lien and
security interest of Indenture for the benefit of the Noteholders (including,
without limitation, all property and interests Granted to the Indenture
Trustee), including all proceeds thereof.
"Independent" shall mean, when used with respect to any specified Person,
that such Person (a) is in fact independent of the Issuer, any other obligor
on the Notes, the Seller and any Affiliate of any of the foregoing Persons,
(b) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller or any
Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
"Independent Certificate" shall mean a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer
has read
10
the definition of "Independent" in the Indenture and that the signer
is Independent within the meaning thereof.
"Initial Certificate Balance" shall mean $17,875,027.
"Initial Pool Balance" shall mean $715,000,027.
"Insolvency Event" shall mean, with respect to any Person, (i) the making
of a general assignment for the benefit of creditors, (ii) the filing of a
voluntary petition in bankruptcy, (iii) being adjudged a bankrupt or
insolvent, or having had entered against such Person an order for relief in
any bankruptcy or insolvency proceeding, (iv) the filing by such Person of a
petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation, (v) the filing by such Person of an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against such Person in any proceeding specified in (vii) below,
(vi) seeking, consent to or acquiescing in the appointment of a trustee,
receiver or liquidator of such Person or of all or any substantial part of the
assets of such Person or (vii) the failure to obtain dismissal within 60 days
of the commencement of any proceeding against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, or the
entry of any order appointing a trustee, liquidator or receiver of such Person
or of such Person's assets or any substantial portion thereof.
"Interest Period" shall mean, with respect to any Payment Date (i) with
respect to the Class A-1 Notes, from and including the Closing Date (in the
case of the first Payment Date) or from and including the most recent Payment
Date on which interest has been paid to but excluding the following Payment
Date and (ii) with respect to each Class of Notes other than the Class A-1
Notes, from and including the Closing Date (in the case of the first Payment
Date) or from and including the 15th day of the calendar month preceding each
Payment Date to but excluding the 15th day of the calendar month of such
Payment Date.
"IRS" shall mean the Internal Revenue Service.
"Issuer" shall mean the Trust unless a successor replaces it and,
thereafter, shall mean the successor.
"Issuer Order" and "Issuer Request" shall mean a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Lien" shall mean a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than, in respect of a Receivable, tax liens,
mechanics' liens, and any liens which attach to the respective Receivable by
operation of law.
"Liquidation Proceeds" shall mean with respect to any Receivable (a)
insurance proceeds received by the Servicer and (b) monies collected by the
Servicer from whatever source, including but not limited to proceeds of
Financed Vehicles after repossession, on a Defaulted Receivable, net of any
payments required by law to be remitted to the Obligor.
11
"Monthly Remittance Condition" shall mean either (a) the Servicer obtains
a short-term certificate of deposit rating of the Servicer from Standard &
Poor's and Moody's of A-1+ and P-1, respectively, or (b) the Servicer provides
the Indenture Trustee with a letter from each Rating Agency to the effect that
the current ratings assigned to the Securities by such Rating Agency will not
be adversely affected by the remittance of Collections on a monthly, rather
than a daily, basis.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc. or its successor in
interest.
"Net Loss Ratio" shall mean, for any Collection Period, the ratio,
expressed as an annualized percentage, of (a) Realized Losses minus Recoveries
for such Collection Period, to (b) the average of the Pool Balances on the
first day of such Collection Period and the last day of such Collection
Period.
"Noteholder" or "holder of a Note" shall mean the Person in whose name a
Note is registered on the Note Register.
"Note Interest Rate" shall mean the Class A-1 Rate, the Class A-2 Rate,
the Class A-3 Rate or the Class A-4 Rate, as applicable.
"Note Owner" shall mean, with respect to any Book-Entry Note, the Person
who is the beneficial owner of such Book-Entry Note, as reflected on the books
of the Clearing Agency or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Note Paying Agent" shall mean the Indenture Trustee or any other Person
that meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 of the Indenture and is authorized by the Issuer to make payments
to and distributions from the Collection Account (including the Principal
Distribution Account), including payment of principal of or interest on the
Notes on behalf of the Issuer.
