Exhibit 10.1
EXECUTION COPY
================================================================================
SALE AND SERVICING AGREEMENT
among
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AUTO LOAN TRUST 2004-HB2,
Issuer,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS CAPITAL II INC.,
Depositor,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ASSET FUNDING INC.,
Seller,
THE HUNTINGTON NATIONAL BANK,
Servicer
and
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
Indenture Trustee
Dated as of June 30, 2004
================================================================================
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.....................................................................................1
Section 1.02 Other Definitional Provisions..................................................................26
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01 Conveyance of Receivables......................................................................27
ARTICLE III
THE RECEIVABLES
Section 3.01 Certain Prior Representations and Warranties of HNB............................................31
Section 3.02 Representations and Warranties of the Depositor................................................32
Section 3.03 Repurchase Upon Breach.........................................................................32
Section 3.04 Custody of Receivable Files....................................................................33
Section 3.05 Duties of Servicer as Custodian................................................................33
Section 3.06 Instructions; Authority to Act.................................................................35
Section 3.07 [Intentionally Omitted]........................................................................35
Section 3.08 Effective Period and Termination...............................................................35
ARTICLE IV
SERVICING OF RECEIVABLES
Section 4.01 Duties of Servicer.............................................................................36
Section 4.02 Collection of Receivable Payments; Modifications of Receivables; Monthly Advances..............37
Section 4.03 Realization upon Receivables...................................................................38
Section 4.04 Satisfaction of Receivable.....................................................................39
Section 4.05 Maintenance of Security Interests in Financed Vehicles.........................................39
Section 4.06 Additional Servicing Covenants.................................................................39
Section 4.07 [Intentionally Omitted]........................................................................40
Section 4.08 Purchase of Receivables Upon Breach............................................................40
Section 4.09 Servicing Fee; Costs and Expenses..............................................................41
Section 4.10 Servicer's Certificate and Servicer Reports....................................................42
Section 4.11 Annual Statement as to Compliance..............................................................42
Section 4.12 Annual Report of Accountants...................................................................43
Section 4.13 Access to Certain Documentation and Information Regarding Receivables..........................43
i
Section 4.14 Access to Information Regarding Trust and Basic Documents......................................43
Section 4.15 Maintenance of Errors and Omission Policy......................................................44
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
Section 5.01 Establishment of Accounts......................................................................44
Section 5.02 Collections; Deposits into Collection Account..................................................46
Section 5.03 Application of Collections.....................................................................47
Section 5.04 Repurchase Amounts.............................................................................47
Section 5.05 Permitted Withdrawals from Collection Account..................................................47
Section 5.06 Distributions..................................................................................47
Section 5.07 Pre-Funding Account............................................................................52
Section 5.08 Statements to Securityholders..................................................................52
Section 5.09 Subcertifications of Indenture Trustee in Connection with ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certifications........54
ARTICLE VI
THE DEPOSITOR
Section 6.01 Representations of Depositor...................................................................55
Section 6.02 Corporate Existence............................................................................57
Section 6.03 Liability of Depositor; Indemnities............................................................57
Section 6.04 Merger or Consolidation of, or Assumption of the Obligations of, Depositor.....................57
Section 6.05 Limitation on Liability of Depositor and Others................................................58
Section 6.06 Depositor May Own Securities...................................................................58
Section 6.07 Depositor to Provide Copies of Relevant Securities Filings.....................................58
Section 6.08 Amendment of Depositor's Organizational Documents..............................................58
Section 6.09 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certifications..................................................................58
ARTICLE VII
THE SERVICER
Section 7.01 Representations of Servicer....................................................................59
Section 7.02 Indemnities of Servicer........................................................................61
Section 7.03 Merger or Consolidation of, or Assumption of the Obligations of, Servicer......................63
Section 7.04 Limitation on Liability of Servicer and Others.................................................63
Section 7.05 Servicer Not to Resign.........................................................................64
ARTICLE VIII
DEFAULT
Section 8.01 Event of Servicing Terminations and Additional Event of Servicing Terminations.................64
ii
Section 8.02 Consequences of an Event of Servicing Termination or an Additional Event of Servicing
Termination....................................................................................66
Section 8.03 Appointment of Successor Servicer..............................................................67
Section 8.04 Notification to Securityholders................................................................68
Section 8.05 Waiver of Past Defaults........................................................................68
ARTICLE IX
TERMINATION
Section 9.01 Optional Purchase of All Receivables...........................................................68
ARTICLE X
MISCELLANEOUS
Section 10.01 Amendment......................................................................................69
Section 10.02 Protection of Title to Trust...................................................................70
Section 10.03 Notices........................................................................................72
Section 10.04 Assignment by the Depositor or the Servicer....................................................72
Section 10.05 Limitations on Rights of Others................................................................73
Section 10.06 Severability...................................................................................73
Section 10.07 Counterparts...................................................................................73
Section 10.08 Headings.......................................................................................73
Section 10.09 Governing Law..................................................................................73
Section 10.10 Assignment by Issuer...........................................................................73
Section 10.11 Nonpetition Covenants..........................................................................73
Section 10.12 Limitation of Liability of Owner Trustee and Indenture Trustee.................................73
SCHEDULE A Schedule of Initial Receivables (On file with the Indenture Trustee)
SCHEDULE B Location of Receivable Files
SCHEDULE C Cumulative Net Loss Ratio
EXHIBIT A Form of Distribution Date Statement to Noteholders
EXHIBIT B Form of Servicer's Certificate
EXHIBIT C Form of Servicer Annual Certification
EXHIBIT D Form of Depositor's Annual ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification
EXHIBIT E Form of Certification to be Provided to the Depositor by the Indenture Trustee
EXHIBIT F Loss Note Affidavit
EXHIBIT G Servicing Standards
EXHIBIT H Form of Subsequent Transfer Agreement
EXHIBIT I Assignment, Assumption and Recognition Agreement
iii
This SALE AND SERVICING AGREEMENT, dated as of June 30, 2004, among
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AUTO LOAN TRUST 2004-HB2, a Delaware statutory trust (the
"Issuer"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS CAPITAL II INC., a Delaware corporation, as
depositor (the "Depositor"), THE HUNTINGTON NATIONAL BANK, as servicer ("HNB,"
and in such capacity, the "Servicer"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ASSET FUNDING INC., a
Delaware corporation, as seller (the "Seller"), and ▇▇▇▇▇ FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, as indenture trustee (the
"Indenture Trustee").
WHEREAS, the Issuer desires to acquire from the Depositor a portfolio
of Receivables arising in connection with various retail automobile and
light-duty truck loan and installment sale contracts purchased by the Seller
in the ordinary course of its business and sold by the Seller to the Depositor
pursuant to the one or more Assignment, Assumption and Recognition Agreements
(as defined herein);
WHEREAS, the Issuer desires to acquire a portion of such Receivables
on the date hereof and the remainder of such portfolio during the Funding
Period (as defined herein);
WHEREAS, the Depositor is willing to transfer such Receivables to the
Issuer; and
WHEREAS, HNB is willing to service such Receivables.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"1934 Act Documents" has the meaning assigned to such term in Section
5.09.
"Addition Notice" means, with respect to any transfer of Subsequent
Receivables to the Issuer pursuant to Section 2.01(b) of this Agreement,
notice of the Depositor's election to transfer Subsequent Receivables to the
Issuer, such notice to designate the related Subsequent Transfer Date and the
approximate principal balance of Subsequent Receivables to be transferred on
such Subsequent Transfer Date.
"Affiliate" means, when used with reference to a specified Person,
any Person that (a) directly or indirectly controls or is controlled by or is
under common control with the specified Person, (b) is an officer of, partner
in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner or
trustee, or with respect to which the specified Person serves in a similar
capacity or (c) directly or indirectly is the beneficial owner of 10% or more
of any class of equity securities of the specified Person or of which the
specified Person is directly or indirectly the owner of 10% or more of any
class of equity securities; provided, however, that when used with reference
to the Servicer in Section
7.01, "Affiliate" means any Person that directly or indirectly controls or is
controlled by or is under common control with the Servicer.
"Additional Event of Servicing Termination" has the meaning assigned
to such term in Section 8.01(b).
"Agreement" means this Sale and Servicing Agreement, including all
schedules and exhibits hereto, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"Amount Financed" means with respect to a Receivable, the amount
advanced under the Receivable toward the purchase price of a Financed Vehicle
and any related costs, including but not limited to, service warranties.
"Applicable Law" means, with respect to any Person, all statutes,
rules and regulations and orders of any Governmental Authority applicable to
such Person.
"Assignment" has the meaning assigned thereto in the Flow Purchase
Agreement.
"Assignment, Assumption and Recognition Agreement" means the
Assignment, Assumption and Recognition Agreement, substantially in the form
attached hereto as Exhibit I among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Funding Inc., as
assignor, the Depositor, as assignee, and HNB, as seller and servicer, entered
into on the Closing Date with respect to the assignment of the Initial
Receivables to the Depositor, and as supplemented on each Subsequent Transfer
Date by an agreement supplemental thereto pursuant to which the agreements and
undertakings made pursuant thereto are extended to cover the Subsequent
Receivables being transferred on such Subsequent Transfer Date, and as it may
be otherwise amended, supplemented or modified from time to time.
"Basic Documents" means the Indenture, this Agreement, the Trust
Agreement, the Assignment, each Assumption and Recognition Agreement, each
Subsequent Transfer Agreement and other documents (including any Letter of
Representations with the Depository Trust Company) and certificates delivered
in connection therewith.
"Business Day" means any day other than (a) a Saturday or Sunday or
(b) a day on which banking institutions in the States of New York or Delaware,
the jurisdiction of the principal place of business of the Servicer or the
cities in which the Corporate Trust Offices of the Indenture Trustee are
located, are authorized or required by law or executive order to be closed.
Notwithstanding the foregoing, with respect to payments to the Noteholders or
Certificateholders, Business Day means any day other than (i) a Saturday or
Sunday or (ii) a day on which banking institutions in the State of New York or
the cities in which the Corporate Trust Offices of the Indenture Trustee are
located are authorized or required by law or executive order to be closed.
"Certificate" means a certificate evidencing the beneficial interest
of a Certificateholder in the Trust.
"Class" means any one of the classes of Notes.
2
"Class A Note" means any Class A-1 Note, Class A-2 Note , Class A-3
Note or Class A-4 Note.
"Class A Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class A-1 Interest
Distributable Amount for such Distribution Date, the Class A-2 Interest
Distributable Amount for such Distribution Date, the Class A-3 Interest
Distributable Amount for such Distribution Date and the Class A-4 Interest
Distributable Amount for such Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (i) the Outstanding Amount of the Class
A Notes immediately prior to such Distribution Date minus (ii) the lesser of
(A) 88.25% of the Pool Balance for such Distribution Date and (B) an amount
equal to (1) the Pool Balance for such Distribution Date minus (2) the
Overcollateralization Target Amount for such Distribution Date; provided,
however, that, unless the Class A Notes have been paid in full, for (I) any
Distribution Date as of which the Three-Month Annualized Net Loss Ratio is
greater than or equal to the Sequential Principal Payment Trigger Percentage
in effect on that Distribution Date and (II) each subsequent Distribution Date
as of which the Six-Month Annualized Net Loss Ratio is greater than or equal
to the Sequential Principal Payment Trigger Percentage in effect on that
Distribution Date, the Class A Principal Distributable Amount shall be 100% of
the Regular Principal Allocation for such Distribution Date; provided further,
that on the Final Scheduled Distribution Date of any Class of Class A Notes,
the Class A Principal Distributable Amount shall not be less than the amount
that is necessary to pay that Class of Class A Notes in full; and provided
further, that the Class A Principal Distributable Amount on any Distribution
Date shall not exceed the Outstanding Amount of the Class A Notes on that
Distribution Date.
"Class A-1 Final Scheduled Distribution Date" means the Distribution
Date in August 2006.
"Class A-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-1
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-1 Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class A-1
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class A-1 Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class A-1 Rate.
"Class A-1 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover
Shortfall for such Distribution Date.
"Class A-1 Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class A-1 Notes at the Class A-1 Rate on the Outstanding
Amount of the Class A-1 Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class A-1 Noteholders
on or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other
3
Basic Documents, interest with respect to the Class A-1 Notes shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
"Class A-1 Noteholder" means each Person in whose name a Class A-1
Note is registered in the Note Register.
"Class A-1 Notes" means the 1.90% Asset Backed Notes, Class A-1,
substantially in the form of Exhibit A-1 to the Indenture.
"Class A-1 Rate" means 1.90% per annum.
"Class A-2 Final Scheduled Distribution Date" means the Distribution
Date in July 2007.
"Class A-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-2
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-2 Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class A-2
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class A-2 Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class A-2 Rate.
"Class A-2 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover
Shortfall for such Distribution Date.
"Class A-2 Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class A-2 Notes at the Class A-2 Rate on the Outstanding
Amount of the Class A-2 Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class A-2 Noteholders
on or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other Basic Documents, 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.
"Class A-2 Noteholder" means each Person in whose name a Class A-2
Note is registered in the Note Register.
"Class A-2 Notes" means the 2.40% Asset Backed Notes, Class A-2,
substantially in the form of Exhibit A-2 to the Indenture.
"Class A-2 Rate" means 2.40% per annum.
"Class A-3 Final Scheduled Distribution Date" means the Distribution
Date in March 2009.
"Class A-3 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-3
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-3 Interest Carryover Shortfall on such
4
preceding Distribution Date exceeds the amount in respect of interest for the
Class A-3 Notes actually deposited in the Note Interest Distribution Account
on such preceding Distribution Date, plus interest on the amount of interest
due but not paid to the Class A-3 Noteholders on such preceding Distribution
Date, to the extent permitted by law, at the Class A-3 Rate.
"Class A-3 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-3 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-3 Interest Carryover
Shortfall for such Distribution Date.
"Class A-3 Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class A-3 Notes at the Class A-3 Rate on the Outstanding
Amount of the Class A-3 Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class A-3 Noteholders
on or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other Basic Documents, 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.
"Class A-3 Noteholder" means each Person in whose name a Class A-3
Note is registered in the Note Register.
"Class A-3 Notes" means the 2.94% Asset Backed Notes, Class A-3,
substantially in the form of Exhibit A-3 to the Indenture.
"Class A-3 Rate" means 2.94% per annum.
"Class A-4 Final Scheduled Distribution Date" means the Distribution
Date in March 2012.
"Class A-4 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-4
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-4 Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class A-4
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class A-4 Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class A-4 Rate.
"Class A-4 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-4 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-4 Interest Carryover
Shortfall for such Distribution Date.
"Class A-4 Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class A-4 Notes at the Class A-4 Rate on the Outstanding
Amount of the Class A-4 Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class A-4 Noteholders
on or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other
5
Basic Documents, 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.
"Class A-4 Noteholder" means each Person in whose name a Class A-4
Note is registered in the Note Register.
"Class A-4 Notes" means the 3.46% Asset Backed Notes, Class A-4,
substantially in the form of Exhibit A-4 to the Indenture.
"Class A-4 Rate" means 3.46% per annum.
"Class B Final Scheduled Distribution Date" means the Distribution
Date in March 2012.
"Class B Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class B Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class B Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class B
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class B Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class B Rate.
"Class B Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class B Notes at the Class B Rate on the Outstanding
Amount of the Class B Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class B Noteholders on
or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other Basic Documents, interest with respect to the Class B
Notes shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
"Class B Noteholder" means each Person in whose name a Class B Note
is registered in the Note Register.
"Class B Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class B Monthly Interest
Distributable Amount for such Distribution Date and the Class B Interest
Carryover Shortfall for such Distribution Date.
"Class B Notes" means the 3.37% Asset Backed Notes, Class B,
substantially in the form of Exhibit B to the Indenture.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) the sum of (i) the Outstanding
Amount of the Class A Notes (after taking into account distribution of the
Class A Principal Distributable Amount on such Distribution Date) and (ii) the
Outstanding Amount of the Class B Notes immediately prior to such Distribution
Date minus (b) the lesser of (i) 92.75% of the Pool Balance for such
Distribution Date and (ii) an amount equal to (A) the Pool Balance for such
Distribution Date minus (B) the Overcollateralization Target Amount for such
Distribution Date; provided, however, that, for (I) any Distribution Date as
of which the Three-Month Annualized Net Loss Ratio is greater than or
6
equal to the Sequential Principal Payment Trigger Percentage in effect on that
Distribution Date and (II) each subsequent Distribution Date as of which the
Six-Month Annualized Net Loss Ratio is greater than or equal to the Sequential
Principal Payment Trigger Percentage in effect on that Distribution Date, the
Class B Principal Distributable Amount shall be an amount equal to (x) 100% of
the Regular Principal Allocation for such Distribution Date minus (y) the
Class A Principal Distributable Amount for such Distribution Date; provided
further that, on the Class B Final Scheduled Distribution Date, the Class B
Principal Distributable Amount shall not be less than the amount that is
necessary to pay the Class B Notes in full; and provided further that the
Class B Principal Distributable Amount on any Distribution Date shall not
exceed the Outstanding Amount of the Class B Notes on that Distribution Date.
"Class B Rate" means 3.37% per annum.
"Class C Final Scheduled Distribution Date" means the Distribution
Date in March 2012.
"Class C Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class C Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class C Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class C
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class C Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class C Rate.
"Class C Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class C Notes at the Class C Rate on the Outstanding
Amount of the Class C Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class C Noteholders on
or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other Basic Documents, interest with respect to the Class C
Notes shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
"Class C Noteholder" means each Person in whose name a Class C Note
is registered in the Note Register.
"Class C Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class C Monthly Interest
Distributable Amount for such Distribution Date and the Class C Interest
Carryover Shortfall for such Distribution Date.
"Class C Notes" means the 3.24% Asset Backed Notes, Class C,
substantially in the form of Exhibit C to the Indenture.
"Class C Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) the sum of (i) the Outstanding
Amount of the Class A Notes (after taking into account distribution of the
Class A Principal Distributable Amount on such Distribution Date), (ii) the
Outstanding Amount of the Class B Notes (after taking into account
distribution of the Class B Principal Distributable Amount on such
Distribution Date) and (iii) the Outstanding
7
Amount of the Class C Notes immediately prior to such Distribution Date minus
(b) the lesser of (i) 94.50% of the Pool Balance for such Distribution Date
and (ii) an amount equal to (A) the Pool Balance for such Distribution Date
minus (B) the Overcollateralization Target Amount for such Distribution Date;
provided, however, that, for (I) any Distribution Date as of which the
Three-Month Annualized Net Loss Ratio is greater than or equal to the
Sequential Principal Payment Trigger Percentage in effect on that Distribution
Date and (II) each subsequent Distribution Date as of which the Six-Month
Annualized Net Loss Ratio is greater than or equal to the Sequential Principal
Payment Trigger Percentage in effect on that Distribution Date, the Class C
Principal Distributable Amount shall be an amount equal to (x) 100% of the
Regular Principal Allocation for such Distribution Date minus (y) an amount
equal to the sum of (1) the Class A Principal Distributable Amount for such
Distribution Date plus (2) the Class B Principal Distribution Amount for such
Distribution Date; provided further that, on the Class C Final Scheduled
Distribution Date, the Class C Principal Distributable Amount shall not be
less than the amount that is necessary to pay the Class C Notes in full; and
provided further that the Class C Principal Distributable Amount on any
Distribution Date shall not exceed the Outstanding Amount of the Class C Notes
on that Distribution Date.
"Class C Rate" means 3.24% per annum.
"Class D Final Scheduled Distribution Date" means the Distribution
Date in March 2012.
"Class D Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class D Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class D Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class D
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class D Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class D Rate.
"Class D Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class D Notes at the Class D Rate on the Outstanding
Amount of the Class D Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class D Noteholders on
or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other Basic Documents, interest with respect to the Class D
Notes shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
"Class D Noteholder" means each Person in whose name a Class D Note
is registered in the Note Register.
"Class D Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class D Monthly Interest
Distributable Amount for such Distribution Date and the Class D Interest
Carryover Shortfall for such Distribution Date.
"Class D Notes" means the 3.82% Asset Backed Notes, Class D,
substantially in the form of Exhibit D to the Indenture.
8
"Class D Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) the sum of (i) the Outstanding
Amount of the Class A Notes (after taking into account distribution of the
Class A Principal Distributable Amount on such Distribution Date), (ii) the
Outstanding Amount of the Class B Notes (after taking into account
distribution of the Class B Principal Distributable Amount on such
Distribution Date), (iii) the Outstanding Amount of the Class C Notes (after
taking into account distribution of the Class C Principal Distributable Amount
on such Distribution Date) and (iv) the Outstanding Amount of the Class D
Notes immediately prior to such Distribution Date minus (b) the lesser of (i)
94.50% of the Pool Balance for such Distribution Date and (ii) an amount equal
to (A) the Pool Balance for such Distribution Date minus (B) the
Overcollateralization Target Amount for such Distribution Date; provided,
however, that, for (I) any Distribution Date as of which the Three-Month
Annualized Net Loss Ratio is greater than or equal to the Sequential Principal
Payment Trigger Percentage in effect on that Distribution Date and (II) each
subsequent Distribution Date as of which the Six-Month Annualized Net Loss
Ratio is greater than or equal to the Sequential Principal Payment Trigger
Percentage in effect on that Distribution Date, the Class D Principal
Distributable Amount shall be an amount equal to (x) 100% of the Regular
Principal Allocation for such Distribution Date minus (y) an amount equal to
the sum of (1) the Class A Principal Distributable Amount for such
Distribution Date plus (2) the Class B Principal Distribution Amount for such
Distribution Date plus (3) the Class C Principal Distribution Amount for such
Distribution Date; provided further that, on the Class D Final Scheduled
Distribution Date, the Class D Principal Distributable Amount shall not be
less than the amount that is necessary to pay the Class D Notes in full; and
provided further that the Class D Principal Distributable Amount on any
Distribution Date shall not exceed the Outstanding Amount of the Class D Notes
on that Distribution Date.
"Class D Rate" means 3.82% per annum.
"Class E Final Scheduled Distribution Date" means the Distribution
Date in March 2012.
"Class E Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class E Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class E Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class E
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class E Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class E Rate.
"Class E Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued during the applicable Interest
Accrual Period on the Class E Notes at the Class E Rate on the Outstanding
Amount of the Class E Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class E Noteholders on
or prior to such preceding Distribution Date. For all purposes of this
Agreement and the other Basic Documents, interest with respect to the Class E
Notes shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
9
"Class E Noteholder" means each Person in whose name a Class E Note
is registered in the Note Register.
"Class E Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class E Monthly Interest
Distributable Amount for such Distribution Date and the Class E Interest
Carryover Shortfall for such Distribution Date.
"Class E Notes" means the 5.00% Asset Backed Notes, Class E,
substantially in the form of Exhibit E to the Indenture.
"Class E Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) 100% of the Regular Principal
Allocation for such Distribution Date minus (b) an amount equal to the sum of
(i) the Class A Principal Distributable Amount for such Distribution Date,
(ii) the Class B Principal Distributable Amount for such Distribution Date,
(iii) the Class C Principal Distributable Amount for such Distribution Date
and (iv) the Class D Principal Distributable Amount for such Distribution
Date; provided, however, that, on the Class E Final Scheduled Distribution
Date, the Class E Principal Distributable Amount shall not be less than the
amount that is necessary to pay the Class E Notes in full; and provided
further that the Class E Principal Distributable Amount on any Distribution
Date shall not exceed the Outstanding Amount of the Class E Notes on that
Distribution Date.