"Note Pool Factor" shall mean, with respect to each Class of Notes as of
the close of business on the last day of a Collection Period, a seven-digit
decimal figure equal to the outstanding principal balance of such Class of
Notes (after giving effect to any reductions thereof to be made on the
immediately following Payment Date) divided by the original outstanding
principal balance of such Class of Notes. The Note Pool Factor will be
1.0000000 as of the Closing Date; thereafter, the Note Pool Factor will
decline to reflect reductions in the outstanding principal amount of such
Class of Notes.
"Note Register" and "Note Registrar" shall have the respective meanings
specified in Section 2.5 of the Indenture.
"Notes" shall mean the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes, collectively.
"Obligor" on a Receivable shall mean the purchaser or co-purchasers of
the Financed Vehicle or any other Person who owes payments under the
Receivable.
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"Officer's Certificate" shall mean (i) with respect to the Trust, a
certificate signed by any Authorized Officer of the Trust and (ii) with
respect to the Seller or the Servicer, a certificate signed by the chairman of
the board, the president, any executive or senior vice president, any vice
president, the treasurer or the controller of the Seller or the Servicer, as
applicable.
"Opinion of Counsel" shall mean a written opinion of counsel which
counsel shall be acceptable to the Indenture Trustee, the Owner Trustee or the
Rating Agencies, as applicable.
"Optional Purchase Percentage" shall mean 5%.
"Outstanding" shall mean with respect to the Securities, as of the date
of determination, all Securities theretofore authenticated and delivered under
the Indenture or the Trust Agreement, as applicable, except:
(a) Securities theretofore (i) cancelled by the Note
Registrar or the Certificate Registrar, as applicable, or (ii)
delivered to the Note Registrar or the Certificate Registrar,
as applicable, for cancellation;
(b) Securities or portions thereof the payment for which
money in the necessary amount has been theretofore deposited
with (i)in the case of the Notes, the Indenture Trustee or any
Note Paying Agent in trust for the Noteholders of such Notes
(provided, however, that if such Notes are to be prepaid,
notice of such prepayment has been duly given pursuant to the
Indenture or provision for such notice has been made,
satisfactory to the Indenture Trustee) or (ii) in the case of
the Certificates, the Owner Trustee or any Certificate Paying
Agent in trust for the Certificateholders of such Certificates
(provided, however, that if such Certificates are to be
prepaid, notice of such prepayment has been duly given pursuant
to the Trust Agreement or provision for such notice has been
made, satisfactory to the Owner Trustee); and
(c) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to
the Indenture or the Trust Agreement, as applicable, unless
proof satisfactory to the Indenture Trustee or the Owner
Trustee, as applicable, is presented that any such Securities
are held by a protected purchaser;
provided, that in determining whether the holders of Notes or Certificates
evidencing the requisite principal amount of the Notes Outstanding or
Certificates Outstanding have given any request, demand, authorization,
direction, notice, consent, or waiver under any Basic Document, Securities
owned by the Issuer, any other obligor upon the Securities, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee or Owner Trustee, as applicable, shall be protected in
relying on any such request, demand, authorization, direction, notice,
consent, or waiver, only (i) Notes that a Responsible Officer of the Indenture
Trustee knows to be so owned and (ii) Certificates that a Responsible Officer
of the Owner Trustee knows to be so owned, shall be so disregarded; provided,
however, if the Issuer, any other obligor upon the Securities, the Seller, the
Servicer or any Affiliate of any of the foregoing
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Persons owns an entire Class of Securities, such Securities shall be deemed to
be Outstanding. Notes owned by the Issuer, any other obligor upon the Notes,
the Seller, the Servicer or any Affiliate of any of the foregoing Persons that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Indenture Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Issuer,
any other obligor upon the Notes, the Seller, the Servicer or any Affiliate of
any of the foregoing Persons. Certificates owned by the Issuer, any other
obligor upon the Certificates, the Seller, the Servicer or any Affiliate of
any of the foregoing Persons that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Owner Trustee the pledgee's right so to act with respect to such Certificates
and that the pledgee is not the Issuer, any other obligor upon the
Certificates, the Seller, the Servicer or any Affiliate of any of the
foregoing Persons.
"Outstanding Advances" on the Receivables shall mean the sum, as of the
close of business on the last day of a Collection Period, of all Advances as
reduced as provided in Section 4.4(a) of the Sale and Servicing Agreement.
"Owner Trustee" shall mean First Union Trust Company, National
Association, a national banking association, not in its individual capacity
but solely as Owner Trustee under the Trust Agreement, or any successor Owner
Trustee under the Trust Agreement.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in, to and under the property and rights assigned to the Trust pursuant
to Article II of the Sale and Servicing Agreement.
"Payment Date" shall mean the fifteenth (15th) day of each calendar month
or, if such day is not a Business Day, the next succeeding Business Day.
"Permitted Investments" shall mean, on any date of determination,
book-entry securities, negotiable instruments or securities represented by
instruments in bearer or registered form with maturities not exceeding the
Business Day preceding the next Payment Date which evidence:
(a) direct non-callable obligations of, and obligations
fully guaranteed as to timely payment by, the United States of
America;
(b) demand deposits, time deposits or certificates of
deposit of any depository institution or trust company
incorporated under the laws of the United States of America or
any state thereof (or any domestic branch of a foreign bank)
and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided,
however, that at the time of the investment or contractual
commitment to invest therein, the commercial paper or other
short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a
Person other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating
Agencies in the highest investment category granted thereby;
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(c) commercial paper having, at the time of the investment
or contractual commitment to invest therein, a rating from each
of the Rating Agencies in the highest investment category
granted thereby;
(d) investments in money market funds having a rating from
each of the Rating Agencies in the highest investment category
granted thereby (including funds for which the Indenture
Trustee or the Owner Trustee or any of their respective
Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security
that is a direct non-callable obligation of, or fully
guaranteed by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by
the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust
company (acting as principal) described in clause (b); and
(g) any other investment with respect to which the Issuer
or the Servicer has received written notification from the
Rating Agencies that the acquisition of such investment as a
Permitted Investment will not result in a withdrawal or
downgrading of the ratings on the Notes or the Certificates.
"Person" shall mean any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, or government or any agency or political subdivision thereof.
"Plan" means an employee benefit plan (as defined in section 3(3) of
ERISA) that is subject to Title I of ERISA, a plan (as defined in section
4975(e)(1) of the Code) and any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity or otherwise.
"Pool Balance" shall mean on any date of determination, the aggregate
outstanding Principal Balance of the Receivables (exclusive of Purchased
Receivables and Defaulted Receivables) as of such date of determination.
"Pool Factor" as of the last day of a Collection Period shall mean a
seven-digit decimal figure equal to the Pool Balance at that time divided by
the Initial Pool Balance.
"Predecessor Note" shall mean, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced
by such particular Note and, for purposes of this definition, any Note
authenticated and delivered under Section 2.6 of the Indenture in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Prepayment Date" shall mean (i) with respect to a prepayment of the
Certificates pursuant to Section 8.2(a) of the Trust Agreement or a
distribution to Certificateholders pursuant
15
to Section 8.1(c) of the Trust Agreement, the Payment Date specified by the
Owner Trustee pursuant to said Section 8.2(a) or 8.1(c), as applicable, and
(ii) with respect to a prepayment of the Notes pursuant to Section 10.1(a) of
the Indenture, the Payment Date specified by the Servicer pursuant to Section
10.1(a) or (b) of the Indenture, as applicable.
"Prepayment Price" shall mean (i) in the case of the Certificates, an
amount equal to the Certificate Balance plus accrued and unpaid interest
thereon at the applicable Class B Rate plus interest on any overdue interest
at the applicable Class B Rate (to the extent lawful) to but excluding the
Prepayment Date and (ii) in the case of a Class of Notes to be prepaid, an
amount equal to the unpaid principal amount of such Class of Notes plus
accrued and unpaid interest thereon at the applicable Note Interest Rate plus
interest on any overdue interest at the applicable Note Interest Rate (to the
extent lawful) to but excluding the Prepayment Date.