"Class E Rate" means 5.00% per annum.
"Closing Date" means August 30, 2004.
"Collateral" has the meaning specified in the Granting Clause of the
Indenture.
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.01(a).
"Collection Period" means, with respect to each Distribution Date,
the calendar month preceding the calendar month in which that Distribution
Date occurs; provided, however, that in the case of the first Distribution
Date, the related Collection Period is the period commencing on July 1, 2004
and ending on August 31, 2004.
"Collector" has the meaning assigned to such term in Section 4.03(b).
"Commission" means the United States Securities and Exchange
Commission or its successor.
"Contract" means a retail automobile and light-duty truck loan and
installment sale contract.
"Contract Rate" means, with respect to each Receivable, the annual
rate of interest applicable to such Receivable stated in the applicable loan
contract or installment sale contract.
"Controlling Class" means (i) if the Class A Notes have not been paid
in full, the Class A Notes, (ii) if the Class A Notes have been paid in full
and Class B Notes remain Outstanding, the
10
Class B Notes, (iii) if the Class A Notes and the Class B Notes have been paid
in full and Class C Notes remain Outstanding, the Class C Notes, (iv) if the
Class A Notes, the Class B Notes and the Class C Notes have been paid in full
and Class D Notes remain Outstanding, the Class D Notes and (v) if the Class A
Notes, the Class B Notes, the Class C Notes and the Class D Notes have been
paid in full and Class E Notes remain Outstanding, the Class E Notes.
"Conveyed Assets" means, collectively, the Initial Conveyed Assets
and the Subsequent Conveyed Assets.
"Cram Down Loss" means, with respect to a Receivable, any loss
resulting from an order issued by a court of appropriate jurisdiction in an
insolvency proceeding that reduces the amount owed on a Receivable or
otherwise modifies or restructures the scheduled payments to be made thereon.
The amount of any such Cram Down Loss will equal the excess of (i) the
Principal Balance of the Receivable immediately prior to such order over (ii)
the Principal Balance of such Receivable as so reduced, modified or
restructured. A Cram Down Loss will be deemed to have occurred at the end of
the Collection Period in which the Servicer enters the Cram Down Loss into its
computer system (and the Servicer shall make such entry within two Business
Days after it has received actual notice of such order).
"Cumulative Net Loss Ratio" means, with respect to any Determination
Date, a fraction (expressed as a percentage), the numerator of which is equal
to (x) the sum of the Net Liquidation Losses for all Collection Periods from
the Initial Cut-Off Date through and including the Collection Period
immediately preceding such Determination Date plus (y) the Cram Down Losses
that occurred during such period, and the denominator of which is equal to the
aggregate Principal Balance of the Receivables as of the applicable Cut-Off
Date.
"Cut-Off Date" means (i) with respect to each Initial Receivable, the
Initial Cut-off Date and (ii) with respect to each Subsequent Receivable, the
cut-off date specified in the related Subsequent Transfer Agreement.
"Dealer" means each dealer that sold a Financed Vehicle and that
originated and/or assigned a related Receivable to HNB under an existing
Dealer Agreement.
"Dealer Agreement" means the agreement between a Dealer and HNB
relating to the origination of, or assignment of, the related Receivables to
HNB and all documents and instruments relating thereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"Defaulted Receivable" means, with respect to any Collection Period,
a Receivable (a) which, at the end of such Collection Period, is deemed
uncollectible by the Servicer in accordance with the Servicing Standard, (b)
in respect of which the Servicer has repossessed the related Financed Vehicle
and such Financed Vehicle has been liquidated during such Collection Period,
(c) in respect of which the Servicer has repossessed the related Financed
Vehicle and has held such Financed Vehicle in its repossession inventory for
60 (sixty) days or more as of the last day of such Collection Period, (d)
which becomes 120 days past due during such Collection Period and in respect
of which the related Financed Vehicle is not in repossession inventory or (e)
which becomes 180 days past due during such Collection Period.
11
"Deficiency Balance" means the outstanding Principal Balance of a
Defaulted Receivable remaining unpaid after the application of all Liquidation
Proceeds (including proceeds of sale or other disposition of the related
Financed Vehicle) and Insurance Proceeds received with respect to such
Defaulted Receivable have been applied in reduction of such Principal Balance.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee by physical delivery to the Indenture Trustee
endorsed to, or registered in the name of, the Indenture Trustee or
endorsed in blank, and, with respect to a certificated security (as
defined in Section 8-102 of the UCC) transfer thereof (i) by delivery
of such certificated security endorsed to, or registered in the name
of, the Indenture Trustee or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102 of the UCC) and the making
by such clearing corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of the Indenture
Trustee by the amount of such certificated security and the
identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the Indenture
Trustee (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee; and such additional or
alternative procedures as may hereafter become appropriate to effect
the complete transfer of ownership of any such Trust Account Property
to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to any security issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the
Federal National Mortgage Association that is a book-entry security
held through the Federal Reserve System pursuant to federal
book-entry regulations, the following procedures, all in accordance
with applicable law, including applicable federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust
Account Property to an appropriate book-entry account maintained with
a Federal Reserve Bank by a securities intermediary that is also a
"depository" pursuant to applicable federal regulations; the making
by such securities intermediary of entries in its books and records
crediting such Trust Account Property to the Indenture Trustee's
security account at the securities intermediary and identifying such
book-entry security held through the Federal Reserve System pursuant
to federal book-entry regulations as belonging to the Indenture
Trustee; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership
of any such Trust Account Property to the Indenture Trustee,
consistent with changes in applicable law or regulations or the
interpretation thereof;
(c) with respect to any item of Trust Account Property that
is an uncertificated security under Article 8 of the UCC and that is
not governed by clause (b) above, registration on the books and
records of the issuer thereof in the name of the Indenture Trustee or
its nominee or custodian who either (i) becomes the registered owner
on behalf
12
of the Indenture Trustee or (ii) having previously become the
registered owner, acknowledges that it holds for the Indenture
Trustee; and
(d) with respect to any item of Trust Account Property that
is a security entitlement under Article 8 of the UCC and that is not
governed by clause (b) above, causing the securities intermediary to
indicate on its books and records that such security entitlement has
been credited to a securities account of the Indenture Trustee.
"Depositor" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS Capital II Inc. and its
successors in interest.
"Depositor's Annual ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification" has the meaning
assigned to such term in Section 6.09.
"Determination Date" means the fourth Business Day preceding a
Remittance Date, or if such day is not a Business Day, the immediately
preceding Business Day.
"Distribution Date" means, with respect to each Collection Period,
the fifteenth day of the following month or, if such day is not a Business
Day, the immediately following Business Day, commencing on September 15, 2004.
"Distribution Date Statement" means the monthly report to
Securityholders specified in Section 5.08, the form of which is set forth in
Exhibit A.
"Eligible Deposit Account" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any State, 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 shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies
investment grade.
"Eligible Institution" means (a) the corporate trust department of
the Indenture Trustee or the Owner Trustee or (b) a depository institution
organized under the laws of the United States of America or any State, that
(i) has either (A) a long-term unsecured debt rating of at least "AA-" by
Standard & Poor's and "A2" by ▇▇▇▇▇'▇ or (B) a short-term unsecured debt
rating or certificate of deposit rating of at least "A-1+" by Standard &
Poor's and "Prime-1" by ▇▇▇▇▇'▇ and (ii) the deposits of which are insured by
the FDIC.
"Eligible Investments" means securities, negotiable instruments or
security entitlements, excluding any security with an "r" attached to the
rating thereof, that evidence:
(a) direct obligations of, and obligations fully
guaranteed as to the full and timely payment by, the United
States of America or any agency or instrumentality thereof;
(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 (or any domestic branch of a foreign bank) and
subject to supervision and examination by federal or state
banking or depository
13
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 Rating Agency in the highest
investment category granted thereby;
(c) commercial paper having, at the time of the
investment or contractual commitment to invest therein, a
rating from each Rating Agency in the highest investment
category granted thereby;
(d) investments in money market funds having a
rating from each Rating Agency 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 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) above; and
(g) any other investment with respect to which the
Rating Agency Condition is met and the Issuer, the Indenture
Trustee or the Servicer has received written notification
from Standard & Poor's that the acquisition of such
investment will not result in a reduction, withdrawal or
downgrade of the then-current rating of any Class of Notes.
"Eligible Servicer" means (a) HNB or (b) any other Person that at the
time of its appointment as Servicer is either (i) a person that (A) is
servicing a portfolio of retail automobile and light-duty truck loan and
installment sale contracts, (B) is legally qualified and has the capacity to
service the Receivables, (C) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sale
contracts or motor vehicle installment loans similar to the Receivables with
reasonable skill and care and (D) has a minimum net worth of $50,000,000 or
(ii) otherwise acceptable to each Rating Agency.
"Event of Servicing Termination" has the meaning assigned to such
term in Section 8.01(a).
"FDIC" means the Federal Deposit Insurance Corporation or any
successor organization.
"Final Scheduled Distribution Date" means the Class A-1 Final
Scheduled Distribution Date, the Class A-2 Final Scheduled Distribution Date,
the Class A-3 Final Scheduled Distribution Date, the Class A-4 Final Scheduled
Distribution Date, the Class B Final Scheduled
14
Distribution Date, the Class C Final Scheduled Distribution Date, the Class D
Final Scheduled Distribution Date or the Class E Final Scheduled Distribution
Date, as applicable.
"Financed Vehicle" means a new or used automobile or light-duty truck
that secures a Receivable.
"First Allocation of Principal" means, with respect to any
Distribution Date, the excess, if any, of (x) the aggregate Outstanding Amount
of the Class A Notes as of the day immediately preceding such Distribution
Date over (y) the Pool Balance with respect to such Distribution Date.
"Fitch" means Fitch Ratings, a wholly-owned subsidiary of Fimalac
S.A., together with its successors.
"Flow Purchase Agreement" means the Purchase and Servicing Agreement,
dated as of May 31, 2004, between HNB, as seller and servicer, and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Asset Funding Inc., as purchaser, as the same may be amended, restated
or modified from time to time, and including each Assignment with respect to
the Receivables that is executed and delivered thereunder.
"Flow Purchase Agreement Collection Period" means a Collection Period
as defined in the Flow Purchase Agreement.
"Fourth Allocation of Principal" means, with respect to any
Distribution Date, the excess, if any, of (x) the aggregate Outstanding Amount
of the Class A Notes, the Class B Notes, the Class C Notes and the Class D
Notes as of the day immediately preceding such Distribution Date over (y) the
Pool Balance with respect to such Distribution Date.
"Funding Period" means the period from and including the Closing Date
until the earliest of (a) the date on which the amount on deposit in the
Pre-Funding Account is less than $2,500, (b) the date on which an Event of
Servicing Termination or Additional Event of Servicing Termination occurs or
an Event of Default occurs under the Indenture or (c) October 15, 2004.
"GAP Amount" means, with respect to any Receivable, the amount of the
outstanding Principal Balance of such Receivable which HNB determines is
required to be cancelled pursuant to HNB GAP in accordance with the terms of
the related loan contract or installment sale contract, if the Obligor on such
Receivable has purchased HNB GAP.
"Governmental Authority" means the government of the United States of
America, or any political subdivision thereof, whether state, federal,
provincial or local, and any agency, authority, instrumentality, regulatory
body, court, administrative court or judge, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"HNB" means The Huntington National Bank, a national banking
association organized under the laws of the United States of America.
"HNB GAP" means, with respect to any Receivable, HNB's debt
cancellation plan pursuant to which some or all of the outstanding Principal
Balance of a Receivable is required to
15
be cancelled as and if provided under the terms of the contract or related
documents for such Receivable.
"Indemnified Claim" has the meaning assigned to such term in Section
7.02(b).
"Indemnified Parties" or "Indemnified Party" has the meaning assigned
to such terms in Section 7.02(a).
"Indenture" means the Indenture, dated as of June 30, 2004, between
the Issuer and the Indenture Trustee, as the same may be amended, supplemented
or otherwise modified from time to time.
"Indenture Trustee" means the Person acting as Indenture Trustee
under the Indenture, its successors in interest and any successor trustee
under the Indenture.
"Indenture Trustee Fee" means one twelfth of the sum of the fees
payable annually to the Indenture Trustee, as set forth in the fee letter from
the Indenture Trustee to the Depositor dated August 30, 2004.
"Initial Class A-1 Note Balance" means $170,000,000.
"Initial Class A-2 Note Balance" means $135,490,000.
"Initial Class A-3 Note Balance" means $178,340,000.
"Initial Class A-4 Note Balance" means $103,320,000.
"Initial Class B Note Balance" means $13,700,000.
"Initial Class C Note Balance" means $17,200,000.
"Initial Class D Note Balance" means $8,285,000.
"Initial Class E Note Balance" means $10,832,000.
"Initial Conveyed Assets" has the meaning assigned to such term in
Section 2.01(a).
"Initial Cut-off Date" means the close of business on June 30, 2004.
"Initial Pool Balance" means an amount equal to the sum of (i) the
aggregate Principal Balance, as of the Initial Cut-Off Date, of the Initial
Receivables listed on Schedule A hereto, which shall be $537,164,809.81 plus
(ii) the Pre-Funded Amount.
"Initial Receivables" means all of the retail automobile and
light-duty truck loan and installment sale contracts listed on Schedule A to
this Agreement (which Schedule may be in electronic form).
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or all or
16
substantially all of its property in an involuntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part
of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for all or substantially all of its property, or
the making by such Person of any general assignment for the benefit of
creditors, or such Person admits in writing its inability to pay its debts as
such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insurance Proceeds" means, with respect to any Receivable, proceeds
of any insurance policy or service warranty related to such Receivable or the
related Collateral, to the extent such proceeds are to be used to reduce the
Principal Balance of such Receivable and are not to be applied to the
restoration of the related Financed Vehicle or released to the Obligor in
accordance with Applicable Law or the procedures that the Servicer would
follow in servicing retail automobile and light duty truck loan and
installment sale contracts or repossessed collateral held for its own account.
For the sake of clarity it is understood that HNB GAP is not an insurance
policy and that payments under HNB GAP with respect to a Receivable are not
Insurance Proceeds.
"Interest Accrual Period" means, with respect to the Notes and any
Distribution Date, the period from and including the 15th day of the calendar
month preceding the calendar month in which such Distribution Date occurs (or,
in the case of the first Distribution Date, the Closing Date) to and including
the 14th day of the calendar month in which such Distribution Date occurs.
"Investment Earnings" means, with respect to any Distribution Date,
the investment earnings (net of losses and investment expenses) on amounts on
deposit in a Trust Account to be applied on such Distribution Date pursuant to
Section 5.01(f).
"Issuer" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2.
"Late Fees" means, with respect to any Receivable, any late fees,
prepayment charges, extension fees, pass-a-payment fees or other
administrative fees or similar charges allowed by Applicable Law with respect
to such Receivable.
"Lien" means a security interest, lien, charge, claim, pledge, equity
or encumbrance of any kind other than tax liens, mechanics' liens and any
liens that attach to any Receivable by operation of Applicable Law.
"Liquidation Proceeds" means, with respect to any Defaulted
Receivable, cash (other than Insurance Proceeds) in excess of the costs of
liquidation received in connection with the liquidation of a Defaulted
Receivable, whether through the sale or assignment of such
17
Receivable, trustee's sale or otherwise, including the sale or other
disposition of the related Financed Vehicle.
"Lost Note Affidavit" means an affidavit substantially in the form of
Exhibit F hereto.
"Minimum Required Rating" means, with respect to HNB, a short-term
senior unsecured debt rating equal to or greater than "Prime-1" by Moody's and
"A-1" by Standard & Poor's.
"Monthly Advance" has the meaning assigned to such term in Section
4.02(c).
"Monthly Payment" means the scheduled monthly payment of principal
and interest on a Receivable that is payable by an Obligor under the related
loan contract or installment sale contract.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., and its successors.
"Net Investment Losses" means, with respect to a Trust Account and
any Collection Period, the amount, if any, by which the aggregate of all
losses and expenses incurred during such period in connection with the
investment of funds in Eligible Investments in accordance with Section 5.01(f)
exceeds the aggregate of all interest and other income realized during such
period on such funds.
"Net Liquidation Losses" means, with respect to any Collection
Period, the amount, if any, by which (a) the aggregate Principal Balance of
all Receivables that became Defaulted Receivables during that Collection
Period exceeds (b) the Liquidation Proceeds, Insurance Proceeds and any
Deficiency Balance recoveries received during that Collection Period.
"Note Balance" means, as of any date of determination, an amount
equal to the sum of (i) the Initial Class A-1 Note Balance, (ii) the Initial
Class A-2 Note Balance, (iii) the Initial Class A-3 Note Balance, (iv) the
Initial Class A-4 Note Balance, (v) the Initial Class B Note Balance, (vi) the
Initial Class C Note Balance, (vii) the Initial Class D Note Balance and
(viii) the Initial Class E Note Balance, less all amounts distributed to
Noteholders on or prior to such date and allocable to principal.
"Note Interest Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.01(b).
"Note Pool Factor" means, 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 Amount of such Class of Notes (after
giving effect to any reductions thereof to be made on the immediately
following Distribution Date) divided by the original Outstanding Amount 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 Amount of each Class of Notes.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes, the Class D
Notes and the Class E Notes.
18
"Noteholders" means the Class A-1 Noteholders, the Class A-2
Noteholders, the Class A-3 Noteholders, the Class A-4 Noteholders, the Class B
Noteholders, the Class C Noteholders, the Class D Noteholders or the Class E
Noteholders.
"Obligor" means the obligor or obligors on a Receivable.
"Officer's Certificate" means a certificate signed by (a) the
chairman of the board, the vice chairman of the board, the president, an
executive vice president, a senior vice president, a vice president, an
assistant vice president, the treasurer, the secretary or (b) two of the
assistant treasurers and/or assistant secretaries of the Depositor or the
Servicer, as required by this Agreement.
"Opinion of Counsel" means one or more written opinions of counsel,
who may be an employee of or counsel to the Depositor, the Servicer or the
Trust, which counsel shall be acceptable to the Indenture Trustee, the Owner
Trustee or the Rating Agencies, as applicable, and which shall be addressed to
the Owner Trustee and the Indenture Trustee and which shall be at the expense
of the person required to provide such an Opinion of Counsel, except as
otherwise provided in the other Basic Documents or in the Flow Purchase
Agreement.
"Overcollateralization Target Amount" means, as of any Distribution
Date, the greater of (x) 2.00% of the outstanding Pool Balance for such
Distribution Date and (y) 1.00% of the Initial Pool Balance.
"Owner Trustee" means Wilmington Trust Company, acting not in its
individual capacity but solely as owner trustee under the Trust Agreement and
any successor Owner Trustee pursuant to the terms of the Trust Agreement.
"Owner Trustee Fee" means the fee payable to the Owner Trustee, as
set forth in a separate fee agreement between the Owner Trustee and the
Depositor.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, joint venture, association, joint-stock
company, trust, national banking association, unincorporated organization or
Governmental Authority or any agency or political subdivision thereof or any
other entity.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means, with respect to any Distribution Date, an
amount equal to the sum of (i) the aggregate Principal Balance of the
Receivables at the end of the related Collection Period, after giving effect
to all payments of principal received from Obligors and Repurchase Amounts to
be remitted by the Servicer for the related Collection Period, and after
adjustment for Cram Down Losses and reduction to zero of the aggregate
outstanding Principal Balance of all Receivables that became Defaulted
Receivables during such Collection Period plus (ii) any amounts (exclusive of
Investment Earnings) on deposit in the Pre-Funding Account at the end of such
Collection Period.
19
"Pool Delinquency Percentage" means, with respect to any
Determination Date, the average for the three (3) preceding Collection Periods
(or if prior to three (3) months from the Initial Cut-Off Date, the number of
whole Collection Periods since the Initial Cut-Off Date) of a fraction
(expressed as a percentage), the numerator of which is the aggregate Principal
Balance of all Receivables that as of the end of the immediately preceding
Collection Period are thirty (30) or more days delinquent (excluding Defaulted
Receivables from such numerator), and the denominator of which is the
aggregate Principal Balance of the Receivables as of the end of the
immediately preceding Collection Period.
"Pre-Funded Amount" means an amount equal to $100,000,000.00, which
shall be deposited in the Pre-Funding Account on the Closing Date and shall be
applied to the purchase of Subsequent Receivables or to the redemption of the
Notes as provided for herein.
"Pre-Funding Account" means the account designated as such,
established and maintained pursuant to Section 5.01(d).
"Principal Balance" means, with respect to any Receivable, as of any
date of determination, the Amount Financed minus an amount equal to the sum,
as of the close of business on the last day of the related Collection Period,
of (i) that portion of all amounts received by the Servicer (which amounts
shall include any amounts received by (x) HNB or (y) the Servicer under the
Flow Purchase Agreement prior to the Closing Date) from or on behalf of the
related Obligor on or prior to such date and allocable to principal using the
Simple Interest Method plus (ii) Cram Down Losses in respect of such
Receivable plus (iii) amounts remitted by HNB in respect of HNB GAP pursuant
to Section 4.06 of the Flow Purchase Agreement.
"Principal Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.01(c).
"Rating Agency" means each of Moody's, Standard & Poor's or Fitch, as
the context may require. If none of Moody's, Standard & Poor's, Fitch or a
successor thereto remains in existence, "Rating Agency" means any nationally
recognized statistical rating organization or other comparable Person
designated by the Depositor.
"Rating Agency Condition" means, with respect to any specified action
or determination, that each Rating Agency shall have been given 10 days' (or
such shorter period as shall be acceptable to each Rating Agency) prior notice
thereof and that each Rating Agency shall have notified the Issuer or the
Indenture Trustee in writing that such action will not result in a reduction,
withdrawal or downgrade of the then-current rating of any Class of Notes.
"Realized Losses" means, as to any Distribution Date, the amount, if
any, by which the aggregate outstanding Principal Balance of all Receivables
that became Defaulted Receivables during the related Collection Period exceeds
that portion allocable to principal of all Liquidation Proceeds, Insurance
Proceeds and Deficiency Balance recoveries received with respect to such
Defaulted Receivables for such Collection Period.
20
"Receivable File" means, with respect to each Receivable that is
transferred or has been transferred to the Issuer:
(i) the original loan contract or installment sale contract
for such Receivable or a copy of the original loan contract or installment
sale contract for such Receivable together with an affidavit of HNB as to the
original loan contract or installment sale contract for such Receivable;
(ii) the original credit application fully executed by the
Obligor or a photocopy thereof or a record thereof on a computer file or
diskette or on microfiche;
(iii) the original certificate of title, or if the original
certificate of title is required to be held by the agency, department or
office that issued such original certificate of title, a receipt thereof
(which for Michigan and Arizona shall be in the form of RD-108 and for
Kentucky shall be in the form of a "Lien Statement"), or such documents that
the Servicer shall keep on file, in accordance with its customary standards,
policies and procedures, evidencing the security interest of the Issuer in the
related Financed Vehicle;
(iv) if the odometer reading of the Financed Vehicle at the
time of sale to the Obligor is not listed on the certificate of title or the
original credit application, the odometer statement; and
(v) any and all other documents that the Servicer, in its
capacity as servicer under the Flow Purchase Agreement prior to the date
hereof, or in its capacity as Servicer under this Agreement effective as of
the date hereof, as applicable, shall maintain on file in accordance with its
customary procedures relating to a Receivable, an Obligor or a Financed
Vehicle.