"Priority Note Principal Payment" shall mean, for each Payment Date, a
payment of principal equal to the excess, if any, of the aggregate principal
amount of the Class A Notes (before giving effect to any payments on that
Payment Date) over the Pool Balance at the end of the related Collection
Period.
"Principal Balance" of a Receivable, as of any date of determination,
shall mean the Amount Financed minus that portion of all payments actually
received on or prior to such date allocable to principal.
"Principal Distribution Account" shall mean the administrative subaccount
of the Collection Account established and maintained as such pursuant to
Section 4.1(b) of the Sale and Servicing Agreement.
"Proceeding" shall mean any suit in equity, action at law or other
judicial or administrative proceeding.
"Prospectus" shall have the meaning specified in the Underwriting
Agreement.
"Purchase Amount" with respect to a Purchased Receivable shall mean the
sum, as of the last day of the preceding Collection Period on which such
Receivable becomes such, of the Principal Balance thereof plus the accrued
interest thereon at the weighted average of the Note Interest Rates and the
Class B Rate.
"Purchased Receivable" shall mean a Receivable purchased as of the close
of business on the last day of the respective Collection Period by the
Servicer pursuant to Section 3.7 of the Sale and Servicing Agreement or by the
Seller pursuant to Section 2.3 of the Sale and Servicing Agreement.
"Rating Agency" shall mean each of the nationally recognized statistical
rating organizations designated by the Seller to provide a rating on the Notes
or the Certificates which is then rating such Notes or Certificates. If no
such organization or successor is any longer in existence, "Rating Agency"
shall be a nationally recognized statistical rating organization or other
comparable Person designated by the Seller, notice of which designation shall
be given to the Indenture Trustee, the Owner Trustee and the Servicer.
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"Rating Agency Condition" shall mean, with respect to any action, that
each of the Rating Agencies shall have notified the Seller, the Servicer, 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 or
the Certificates.
"Realized Losses" shall mean, for any Collection Period and for each
Receivable that became a Defaulted Receivable during such Collection Period,
the sum of the excess, for each such Receivable, of (i) the Principal Balance
of such Receivable over (ii) Liquidation Proceeds received with respect to
such Receivable during such Collection Period, to the extent allocable to
principal.
"Receivable" shall mean a motor vehicle installment loan contract listed
on Schedule A to the Sale and Servicing Agreement and all proceeds thereof and
payments thereunder, which Receivable shall not have been released by the
Indenture Trustee and the Owner Trustee from the Trust.
"Receivable Files" shall mean the documents specified in Section 2.4 of
the Sale and Servicing Agreement.
"Record Date" shall mean, with respect to any Payment Date or Prepayment
Date and any Book-Entry Security, the close of business on the day prior to
such Payment Date or Prepayment Date or, with respect to any Definitive Note
or Definitive Certificate, the last day of the month preceding the month in
which such Payment Date or Prepayment Date occurs.
"Recoveries" shall mean, with respect to any Collection Period, all
amounts received by the Servicer with respect to any Defaulted Receivable
during any Collection Period following the Collection Period in which such
Receivable became a Defaulted Receivable, net of any fees, costs and expenses
incurred by the Servicer in connection with the collection of such Receivable
and any payments required by law to be remitted to the Obligor.
"Registered Noteholder" shall mean the Person in whose name a Note is
registered on the Note Register on the applicable Record Date.
"Regular Principal Distribution Amount" shall mean, with respect to any
Payment Date, an amount equal to the sum of (i) the Collections on the
Receivables received during the related Collection Period and allocable to
principal and (ii) the aggregate Principal Balance (net of Liquidation
Proceeds received during the related Collection Period applied to principal)
of all Receivables that became designated as Defaulted Receivables in such
Collection Period; provided, however, that the Regular Principal Distribution
Amount shall not exceed the sum of the aggregate outstanding principal amount
of all of the Notes and the Certificate Balance on such Payment Date.
"Related Agreements" shall have the meaning specified in the recitals to
the Administration Agreement.
"Representatives" shall mean Deutsche Banc Alex. ▇▇▇▇▇ Inc. and ▇▇▇▇▇▇▇
▇▇▇▇▇ Barney Inc., as representatives of the several Underwriters.
17
"Repurchase Event" shall mean the occurrence of a breach of any of the
Seller's representations and warranties contained in Section 2.2 of the Sale
and Servicing Agreement obligating the Seller to repurchase Receivables
thereunder at the Purchase Amount from the Trust.
"Required Rating" shall mean a rating on (i) short-term unsecured debt
obligations of P-1 by Moody's and (ii) short-term unsecured debt obligations
of A-1+ by Standard & Poor's; and any requirement that short-term unsecured
debt obligations have the "Required Rating" shall mean that such short-term
unsecured debt obligations have the foregoing required ratings from each of
such Rating Agencies.
"Reserve Account" shall mean the account established and maintained as
such pursuant to Section 4.7(a) of the Sale and Servicing Agreement.
"Reserve Account Property" shall have the meaning specified in Section
4.7(a) of the Sale and Servicing Agreement.
"Reserve Account Excess Amount" shall mean, with respect to any Payment
Date, an amount equal to the excess, if any, of (i) the amount of cash or
other immediately available funds in the Reserve Account on such Payment Date
(prior to giving effect to any withdrawals therefrom relating to such Payment
Date) over (ii) the Specified Reserve Balance with respect to such Payment
Date.
"Reserve Initial Deposit" shall mean, with respect to the Closing Date,
$3,575,000.14.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement, dated as of November 1, 2001, by and between the Trust, as issuer,
and the Bank, as seller and servicer.
"Scheduled Payment" shall mean, for any Collection Period for any
Receivable, the amount indicated in such Receivable as required to be paid by
the Obligor in such Collection Period (without giving effect to deferments of
payments pursuant to Section 3.2 of the Sale and Servicing Agreement or any
rescheduling in any insolvency or similar proceedings).
"Schedule of Receivables" shall mean the list identifying the Receivables
attached as Schedule A to the Sale and Servicing Agreement and the Indenture
(which list may be in the form of microfiche, disk or other means acceptable
to the Trustee).
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities" shall mean the Notes and the Certificates, collectively.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Depository Agreement" shall mean the agreement dated the
Closing Date by and among the Trust, the Indenture Trustee, the Owner Trustee
and The Depository Trust Company, as the initial Clearing Agency, relating to
the Securities.
"Securityholders" shall mean the Noteholders and the Certificateholders,
collectively.
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"Seller" shall mean the Bank as the seller of the Receivables under the
Sale and Servicing Agreement, and each successor to the Bank (in the same
capacity) pursuant to Section 5.3 of the Sale and Servicing Agreement.
"Servicer" shall mean the Bank as the servicer of the Receivables under
the Sale and Servicing Agreement, and each successor to the Bank (in the same
capacity) pursuant to Section 6.3 of the Sale and Servicing Agreement.
"Servicer's Certificate" shall mean a certificate completed and executed
by the Servicer by the chairman of the board, the president, any executive
vice president, any vice president, the treasurer, any assistant treasurer,
the controller, or any assistant controller of the Servicer pursuant to
Section 3.9 of the Sale and Servicing Agreement.
"Servicing Fee" shall mean, with respect to a Collection Period, the fee
payable to the Servicer for services rendered during such Collection Period,
which shall be equal to one-twelfth of the Servicing Fee Rate multiplied by
the Pool Balance as of the first day of the Collection Period.
"Servicing Fee Rate" shall mean 0.5% per annum.
"Simple Interest Method" shall mean the method of allocating a fixed
level payment to principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the amount accrued from the
date of the preceding payment to the date of the current payment.
"Specified Reserve Balance" shall mean, with respect to any Payment Date,
the greater of (i) 0.50% of the Initial Pool Balance and (ii) 0.75% of the
Pool Balance at the end of the Collection Period preceding such Payment Date;
provided, however, the Specified Reserve Balance shall be calculated using a
percentage of 0.75% in (i) above and 2.50% in (ii) above, for any Payment Date
on which the Average Net Loss Ratio exceeds the Average Net Loss Trigger
Percentage or the Average Delinquency Ratio exceeds the Average Delinquency
Trigger Percentage; provided, further, however, that such higher percentage
shall remain in effect until the Average Net Loss Ratio and the Average
Delinquency Ratio are equal to or less than 1.25% for at least six consecutive
Collection Periods. Notwithstanding the foregoing, the Specified Reserve
Balance may be reduced to a lesser amount as determined by the Seller if the
Rating Agency Condition is satisfied.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or its successor in interest.