"Receivables" means all of the Initial Receivables and Subsequent
Receivables that are transferred or have been transferred to the Issuer.
"Record Date" means, as to any Distribution Date, the day immediately
preceding such Distribution Date; provided however, that the Record Date with
respect to any Definitive Notes and any Distribution Date shall be the last
day of the calendar month immediately preceding such Distribution Date.
"Regular Principal Allocation" means, with respect to any
Distribution Date, the excess, if any, of the aggregate Outstanding Amount of
the Notes as of the day immediately preceding such Distribution Date over the
result of (a) the Pool Balance with respect to such Distribution Date minus
(b) the Overcollateralization Target Amount with respect to such Distribution
Date; provided, however, that the Regular Principal Allocation on any
Distribution Date shall not exceed the Outstanding Amount of the Notes; and
provided further that the Regular Principal Allocation on or after the Final
Scheduled Distribution Date of any Class of Notes shall not be less than the
amount that is necessary to reduce the Outstanding Amount of such Class of
Notes to zero.
"Remittance Date" means, with respect to each Collection Period, the
11th day of the month following the end of that Collection Period, or if such
day is not a Business Day, the first Business Day immediately preceding such
date.
21
"Repurchase Amount" means, with respect to each Repurchased
Receivable, an amount equal to (a) the remaining Principal Balance of the
Receivable as of the last day of the Collection Period related to the
Distribution Date on which the purchase or repurchase occurs, plus (b) accrued
interest on such outstanding Principal Balance at the Contract Rate from the
date the Obligor on such Receivable last made a payment of interest through
the last day of the Collection Period related to the Distribution Date on
which the purchase or repurchase occurs, less (c) Monthly Advances in respect
of such Receivable which have not been reimbursed in accordance with this
Agreement.
"Repurchased Receivable" means a Receivable purchased by or on behalf
of HNB as described in Section 3.03 or by or on behalf of the Servicer
pursuant to Section 4.08.
"Responsible Officer" means the chairman of the board, the president,
any executive vice president, senior vice president, vice president, assistant
vice president, the treasurer, any assistant treasurer, the secretary, the
assistant secretary or any other officer or assistant officer of such Person
customarily performing (or supervising the performance of) functions similar
to those performed by any of the above designated officers and also, with
respect to a particular matter, any other officer to whom such matter is
required because of such officer's knowledge and familiarity with the
particular subject. Responsible Officer of the Indenture Trustee or the Owner
Trustee shall be as defined in the Indenture.
"Review Period" has the meaning assigned to such term in Section
4.11(a).
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act" means the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
rules and regulations promulgated thereunder by the Commission with respect
thereto.
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification" means as and to the extent required by
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, the certification or certifications as comply in form
and substance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act required to be filed in all Annual
Reports on Form 10-K filed with the Commission with respect to the Trust.
"Schedule of Receivables" means, collectively, the list of Initial
Receivables set forth in Schedule A hereto and the list of Subsequent
Receivables set forth in Schedule A to each Subsequent Transfer Agreement.
"Second Allocation of Principal" means, with respect to any
Distribution Date, the excess, if any, of (x) the aggregate Outstanding Amount
of the Class A Notes and the Class B Notes as of the day immediately preceding
such Distribution Date over (y) the Pool Balance with respect to such
Distribution Date.
"Securities" means the Notes and the Certificates.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Securityholders" means the Noteholders and/or the
Certificateholders, as the context may require.
22
"Seller" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Funding Inc. and its successors
in interest, as assignor of the Receivables to the Depositor pursuant to the
Assignment, Assumption and Recognition Agreement.
"Sequential Principal Payment Trigger Percentage" means, with respect
to each Determination Date occurring in the time periods set forth below, the
percentage corresponding thereto:
Determination
Date Percentage
September 2004 through and including July 2005 1.50%
August 2005 through and including September 2006 2.25%
October 2006 and thereafter 2.50%
"Servicer" means HNB, as the servicer of the Receivables, and each
successor to HNB (in the same capacity) pursuant to Section 7.03 or 8.03.
"Servicer Annual Certification" means an Officer's Certificate of the
Servicer delivered pursuant to Section 4.11(a), substantially in the form of
Exhibit C.
"Servicer Employees" has the meaning assigned to such term in Section
4.15.
"Servicer's Certificate" means a Certificate of the Servicer
delivered pursuant to Section 4.10(a), substantially in the form of Exhibit B.
"Servicing Advances" means all customary, reasonable and necessary
"out-of-pocket" costs and expenses other than Monthly Advances (including
reasonable attorney's fees and disbursements) incurred in the performance by
the Servicer of its servicing obligations, including, but not limited to, the
cost of (a) repossessing a Financed Vehicle, (b) restoring and reconditioning
a Financed Vehicle in preparation of such Financed Vehicle for auction, (c)
any enforcement or judicial proceedings or (d) the sale or other disposition
of repossessed Financed Vehicles.
"Servicing Fee" has the meaning assigned to such term in Section
4.09(a).
"Servicing Fee Rate" means 1.00% per annum.
"Servicing Reimbursement Amount" has the meaning assigned to such
term in Section 4.09(c).
"Servicing Rights" means all rights relating to the servicing of the
Receivables.
"Servicing Standard" has the meaning assigned to such term in Section
4.01(a).
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which (a) an amount equal
to the product of the Contract Rate
23
multiplied by the unpaid Principal Balance multiplied by the period of time
(expressed as a fraction of a year, based on the actual number of days in the
month and a 365-day year or, in the event of a leap year, a 366-day year)
elapsed since the preceding payment was made is allocated to interest and (b)
the remainder of such payment is allocable to late fees and other fees and
charges, if any and then to principal.
"Six-Month Annualized Net Loss Ratio" means, with respect to any
Determination Date, the average for the six (6) preceding Collection Periods
(or if prior to six (6) months from the Initial Cut-Off Date, the number of
whole Collection Periods since the Initial Cut-Off Date), of the product of 12
times a fraction (expressed as a percentage), the numerator of which is equal
to the Net Liquidation Losses during the Collection Period plus the Cram Down
Losses that occurred during the Collection Period, and the denominator of
which is equal to the aggregate Principal Balance of the Receivables as of the
first day of the Collection Period; provided, however, that, the first
Collection Period shall be treated as two such periods each having one-half of
the numerator calculated for the entire period.
"Standard & Poor's" means Standard & Poor's, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and its successors.
"Subsequent Conveyed Assets" has the meaning specified in Section
2.01(b).
"Subsequent Cut-Off Date" means, with respect to a Subsequent
Receivable, the cut-off date set forth in the related Subsequent Transfer
Agreement.
"Subsequent Receivables" means the Receivables transferred to the
Issuer pursuant to Section 2.01(b) of this Agreement and the related
Subsequent Transfer Agreement, which Receivables shall be listed on Schedule A
to the related Subsequent Transfer Agreement.
"Subsequent Transfer Agreement" has the meaning assigned thereto in
Section 2.01(c) of this Agreement.
"Subsequent Transfer Date" means with respect to Subsequent
Receivables, any date during the Funding Period on which Subsequent
Receivables are transferred to the Trust pursuant to this Agreement and the
related Subsequent Transfer Agreement.
"Termination Trigger Event" means, with respect to any Determination
Date, any of the following conditions shall exist: (a) the Pool Delinquency
Percentage as of the last day of the related Collection Period is greater than
2.50%, (b) the Six-Month Annualized Net Loss Ratio as of such Determination
Date exceeds the percentages set forth for the period in which the
Determination Date occurs in the definition of "Sequential Principal Payment
Trigger Percentage" and (c) for any Determination Date, the Cumulative Net
Loss Ratio exceeds the percentage set forth opposite such Determination Date
on Schedule C hereto.
"Third Allocation of Principal" means, with respect to any
Distribution Date, the excess, if any, of (x) the aggregate Outstanding Amount
of the Class A Notes, the Class B Notes and the Class C Notes as of the day
immediately preceding such Distribution Date over (y) the Pool Balance with
respect to such Distribution Date.
24
"Three-Month Annualized Net Loss Ratio" means, with respect to any
Determination Date, the average for the three preceding Collection Periods (or
if prior to three months from the Initial Cut-Off Date, the number of whole
Collection Periods since the Initial Cut-Off Date), of the product of 12 times
a fraction (expressed as a percentage), the numerator of which is equal to the
Net Liquidation Losses during the Collection Period plus the Cram Down Losses
that occurred during the Collection Period, and the denominator of which is
equal to the aggregate Principal Balance of the Receivables as of the first
day of the Collection Period; provided, however, that, the first Collection
Period shall be treated as two such periods each having one-half of the
numerator calculated for the entire period.
"Total Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts, without duplication, with respect to
the related Collection Period: (i) all collections on the Receivables during
such Collection Period allocable to interest in accordance with the Simple
Interest Method and all collections on the Receivables during such Collection
Period allocable to principal in accordance with the Simple Interest Method,
(ii) Liquidation Proceeds for such Collection Period, (iii) Insurance Proceeds
for such Collection Period, (iv) GAP Amounts for such Collection Period, (v)
Monthly Advances for such Collection Period, (vi) the Repurchase Amount of
each Receivable that became a Repurchased Receivable during or in respect of
such Collection Period, (vii) Deficiency Balance recoveries for such
Collection Period, (viii) any rebate of an unearned insurance premium, service
warranty or other amount received by the Servicer with respect to such
Collection Period which was financed in the contract for a Financed Vehicle;
(ix) Investment Earnings; and (x) any other amounts received by the Servicer
in respect of a Receivable; provided, however, that the Total Distribution
Amount shall not include: (A) all payments and proceeds (including Liquidation
Proceeds and Insurance Proceeds) of any Repurchased Receivables the Repurchase
Amount of which has been included in the Total Distribution Amount in a prior
Collection Period, (B) any Late Fees collected by and paid to the Servicer
during the related Collection Period and (C) costs and expenses incurred by
the Servicer for or on behalf of an Obligor (such as retitling costs) that
such Obligor repays to the Servicer.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise) and all proceeds of the foregoing.
"Trust Accounts" means the Collection Account, the Note Interest
Distribution Account, the Principal Distribution Account and the Pre-Funding
Account.
"Trust Agreement" means the Amended and Restated Trust Agreement,
dated as of June 30, 2004, between the Depositor and the Owner Trustee, as the
same may be amended, supplemented or modified from time to time.
"Trust Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions with respect to corporate trust matters and having direct
25
responsibility for the administration of the Indenture and the other Basic
Documents 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, in each case having direct
responsibility for the administration of the Basic Documents.
"UCC" means the Uniform Commercial Code, as in effect in the State of
New York or, if so provided herein, in any relevant jurisdiction.
"VSI Policy" means that certain "Ultimate Loss Insurance Blanket
Single Interest Policy" issued by Ohio Indemnity Company to HNB and currently
in force, together with all endorsements thereto.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein that are not otherwise defined
have the meanings ascribed thereto in the Indenture or, if not defined
therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement and in any instrument governed
hereby and in any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Agreement or in any
such instrument, certificate or other document, and accounting terms partly
defined in this Agreement or in any such instrument, certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles as in effect on the
date of this Agreement or any such instrument, certificate or other document,
as applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such instrument, certificate or other document are
inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such instrument, certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; the term "including" means "including without
limitation"; and the term "or" shall include "and/or".
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of
26
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01 Conveyance of Receivables.
(a) In consideration of the Issuer's delivery to or upon the
order of the Depositor of the Notes and the Certificates, the Depositor does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer on
the Closing Date, without recourse (subject to the obligations of the
Depositor set forth herein), and the Issuer hereby purchases, all right, title
and interest of the Depositor in, to and under each of the Initial
Receivables, including:
(i) all interest, principal, and any other amounts received
on or with respect to each of the Initial Receivables after the
Initial Cut-Off Date;
(ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to the Initial Receivables and any other
interest of the Depositor in such Financed Vehicles;
(iii) all other security interests or other property
interests created by or constituting each Initial Receivable and on
any property that shall have secured the Initial Receivable and that
shall have been acquired by or on behalf of the Depositor;
(iv) all of the Depositor's rights with respect to each
Initial Receivable and the documentation relating to the Initial
Receivables, including, without limitation, all rights under the VSI
Policy with respect to such Receivable and the contents of each
Receivable File, including, without limitation, all of the
Depositor's enforcement and other rights under the UCC and other
Applicable Law;
(v) rebates of premiums on insurance policies and all other
items financed as part of the Initial Receivables in effect as of the
Cut-Off Date, including but not limited to, service warranties;
(vi) all Servicing Rights with respect to, and all proceeds
of and rights to enforce, any of the foregoing, including, without
limitation, any Insurance Proceeds and Liquidation Proceeds;
(vii) all of the Depositor's rights (but not its
obligations) under each related Assignment, the related Assignment,
Assumption and Recognition Agreement and the Flow Purchase Agreement
with respect to the Initial Receivables;
(viii) the Pre-Funded Amount and all other funds on deposit
from time to time in the Trust Accounts and the Certificate
Distribution Account and in all investments therein and proceeds
thereof (including all Investment Earnings thereon);
27
(ix) all accounts, money, chattel paper, securities,
instruments, documents, deposit accounts, certificates of deposit,
letters of credit, advices of credit, banker's acceptances,
uncertificated securities, general intangibles, contract rights,
goods and other property consisting of, arising from or relating to
any and all of the foregoing; and
(x) the proceeds of any and all of the foregoing
(collectively, with the assets listed in clauses (i) through (ix)
above, the "Initial Conveyed Assets").
(b) Subject to the conditions set forth in Section 2.01(c), in
consideration of the Issuer's agreement to deliver to or upon the order of the
Depositor on each Subsequent Transfer Date the amount described in Section
5.07(a), the Depositor does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer on the related Subsequent Transfer Date,
without recourse (subject to the obligations of the Depositor set forth
herein), and the Issuer hereby purchases, all right, title and interest of the
Depositor in, to and under each of the Subsequent Receivables listed on
Schedule A to the related Subsequent Transfer Agreement, including:
(i) all interest, principal, and any other amounts received
on or with respect to each of such Subsequent Receivables after the
related Subsequent Cut-Off Date;
(ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to such Subsequent Receivables and any other
interest of the Depositor in such Financed Vehicles;
(iii) all other security interests or other property
interests created by or constituting each such Subsequent Receivable
and on any property that shall have secured the Subsequent Receivable
and that shall have been acquired by or on behalf of the Depositor;
(iv) all of the Depositor's rights with respect to each such
Subsequent Receivable and the documentation relating to such
Subsequent Receivables, including, without limitation, all rights
under the VSI Policy with respect to such Subsequent Receivable and
the contents of each Receivable File, including, without limitation,
all of the Depositor's enforcement and other rights under the UCC and
other Applicable Law;
(v) rebates of premiums on insurance policies and all other
items financed as part of such Subsequent Receivables in effect as of
the related Subsequent Cut-Off Date, including but not limited to,
service warranties;
(vi) all Servicing Rights with respect to, and all proceeds
of and rights to enforce, any of the foregoing, including, without
limitation, any Insurance Proceeds and Liquidation Proceeds;
(vii) all of the Depositor's rights (but not its
obligations) under the Assignment, Assumption and Recognition
Agreement (as supplemented), the Flow
28
Purchase Agreement and the related Assignment with respect to such
Subsequent Receivables;
(viii) all accounts, money, chattel paper, securities,
instruments, documents, deposit accounts, certificates of deposit,
letters of credit, advices of credit, banker's acceptances,
uncertificated securities, general intangibles, contract rights,
goods and other property consisting of, arising from or relating to
any and all of the foregoing; and
(ix) the proceeds of any and all of the foregoing
(collectively, with the assets listed in clauses (i) through (viii)
above, the "Subsequent Conveyed Assets" with respect to such
Subsequent Receivables).
(c) The Depositor shall transfer to the Issuer the Subsequent
Receivables and the other Subsequent Conveyed Assets and rights related
thereto described in Section 2.01(b) of this Agreement only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) the Depositor shall have provided the Indenture Trustee,
the Owner Trustee and the Rating Agencies with an Addition Notice not
later than five days prior to any Subsequent Transfer Date and shall
have provided any information reasonably requested by any such Person
with respect to the Subsequent Receivables; provided, however, that
the Addition Notice for the transfer of Subsequent Receivables on the
Closing Date or the next Business Day thereafter is hereby deemed to
have been timely provided;
(ii) the Depositor shall have delivered to the Owner Trustee
and the Indenture Trustee a duly executed subsequent transfer
agreement substantially in the form of Exhibit H attached hereto
(each, a "Subsequent Transfer Agreement" which shall include Schedule
A thereto, listing the Subsequent Receivables);
(iii) the Depositor shall, to the extent required by Section
5.02(b), have deposited (or caused to be deposited) in the Collection
Account all collections in respect of the Subsequent Receivables from
and after the related Subsequent Cut-off Date;
(iv) as of each Subsequent Transfer Date, (A) the Depositor
shall not be insolvent and shall not become insolvent as a result of
the transfer of Subsequent Receivables on such Subsequent Transfer
Date, (B) the Depositor shall not intend to incur or believe that it
shall incur debts that would be beyond its ability to pay as such
debts mature, (C) such transfer shall not have been made with actual
intent to hinder, delay or defraud any Person and (D) the assets of
the Depositor shall not constitute unreasonably small capital to
carry out its business as conducted;
(v) the Funding Period shall not have terminated;
(vi) each of the representations and warranties made by
Depositor pursuant to Section 3.02 with respect to the Subsequent
Receivables to be transferred on such Subsequent Transfer Date shall
be true and correct as of the related Subsequent
29
Transfer Date, and on or prior to such Subsequent Transfer Date the
Depositor shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Transfer Date;
(vii) the Depositor shall, at its own expense, on or prior
to the Subsequent Transfer Date indicate in its files that the
Subsequent Receivables identified in the Subsequent Transfer
Agreement have been sold to the Trust pursuant to this Agreement;
(viii) the Depositor shall have taken any action required to
maintain the first priority perfected security interest granted by
the Depositor to the Trust in the Conveyed Assets and the first
priority perfected security interest granted by the Trust to the
Indenture Trustee in the Collateral;
(ix) no selection procedures adverse to the interests of the
Noteholders or the Depositor shall have been utilized by the
Depositor in selecting the Subsequent Receivables;
(x) the Subsequent Receivables shall have been sold by HNB
to the Seller under and in accordance with the Flow Purchase
Agreement and the Assignment with respect thereto shall have been
executed and delivered by HNB, and a supplement to the Assignment,
Assumption and Recognition Agreement with respect thereto shall have
been executed and delivered by HNB, the Seller and the Depositor; and
(xi) the Depositor shall have delivered to the Indenture
Trustee an Officers' Certificate confirming the satisfaction of each
condition precedent specified in this Section 2.01(c).
(d) Upon each sale of Receivables hereunder, the ownership of each
such Receivable (for non-tax purposes), including the contents of the related
Receivable File, and all rights, benefits, payments, proceeds and obligations
arising from or in connection with any of the foregoing (but excluding all
rights and obligations under any Dealer Agreement), shall be vested in the
Trust, and the ownership of all records and documents with respect to the
related Receivable prepared by or which come into the possession of the
Depositor shall immediately vest in the Trust and shall be retained and
maintained, in trust, by the Servicer for the benefit of the Trust, as the
owner thereof, in a custodial capacity only. The Depositor shall deliver a
computer file, microfiche list or printed list of the related Schedule of
Receivables which shall be incorporated by reference herein in this Agreement.
(e) It is the intention of the parties hereto that each transfer and
assignment contemplated by this Agreement shall constitute a sale of the
related Receivables and other related property from the Depositor to the Trust
(for non-tax purposes) and the beneficial interest in and title to the
Receivables and that such Conveyed Assets shall not be treated as property of
the Depositor as debtor-in-possession or by a bankruptcy trustee in any
insolvency, bankruptcy or other similar proceeding in respect of the Depositor
under any Applicable Law. Further, it is not the intent of the parties hereto
that any such transfer and conveyance be deemed a grant by the Depositor to
the Trust of a mere security interest (for non-tax purposes) in any of the
30
Conveyed Assets in order to secure a debt or other obligation of the
Depositor. However, in the event and to the extent that, notwithstanding the
intent of the parties hereto, any transfer and assignment contemplated hereby
is held not to be a true or absolute sale (for non-tax purposes), this
Agreement shall constitute a security agreement under Applicable Law, and, in
such event, the Depositor shall be deemed to have granted, and the Depositor
hereby grants, to the Issuer a first priority security interest in all
accounts, money, chattel paper, securities, instruments, documents, deposit
accounts, certificates of deposit, letters of credit, advices of credit,
banker's acceptances, uncertificated securities, general intangibles, contract
rights, goods and other property consisting of, arising from or relating to
such Conveyed Assets, for the benefit of the Trust and its assignees as
security for the Depositor's obligations hereunder and the Depositor consents
to the pledge of the foregoing Conveyed Assets under the Indenture to the
Indenture Trustee. The Depositor shall file and deliver, prior to the Closing
Date, financing statements on form UCC-1 in respect of such security interest
(including the security interest in all Subsequent Conveyed Assets), and the
Depositor hereby authorizes, on or after the Closing Date, the filing of any
financing statements or continuation statements, and amendments to financing
statements, or any similar document in any jurisdictions and with any filing
offices as the Issuer or the Indenture Trustee may determine, in its sole
discretion, are necessary or advisable to perfect the security interest
granted to the Trust herein and assigned to the Indenture Trustee under the
Indenture. Such financing statements shall contain a statement to the
following effect: "A purchase of or security interest in any collateral
described in this financing statement other than by the Issuer or the
Indenture Trustee on behalf of the Noteholders will violate the rights of the
Issuer and the Indenture Trustee on behalf of the Noteholders" and may
describe the Conveyed Assets in the same manner as described herein or may
contain an indication or description of collateral that describes such
property as necessary, advisable or prudent to ensure the perfection of the
security interest in the Conveyed Assets granted to the Trust herein and
pledged to the Indenture Trustee under the Indenture.
(f) The Depositor has determined that the Depositor's disposition of
the Receivables pursuant to this Agreement will be afforded sale treatment for
accounting purposes and shall treat the disposition of the Receivables
pursuant to this Agreement in such manner. The sale of each Receivable (for
non-tax purposes) shall be reflected on the Depositor's balance sheet and
other financial statements as a sale of assets by the parties hereto and the
Depositor shall treat the disposition of the Receivables hereunder as a sale
for accounting and tax purposes.
ARTICLE III
THE RECEIVABLES
Section 3.01 Certain Prior Representations and Warranties of HNB.
Pursuant to Section 1 of the Assignment, Assumption and
Recognition Agreement, the Seller, as assignor, has assigned to the Depositor,
as assignee, all of its right, title and interest in and to the Initial
Receivables and the Flow Purchase Agreement, to the extent relating to the
Initial Receivables (other than certain rights of the Seller to
indemnification thereunder), and the Depositor has thereby assumed all of the
Seller's obligations under the Flow Purchase Agreement to the extent relating
to the Initial Receivables. Pursuant to Section 1 of the Assignment,
Assumption and Recognition Agreement, the Seller, as assignor, will assign to
the
31
Depositor, as assignee, pursuant to a supplement to the Assignment, Assumption
and Recognition Agreement all of its right, title and interest in and to the
Subsequent Receivables and the Flow Purchase Agreement and each applicable
Assignment, to the extent relating to the Subsequent Receivables (other than
certain rights of the Seller to indemnification thereunder), and the Depositor
has assumed or will thereby assume all of the Seller's obligations under the
Flow Purchase Agreement to the extent relating to the Subsequent Receivables.
Pursuant to Section 2.01(a) and Section 2.01(b) of this Agreement and each
related Subsequent Transfer Agreement, the Depositor has sold, assigned,
transferred and conveyed to the Issuer or will sell, assign, transfer and
convey to the Issuer, in each case as part of the assets of the Issuer, its
rights under the Flow Purchase Agreement and each applicable Assignment,
including the representations and warranties of HNB made pursuant to Section
3.01 of the Flow Purchase Agreement with regard to the Initial Receivables and
the Subsequent Receivables, as the case may be, upon which representations and
warranties the Issuer relies in accepting the Receivables, delivering the
Securities and remitting funds from the Pre-Funding Account, together with all
rights with respect to any breach thereof, including the right to require HNB
to repurchase Receivables in accordance with the Flow Purchase Agreement. It
is understood and agreed that the representations and warranties of HNB made
pursuant to Section 3.01 of the Purchase and Sale Agreement speak as of the
applicable Cut-Off Date and/or the Closing Date or related Transfer Date (each
as defined in the Flow Purchase Agreement) under the Flow Purchase Agreement
but shall survive the sale, assignment and delivery of the Receivables to the
Depositor and the Issuer and the pledge of such Receivables to the Indenture
Trustee.
Section 3.02 Representations and Warranties of the Depositor.
The Depositor makes the following representations and warranties, on
which the Issuer relies in accepting the Receivables and delivering the
Securities. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date in the case of the
Initial Receivables and as of the applicable Subsequent Transfer Date, in the
case of the Subsequent Receivables, but shall survive the sale, transfer and
assignment of the Receivables by the Depositor to the Issuer and the pledge
thereof to the Indenture Trustee in accordance with the terms of the
Indenture:
(a) Title. The Depositor shall convey to the Issuer all right,
title and interest of the Depositor in and to each Receivable, including all
right, title and interest of the Depositor in and to the security interests in
the related Financed Vehicle.
(b) All Filings Made. The Depositor has caused all filings
(including UCC filings) to be made in Delaware with respect to each sale of
the Receivables to the Issuer and the pledge contemplated in the Basic
Documents to the Indenture Trustee.
(c) Liens. The Depositor has not taken any actions to create,
incur or suffer to exist any Lien on or restriction on transferability of any
Receivable except for the Lien of the Indenture and the restrictions on
transferability imposed by this Agreement.
Section 3.03 Repurchase Upon Breach.
32
(a) Each of the Depositor, the Owner Trustee, the Indenture
Trustee, the Seller and the Servicer shall inform the other parties to this
Agreement promptly, in writing, upon the discovery by it that any of HNB's
representations and warranties made pursuant to the Flow Purchase Agreement
were incorrect when made. Upon its receipt of notice as described in the
previous sentence, the Indenture Trustee shall notify (or shall cause notice
to be delivered to) HNB of its breach of any such representation and warranty.
Unless the breach shall have been cured within the cure period specified in
the Flow Purchase Agreement, the Indenture Trustee shall enforce the
obligations of HNB with respect to each affected Receivable pursuant to the
Flow Purchase Agreement. Pursuant to each Assignment, Assumption and
Recognition Agreement, the Seller has irrevocably appointed the Indenture
Trustee as its attorney-in-fact to exercise the remedies of the Seller against
HNB in the event it is discovered that any of HNB's (including any
representations and warranties supplemental to such Section 3.01(b) made in
the related Assignment) representations and warranties made in Section 3.01(b)
of the Flow Purchase Agreement were incorrect when made, and the Indenture
Trustee hereby acknowledges and accepts such appointment, further
acknowledging that, pursuant to the conveyance and assignment under Section
2.01 of this Agreement, all of the Depositor's rights with respect to that
appointment established pursuant to the related Assignment, Assumption and
Recognition Agreement have been conveyed and assigned to the Issuer and that
such rights have been collaterally assigned to the Indenture Trustee pursuant
to the Indenture.
(b) The Indenture Trustee shall not have any duty to conduct any
affirmative investigation as to the occurrence of any conditions requiring the
repurchase of any Receivable pursuant to this Section 3.03 and will not be
deemed to have discovered any breach hereunder or under Section 4.08 hereof
unless and until a Trust Officer shall have actual knowledge thereof.
Section 3.04 Custody of Receivable Files. To assure uniform quality
in servicing the Receivables and to reduce administrative costs, the Issuer
hereby appoints the Servicer, and the Servicer hereby accepts such
appointment, to act for the benefit of the Issuer and the Indenture Trustee as
custodian of the Receivable Files, such appointment and acceptance to be
effective as of the Closing Date with respect to the Initial Receivables, and
as of the related Subsequent Transfer Date with respect to the Subsequent
Receivables being conveyed on such Subsequent Transfer Date. The Receivable
Files for the Initial Receivables are hereby constructively delivered by the
Issuer to the Indenture Trustee as of the Closing Date and the Receivable
Files for the Subsequent Receivables conveyed on any Subsequent Transfer Date
will be deemed to be constructively transferred to the Indenture Trustee on
such Subsequent Transfer Date. To the extent that original documents are not
required for purposes of realization of Liquidation Proceeds or Insurance
Proceeds, as certified in an Officer's Certificate to the Issuer or the
Indenture Trustee, documents maintained by the Servicer may be in the form of
microfilm or microfiche or such other reliable means of recreating original
documents, including but not limited to, optical imagery techniques so long as
the Servicer complies with the requirements of all Applicable Laws.
Section 3.05 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Receivable Files, in
trust, as custodian for the benefit of the Issuer and the Indenture Trustee,
and shall maintain such accurate and complete accounts, records and computer
systems pertaining to each Receivable File as shall
33
enable the Issuer to comply with this Agreement. 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 motor vehicle receivables that the Servicer
services for itself or others. The Servicer shall conduct, or cause to be
conducted, periodic internal 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 and the Indenture Trustee to 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 shall 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 or the Indenture Trustee of the Receivable
Files. In acting as custodian of the Receivable Files, the Servicer further
agrees not to assert any beneficial ownership interests in the Receivables or
the Receivable Files.
(b) Maintenance of and Access to Receivable Files. (i) Each
Receivable File shall be maintained by the Servicer at one of the locations
specified in Schedule B to this Agreement or at such other location in the
United States as shall be specified by the Servicer by written notice to the
Issuer and the Indenture Trustee not later than ninety (90) days prior to any
change in location. The Servicer shall make available to the Issuer and the
Indenture Trustee or their designees a current list of locations of the
Receivable Files upon written request and shall make the Receivable Files and
the related accounts, records and computer systems maintained by the Servicer
available for inspection by the Issuer and the Indenture Trustee or their
designees without charge during normal business hours at the offices of the
Servicer and shall permit the Issuer and the Indenture Trustee or their
designees to make copies of and obtain abstracts from the Receivable Files, in
each case during the time the Issuer retains ownership of a Receivable and
thereafter in accordance with Applicable Law.
(ii) 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 each 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
such Receivable and the amounts from time to time held by the Servicer or
deposited in the Collection Account in respect of each such Receivable.
(c) Release of Documents. Upon written instruction from the
Indenture Trustee or, if the Notes have been paid in full, from the Owner
Trustee, the Servicer shall release to the Indenture Trustee or the Owner
Trustee, as the case may be, or to the agent or designee of the Indenture
Trustee or the Owner Trustee, as the case may be, any Receivable File relating
to a Receivable that has not been repurchased by HNB in accordance with the
terms of this Agreement or repurchased by HNB in accordance with the terms of
the Purchase and Sale Agreement at such place or places as the Indenture
Trustee or the Owner Trustee, as applicable, may designate, as soon as
practicable (but in no event more than five (5) days after the date of such
instruction) and the Issuer shall reimburse the Servicer for its reasonable
out-of-pocket expenses incurred in connection with any such delivery. Upon the
delivery of any such document in accordance with the instructions of the
Indenture Trustee or the Owner Trustee, as the case may be, the Servicer shall
be released from any further liability and responsibility with
34
respect to such documents and any other provision of this Agreement if the
fulfillment of the Servicer's responsibilities is dependent upon possession of
such documents, unless and until such time as such documents shall be returned
to the Servicer. In no event shall the Servicer be responsible for any loss
occasioned by the Indenture Trustee's or the Owner Trustee's failure to return
any Receivable File or any portion thereof in a timely manner. Any costs
associated with the transfer of the Receivable Files in connection with this
clause (c) and all fees and expenses incurred by the successor custodian as
custodian pursuant to this clause (c) shall be paid by the Issuer; provided,
however, that in the event such transfer occurs after the occurrence of an
event which, with the giving of notice or lapse of time or both, would become
an Event of Servicing Termination under Section 8.01(a) or an Additional Event
of Servicing Termination under Section 8.01(b), such costs shall be paid by
the Servicer.
(d) Reimbursement for Reasonable Out-of-Pocket Expenses. Pursuant
to Section 4.09(c), the Servicer shall be entitled to reimbursement for all
reasonable out-of-pocket expenses incurred in connection with the performance
of its obligations as custodian of the Receivable Files under this Section
3.05.
(e) Destruction of Receivable Files. In the event the Receivable
Files held by the Servicer are destroyed due to fire or other casualty, the
Servicer will bear the responsibility for (i) having new titles issued for
each Financed Vehicle and providing printed copies of the destroyed title from
the Servicer's imaging system, which shall remain in the Receivable File until
such new titles are received, (ii) replacing each Receivable (by printing a
copy thereof held on the Servicer's imaging system), and (iii) creating a Lost
Note Affidavit to accompany each replaced Receivable, certifying that the
original Receivable was destroyed; provided, however, that in the event any
additional document is needed in order to service the Receivable, the Servicer
shall print a copy thereof from its imaging system. All costs incurred in
connection with this clause (e) shall be paid by the Servicer and the Servicer
shall indemnify the Issuer and the Indenture Trustee for any losses suffered
by the Issuer as a result of the loss or destruction of the original
Receivable Files.
Section 3.06 Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by a Trust Officer of
the Indenture Trustee or, if the Notes have been paid in full, of the Owner
Trustee. A certified copy of a by-law or of a resolution of the Board of
Directors of the Indenture Trustee or Owner Trustee, as applicable, shall
constitute conclusive evidence of the authority of any such Trust Officer to
act and shall be considered in full force and effect until receipt by the
Servicer of written notice to the contrary given by the Indenture Trustee or
Owner Trustee, as applicable.
Section 3.07 [Intentionally Omitted]
Section 3.08 Effective Period and Termination. The Servicer shall act
as custodian of the Receivables and shall continue to act in such capacity
unless and until terminated pursuant to this Section 3.08. If the Servicer or
any successor Servicer shall resign as Servicer in accordance with the
provisions of this Agreement or if all of the rights and obligations of the
Servicer or any successor Servicer shall have been terminated under Section
8.02, (i) such Servicer shall also resign as custodian of the Receivables and
(ii) the appointment of such Servicer as custodian
35
may be terminated by the Issuer or by the Holders of Notes evidencing not less
than 25% of the Outstanding Amount of the Notes, or, if no Notes are
outstanding, by Holders of Certificates evidencing not less than 25% of the
percentage interests in the Certificates, in the same manner as the Indenture
Trustee or such Securityholders may terminate the rights and obligations of
the Servicer under Section 8.02. The Indenture Trustee or, with the consent of
the Indenture Trustee, the Owner Trustee may terminate the Servicer's
appointment as custodian, with cause, at any time upon written notification to
the Servicer and without cause, only by written notification to the Servicer
pursuant to Section 8.02. As soon as practicable after any termination of such
appointment (but in no event more than ten Business Days after any such
termination of appointment), the Servicer shall deliver the Receivable Files
to the Indenture Trustee or the Indenture Trustee's agent, at such place or
places as the Indenture Trustee may reasonably designate; provided, however,
that, if the Servicer shall have been terminated as custodian without cause
pursuant to this Section 3.08, the Servicer shall be entitled to reimbursement
by the Issuer for all reasonable out-of-pocket expenses incurred in connection
with such delivery of the Receivable Files. Notwithstanding the termination of
the Servicer as custodian, the Indenture Trustee and the Owner Trustee agree
that, upon any such termination and for so long as the Servicer remains the
Servicer hereunder, the Indenture Trustee or the Owner Trustee, as the case
may be, shall provide, or cause its agent to provide, access to the Receivable
Files to the Servicer for the purpose of enabling the Servicer to perform its
obligations under this Agreement with respect to the servicing of the
Receivables.
ARTICLE IV
SERVICING OF RECEIVABLES
Section 4.01 Duties of Servicer.
(a) From and after the Closing Date with respect to the Initial
Receivables and the related Subsequent Transfer Date with respect to the
Subsequent Receivables, the Servicer, as an independent contract servicer, for
the benefit of the Issuer and the Indenture Trustee, shall manage, service,
administer and make collections on the Receivables and perform the other
actions required by the Servicer under this Agreement. The Servicer will
service the Receivables in accordance with the servicing standard set forth in
Exhibit G, or in the event that Exhibit G does not specify a standard with
respect to a particular servicing function, in accordance with its usual and
customary procedures, consistent with the procedures employed by institutions
that service motor vehicle installment sale contracts or motor vehicle
installment loan notes for their own account or for the account of third
parties (the foregoing, the "Servicing Standard").
(b) The Servicer's duties shall include, but not be limited to,
the collection and posting of all payments, responding to inquiries of
Obligors on the Receivables, investigating delinquencies, sending payment
coupons to Obligors, reporting tax information to Obligors, monitoring the
Receivables, accounting for collections, preparing tax forms required by any
federal, state or local tax authority, if any, furnishing Servicer Reports,
including the Servicer's Certificate, and annual statements as required
herein, making Monthly Advances and performing the other duties specified
herein. The Servicer is hereby authorized and empowered to execute and
deliver, on behalf of itself, the Issuer, the Owner Trustee, the Indenture
Trustee, the Certificateholders and the Noteholders, or any of them, any and
all instruments of satisfaction
36
or cancellation, or of partial or full release or discharge, and all other
comparable instruments with respect to the Receivables and with respect to the
Financed Vehicles; provided, however, that, notwithstanding the foregoing, the
Servicer shall not, except as permitted by the Servicing Standard or pursuant
to an order from a court of competent jurisdiction (including court approval
of a settlement in respect of any litigation matter entered into in accordance
with the Servicing Standard) or as otherwise required by Applicable Law, (i)
release the Financed Vehicle securing a 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 or repossession, (ii) impair
the rights of the Trust or the Indenture Trustee in the Receivables, (iii)
change the Contract Rate with respect to any Receivable, (iv) waive the right
to collect the unpaid balance of any Receivable from an Obligor or (v) modify
the Principal Balance or the total number of originally scheduled due dates of
any Receivable.
(c) The Servicer is hereby authorized to commence, in its own
name or in the name of the Indenture Trustee or the Owner Trustee, a legal
proceeding to enforce a Receivable pursuant to Section 4.03 or to commence or
participate in any other legal proceeding (including a bankruptcy proceeding)
relating to or involving a Receivable, an Obligor or a Financed Vehicle. If
the Servicer commences or participates in any such legal proceeding in its own
name, the Indenture Trustee or the Issuer shall thereupon be deemed to have
automatically assigned the applicable Receivable to the Servicer solely for
purposes of commencing or participating in such proceeding as a party or
claimant. The Servicer is authorized and empowered by the Indenture Trustee to
execute and deliver in the Indenture Trustee's name any notices, demands,
claims, complaints, responses, affidavits or other documents or instruments in
connection with any such proceeding and to bring suit in the name of the
Indenture Trustee. 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 is
not a real party in interest or a holder entitled to enforce such Receivable,
the Owner Trustee shall, at the Servicer's direction, take steps to enforce
such Receivable, including bringing suit in its name or in the name of the
Indenture Trustee or, with the prior written permission of the Depositor, the
Issuer. The Owner Trustee and the Indenture Trustee shall upon the written
request of the Servicer 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, and the Owner
Trustee and the Indenture Trustee shall not be held responsible for any acts
by the Servicer in its uses of any such powers of attorney or other document
other than as authorized or permitted by this Agreement.
Section 4.02 Collection of Receivable Payments; Modifications of
Receivables; Monthly Advances.
(a) Consistent with the Servicing Standard, the Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables. The Servicer may, in its discretion and, in
accordance with the Servicing Standard, waive any Late Fees that may be
collected in the ordinary course of servicing Receivable.
(b) The Servicer may, in accordance with the Servicing Standard,
grant extensions on a Receivable for which the related Obligor is delinquent
for failure of payment. The Servicer shall not grant more than one (1)
extension on such Receivable in any calendar year and not more than three (3)
extensions on any such Receivable; provided, however, that if the
37
Servicer extends the date for the final payment by any Obligor of any
Receivable beyond November 30, 2011, the Servicer shall promptly purchase such
Receivable at the Repurchase Amount. The use of a pass-a-payment coupon shall
not be considered an extension on a Receivable pursuant to this Section
4.02(b).
(c) On each Remittance Date, subject to a determination of
recoverability, the Servicer shall remit to the Collection Account from its
own funds or from amounts held for future distribution an amount (the "Monthly
Advance") equal to the interest portion of all Monthly Payments that were (i)
due on the Receivables during the applicable Collection Period and that were
delinquent at the close of business on the last day of such Collection Period
immediately preceding the related Distribution Date or (ii) not due during the
applicable Collection Period because payment in the Collection Period was
deferred by the Servicer (including, for this purpose, any extension made in
connection with the use of a pass-a-payment coupon). Any amounts held for
future distribution used for purposes of making the remittances provided in
the preceding sentence shall be reimbursed by the Servicer on or before any
future Remittance Date, if funds available on such Remittance Date shall be
less than amounts required to be deposited into the Collection Account on such
Remittance Date subject to a determination of recoverability, and amounts so
reimbursed by the Servicer shall be treated as a Monthly Advance, reimbursable
to the Servicer pursuant to Section 4.09(c). Notwithstanding the foregoing,
the Servicer shall not be permitted to make any Monthly Advances pursuant to
this Section 4.02 from amounts held for future distribution, and instead shall
be required to make all Monthly Advances from its own funds, unless the
Servicer has a long-term credit rating of at least "A" by Standard & Poor's
and "A2" by Moody's. The Servicer's obligation to make such Monthly Advances
as to any Receivable shall continue through the earlier to occur of (i) the
last Monthly Payment due prior to the payment in full of the Receivable or
(ii) the last Remittance Date prior to the Remittance Date for the remittance
of all Liquidation Proceeds and other payments or recoveries (including
Insurance Proceeds) with respect to the Receivable; provided, however, that
the obligation to pay Monthly Advances shall cease if the Servicer determines,
in its sole reasonable opinion, that advances with respect to such Receivable
are non-recoverable by the Servicer from Liquidation Proceeds or otherwise
from amounts allocable to interest with respect to a particular Receivable.
Section 4.03 Realization upon Receivables.
(a) In the event that any payment due under any Receivable is not
paid when the same becomes due and payable, or in the event the related
Obligor fails to perform any other covenant or obligation under the Receivable
and such failure continues beyond any applicable grace period, the Servicer
shall take such actions as (i) it would take under similar circumstances with
respect to a similar motor vehicle retail installment contract or motor
vehicle installment loan note held for its own account for investment, (ii)
shall be consistent with Servicing Standard, and (iii) it shall determine
prudently to be in the best interest of the Trust. In connection herewith, the
Servicer shall from its own funds make all necessary and proper Servicing
Advances, subject to reimbursement pursuant to Section 4.09; provided,
however, that the foregoing shall not be construed to require the Servicer to
undertake repossession, restoration or preservation of any Financed Vehicle,
unless the Servicer shall determine (x) that such preservation, restoration
and/or repossession will increase the proceeds of liquidation of the
Receivable after reimbursement to itself for such expenses and (y) that
expenses in connection
38
with such repossession, restoration or repossession will be recoverable either
through Liquidation Proceeds or through Insurance Proceeds. The recovery of
expenses incurred by the Servicer shall be limited to Liquidation Proceeds,
Insurance Proceeds and Deficiency Balance recoveries with respect to such
Receivable.
(b) In connection with any Deficiency Balance, the Servicer in
accordance with the Servicing Standard will (A)(i) pursue collection of the
deficiency for a period of no more than 120 days, which may be extended an
additional 60 days if, in the Servicer's reasonable judgment such extension
will maximize recovery of the Deficiency Balance and then (ii) refer the
related account to (x) its routinely preferred third party collector or (y)
such other third party collector as approved by the Issuer (the entity hired
pursuant to clause (x) or (y), the "Collector"), which will pursue collection
of such Deficiency Balance; or (B) refer the related account directly to the
Collector as provided in (A)(ii) above, if, in the Servicer's reasonable
judgment referral of such account to the Collector will maximize recovery of
the Deficiency Balance. In the event the Servicer refers the related account
to the Collector, the Servicer shall no longer remain obligated or be liable
to any other party for the collection of such Receivable. The Servicer shall,
in accordance with Section 5.02(a), remit any amounts collected by it or
remitted to it by the Collector (from which the Collector may net a portion of
the Collector's costs, expenses and other charges not to exceed an amount
equal to 40% of the recovery amount prior to deducting such costs, expenses
and charges) in regards to such Deficiency Balance.
Section 4.04 Satisfaction of Receivable. Upon payment in full on any
Receivable, or otherwise in accordance with the Servicer's customary policies
and procedures consistent with the Servicing Standard, the Servicer is
authorized to execute an instrument in satisfaction of such Receivable and to
do such other acts and execute such other documents as the Servicer deems
necessary to discharge the Obligor thereunder and eliminate the security
interest in the Financed Vehicle related thereto. To the extent that
insufficient payments are received on a Receivable credited by the Servicer as
prepaid or paid in full and satisfied, the shortfall shall be paid by the
Servicer out of its own funds if the shortfall is in excess of $25.
Section 4.05 Maintenance of Security Interests in Financed Vehicles.
The Servicer shall, consistent with the Servicing Standard, take such steps as
are necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle in favor of the Issuer and the
Indenture Trustee. The Servicer is hereby authorized 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. Notwithstanding the foregoing, (i) the Servicer shall have
no obligation to audit the perfection or re-perfection of security interests
in the Financed Vehicles and (ii) the Servicer shall have no obligation to
perfect or re-perfect any security interest in any Financed Vehicle unless it
is aware that perfection or re-perfection is necessary. Pursuant to Section
4.09(c), the Servicer shall be reimbursed for all reasonable out-of-pocket
expenses incurred in connection with the performance of its obligations under
this Section 4.05.
Section 4.06 Additional Servicing Covenants.