"State" shall mean any state or commonwealth of the United States of
America, or the District of Columbia.
"Successor Servicer" shall mean an institution appointed as successor
Servicer pursuant to Section 7.2 of the Sale and Servicing Agreement.
19
"Supplemental Servicing Fee" shall mean, the fee payable to the Servicer
for certain services rendered during the respective Collection Period,
determined pursuant to and defined in Section 3.8 of the Sale and Servicing
Agreement.
"Total Required Payment" shall mean, with respect to any Payment Date,
the sum of the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods, the Accrued Class A Note Interest, the Accrued Class B
Certificate Interest and the Regular Principal Distribution Amount; provided,
however, that on any Final Scheduled Payment Date the amount required to be
paid pursuant to Section 4.6(c)(v) of the Sale and Servicing Agreement shall
be included in the Total Required Payment; provided, further, that following
the occurrence and during the continuation of an Event of Default, on any
Payment Date until the Payment Date on which the outstanding principal amount
of all the Securities has been paid in full, the Total Required Payment shall
mean the sum of the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods, the Accrued Class A Note Interest, the Accrued Class B
Certificate Interest and the amount necessary to reduce the outstanding
principal amount of all the Securities to zero.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean USAA Auto Owner Trust 2001-2, a Delaware business
trust governed by the Trust Agreement.
"Trust Accounts" shall have the meaning specified in Section 4.7(a) of
the Sale and Servicing Agreement.
"Trust Agreement" shall mean the Amended and Restated Trust Agreement
dated as of November 1, 2001, by and among the Seller, as depositor, and the
Owner Trustee.
"Trust Indenture Act" or "TIA" shall mean the Trust Indenture Act of
1939, as amended, unless otherwise specifically provided.
"Trustee Officer" shall mean, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee with direct
responsibility for the administration of the Indenture and the other Basic
Documents on behalf of the Indenture Trustee and also, with respect to a
particular matter, any other officer to whom such matter is referred because
of such officer's knowledge of and familiarity with the particular subject
and, with respect to the Owner Trustee, any officer within the Corporate Trust
Office of the Owner Trustee with direct responsibility for the administration
of the Trust Agreement and the other Basic Documents on behalf of the Owner
Trustee.
"Trust Property" shall mean, collectively, (i) the Receivables; (ii)
monies received thereunder on or after the Cut-off Date; (iii) the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and any other interest of the Issuer in the Financed Vehicles;
(iv) rights to receive proceeds with respect to the Receivables from claims on
any theft, physical damage, credit life, credit disability, or other insurance
policies covering Financed Vehicles or Obligors; (v) all of the Seller's
rights to the Receivable Files; (vi) the Trust
20
Accounts, the Certificate Interest Distribution Account, the Certificate
Principal Distribution Account and all amounts, securities, investments,
investment property and other property deposited in or credited to any of the
foregoing, all security entitlements relating to the foregoing and all
proceeds thereof; (vii) payments and proceeds with respect to the Receivables
held by the Servicer; (viii) all property (including the right to receive
Liquidation Proceeds) securing a Receivable (other than a Receivable
repurchased by the Servicer or purchased by the Seller); (ix) rebates of
premiums and other amounts relating to insurance policies and other items
financed under the Receivables in effect as of the Cut-off Date; and (x) all
present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation awards, rights to payment
of any and every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing.
"UCC" shall mean the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Underwriters" shall mean the underwriters named in Schedule I to the
Underwriting Agreement.
"Underwriting Agreement" shall mean the Underwriting Agreement, dated
November 14, 2001 between the Seller and the Representatives of the several
Underwriters.
"Underwritten Securities" shall mean the Notes.
21