The Servicer further agrees:
39
(a) Except as permitted by the Servicing Standard and as provided
in Sections 4.01 and 4.02, the Servicer shall not (i) release the Financed
Vehicle securing each Receivable from the security interest granted by such
Receivable, in whole or in part, except (x) in the event of payment in full
(or within $25.00 of payment in full) by or on behalf of the Obligor
thereunder or (y) upon repossession and liquidation of such Financed Vehicle,
(ii) impair the rights of the Issuer in the Receivables or (iii) extend or
otherwise amend the terms of any Contract (including any change to the
Contract Rate applicable to any Receivable, the Principal Balance or the total
number of originally scheduled due dates of any Receivable); and
(b) The Servicer shall not (1) create or incur, or agree to
create or incur or consent to or permit in the future (upon the occurrence of
a contingency or otherwise) the creation, incurrence or existence of any Lien
on or restriction on transferability of any Receivable except for the Lien of
the Indenture and the restrictions on transferability imposed by this
Agreement or (2) other than as contemplated herein, sign or file any UCC
financing statements in any jurisdiction that names HNB, the Seller, the
Depositor as a debtor, and any Person other than the Seller, the Depositor,
the Indenture Trustee or the Issuer as a secured party, or sign any security
agreement authorizing any secured party thereunder to file any such financing
statement, in each case with respect to the Receivables or any other Conveyed
Assets.
Section 4.07 [Intentionally Omitted].
Section 4.08 Purchase of Receivables Upon Breach. Upon discovery by
any of the Servicer, the Seller, the Depositor, the Owner Trustee or the
Indenture Trustee of a breach of any of the covenants set forth in Sections
4.02(b), 4.05 or 4.06, the party discovering such breach shall give prompt
written notice to the others; provided, however, that the failure to give any
such notice shall not affect any obligation of the Servicer under this Section
4.08. Within sixty days of the earlier of either discovery by, or notice to,
the Servicer of a breach of any covenant set forth in Sections 4.02(b), 4.05
or 4.06, (i) the Servicer shall use its best efforts promptly to cure such
breach in all material respects and (ii) if such breach cannot be cured, the
Servicer shall be required to purchase the affected Receivable. If such breach
of a covenant set forth in Sections 4.02(b), 4.05 or 4.06 is curable and the
Servicer shall have timely commenced such cure or remedy but notwithstanding
its due and diligent efforts, the remedy or cure shall not be capable of cure
within such sixty day period, the Servicer shall, upon receipt of written
consent by the Issuer, the Indenture Trustee or the Owner Trustee, have up to
two additional thirty day period to effectuate the cure (up to an aggregate
total of 120 days) so long as it is acting in good faith to effectuate such
cure. In the event that such breach cannot be cured within a maximum of 120
days of the earlier of either discovery by, or notice to, the Servicer of such
breach (or within sixty or ninety days, if the applicable extension was not
granted), the affected Receivable shall, at the option of the Issuer, the
Indenture Trustee or the Owner Trustee, be purchased by the Servicer in an
amount equal to the Repurchase Amount. The Servicer shall remit such amount to
the Collection Account in the manner specified in Section 5.04 and shall
notify in writing the Indenture Trustee of such deposit. Subject to Section
7.02, it is understood and agreed that the obligation of the Servicer to
purchase any Receivable with respect to which such breach has occurred and is
continuing shall, if such obligation is fulfilled, be the sole remedy against
the Servicer for such breach available to the Issuer, the Indenture Trustee,
the Noteholders, or the Certificateholders. Notwithstanding anything to the
contrary, the Servicer shall not intentionally
40
breach any of the covenants set forth in Sections 4.02(b), 4.05 or 4.06 for
the purpose of acquiring any Receivable.
Section 4.09 Servicing Fee; Costs and Expenses.
(a) In compensation for performing the servicing obligations
described in this Agreement during each Collection Period, the Servicer shall
be paid a monthly fee, for all Receivables that are not Defaulted Receivables
serviced pursuant to this Agreement, equal to one-twelfth of the product of
(i) the Servicing Fee Rate and (ii) the Principal Balance of the Receivables
as of the beginning of the first day of such Collection Period (such monthly
fee, the "Servicing Fee"); provided, however, that, for the first Distribution
Date, the fee payable to the Servicer is equal to one-twelfth of the product
of the Servicing Fee Rate and the Principal Balance as of August 1, 2004, it
being understood that pursuant to the Flow Purchase Agreement the Servicer
received a fee from the Seller in an amount equal to one-twelfth of the
product of the Servicing Fee Rate and the Principal Balance as of July 1, 2004.
As additional servicing compensation, the Servicer shall be entitled to
receive all Late Fees with respect to the Receivables serviced pursuant to
this Agreement and all interest accrued on any funds held by the Servicer
constituting collections of any of the Receivables.
(b) In addition to the Servicing Fee set forth above, the Servicer
shall also be entitled to receive on each Distribution Date reimbursement for
amounts set forth below for the related Collection Period. The Servicer shall
be paid the Servicing Fee and the Servicing Reimbursement Amount payable for
each Collection Period on the Distribution Date related to such Collection
Period in accordance with Sections 5.06(b)(i) and (xiii).
(c) The Servicer shall pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled
to reimbursement thereof except to the extent as follows:
(i) The Servicer shall be entitled to reimbursement for
Monthly Advances and for amounts treated as Monthly Advances pursuant
to Section 4.02(c); provided, however, that reimbursement for Monthly
Advances shall be limited to that portion of collections that are
allocated or allocable to payment of interest in accordance with the
Simple Interest Method and the terms of each Receivable;
(ii) To the extent set forth under Section 4.03, the
Servicer shall be entitled to reimbursement for unreimbursed
Servicing Advances in connection with the realization upon a
Receivable; provided that, in accordance with Section 4.03, such
right of reimbursement shall be limited to the amount of Liquidation
Proceeds, Insurance Proceeds and Deficiency Balance recoveries with
respect to such Receivable; and
(iii) The Servicer shall be entitled to the reimbursement of
certain reasonable out-of-pocket expenses to the extent permitted
under Sections 3.05(d), 4.05 and 10.02(g).
41
The aggregate amount of all amounts set forth in clauses (i) through (iii) of
this Section 4.09(c) that the Servicer shall incur during any Collection
Period shall be referred to herein as the "Servicing Reimbursement Amount" for
such Collection Period.
(d) For so long as (i) HNB is the Servicer, (ii) the Servicer has
the Minimum Required Rating and (iii) no Event of Servicing Termination shall
have occurred and be continuing, the Servicer may net the Servicing Fee and
the Servicing Reimbursement Amount payable to the Servicer on the related
Distribution Date from any remittance it makes pursuant to Section 5.02(a).
The Servicing Fee shall be retained from the interest portion of Monthly
Payments collected or the interest portion of Liquidation Proceeds received on
the Receivables. To the extent the interest portions are insufficient to pay
the full amount of the Servicing Fee in a particular month, the Servicer shall
be entitled to retain the interest portions of Monthly Payments collected and
Liquidation Proceeds received in subsequent months to recover the unpaid
portion.
Section 4.10 Servicer's Certificate and Servicer Reports.
(a) Servicer's Certificate. Not later than 10:00 a.m. (New York
City time) on each Determination Date, the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee and the Depositor, with a copy to each Rating
Agency, a Servicer's certificate (a "Servicer's Certificate") substantially in
the form of Exhibit B which shall be delivered in electronic format or through
any other means mutually acceptable to the Indenture Trustee and the Servicer
and which shall contain the amount of collections received on the Receivables
during the related Collection Period. Such Servicer's Certificate shall be
certified by a Responsible Officer of the Servicer that the information
provided is accurate and complete and no defaults have occurred. With respect
to each Collection Period, Receivables to be repurchased by the Seller and
each Receivable that became a Defaulted Receivable, in each case, during such
Collection Period shall be identified by the Servicer by account number with
respect to such Receivable (as specified in the applicable Schedule of
Receivables).
(b) Servicer Reports. Not later than 10:00 a.m. (New York City
time) on each Determination Date, the Servicer shall deliver to the Owner
Trustee (for delivery to the Certificateholders pursuant to the Trust
Agreement) each of the Servicer Reports listed as an exhibit to the Flow
Purchase Agreement and each Servicer Report shall be substantially in the form
set forth in the Flow Purchase Agreement (it being understood that for
purposes of the first Determination Date, the Depositor shall deliver such
reports for the first Flow Purchase Agreement Collection Period and the
Servicer shall deliver such reports for the second Flow Purchase Agreement
Collection Period (which together cover the first Collection Period)). Each
Servicer Report shall be certified by a Responsible Officer of the Servicer
that the information provided is accurate and complete and no defaults have
occurred. In addition, the Servicer shall at all times maintain a complete
system backup file with respect to the Receivables and shall, by no later than
each Determination Date, deliver to the Owner Trustee a copy of (i) the loan
file tape and (ii) the extracts from other applicable servicing systems of the
Servicer.
Section 4.11 Annual Statement as to Compliance.
42
(a) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Depositor and each Rating Agency, on or before March 15 each
year, beginning March 15, 2005, an Officer's Certificate (the "Servicer Annual
Certification") substantially in the form of Exhibit C, signed by a
Responsible Officer of the Servicer.
(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 three Business Days thereafter, written
notice in an Officer's Certificate of any event that is, or with the giving of
notice or lapse of time or both would become, an Event of Servicing
Termination under Section 8.01(a) or an Additional Event of Servicing
Termination under Section 8.01(b).
Section 4.12 Annual Report of Accountants. On or before March 15 of
each year, beginning March 15, 2005, the Servicer, at its expense, shall cause
a firm of independent certified public accountants that is a member of the
American Institute of Certified Public Accountants to furnish a report
addressed to the Owner Trustee, the Indenture Trustee and each Rating Agency
to the effect that such firm of independent certified public accountants has
examined the documents or records of the Servicer relating to the Receivables
that such examination (a) was conducted in accordance with generally accepted
auditing standards, and (b) included tests relating to retail motor vehicle
loan and installment sale contracts serviced for others and that such firm is
of the opinion that the provisions of this Agreement have been complied with
during the preceding calendar year (or, with respect to the first report, the
period from the Closing Date through December 31 of such year), and that, on
the basis of such examination, nothing has come to their attention that would
indicate that such servicing has not been conducted therewith during such
calendar year or other applicable period, except for (x) such exceptions as
such firm shall believe to be immaterial and (y) such other exceptions as
shall be set forth in such statement.
Section 4.13 Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
Owner Trustee, the Indenture Trustee and the Certificateholders reasonable
access to the documentation regarding the Receivables and the related Trust
property. Access shall be afforded without charge, but only upon reasonable
request, which does not unreasonably interfere with the Servicer's normal
business operations or employee or customer relations, and during the normal
business hours at the offices of the Servicer. Nothing in this Section 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.
Section 4.14 Access to Information Regarding Trust and Basic
Documents. The Servicer shall furnish to the Owner Trustee from time to time
such information regarding the Trust or the Basic Documents as the Owner
Trustee shall reasonably request. Upon written request, the Indenture Trustee
shall furnish to the Owner Trustee annually a copy of the Note Register;
provided, however, the Indenture Trustee shall not be obligated to furnish a
copy of the Note Register more than once each calendar year. The Servicer
shall furnish to the Owner Trustee copies of all documents and reports
required to be provided by the Servicer pursuant to Sections 4.10, 4.11 and
4.12 of this Agreement.
43
Section 4.15 Maintenance of Errors and Omission Policy. The Servicer
shall maintain, at its own expense, an errors and omissions insurance policy
on all officers, employees or other persons acting in any capacity with regard
to the Receivables to handle funds, money, documents or papers relating to the
Receivables ("Servicer Employees"), which policy shall protect and insure the
Servicer against losses, including forgery, theft, embezzlement, fraud, errors
and omissions, and negligent acts of such Servicer Employees. Such errors and
omissions insurance policy shall also protect and insure the Servicer, against
losses in connection with the release or satisfaction of a Receivable without
having obtained payment in full of the indebtedness secured thereby.
Notwithstanding the foregoing, such errors and omission policy may have a
deductible consistent with prudent corporate practice. No provision of this
Section 4.15 requiring such errors and omissions insurance shall diminish or
relieve the Servicer from its duties and obligations as set forth in this
Agreement. Nothing in the preceding sentence shall limit any of the Servicer's
indemnification obligations under this Agreement. Upon the request of the
Issuer or the Indenture Trustee, the Servicer shall cause to be delivered to
the Issuer or the Indenture Trustee a certified true copy of such fidelity
bond and insurance policy.
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
Section 5.01 Establishment of Accounts.
(a) The Indenture Trustee shall establish and maintain, in the
name of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders and the Certificateholders. The Collection Account shall be
established initially at the Indenture Trustee.
(b) The Indenture Trustee shall establish and maintain, in the
name of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Note Interest Distribution Account"), bearing a
designation clearly indicating that the funds deposited therein are held for
the benefit of the Noteholders. The Note Interest Distribution Account shall
be established initially at the Indenture Trustee.
(c) The Indenture Trustee shall establish and maintain, in the
name of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Principal Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit
of the Noteholders. The Principal Distribution Account shall be established
initially at the Indenture Trustee.
(d) The Indenture Trustee shall establish and maintain, in the
name of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Pre-Funding Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders and the Certificateholders. The Pre-Funding Account shall be
established initially at the Indenture Trustee.
44
(e) Funds on deposit in the Collection Account and the Pre-Funding
Account shall be invested by the Indenture Trustee, in Eligible Investments
selected in writing by the Seller (it being understood that the Seller may
select a particular Eligible Investment pursuant to an instruction letter
which shall be executed by the Seller as of the Closing Date); provided,
however, that if the Seller fails to select any Eligible Investment, the
Indenture Trustee shall invest such funds in an Eligible Investment described
in clause (d) of the definition of "Eligible Investment" herein. The Indenture
Trustee shall have no duty or obligation to confirm or verify whether any
Eligible Investment selected by the Seller is in fact an Eligible Investment.
All such Eligible Investments shall be held by the Indenture Trustee for the
benefit of the Noteholders and/or the Certificateholders, as applicable. Other
than as permitted in writing by the Rating Agencies, funds on deposit in the
Trust Accounts shall be invested in Eligible Investments that will mature not
later than the Business Day immediately preceding the next Distribution Date.
Funds deposited in a Trust Account on a day that immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not
required to be invested overnight.
(f) The Indenture Trustee shall possess all right, title and
interest in all funds and investment property on deposit from time to time in
or credited to the Trust Accounts and in all proceeds thereof (including
Investment Earnings thereon) and all such funds, investment property, proceeds
and income shall be part of the Trust Estate, except as otherwise set forth
herein. The Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the
Certificateholders, as applicable. If, at any time, any Trust Account ceases
to be an Eligible Deposit Account, the Indenture Trustee, shall within ten
(10) Business Days (or such longer period, not to exceed thirty (30) calendar
days, as to which each Rating Agency shall have consented) establish a new
Trust Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments from the account that is no longer an Eligible Deposit
Account to the new Trust Account.
(i) With respect to the Trust Account Property, the
Indenture Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts,
subject to the last sentence of Section 5.01(f)(i); and each such
Eligible 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;
(B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture Trustee, in
accordance with paragraph (a) of the definition of "Delivery" and
shall be held, pending maturity or disposition, solely by the
Indenture Trustee, or a securities intermediary (as such term is
defined in Section 8-102 of the UCC) acting solely for the Indenture
Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to federal
book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be maintained
by the Indenture Trustee, pending maturity or disposition, through
continued book-entry registration of such Trust Account Property as
described in such paragraph;
45
(D) any Trust Account Property that is an
"uncertificated security" under Article 8 of the UCC and that is not
governed by clause (C) above shall be delivered to the Indenture
Trustee, in accordance with paragraph (c) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued registration of the
Indenture Trustee's (or its nominee's) ownership of such security;
and
(E) any Trust Account Property that is a security
entitlement shall be delivered in accordance with paragraph (d) of
the definition herein of "Delivery" and shall be held pending
maturity or disposition by the Indenture Trustee or a securities
intermediary acting solely for the Indenture Trustee.
(ii) The Servicer shall have the power, revocable by the
Indenture Trustee, or by the Owner Trustee with the consent of the
Indenture Trustee, following an Event of Servicing Termination to
instruct the Indenture Trustee in writing, to make withdrawals and
payments from the Trust Accounts and the Certificate Distribution
Account for the purpose of withdrawing any amounts deposited in error
into such accounts.
Section 5.02 Collections; Deposits into Collection Account.
(a) The Servicer shall remit to the Collection Account the Total
Distribution Amount on each Remittance Date for so long as (i) HNB is the
Servicer, (ii) the Servicer has the Minimum Required Rating and (iii) no Event
of Servicing Termination shall have occurred and be continuing.
Notwithstanding anything herein to the contrary, so long as the conditions set
forth in clauses (i) through (iii) above are satisfied, the Servicer may make
any remittance pursuant to the preceding sentence net of the Servicing Fee and
any Servicing Reimbursement Amount payable to the Servicer on the related
Distribution Date. If (i) HNB is no longer the Servicer, (ii) HNB no longer
has the Minimum Required Rating or (iii) an Event of Servicing Termination
shall have occurred and be continuing, the Servicer shall remit to the
Collection Account within two Business Days of receipt thereof any amounts
received by it that are to be included in the Total Distribution Amount for
such Collection Period. Notwithstanding anything to the contrary contained
herein, for purposes of the first Collection Period, the Servicer shall remit
to the Collection Account on the first Remittance Date, the Total Distribution
Amount with respect to the second Flow Purchase Agreement Collection Period
and the Depositor shall remit the amounts pursuant to Section 5.02(b),
together comprising the Total Distribution Amount for the first Collection
Period.
(b) The Issuer hereby directs the Depositor (in accordance with
Section 2.01(a)(i) and Section 2.01(b)(i) hereof) to cause the Seller, and the
Depositor hereby directs the Seller (in accordance with each Assignment,
Assumption and Recognition Agreement) to deliver to the Indenture Trustee on
the Closing Date and on each Subsequent Transfer Date for deposit into the
Collection Account all moneys received by the Seller in respect of the Initial
Receivables and Subsequent Receivables, respectively, from (but excluding) the
Initial Cut-Off Date or the applicable Subsequent Cut-off Date, as the case
may be, to (and including) the Closing Date or the related Subsequent Transfer
Date, as applicable, and the Indenture Trustee
46
shall deposit all such moneys so delivered to it into the Collection Account
on the Closing Date or the related Subsequent Transfer Date, as applicable.
Section 5.03 Application of Collections. All payments received from
or on behalf of an Obligor during each Collection Period with respect to each
Receivable (other than a Receivable that is a Repurchased Receivable) shall be
applied to interest and principal in accordance with the Simple Interest
Method and the Servicer's customary procedures. Generally, subject to the
foregoing sentence, the Servicer applies obligor payments, first to interest,
second to Late Fees and third, to unpaid principal; provided, however, that
with respect to Defaulted Receivables for which the Servicer disposes of or
sells a Financed Vehicle, and the Liquidation Proceeds from the disposition of
the Financed Vehicle do not equal the Principal Balance of such Receivable,
the Servicer applies such Liquidation Proceeds, first to unpaid principal,
second to interest and third to unpaid Late Fees.
Section 5.04 Repurchase Amounts. For so long as (i) HNB is the
Servicer, (ii) HNB has the Minimum Required Rating, and (iii) no Event of
Servicing Termination shall have occurred and be continuing, the Servicer
shall be entitled, pursuant to the first sentence of Section 5.02, to deposit
or cause to be deposited in the Collection Account on the related Remittance
Date, (x) the aggregate Repurchase Amounts owed by the Servicer with respect
to the related Collection Period pursuant to Section 4.08 and (y) any amounts
remitted to the Servicer in respect of the Repurchase Price (as defined in the
Flow Purchase Agreement) during the related Collection Period. If, however,
(i) HNB no longer is the Servicer, (ii) HNB no longer has the Minimum Required
Rating, or (iii) an Event of Servicing Termination shall have occurred and be
continuing, the Servicer shall deposit or cause to be deposited in the
Collection Account (x) the aggregate Repurchase Amount pursuant to Section
4.08 within two Business Days' of the purchase of the Repurchased Receivable
by the Servicer pursuant to Section 4.08 and (y) any amounts remitted to the
Servicer in respect of the Repurchase Price (as defined in the Flow Purchase
Agreement) within two Business Days' of its receipt of such amounts.
Section 5.05 Permitted Withdrawals from Collection Account.
(a) On each Distribution Date, the Indenture Trustee, at the
written direction of the Servicer, shall, in addition to, and prior to, the
withdrawals from the Collection Account on such Distribution Date pursuant to
Section 5.06(b), make withdrawals from the Collection Account to withdraw any
amount not required to be deposited in the Collection Account or deposited
therein in error.
(b) The Indenture Trustee shall make withdrawals from the
Collection Account to clear and terminate the Collection Account in connection
with the termination of this Agreement; provided that all conditions to the
termination of this Agreement set forth herein and in the other Basic
Documents shall have been met.
Section 5.06 Distributions.
(a) On each Distribution Date, the Indenture Trustee shall
determine all amounts required to be deposited pursuant to this Section.
47
(b) On each Distribution Date, the Indenture Trustee (based in
relevant part on the information provided by the Servicer in the Servicer's
Certificate delivered on the related Determination Date pursuant to Section
4.10(a)) shall make the following payments, deposits and distributions from
amounts on deposit in the Collection Account, to the extent of the Total
Distribution Amount for such Distribution Date, to make required payments and
distributions on such date pursuant to clauses (i) through (xiv) below, in the
following order and priority:
(i) to the Servicer, the Servicing Fee and Servicing
Reimbursement Amount for the related Collection Period (and any
accrued and unpaid Servicing Fees and Servicing Reimbursement Amounts
from prior Collection Periods);
(ii) (x) to the Indenture Trustee and the Owner Trustee pro
rata, the Indenture Trustee Fee for the related Collection Period
(and any accrued and unpaid Indenture Trustee Fees from prior
Collection Periods) and the Owner Trustee Fee for the related
Collection Period (and any accrued and unpaid Owner Trustee Fees from
prior Collection Periods) and then (y) to the Indenture Trustee and
the Owner Trustee pro rata, any other accrued and unpaid amounts
(including reasonable legal fees and expenses) owed to the Indenture
Trustee and the Owner Trustee not to exceed $100,000 in the aggregate
in any consecutive twelve month period;
(iii) to the Note Interest Distribution Account for payment
to the Class A Noteholders pursuant to Section 5.06(c)(i), from the
Total Distribution Amount remaining after the application of clauses
(i) and (ii), the Class A Noteholders' Interest Distributable Amount;
(iv) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount
remaining after the application of clauses (i) through (iii), the
First Allocation of Principal, if any;
(v) to the Note Interest Distribution Account for payment to
the Class B Noteholders pursuant to Section 5.06(c)(ii), from the
Total Distribution Amount remaining after the application of clauses
(i) through (iv), the Class B Noteholders' Interest Distributable
Amount;
(vi) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount
remaining after the application of clauses (i) through (v), the
Second Allocation of Principal, if any, reduced by any First
Allocation of Principal paid pursuant to clause (iv) above;
(vii) to the Note Interest Distribution Account for payment
to the Class C Noteholders pursuant to Section 5.06(c)(iii), from the
Total Distribution Amount remaining after the application of clauses
(i) through (vi), the Class C Noteholders' Interest Distributable
Amount;
(viii) to the Principal Distribution Account, for
distribution pursuant to Section 5.06(d), from the Total Distribution
Amount remaining after the application of clauses (i) through (vii),
the Third Allocation of Principal, if any, reduced by any First
48
Allocation of Principal paid pursuant to clause (iv) above and any
Second Allocation of Principal paid pursuant to clause (vi) above;
(ix) to the Note Interest Distribution Account for payment
to the Class D Noteholders pursuant to Section 5.06(c)(iv), from the
Total Distribution Amount remaining after the application of clauses
(i) through (viii), the Class D Noteholders' Interest Distributable
Amount;
(x) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount
remaining after the application of clauses (i) through (ix), the
Fourth Allocation of Principal, if any, reduced by any First
Allocation of Principal paid pursuant to clause (iv) above, any
Second Allocation of Principal paid pursuant to clause (vi) above and
any Third Allocation of Principal paid pursuant to clause (viii)
above;
(xi) to the Note Interest Distribution Account for payment
to the Class E Noteholders pursuant to Section 5.06(c)(v), from the
Total Distribution Amount remaining after the application of clauses
(i) through (x), the Class E Noteholders' Interest Distributable
Amount;
(xii) to the Principal Distribution Account, for
distribution pursuant to Section 5.06(d), from the Total Distribution
Amount remaining after the application of clauses (i) through (xi),
the Regular Principal Allocation, if any, reduced by any First
Allocation of Principal paid pursuant to clause (iv) above, any
Second Allocation of Principal paid pursuant to clause (vi) above,
any Third Allocation of Principal paid pursuant to clause (viii)
above and any Fourth Allocation of Principal paid pursuant to clause
(x) above;
(xiii) to the applicable party, from the Total Distribution
Amount remaining after the application of clauses (i) through (xii),
any accrued and unpaid fees or expenses (including reasonable legal
fees and expenses) or any other amounts owed to such party under any
of the Basic Documents, to the extent not paid pursuant to clauses
(i) through (xii); and
(xiv) the remainder, if any, of the Total Distribution
Amount, to the Certificate Distribution Account for distribution to
the Certificateholders.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee, shall continue to maintain the Collection Account hereunder until all
amounts distributable on the Certificates have been distributed to the
Certificateholders.
(c) On each Distribution Date, the Indenture Trustee (based in
relevant part on the information provided to it by the Servicer in the
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 4.10(a)) shall withdraw the funds on deposit in the Note Interest
Distribution Account with respect to the Collection Period preceding such
Distribution Date and make payments on such date pursuant to clauses (i)
through (v) below, in the following order and priority:
49
(i) first, to the Class A Noteholders, ratably, the Class A
Noteholders' Interest Distributable Amount for such Distribution
Date;
(ii) second, to the Class B Noteholders, the Class B
Noteholders' Interest Distributable Amount for such Distribution
Date;
(iii) third, to the Class C Noteholders, the Class C
Noteholders' Interest Distributable Amount for such Distribution
Date;
(iv) fourth, to the Class D Noteholders, the Class D
Noteholders' Interest Distributable Amount for such Distribution
Date, and
(v) fifth, to the Class E Noteholders, the Class E
Noteholders' Interest Distributable Amount for such Distribution
Date.
(d) On each Distribution Date, the Indenture Trustee (based in
relevant part on the information provided to it by the Servicer in the
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 4.10(a)) shall withdraw the funds on deposit in the Principal
Distribution Account with respect to the Collection Period preceding such
Distribution Date and make payments on such date pursuant to clauses (i)
through (v) below, in the following order and priority:
(i) to the Class A Noteholders, in the following order and
priority, the Class A Principal Distributable Amount for such Payment
Date:
(A) first, to the Class A-1 Noteholders on account of
principal until the Outstanding Amount of the Class A-1 Notes is
reduced to zero;
(B) second, to the Class A-2 Noteholders on account of
principal until the Outstanding Amount of the Class A-2 Notes is
reduced to zero; and
(C) third, to the Class A-3 Noteholders on account of
principal until the Outstanding Amount of the Class A-3 Notes is
reduced to zero;
(D) fourth, to the Class A-4 Noteholders on account of
principal until the Outstanding Amount of the Class A-4 Notes is
reduced to zero;
(ii) to the Class B Noteholders, the Class B Principal
Distributable Amount for such Payment Date;
(iii) to the Class C Noteholders, the Class C Principal
Distributable Amount for such Payment Date;
(iv) to the Class D Noteholders, the Class D Principal
Distributable Amount for such Payment Date; and
(v) to the Class E Noteholders, the Class E Principal
Distributable Amount for such Payment Date.
50
(e) Notwithstanding the foregoing, subject to the provisions of
Section 5.04(b) of the Indenture:
(i) If the Notes have been accelerated following the
occurrence and during the continuation of an Event of Default
specified in Section 5.01(i), 5.01(ii), 5.01(iv) or 5.01(v) of the
Indenture but prior to any liquidation of the Trust Estate, the
Indenture Trustee shall (v) transfer the funds on deposit in the
Collection Account remaining after the application of clauses
5.06(b)(i) through (iii) above to the Principal Distribution Account
to the extent necessary to reduce the Outstanding Amount of all the
Class A Notes to zero, or, (w) if the Class A Notes shall have been
paid in full, transfer the funds on deposit in the Collection Account
remaining after the application of clauses 5.06(b)(i) through (v)
above to the Principal Distribution Account to the extent necessary
to reduce the Outstanding Amount of all the Class B Notes to zero,
or, (x) if the Class A Notes and Class B Notes shall have been paid
in full, transfer the funds on deposit in the Collection Account
remaining after the application of clauses 5.06(b) (i) through (vii)
above to the Principal Distribution Account to the extent necessary
to reduce the Outstanding Amount of all the Class C Notes to zero,
or, (y) if the Class A Notes, Class B Notes and Class C Notes shall
have been paid in full, to transfer the funds on deposit in the
Collection Account remaining after the application of clauses
5.06(b)(i) through (ix) above to the Principal Distribution Account
to the extent necessary to reduce the Outstanding Amount of all the
Class D Notes to zero, or (z) if the Class A Notes, Class B Notes,
Class C Notes and Class D Notes shall have been paid in full, to
transfer the funds on deposit in the Collection Account remaining
after the application of clauses 5.06(b)(i) through (xi) above to the
Principal Distribution Account to the extent necessary to reduce the
Outstanding Amount of all Class E Notes to zero. Any amounts
transferred to the Principal Distribution Account pursuant to clause
(v) shall be applied to the repayment of principal of the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes pro rata based on the respective Outstanding Amounts of the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes.
(ii) If the Notes have been accelerated following the
occurrence and during the continuation of an Event of Default
specified in Section 5.01(iii) of the Indenture, the Indenture
Trustee shall transfer the funds on deposit in the Collection Account
remaining after the application of clauses 5.06(b)(i) through (xii)
to the Principal Distribution Account to the extent necessary to
reduce the principal amount of all the Notes to zero in the order and
priority set forth in Section 5.06(d).
(f) On each Subsequent Transfer Date, the Indenture Trustee,
based on the instruction of the Depositor pursuant to Section 5.07(a), shall
withdraw amounts on deposit in the Pre-Funding Account representing all or a
portion of the unused Pre-Funded Amount, and shall remit such funds to the
order of the Depositor in an amount equal to the aggregate Principal Balance,
as of the related Subsequent Cut-off Date, of the Subsequent Receivables being
transferred to the Issuer on such date under the related Subsequent Transfer
Agreement.
(g) On the last day of the Funding Period, the Indenture Trustee,
based on the instruction of the Depositor pursuant to Section 5.07(b), shall
withdraw amounts on deposit in the Pre-Funding Account representing the unused
portion of the Pre-Funded Amount, and shall
51
apply such amount to the payment of principal of the Notes in accordance with
Section 8.02(e)(iii) of the Indenture.
Section 5.07 Pre-Funding Account.
(a) On the Closing Date, the Indenture Trustee will deposit, on
behalf of the Depositor, in the Pre-Funding Account the Pre-Funded Amount from
the proceeds of the sale of the Securities. On each Subsequent Transfer Date,
the Depositor shall instruct the Indenture Trustee to withdraw from the
Pre-Funding Account an amount equal to the Principal Balance of the Subsequent
Receivables transferred to the Issuer on such Subsequent Transfer Date and to
distribute such amount to or upon the order of the Depositor upon satisfaction
of the conditions set forth in this Agreement with respect to such transfer.
(b) If the aggregate Principal Balance of the Subsequent
Receivables transferred to the Issuer during the Funding Period is less than
the Pre-Funded Amount, on the date on which the Funding Period ends, after
giving effect to any transfers of Subsequent Receivables to the Issuer on such
date, the Depositor shall instruct the Indenture Trustee to withdraw from the
Pre-Funding Account and deposit into the Principal Distribution Account, the
unused portion of the Pre-Funded Amount on the Distribution Date on or
immediately after which the Funding Period ends.
Section 5.08 Statements to Securityholders. On each Distribution
Date, the Indenture Trustee shall prepare and make available via its website
at ▇▇▇.▇▇▇▇▇▇▇.▇▇▇ to each Noteholder of record as of the most recent Record
Date, and shall provide to each Rating Agency, the Depositor and to the Owner
Trustee (with a copy to each Paying Agent (if any)) for the Owner Trustee to
forward to each Certificateholder of record as of the most recent Record Date,
a statement substantially in the form of Exhibit A setting forth at least the
following information as to the Securities to the extent applicable:
(a) the amount of collections received with respect to the
Receivables during the related Collection Period and allocable to principal
allocable to each Class of Notes on such Distribution Date;
(b) the amount of collections received with respect to the
Receivables during the related Collection Period and allocable to interest
allocable to each Class of Notes on such Distribution Date;
(c) the amount of the Regular Principal Allocation for such
Distribution Date;
(d) the amount of the First Allocation of Principal, if any, for
such Distribution Date;
(e) the amount of the Second Allocation of Principal, if any, for
such Distribution Date;
(f) the amount of the Third Allocation of Principal, if any, for
such Distribution Date;
52
(g) the amount of the Fourth Allocation of Principal, if any, for
such Distribution Date;
(h) the Pool Balance with respect to such Distribution Date, after
giving effect to payments allocated to principal reported under clause (a)
above;
(i) the Outstanding Amount of each Class of Notes, the Note Pool
Factor for each such Class, and the Note Balance for each such Class as of the
close of business on the preceding Distribution Date, after giving effect to
payments allocated to principal reported under clause (a) above;
(j) the amount of the Servicing Fee and Servicing Reimbursement
Amount paid to the Servicer with respect to the related Collection Period;
(k) the respective amounts of the Owner Trustee Fee paid to the
Owner Trustee and the Indenture Trustee Fee paid to the Indenture Trustee in
each case with respect to the related Collection Period;
(l) the aggregate amounts of Realized Losses, if any, and Cram
Down Losses, if any, separately identified, with respect to the related
Collection Period;
(m) the aggregate Principal Balance of all Receivables that became
Defaulted Receivables or Repurchased Receivables during the related Collection
Period;
(n) the aggregate Principal Balance and number of Receivables that
are 30 to 59 days, 60 to 89 days or 90 days or more delinquent as of the last
day of the related Collection Period;
(o) the Class A-1 Interest Carryover Shortfall, the Class A-2
Interest Carryover Shortfall, the Class A-3 Interest Carryover Shortfall, the
Class A-4 Interest Carryover Shortfall, the Class B Interest Carryover
Shortfall, the Class C Interest Carryover Shortfall, the Class D Interest
Carryover Shortfall and the Class E Interest Carryover Shortfall, in each case
after giving effect to payments on such Distribution Date, and any change in
such amounts from the preceding statement;
(p) the aggregate Repurchase Amounts for Repurchased Receivables,
if any, that were or are to be purchased during or with respect to such
Collection Period;
(q) the aggregate Principal Balance and number of all Receivables
with respect to which the related Financed Vehicle was repossessed;
(r) the aggregate Principal Balance and number of Receivables with
respect to which the Servicer granted an extension;
(s) the Overcollateralization Target Amount for the next
Distribution Date;
(t) the Cumulative Net Loss Ratio as of such Determination Date;
53
(u) the Six-Month Annualized Net Loss Ratio as of such
Determination Date;
(v) the Three-Month Annualized Net Loss Ratio as of such
Determination Date;
(w) the Pool Delinquency Percentage as of such Determination Date;
(x) for each Distribution Date, if any, during the Funding Period,
the remaining Pre-Funded Amount and the amount in the Pre-Funding Account;
(y) for each Subsequent Transfer Date and the last day of the
Funding Period, the amount of any remaining Pre-Funded Amount that has not
been used to fund the purchase of Subsequent Receivables and, with respect to
the last day of the Funding Period, the amount that is to be paid as principal
of the Notes; and
(z) with respect to the Funding Period, the date of each
Subsequent Transfer Date that occurred during the related Collection Period,
the Principal Balance of the Subsequent Receivables transferred on such date
and the related Subsequent Cut-off Date.
Each amount set forth on the Distribution Date Statement under
clauses (a), (b), (c), (d), (e), (f), (g), (j), (k), (o) or (y) above shall be
expressed as a dollar amount per $1,000 of original principal balance of a
Note.
Section 5.09 Subcertifications of Indenture Trustee in Connection
with ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certifications.
(a) The Indenture Trustee and the Servicer shall reasonably
cooperate with the Depositor in connection with the Trust satisfying the
reporting requirements under the Exchange Act. The Indenture Trustee shall
prepare on behalf of the Trust any Forms 8-K and 10-K customary for similar
securities as required by the Exchange Act and the rules and regulations of
the Commission thereunder, and the Indenture Trustee shall file (via the
Commission's Electronic Data Gathering and Retrieval System) such Forms with
the Commission on behalf of the Depositor. The Depositor hereby grants to the
Indenture Trustee a limited power of attorney to execute and file each such
Form 8-K but only to the extent no accompanying certification is required to
be filed on behalf of the Depositor. Such power of attorney shall continue
until either the earlier of (i) receipt by the Indenture Trustee from the
Depositor of written termination of such power of attorney and (ii) the
termination of the Trust. The Depositor shall execute the Form 10-Ks. The
Indenture Trustee shall have no liability with respect to any failure to
properly prepare or file such periodic reports resulting from or relating to
the Indenture Trustee's inability or failure to obtain any information not
resulting from its own negligence or willful misconduct.
(b) Each Form 8-K shall be filed by the Indenture Trustee with the
Commission within 15 days after each Distribution Date, including a Form 8-K
with a copy of the statement to the Noteholders for such Distribution Date as
an exhibit thereto. Prior to March 30th of each year (or such earlier date as
may be required by the Exchange Act and the Rules and Regulations of the SEC),
the Indenture Trustee shall file a Form 10-K, in substance as required by
applicable law or the Commission's staff interpretations. Such Form 10-K shall
include as exhibits the Servicer's annual statement of compliance described
under Section 4.11 (upon which
54
the Indenture Trustee may rely) and the accountant's report described under
Section 4.12, in each case to the extent they have been timely delivered to
the Indenture Trustee. If they are not so timely delivered, the Indenture
Trustee shall file an amended Form 10-K including such documents as exhibits
reasonably promptly after they are delivered to the Indenture Trustee. The
Form 10-K shall also include the Depositor's Annual ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Certification provided for in Section 6.09. The Indenture Trustee shall
prepare and deliver each Form 10-K to the Depositor for execution no later
than March 20th (or if such day is not a Business Day, the immediately
preceding Business Day) of each year. The Depositor shall return the executed
Form 10-K to the Indenture Trustee for filing no later than March 25th (or if
such day is not a Business Day, the immediately preceding Business Day) of
each year.
(c) Notwithstanding that the Depositor's Annual ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Certification is to be signed by an officer of the Depositor, a Responsible
Officer of the Indenture Trustee shall sign a certification, in the form
attached hereto as Exhibit E for the benefit of the Depositor and its
officers, directors and Affiliates (provided, however, that the Indenture
Trustee shall not undertake an analysis of the accountant's report attached as
an exhibit to the Form 10-K). The forms of certification attached as Exhibit D
and Exhibit E hereto are subject to revision so as to conform to any
amendments made to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or to any rules and
regulations promulgated thereto. Such certification shall be delivered to the
Depositor, no later than March 15th of each year (or if such day is not a
Business Day, the immediately preceding Business Day) and the Depositor shall
deliver the Depositor's Annual ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification to be filed to the
Indenture Trustee no later than March 20th of each year (or if such day is not
a Business Day, the immediately preceding Business Day). In the event that
prior to the filing date of the Form 10-K in March of each year, the Indenture
Trustee has actual knowledge of information material to the Depositor's Annual
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification, the Indenture Trustee shall promptly notify the
Depositor. In addition, the Indenture Trustee shall indemnify and hold
harmless the Depositor and its officers, directors and Affiliates from and
against any losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments and other costs and expenses
arising out of or based upon any breach of the Indenture Trustee's obligations
under this Section 5.09 or the Indenture Trustee's negligence, bad faith or
willful misconduct in connection therewith.
(d) Upon any filing with the Commission, the Indenture Trustee
shall promptly deliver to the Depositor a copy of any such executed report,
statement or information.
(e) Prior to January 30 of the first year in which the Indenture
Trustee is able to do so under applicable law, the Indenture Trustee shall, in
accordance with applicable law, file a Form 15D Suspension Notification with
respect to the Issuer in a timely manner.
ARTICLE VI
THE DEPOSITOR
Section 6.01 Representations of Depositor. The Depositor makes the
following representations to the Issuer, the Servicer, the Indenture Trustee
and the Seller. The Issuer relies on such representations in accepting the
Receivables and delivering the Securities. Such representations and warranties
speak as of the execution and delivery of this Agreement and as
55
of the Closing Date with respect to the Initial Receivables and as of the
related Subsequent Transfer Date with respect to the Subsequent Receivables,
and shall survive the sale, transfer and assignment of the Receivables by the
Depositor to the Issuer and the pledge thereof to the Indenture Trustee in
accordance with the terms of the Indenture.
(a) Organization and Good Standing. The Depositor is duly
organized and validly existing as a corporation in good standing under the
laws of the State of Delaware, with the corporate power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(b) Due Qualification. The Depositor is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions where the failure to do
so would materially and adversely affect the Depositor's ability to transfer
the Receivables to the Issuer pursuant to this Agreement or the validity or
enforceability of the Receivables.
(c) Power and Authority. The Depositor has the corporate 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 respective terms; the Depositor
has full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Issuer, and the Depositor shall have duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement and the
other Basic Documents to which the Depositor is a party have been, duly
authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement and the other Basic
Documents to which the Depositor is a party, when duly executed and delivered
by the other parties hereto and thereto, shall constitute legal, valid and
binding obligations of the Depositor, enforceable against the Depositor in
accordance with their respective terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or similar laws now
or hereafter in effect relating to or affecting creditors' rights generally
and to general principles of equity (whether applied in a proceeding at law or
in equity).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Basic Documents and the
fulfillment of the terms of this Agreement and the other Basic Documents shall
not conflict with, result in any breach of any of the terms or provisions of
or constitute (with or without notice or lapse of time, or both) a default
under, the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Depositor is a party or by which it is bound; or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement and the other Basic Documents; or violate any law, order,
rule or regulation applicable to the Depositor of any court or federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor.
(f) No Proceedings. No legal or governmental proceedings are
pending to which the Depositor is a party or of which any property of the
Depositor is subject and no such
56
proceedings are, to the Depositor's knowledge, threatened or contemplated,
against the Depositor before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality having jurisdiction over the
Depositor or its properties: (i) asserting the invalidity of this Agreement or
any other Basic Document; (ii) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by this
Agreement or any other Basic Document; (iii) seeking any determination or
ruling that might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of, this
Agreement or any other Basic Document; or (iv) seeking to adversely affect the
federal income tax attributes of the Trust, the Notes or the Certificates.
(g) No Litigation Pending. There is no action, suit, regulatory or
other proceeding of any kind pending or, to the Depositor's knowledge,
threatened against or materially affecting the Depositor or the properties of
the Depositor before any Governmental Authority which, if determined adversely
to the Depositor, would adversely affect the Depositor ability to execute,
deliver and perform its obligations under this Agreement.
(h) No Consents. The Depositor is not required to obtain the
consent of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Basic Document to which it is a
party that has not already been obtained.
(i) No Untrue Information. Neither this Agreement nor any
statement, report or other document furnished or to be furnished by the
Depositor in writing pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary to
make such statement, document or report not misleading.
Section 6.02 Corporate Existence. During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. In
addition, all transactions and dealings between the Depositor and its
Affiliates will be conducted on an arm's-length basis.
Section 6.03 Liability of Depositor; Indemnities. The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement (which shall not
include distributions on account of the Notes or the Certificates).
Section 6.04 Merger or Consolidation of, or Assumption of the
Obligations of, Depositor. Any Person with which the Depositor shall merge or
consolidate or which the Depositor shall permit to become the successor to the
Depositor's business shall execute an agreement of assumption of every
obligation of the Depositor under this Agreement and the other Basic
Documents. Whether or not such assumption agreement is executed, such
successor
57
Person shall be the successor to the Depositor 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 Depositor shall provide prompt notice of
any merger, consolidation or succession pursuant to this Section 6.04 to the
Owner Trustee, the Indenture Trustee, the Servicer, the Securityholders and
the Rating Agencies. Notwithstanding the foregoing, the Depositor shall not
merge or consolidate with any other Person or permit any other Person to
become a successor to the Depositor's business unless (w) immediately after
giving effect to such transaction, no representation or warranty made pursuant
to Section 3.02 or 6.01 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction), (x) the Depositor shall have delivered to the Owner
Trustee, the Indenture Trustee and the Servicer an Officer's Certificate and
an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 6.04 and
that all conditions precedent provided for in this Agreement relating to such
transaction have been complied with, (y) the Rating Agency Condition shall
have been satisfied and (z) the Depositor shall have delivered to the Owner
Trustee, the Indenture Trustee and the Servicer an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed
that are necessary to preserve and protect the interest of the Trust in the
Receivables and reciting the details of such filings or (B) no such action is
necessary to preserve and protect such interest.
Section 6.05 Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Depositor shall be under no 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 6.06 Depositor May Own Securities. The Depositor and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Securities with the same rights as it would have if it were not
the Depositor or an Affiliate thereof, except as expressly provided herein or
in any Basic Document.
Section 6.07 Depositor to Provide Copies of Relevant Securities
Filings. The Depositor shall provide or cause to be provided to the Indenture
Trustee a copy of any document filed by the Depositor subsequent to the date
hereof with the Commission pursuant to the Securities Act of 1933 or the
Securities Exchange Act of 1934 that relate specifically to the Trust, the
Notes or the Certificates.
Section 6.08 Amendment of Depositor's Organizational Documents. The
Depositor shall not amend its organizational documents except in accordance
with the provisions thereof.
Section 6.09 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certifications. The Depositor shall
provide on a timely basis for filing with the 1934 Act Documents, the
certification (the "Depositor's Annual ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification"),
substantially in the form of Exhibit D, required by Section 302 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act to be included in those reports.
58
ARTICLE VII
THE SERVICER
Section 7.01 Representations of Servicer.
(a) The Servicer makes the following representations and
warranties to the Issuer, the Depositor, the Indenture Trustee, the Owner
Trustee and the Seller and upon which the Issuer is deemed to have relied in
acquiring the Receivables. Such representations speak as of the execution and
delivery of this Agreement and as of the Closing Date with respect to the
Initial Receivables and as of the related Subsequent Transfer Date with
respect to the Subsequent Receivables (and in the case of subsections (i), (v)
and (ix) as of any point during the term of the Agreement), and shall survive
the sale of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee in accordance with the terms of the Indenture.
(i) Due Organization and Qualification. The Servicer (A) is
duly organized and validly existing as a national banking association
under the laws of the United States of America, (B) is in good
standing under such laws and (C) is duly qualified to transact
business under such laws. The Servicer is an insured depository
institution under the provisions of the Federal Deposit Insurance
Act, 12 U.S.C. Sections 1811-1831 and the Servicer's status as an
insured depository institution has not been terminated under the
provisions of Section 8 of the Federal Deposit Insurance Act, 12
U.S.C. Section 1818. The Servicer has, and at all relevant times had,
the power, authority and legal right to service the Receivables.
(ii) Power and Authority; Due Authorization; Enforceability.
The Servicer has full power and authority to perform its obligations
under this Agreement and has duly authorized the performance of its
obligations under this Agreement by all necessary action. The
Agreement has been duly authorized, executed and delivered by the
Servicer and constitutes the legal, valid, binding and enforceable
obligation of the Servicer except as the same may be limited by
insolvency, bankruptcy, reorganization or other laws relating to or
affecting the enforcement of creditors' rights or by general equity
principles.
(iii) No Violation. The Servicer is not in default under any
indenture, mortgage, deed of trust, loan agreement, guarantee, lease
financing agreement or similar agreement or instrument to which the
Servicer is a party, as borrower or guarantor, and the consummation
of the transactions contemplated by this Agreement and the other
Basic Documents to which it is a party, and the fulfillment of the
respective terms thereof, will not conflict with or result in a
breach of any of the terms or provisions of, or constitute (with or
without notice or lapse of time or both) a default under, or result
in the creation or imposition of any lien, charge or encumbrance upon
any of the property or assets of the Servicer pursuant to the terms
of, any such indenture, mortgage, deed of trust, loan agreement,
guarantee, lease financing agreement or similar agreement or
instrument to which the Servicer is a party or by which it is bound,
in each case where such a default, conflict or breach would
materially and adversely affect the performance by the Servicer of
its obligations under this Agreement and the consummation of the
59
transactions contemplated by this Agreement; and the fulfillment of
the terms hereof will not result in any violation of the provisions
of the organizational documents of the Servicer.
(iv) No Proceedings. No legal or governmental proceedings or
investigations are pending to which the Servicer is a party or of
which any property of the Servicer is the subject, and no such
proceedings are threatened or contemplated by Governmental
Authorities or threatened by others against the Servicer before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or
its properties, other than such proceedings which will not have a
material adverse effect upon the general affairs, financial position,
net worth or operations of the Servicer and its subsidiaries
considered as a whole: (x) asserting the invalidity of this Agreement
or any of the other Basic Documents; (y) seeking to prevent the
issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or any of the other Basic
Documents; or (z) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of
its obligations under, or the validity and enforceability of, this
Agreement or any of the other Basic Documents to which it is a party.
(v) Licenses and Approvals. The Servicer has obtained all
the licenses and approvals necessary for the conduct of Servicer's
business in the jurisdictions where the failure to do so would
materially and adversely affect its performance of its obligations
under this Agreement or render any of the Receivables unenforceable.
(vi) Ability to Perform. The Servicer has the facilities,
procedures and experienced personnel necessary for the servicing of
retail motor vehicle loan and installment sale contracts of the same
type as the Receivables in accordance with the Servicing Standard.
The Servicer does not believe, nor does it have any reason or cause
to believe, that it cannot perform each and every one of its
obligations under this Agreement.
(vii) No Consent Required. The Servicer is not required to
obtain the consent of any other Person, or any consent, license,
approval or authorization or registration or declaration with, any
Governmental Authority in connection with the execution, delivery or
performance of this Agreement or any other Basic Document to which it
is a party, except for such as have been obtained, effected or made
or will be obtained on or prior to the Closing Date.
(viii) No Litigation Pending. There is no action, suit,
proceeding or investigation pending or, to the Servicer's knowledge,
threatened against the Servicer or any of its Affiliates which, if
determined adversely against the Servicer, would materially adversely
affect the execution, delivery or enforceability of this Agreement,
the other Basic Documents to which the Servicer is a party, as
applicable, or draw into question the validity of this Agreement, the
other Basic Documents to which the Servicer is a party, as
applicable, or any of the Receivables or have a material adverse
effect on the financial condition of the Servicer or the Servicer's
ability to perform its obligations under the
60
terms of this Agreement or the other Basic Documents to which the
Servicer is a party, as applicable.
(ix) No Untrue Information. None of this Agreement, the
other Basic Documents to which the Servicer is a party or any
statement, report or other document furnished or to be furnished in
writing by the Servicer pursuant to this Agreement, the other Basic
Documents to which the Servicer is a party, as applicable, or in
connection with the transactions contemplated hereby or thereby
contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary to make such
statement, document or report not misleading.
(x) No Fraud. To the best of the Servicer's knowledge, no
fraud in respect of such Receivable has taken place on the part of
any employee or agent of the Servicer in connection with the
servicing of the Receivables.
Section 7.02 Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer and the representations made by the Servicer under
this Agreement and:
(a) The Servicer shall indemnify, defend and hold harmless the
Seller, the Issuer, the Owner Trustee, the Indenture Trustee, the
Securityholders and the Depositor and any of the officers, directors, agents,
partners, members, shareholders and employees of the Seller, the Issuer, the
Owner Trustee, the Indenture Trustee (collectively, the "Indemnified Parties"
and each, an "Indemnified Party") from and against any and all claims, losses
and liabilities, reasonable and necessary legal fees and related costs,
judgments, and any other costs, fees or expenses that an Indemnified Party may
sustain in any way related to claims of third parties related to (i) the
failure of the Servicer to perform its duties as servicer and custodian and to
service the Receivables in compliance with the terms of this Agreement, (ii)
the breach of any representation or warranty, covenant or other agreement of
the Servicer set forth in this Agreement or the other Basic Documents
applicable to it, (iii) the use, ownership or operation by the Servicer or any
Affiliate thereof of a Financed Vehicle or (iv) any information delivered by
the Servicer to the Indenture Trustee and/or the Depositor pursuant to this
Agreement that is false, incorrect, incomplete or misleading in any material
respect when delivered.
(b) The Servicer or the Indemnified Party, as applicable, shall
promptly notify the other upon becoming aware that a claim subject to
indemnification under Section 7.02(a) (an "Indemnified Claim") has been made
by a third party with respect to this Agreement or the Receivables; provided,
however, that the failure of the Indemnified Party to notify the Servicer of
an Indemnified Claim shall not relieve the Servicer from any liability that it
may have to any Indemnified Party, but only to the extent such failure to
notify does not prejudice the Servicer's ability to defend. The Servicer shall
assume the defense of any such Indemnified Claim and be responsible for all
fees and expenses of counsel incurred therewith as well as any other
litigation expenses; provided, however, that counsel chosen by the Servicer
shall be reasonably acceptable to the Issuer; and provided, however, that at
any time the Indemnified Party shall be entitled to participate therein and,
to the extent that it shall wish, hire counsel (who shall not, except with the
consent of the Servicer, be counsel to the Servicer) and, jointly with the
Servicer, assume the defense thereof. The Servicer shall not be liable to the
Indemnified Party for the cost of the
61
Indemnified Party's counsel. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless: (i) the employment thereof has been specifically
authorized by the Servicer in writing; (ii) the actual or potential defendants
in, or targets of, any such action include both the Servicer and the
Indemnified Party and counsel retained by the Servicer cannot adequately
represent both the Servicer and the Indemnified Party in light of the claims
and defenses that each intends to raise; or (iii) the Servicer has failed to
assume the defense of such action and employ counsel reasonably satisfactory
to the Indemnified Party within a reasonable time after the commencement of
the action. In the case of (ii) or (iii) above, if the Indemnified Party
notifies the Servicer in writing that it elects to employ separate counsel at
the expense of the Servicer, the Servicer shall not have the right to select
separate counsel to participate in the defense of such action on behalf of the
Indemnified Party. Notwithstanding the foregoing sentence, the Servicer shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with no more
than one local counsel, if necessary) at any time for the Indemnified Party,
which firm shall be designated in writing by the Servicer. The Servicer shall
not, without the written consent of the Indemnified Party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the Indemnified Party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of,
fault, culpability or failure to act, by or on behalf of the Indemnified
Party.
For purposes of this Section, in the event of the termination of the
rights and obligations of HNB (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.02, or the resignation by such
Servicer pursuant to this Agreement, such Servicer shall have the rights and
obligations of "Servicer" pursuant to Section 7.02(b) with respect to any
Indemnified Claim arising from its capacity as Servicer under this Agreement.
The Servicer shall have no obligation to indemnify any of the
Indemnified Parties in connection with (x) a Receivable being deemed to be
unenforceable in a jurisdiction or (y) any impairment of receipt of
collections on a Receivable if either of the foregoing occurs as a result of
the Issuer's, the Indenture Trustee's or the Owner Trustee's failure to obtain
any license or consent necessary in connection with the ownership or
enforcement of the Receivables or the inability of the Servicer to pursue
litigation as a result of the restrictions set forth in Section 4.01(c).
Indemnification under this Section shall survive the resignation or
removal of the Servicer or the termination of this Agreement with respect to
acts of the Servicer prior thereto, and shall include reasonable fees and
expenses of counsel and reasonable expenses of litigation. If the Servicer
shall have made any indemnity payments pursuant to this Section 7.02 and the
Person to or on behalf of whom such payments are made thereafter collects any
of such amounts from others, such Person shall promptly repay such amounts to
the Servicer, without interest.
62
Section 7.03 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. The Servicer shall preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement or any
of the Receivables and to perform its duties under this Agreement.
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) that acquires by conveyance, transfer or
lease substantially all of the assets of the Servicer, or (iv) succeeding to
the business of the Servicer, which Person shall execute an agreement of
assumption to perform every obligation of the Servicer under this Agreement,
shall be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement anything herein to the contrary notwithstanding;
provided, however, that, the Servicer shall provide prompt notice of any
merger, consolidation or succession pursuant to this Section 7.03 to the Owner
Trustee, the Indenture Trustee, the Depositor and the Rating Agencies and
immediately after giving effect to such transaction, (i) no representation or
warranty made pursuant to Section 7.01 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction), (ii) no event that, after notice or lapse
of time or both, would become an Event of Servicing Termination or an
Additional Event of Servicing Termination shall have occurred and be
continuing, (iii) the Servicer shall have delivered to the Indenture Trustee
and the Owner Trustee an Officer's Certificate and Opinion of Counsel each
stating that such consolidation, merger or succession and any such related
agreements comply with this Section 7.03 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with and (iv) the Servicer shall have delivered to the Indenture
Trustee and the Owner Trustee an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the Trust and the
Indenture Trustee in the Receivables or (B) no such action shall be necessary
to preserve and protect such interest. Furthermore, in the event the Servicer
transfers or otherwise disposes of all or substantially all of its assets to
an Affiliate of the Servicer, such Affiliate shall satisfy the condition
described in the preceding sentence and shall also be fully liable to for all
of the Servicer's obligations and liabilities hereunder.
Section 7.04 Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of its shareholders, directors, officers, employees or
agents shall be under any liability to the Seller, the Issuer, the Depositor,
the Indenture Trustee, the Owner Trustee, the Noteholders or any other Person
for taking any action or for refraining from the taking of any action pursuant
to this Agreement, or for errors in judgment; provided, however, that this
Section 7.04 shall not protect the Servicer against any liability that would
otherwise be imposed by reason of a breach or warranties or representation
made in this Agreement or the failure to perform its obligations in compliance
with any standard of care set forth in this Agreement or any other liability
which would otherwise be imposed under this Agreement. The Servicer and any
director, officer, employee or agent of the Servicer may conclusively rely in
good faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement; provided further, however, that in no event shall
Servicer be liable to the Issuer or any other Person for any consequential,
exemplary or
63
punitive damages, except to the extent awarded to a third party with respect
to any matters indemnified under Section 7.02.
Section 7.05 Servicer Not to Resign.
(a) Subject to the provisions of Section 7.03, the Servicer shall
not resign from the obligations and duties imposed on it by this Agreement as
Servicer except upon mutual consent of the Servicer, the Depositor, the
Indenture Trustee and the Owner Trustee or upon the determination that the
performance of its duties under this Agreement shall no longer be permissible
under Applicable Law and such incapacity cannot be cured by the Servicer.
(b) Notice of any determination that the performance by the
Servicer of its duties hereunder is no longer permitted under Applicable Law
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 by the Servicer to the Owner Trustee and the Indenture Trustee. No
resignation of the Servicer shall become effective until a successor Servicer
(or if one is not appointed, the Indenture Trustee) shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
8.03, unless the Servicer is prohibited by Applicable Law from serving as
Servicer, in which instance the Indenture Trustee shall act as successor
Servicer or immediately appoint another Person to do so. If the Indenture
Trustee is legally unable to act as Servicer and if no successor Servicer
shall have been appointed within thirty days of resignation or removal of the
resigning Servicer, the Indenture Trustee, the Owner Trustee or the
Certificateholders evidencing not less than 25% of the percentage interests in
the Certificates may petition any court of competent jurisdiction for such
appointment.
ARTICLE VIII
DEFAULT
Section 8.01 Event of Servicing Terminations and Additional Event of
Servicing Terminations.
(a) For purposes of this Agreement, the occurrence and continuance
of any of the following shall constitute a "Event of Servicing Termination":
(i) any failure by the Servicer to deposit into the
Collection Account (x) any proceeds or payment required to be so
delivered on a Remittance Date under the terms of this Agreement that
continues unremedied for a period of one Business Day after the date
upon which such payment was due or (y) any payment required to be
made under the terms of this Agreement (other than any payment to be
made on a Remittance Date) that continues unremedied for a period of
three Business Days after the date upon which such payment was due;
(ii) failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Servicer set forth in this Agreement, which failure continues
unremedied for a period of thirty days after
64
discovery of such failure by a Responsible Officer of the Servicer or
after the date on which written notice of such failure requiring the
same to be remedied shall have been given to the Servicer by
Noteholders evidencing not less than 25% of the Outstanding Amount of
the Controlling Class;
(iii) failure by the Servicer to maintain its license to do
business in any jurisdiction where the Servicer is required to be
licensed in connection with the servicing of the Receivables or the
performance of its other obligations under this Agreement, where such
failure materially and adversely affects the ability of the Servicer
to perform its obligations under this Agreement;
(iv) the occurrence of an Insolvency Event with respect to
the Servicer;
(v) any assignment or delegation by the Servicer of its
duties or rights hereunder except as specifically permitted
hereunder, or any attempt to make such assignment or delegation;
(vi) the indictment of the Servicer, any director or
employee thereof, any Affiliate or any director or employee thereof
for criminal activity related to the origination or servicing
activities of the Servicer, in each case, where such indictment
materially and adversely affects the ability of the Servicer, as
applicable, to perform its obligations under this Agreement subject
to the condition that such indictment is not dismissed within ninety
days; or
(vii) any disqualification of the Servicer as an Eligible
Servicer.
(b) For purposes of this Agreement, the occurrence and continuance
of the following shall constitute an "Additional Event of Servicing
Termination":
(i) the occurrence of a Termination Trigger Event;
(ii) any change in the business, assets, operations,
prospects or condition, financial or otherwise, of the Servicer that
has a material adverse effect on the ability of the Servicer to
perform any of its obligations under this Agreement;
(iii) the long-term unsecured debt rating of the Servicer is
withdrawn or reduced to "Baa2" or below by ▇▇▇▇▇'▇, "BBB" or below by
Standard & Poor's or "BBB" or below by Fitch; or
(iv) the Servicer shall default in the payment of
indebtedness for any borrowed monies (after giving effect to all
applicable cure periods in any agreement governing such indebtedness)
in an amount in excess of $10,000,000.
(c) The Servicer shall deliver to the Indenture Trustee and the Owner
Trustee, promptly after having obtained knowledge thereof, but in no event
later than three 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 8.01(a) or
an Additional Event of Servicing Termination under Section 8.01(b).
65
(d) Any delinquencies, repossessions or losses on the Receivables
caused by (i) the failure of the Issuer, the Indenture Trustee or the Owner
Trustee to have any licenses or consents necessary in connection with the
ownership or enforcement of the Receivables or (ii) the inability of the
Servicer to pursue litigation as a result of the restrictions set forth in
bringing suit at the direction of the Servicer as required by Section 4.01(c)
shall not be considered in determining the existence of an Additional Event of
Servicing Termination.
Section 8.02 Consequences of an Event of Servicing Termination or an
Additional Event of Servicing Termination.
(a) If an Event of Servicing Termination shall occur and be
continuing, the Indenture Trustee may, and at the written direction of
Noteholders evidencing not less than a majority of the Outstanding Amount of
the Controlling Class, or, if no Notes are Outstanding, Certificateholders
evidencing 25% of the percentage interests in the Certificates, shall
terminate all of the rights and obligations of the Servicer under this
Agreement by notice in writing to the Servicer. If an Additional Event of
Servicing Termination shall occur, the Indenture Trustee may, and at the
written direction of Certificateholders evidencing not less than 75% of the
percentage interests in the Certificates shall, terminate all of the rights
and obligations of the Servicer under this Agreement by notice in writing to
the Servicer. At the time a notice of termination is delivered to the Servicer
or as soon thereafter as possible, a successor Servicer shall be appointed
pursuant to Section 8.03.
(b) The Indenture Trustee or such other successor Servicer is
authorized and empowered by this Agreement to execute and deliver, on behalf
of the terminated Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables and related documents to show the Indenture Trustee (or the Owner
Trustee if the Notes have been paid in full) as lienholder or secured party on
the related certificates of title of the Financed Vehicles or otherwise. In
the event of termination pursuant to Section 8.02(a), the terminated Servicer
agrees to cooperate with the Indenture Trustee or the successor Servicer, as
applicable, in effecting the termination of the responsibilities and rights of
the terminated Servicer under this Agreement, including the transfer to the
Indenture Trustee or such other successor Servicer for administration by it of
all money and property held by the Servicer with respect to the Receivables
and other records relating to the Receivables, including any portion of the
Receivables File held by the Servicer and a computer tape in readable form as
of the most recent Business Day containing all information necessary to enable
the successor Servicer or the Indenture Trustee to service the Receivables.
The terminated Servicer shall also provide the Indenture Trustee or such other
successor Servicer computer records in order to facilitate the orderly and
efficient transfer of servicing duties. Upon such termination, the terminated
Servicer, upon the request of the Indenture Trustee, shall give notice to each
Obligor of the sale of the related Receivable to the Issuer and that such
Obligor shall, effective as of the date of such notice, remit all Monthly
Payments to an account specified by the Indenture Trustee or such other
successor Servicer.
66
Section 8.03 Appointment of Successor Servicer.
(a) On and after the receipt by the Servicer of a notice of
termination pursuant to Section 8.02 or upon resignation of the Servicer
pursuant to Section 7.05, the Servicer shall continue to perform all servicing
functions under this Agreement until the earlier of the date specified in such
notice of termination or otherwise specified by the Indenture Trustee or until
a date mutually agreed upon by the Servicer and the Indenture Trustee. As
promptly as possible after a notice of termination has been received by the
Servicer, the Certificateholders evidencing not less than a majority of the
percentage interests in the Certificates shall appoint an Eligible Servicer
who satisfies the Rating Agency Condition as successor Servicer, and such
successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee. In the event that a successor
Servicer has not been appointed by the requisite percentage of
Certificateholders or has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Indenture Trustee without further
action shall automatically be appointed the successor Servicer.
Notwithstanding the above, if (x) a successor Servicer has not been selected
by the Certificateholders or has not accepted its appointment at the time when
the Servicer ceases to act as Servicer and (y) the Indenture Trustee is
legally unable to act as Servicer, the Indenture Trustee, the Owner Trustee or
Noteholders evidencing not less than 25% of the Outstanding Amount of the
Controlling Class or, if no Notes are outstanding, Certificateholders
evidencing not less than 25% of the percentage interests in the Certificates,
may petition a court of competent jurisdiction to appoint an Eligible Servicer
as the successor to the Servicer. Except as provided in Section 7.05, pending
appointment pursuant to the preceding sentence, the outgoing Servicer shall
continue to act as Servicer until a successor has been appointed and accepted
such appointment. The Indenture Trustee shall be entitled to withdraw from the
Collection Account and remit to the successor Servicer (including the
Indenture Trustee as successor Servicer) or such other party entitled thereto
(but not including the terminated Servicer) all reasonably incurred Servicer
transition costs. The sole remedy for termination under Section 8.01(b)(i)
shall be the termination of the Servicer.
(b) The successor Servicer (including the Indenture Trustee in its
capacity as successor Servicer), shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and all rights,
including to the Servicing Fee, authority, power, obligations and
responsibilities of the Servicer under this Agreement automatically shall pass
to, be vested in and become obligations and responsibilities of such successor
Servicer and such successor Servicer shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating to the Servicer under this Agreement, except as otherwise stated
herein; provided, however, that such successor Servicer shall have no
liability with respect to any obligation that was required to be performed by
the terminated Servicer prior to the date that such successor Servicer becomes
the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer; and provided, further that the Indenture
Trustee as successor Servicer shall have no obligation to make Monthly
Advances (as provided in Section 4.02(c)). The Depositor, the Owner Trustee,
the Indenture Trustee and the successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicing Fee to which a successor Servicer is entitled may be
modified, with the prior written consent of Certificateholders evidencing not
less than 100% of the percentage interests in the Certificates and subject to
satisfaction of the Rating Agency Condition with respect to such modification
of the Servicing Fee.
67
Section 8.04 Notification to Securityholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Owner Trustee shall give prompt written notice thereof to the
Certificateholders, and the Indenture Trustee shall give prompt written notice
thereof to the Noteholders and each Rating Agency.
Section 8.05 Waiver of Past Defaults. Noteholders evidencing not less
than a majority of the Outstanding Amount of the Controlling Class, or, if no
Notes are Outstanding, Certificateholders evidencing not less than a majority
of the percentage interests in the Certificates, may, on behalf of all
Securityholders, waive in writing any Event of Servicing Termination or
default by the Servicer in the performance of its obligations hereunder and
its consequences, except (i) a default in making any required deposits to or
payments from any of the Trust Accounts in accordance with this Agreement or
(ii) a default that is an Insolvency Event. Certificateholders evidencing not
less than 100% of the percentage interests in the Certificates, may, on behalf
of all Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences that is, or with
the giving of notice or lapse of time or both would become, an Additional
Event of Servicing Termination. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Servicing Termination or
Additional Event of Servicing Termination, as applicable, arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any
right consequent thereto except to the extent so expressly waived.
ARTICLE IX
TERMINATION
Section 9.01 Optional Purchase of All Receivables.
(a) On each Determination Date as of which the Pool Balance with
respect to the related Distribution Date will be equal to or less than 10% of
the Initial Pool Balance, the Servicer shall have the option to purchase the
Receivables. If the Servicer shall elect not to exercise such option, a
Certificateholder evidencing 100% of the percentage interests in the
Certificates shall have the option to purchase the Receivables; provided that
such Certificateholder shall not be the Seller, the Depositor or any Affiliate
thereof. To exercise such option, the Servicer or the Certificateholder, shall
deposit to the Collection Account on the Business Day prior to the Redemption
Date, an amount equal to the lesser of (i) the fair market value of the
Receivables and (ii) aggregate Repurchase Amount for the Receivables
(including Receivables that became Defaulted Receivables during the related
Collection Period) and shall succeed to all interests in and to the
Receivables; provided, however, that in order for the Servicer or such
Certificateholder to exercise such option the amount deposited into the
Collection Account shall be sufficient to pay the full amount of principal and
interest then due and payable on any Outstanding Notes and to pay any amounts
due to the Indenture Trustee and the Owner Trustee; and provided further, that
the Certificateholder shall also be required to deposit into the Collection
Account on the date of such purchase, an amount sufficient reimburse the
Servicer for any Monthly Advances which have not been reimbursed in accordance
with this Agreement. The exercise of such option shall effect a retirement, in
whole but not in part, of all outstanding Notes.
68
(b) As described in Article IX of the Trust Agreement, notice of
any termination of the Trust shall be given by the Servicer to the Owner
Trustee and the Indenture Trustee as soon as practicable after the Servicer
has received notice thereof.
(c) If the Servicer shall exercise its option to purchase the
Receivables pursuant to Section 9.01(a), any Certificateholder (unless such
Certificateholder is the Seller, the Depositor or any Affiliate thereof) shall
have the option to purchase such Receivables from the Servicer at a price
equal to the price that the Servicer paid for such Receivables pursuant to
Section 9.01(a).
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee, on behalf of the Issuer, will succeed to the rights of the
Indenture Trustee pursuant to this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01 Amendment.
(a) This Agreement may be amended by the Depositor, the Servicer,
the Indenture Trustee and the Issuer, without the consent of any of the
Noteholders or Certificateholders, to amend Section 5.09 in a manner
consistent with the rules and regulations of the Commission, to cure any
ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Owner Trustee and the Indenture Trustee, adversely affect in
any material respect the interests of any Noteholder or Certificateholder;
provided further, that such action shall be deemed not to adversely affect in
any material respect the interests of any Noteholder or Certificateholder and
no Opinion of Counsel to that effect shall be required if the person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the ratings
then assigned to the Notes.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Issuer, with the prior written consent of the
Indenture Trustee, Noteholders holding not less than a majority of the
Outstanding Amount of the Class A Notes, Noteholders holding not less than a
majority of the Outstanding Amount of the Class B Notes, Noteholders holding
not less than a majority of the Outstanding Amount of the Class C Notes,
Noteholders holding not less than a majority of the Outstanding Amount of the
Class D Notes, Noteholders holding not less than a majority in Outstanding
Amount of the Class E Notes and Certificateholders evidencing not less than a
majority of the percentage interests in the Certificates, 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
Securityholders; provided, however, that no such amendment shall (i) increase
or reduce in
69
any manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Securityholders, (ii) reduce the aforesaid percentage of
the Outstanding Amount of the Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes or the Class E Notes, the Noteholders of which are
required to consent to any such amendment, without the consent of the
Noteholders holding all Outstanding Class A Notes, Class B Notes, Class C
Notes, Class D Notes and Class E Notes or (iii) reduce the aforesaid
percentage of the percentage interests in the Certificates, the
Certificateholders of which are required to consent to any such amendment,
without the consent of all of the Certificateholders.
(c) Promptly after the execution of any amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent to each Securityholder and each Rating Agency.
(d) It shall not be necessary for the consent of Noteholders or
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
(e) Prior to the execution of any amendment to this Agreement, the
Owner Trustee, on behalf of the Issuer 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,
if applicable, the Opinion of Counsel referred to in Section 10.01(a). The
Owner Trustee and the Indenture Trustee, may, but shall not be obligated to,
enter into any such amendment that affects the Owner Trustee's or the
Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise.
Section 10.02 Protection of Title to Trust.
(a) The Seller and the Depositor shall file such financing
statements and cause to be filed such continuation statements, all in such a
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 in
the Receivables and the proceeds thereof. The Seller and/or the Depositor, as
applicable, 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.
In addition, the Seller and the Depositor hereby authorize the Issuer and the
Indenture Trustee at any time and from time to time to prepare and file, at
the Depositor's sole cost and expense, financing statements and amendments
thereto in any jurisdiction as may be necessary or desirable to preserve,
maintain and protect the interests of the Issuer and the Indenture Trustee in
the Receivables and the proceeds thereof.
(b) None of the Seller, the Depositor or 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 in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-506(b) of the UCC, unless it shall have given the Owner Trustee and
the Indenture Trustee at least five (5) days' prior written notice thereof and
shall have promptly filed appropriate amendments to all previously filed
financing statements or
70
continuation statements. Each of the Seller and the Depositor hereby
authorizes the Issuer to file any continuation statements or amendments to
financing statements, or any similar document in any jurisdictions and with
any filing offices as the Issuer (or the Indenture Trustee on behalf of the
Issuer) may determine, in its sole discretion, are necessary or advisable in
connection with the protection of ownership interest granted to the Issuer and
the Indenture Trustee herein.
(c) Each of Seller, the Depositor and the Servicer shall have an
obligation to give the Owner Trustee and the Indenture Trustee at least sixty
days' prior written notice of (i) any relocation of its registered location or
(ii) any change in the jurisdiction of its organization (including, with
respect to the Servicer, the jurisdiction in which the Servicer maintains its
main office under its national banking association charter). In addition, 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) [Reserved].
(e) The Servicer shall maintain its computer systems, in
accordance with customary standards, so that, from and after the time of sale
under this Agreement of the Receivables, the Servicer's master computer
records (including any backup archives) that refer to a Receivable shall be
coded to reflect that such Receivable is part of the portfolio of Receivables
that is the subject of this Agreement and is owned by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan
Trust 2004-HB2 and pledged to the Indenture Trustee. The unique identification
code which the Servicer shall use is "GL Type Code 307". The Servicer shall
have the right to change such code upon written notice to the Issuer, provided
that such new code is a unique identification code. Indication of such
Receivables' inclusion in the portfolio shall be deleted from or modified on
the Servicer's computer systems when, and only when, the lien on the related
Financed Vehicle has been released in accordance with the Basic Documents.
(f) If at any time the Depositor or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest in motor
vehicle receivables to any prospective purchaser, lender or other transferee,
all of the computer diskettes, records or printouts (including any restored
from backup archives) that are delivered to such prospective purchaser, lender
or transferee refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Issuer and has
been pledged to the Indenture Trustee.
(g) The Servicer shall, without charge, permit the Indenture
Trustee and its agents upon reasonable notice and at any time during normal
business hours, which does not unreasonably interfere with the Servicer's
normal operations or customer or employee relations to, at the expense of the
Indenture Trustee (which reasonable expenses shall be reimbursed by the Issuer
pursuant to Section 5.06(b)), inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Receivable.
(h) The Depositor shall deliver to the Owner Trustee and the
Indenture Trustee:
71
(i) promptly after the execution and delivery of this
Agreement and each amendment hereto, an Opinion of Counsel stating
that, in the opinion of such counsel, either (i) all financing
statements and continuation statements have been executed and filed
that are necessary to fully preserve and protect the interest of the
Trust and the Indenture Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (ii) no such action shall be
necessary to preserve and protect such interest; and
(ii) within ninety 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 90-day period, stating that, in the opinion of such
counsel, either (i) all financing statements and continuation
statements have been executed and filed that are necessary to fully
preserve and protect the interest of the Trust and the Indenture
Trustee in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are
given, or (ii) no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (i) or (ii) 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.
Section 10.03 Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Issuer, the Owner
Trustee, the Indenture Trustee or any Rating Agency under this Agreement shall
be in writing, personally delivered, faxed and followed by first class mail,
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 Depositor, to ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇▇
▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(fax no.: (▇▇▇) ▇▇▇-▇▇▇▇), (b) in the case of the Servicer and the custodian,
to The Huntington National Bank, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, (c) in the case
of the Issuer or the Owner Trustee, at the Corporate Trust Administration
Department (as defined in the Trust Agreement); (d) in the case of the
Indenture Trustee, to ▇▇▇▇▇ Fargo Bank, National Association, Sixth and
Marquette Avenue, MAC N9311-161, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (fax no.: (612)
▇▇▇-▇▇▇▇), Attention: CTS/Asset Backed Securities Administration, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2, (e) in the case of ▇▇▇▇▇'▇, to ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ABS
Monitoring Department, (f) in the case of Fitch, to ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (fax no.: (▇▇▇)-▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇▇ ▇▇▇▇ and
(g) in the case of Standard & Poor's, to ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: Asset Backed
Surveillance Department; or, as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 10.04 Assignment by the Depositor or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided
in Sections 6.04 and 7.03 herein and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not
be assigned by the Depositor or the Servicer.
72
Section 10.05 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the
Seller, the Issuer, the Owner Trustee, the Certificateholders, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 10.06 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 10.07 Counterparts. This Agreement may be executed by the
parties hereto in any number of counterparts, each of which when so executed
and delivered shall be an original, but all of which shall together constitute
but one and the same instrument. Transmission by facsimile of an executed
counterpart hereof shall be deemed to constitute due and sufficient delivery
of such counterpart.
Section 10.08 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 10.09 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 HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 10.10 Assignment by Issuer. The Depositor hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Indenture Trustee in accordance with the terms
of the Indenture for the benefit of the Noteholders of all right, title and
interest of the Issuer in, to and under the Receivables or the assignment of
any or all of the Issuer's rights and obligations hereunder to the Indenture
Trustee.
Section 10.11 Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement, the parties hereto shall not, prior to the date
that is one year and one day after the termination of this Agreement with
respect to the Issuer or the Depositor, acquiesce, petition or otherwise
invoke or cause the Issuer or the Depositor to invoke the process of any court
or government authority for the purpose of commencing or sustaining a case
against the Issuer or the Depositor under any federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or
the Depositor or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer or the Depositor.
Section 10.12 Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity
73
but solely in its capacity as Owner Trustee of the Issuer and in no event
shall Wilmington Trust Company 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 certificates,
notices or agreements delivered pursuant hereto, as to all of which recourse
shall be had solely to the assets of the Issuer in accordance with the
priorities set forth herein. 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, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by ▇▇▇▇▇ Fargo Bank, National Association,
not in its individual capacity but solely as Indenture Trustee, and in no
event shall ▇▇▇▇▇ Fargo Bank, National Association 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 in accordance with the priorities set forth herein.
74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first
above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AUTO LOAN
TRUST 2004-HB2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Financial Services Officer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS CAPITAL II INC.,
as Depositor
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ASSET FUNDING INC.,
as Seller
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
-------------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
Title: Vice President
THE HUNTINGTON NATIONAL BANK,
as Servicer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
75
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
76
SCHEDULE A
Schedule of Initial Receivables
(On file with the Indenture Trustee)
SCHEDULE B
Location of Receivable Files
1. The Huntington National Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE C
Cumulative Net Loss Ratio
Determination Cumulative Net
Date Loss Ratio
Jul-04 0.07%
Aug-04 0.07%
Sep-04 0.07%
Oct-04 0.28%
Nov-04 0.28%
Dec-04 0.28%
Jan-05 0.57%
Feb-05 0.57%
Mar-05 0.57%
Apr-05 0.83%
May-05 0.83%
Jun-05 0.83%
Jul-05 1.07%
Aug-05 1.07%
Sep-05 1.07%
Oct-05 1.27%
Nov-05 1.27%
Dec-05 1.27%
Jan-06 1.44%
Feb-06 1.44%
Mar-06 1.44%
Apr-06 1.60%
May-06 1.60%
Jun-06 1.60%
Jul-06 1.73%
Aug-06 1.73%
Sep-06 1.73%
Oct-06 1.84%
Nov-06 1.84%
Dec-06 1.84%
Jan-07 1.94%
Feb-07 1.94%
Mar-07 1.94%
Apr-07 2.01%
May-07 2.01%
Jun-07 2.01%
Jul-07 2.08%
Aug-07 2.08%
Sep-07 2.08%
Determination Cumulative Net
Date Loss Ratio
Oct-07 2.13%
Nov-07 2.13%
Dec-07 2.13%
Jan-08 2.17%
Feb-08 2.17%
Mar-08 2.17%
Apr-08 2.21%
May-08 2.21%
Jun-08 2.21%
Jul-08 2.23%
Aug-08 2.23%
Sep-08 2.23%
Oct-08 2.24%
Nov-08 2.24%
Dec-08 2.24%
Jan-09 2.26%
Feb-09 2.26%
Mar-09 2.26%
Apr-09 2.26%
May-09 2.26%
Jun-09 2.26%
2
EXHIBIT A
Form of Distribution Date Statement to Noteholders
-----------------------------------------------------------------------------------------------------------------------------
Servicer Huntington National Bank Contact:
Collection Period (contact's name)
Determination Date Corporate Trust Officer
Distribution Date ▇▇▇▇▇ Fargo Bank, N.A.
(contact's e-mail)
(contact's phone #)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Certificateholders Distribution Summary
-----------------------------------------------------------------------------------------------------------------------------
Beginning Interest Interest Principal distribution Ending Total
Class Cusip Principal Distribution Carryover Distribution of Principal Distribution
Balance Amount Shortfall Amount Pre-Funded Balance
Amount
-----------------------------------------------------------------------------------------------------------------------------
A-1 61747R AN0 170,000,000.00 0.00 0.00 0.00 0.00 170,000,000.00 0.00
A-2 61747R AP5 135,490,000.00 0.00 0.00 0.00 0.00 135,490,000.00 0.00
A-3 61747R AQ3 178,340,000.00 0.00 0.00 0.00 0.00 178,340,000.00 0.00
A-4 61747R AR1 103,320,000.00 0.00 0.00 0.00 0.00 103,320,000.00 0.00
B 61747R AS 9 13,700,000.00 0.00 0.00 0.00 0.00 13,700,000.00 0.00
C 61747R AT7 17,200,000.00 0.00 0.00 0.00 0.00 17,200,000.00 0.00
D 61747R AU 4 8,285,000.00 0.00 0.00 0.00 0.00 8,285,000.00 0.00
E 61747R AV2 10,832,000.00 0.00 0.00 0.00 0.00 10,832,000.00 0.00
Certificates n/a n/a n/a 0.00 0.00 n/a 0.00
-----------------------------------------------------------------------------------------------------------------------------
Total 637,167,000.00 0.00 0.00 0.00 0.00 637,167,000.00 0.00
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Pool Factors
Interest
Rate
-----------------------------------------------------------------------------------------------------------
Beginning Interest Interest Principal Pre-Funded Ending
Class Note Pool Distribution Carryover Distribution distribution Note Pool
Factor per 1,000 per 1,000 per 1,000 per 1,000 Factor
-----------------------------------------------------------------------------------------------------------------------------
A-1 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 1.90%
A-2 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 2.40%
A-3 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 2.94%
A-4 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 3.46%
B 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 3.37%
C 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 3.24%
D 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 3.82%
E 1.0000000 0.0000000 0.0000000 0.0000000 0.0000000 1.0000000 5.00%
-----------------------------------------------------------------------------------------------------------------------------
A-1
-----------------------------------------------------------------------------------------------------------------------------
Servicer Huntington National Bank Contact:
Collection Period (contact's name)
Determination Date Corporate Trust Officer
Distribution Date ▇▇▇▇▇ Fargo Bank, N.A.
(contact's e-mail)
(contact's phone #)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2
-----------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Cash Statement
-------------------------------------------------------------------------------------------------------------------------------
Collections
Principal Collections 0.00
Interest Collections 0.00
Recoveries and Liquidation Proceeds 0.00
Purchase Amounts and Advance Amounts from servicer 0.00
Total Collections Amount 0.00
per 1,000
Original
Principal
Balance
Disbursements
Servicing Fee 0.0000000 0.00
Servicing Reimbursement Amount 0.0000000 0.00
Owner Trustee Fee 0.0000000 0.00
Indenture Trustee Fee 0.0000000 0.00
Note Interest Distribution 0.0000000 0.00
Regular Principal Allocation 0.0000000 0.00
First Allocation of Principal 0.0000000 0.00
Second Allocation of Principal 0.0000000 0.00
Third Allocation of Principal 0.0000000 0.00
Fourth Allocation of Principal 0.0000000
Total Distribution 0.00
Amount
A-2
-----------------------------------------------------------------------------------------------------------------------------
Servicer Huntington National Bank Contact:
Collection Period (contact's name)
Determination Date Corporate Trust Officer
Distribution Date ▇▇▇▇▇ Fargo Bank, N.A.
(contact's e-mail)
(contact's phone #)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2
-----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Collateral Statement
------------------------------------------------------------------------------------------------------------------------------
Pool Balance (beginning of Collection Period) 537,164,809.81
Pool Balance (end of Collection Period) 537,164,809.81
Overcollateralization Target Amount for next Distribution Date 0.00
Overcollateralization Amount 0.00
-------------------------------------------------------------------
Delinquency Principal
Period Number Balance Percentage
-------------------------------------------------------------------
30 - 59 days 0 0.00 0.00%
60 - 89 days 0 0.00 0.00%
90 + days 0 0.00 0.00%
Totals 0 0.00 0.00%
-------------------------------------------------------------------
Pool Delinquency Percentage as of related Determination Date 0.00%
Repossessed Receivables 0 0.00
Defaulted Receivables or Repurchased Receivables 0.00
Receivables granted extensions 0 0.00
Repurchase Amounts 0.00
Realized Losses 0.00
Cram Down Losses 0.00
Cumulative Net Loss Ratio as of related Determination Date 0.00%
Six-Month Annualized Net Loss Ratio as of related Determination Date 0.00%
Three-Month Annualized Net Loss Ratio as of related Determination Date 0.00%
WAC 0.00
WAM 0.00
A-3
-----------------------------------------------------------------------------------------------------------------------------
Servicer Huntington National Bank Contact:
Collection Period (contact's name)
Determination Date Corporate Trust Officer
Distribution Date ▇▇▇▇▇ Fargo Bank, N.A.
(contact's e-mail)
(contact's phone #)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2
-----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Prefundings
------------------------------------------------------------------------------------------------------------------------------
PreFunding Account
Pre-Funded Amount (beginning of Collection Period) 100,000,000.00
Amount applied to funding of Subsequent Receivables 0.00
Unused Amount applied to Principal of Notes (Class A-1) 0.00
Remaining Pre-Funded Amount (end of Collection Period) 100,000,000.00
Subsequent Transfers
Subsequent Transfer date xx/xx/04
Subsequent Receivables Cut-off date xx/xx/04
Principal Balance of Subsequent receivables 0.00
A-4
EXHIBIT B
FORM OF SERVICER'S CERTIFICATE
(Available from Servicer)
B-1
EXHIBIT C
FORM OF SERVICER ANNUAL CERTIFICATION
I, [ ] certify that I am the duly authorized representative of The Huntington
National Bank ("Huntington"), as servicer (the "Servicer") pursuant to the
Sale and Servicing Agreement dated as of June 30, 2004, as amended from time
to time (the Sale and Servicing Agreement"), among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan
Trust 2004-HB2, as issuer (the "Issuer"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Funding Inc.
(the "Seller"), as seller, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS Capital II Inc., as depositor
(the "Depositor"), Huntington and ▇▇▇▇▇ Fargo Bank, National Association, as
indenture trustee (the "Indenture Trustee"), and I do hereby certify in the
name of and on behalf of the Servicer that:
1. A review of the activities of the Servicer and of the
performance of its obligations under the Sale and Servicing Agreement during
the period from [ ], 200[ ] to and including December 31, 200[ ] (the "Review
Period") [or, with respect to the first Officer's Certificate, the period from
the Closing Date to December 31 of such year] was conducted under the
supervision of the undersigned.
2. Based on such review, except as otherwise disclosed
pursuant to paragraph 3 below, to undersigned's knowledge, the Servicer has
fulfilled its obligations under the Sale and Servicing Agreement during the
applicable Review Period and there is no default known the undersigned with
respect to the applicable Review Period which has not been disclosed herein.
3. Based on such review, to the undersigned's knowledge, the
following is a description of each default in the performance of the
Servicer's obligations under the provisions of the Sale and Servicing
Agreement made during the Review Period, which sets forth in detail (i) the
nature and status of each such default and (ii) the action taken by the
Servicer, if any, to remedy each such default: [List Out]
4. To the undersigned's knowledge, the servicing information
provided by the Servicer herein in respect of the Receivables, including
information relating to actions of the Servicer and/or payments and other
collections on and characteristics of the Receivables, taken as a whole, does
not contain any untrue statement of material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading as of the last day of
the applicable Review Period.
5. To the knowledge of the undersigned, the Servicer has
provided all of the reports and certificates required under Sections 4.10,
4.11 and 4.12 to the parties to which such reports and certificates are
required to be provided with respect to the applicable Review Period.
C-1
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate this [ ] day of [ ], 200[ ].
Responsible Officer of the Servicer
By:_________________________
Name:
Title:
C-2
EXHIBIT D
FORM OF DEPOSITOR'S ANNUAL ▇▇▇▇▇▇▇▇-▇▇▇▇▇ CERTIFICATION
I, [identify the certifying individual], certify that:
1. I have reviewed this annual report on Form 10-K (the "Annual
Report"), and all reports on Form 8-K containing distribution reports
(collectively with this Annual Report, the "Report") filed in respect
of periods included in the year covered by this Annual Report, of the
Trust;
2. Based on my knowledge, the information in the Reports, taken as a
whole, does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made,
not misleading as of the last day of the period covered by this
Annual Report;
3. Based on my knowledge, the distribution or servicing information
required to be provided to the Indenture Trustee by the Servicer
under the Sale and Servicing Agreement, for inclusion in the Reports
is included in the Reports;
4. Based on my knowledge and upon the annual compliance statement
included in this Annual Report and required to be delivered to the
Indenture Trustee in accordance with the terms of the Sale and
Servicing Agreement, and except as disclosed in the Reports, the
Servicer has fulfilled its obligations under the Sale and Servicing
Agreement; and
5. The Reports disclose all significant deficiencies relating to the
Servicer's compliance with the minimum servicing standards based upon
the report provided by an independent public accountant, after
conducting a review in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or similar procedure, as set forth in
the Sale and Servicing Agreement, that is included in the Reports.
In giving the certifications above, I have reasonably relied on information
provided to me by the following unaffiliated parties: the Indenture Trustee
and the Servicer.
Date:__________
_________________________
Name:
Title:
D-1
EXHIBIT E
Form of Certification to be Provided to the Depositor by the Indenture Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS Capital II Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto Loan Trust 2004-HB2
Reference is made to the Sale and Servicing Agreement (the "Sale and
Servicing Agreement"), dated as of June 30, 2004, among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Auto
Loan Trust 2004-HB2 (the "Issuer"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS Capital II Inc. (the
"Depositor"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Funding Inc. (the "Seller"), The Huntington
National Bank (the "Servicer") and ▇▇▇▇▇ Fargo Bank, National Association (the
"Indenture Trustee"). The Indenture Trustee hereby certifies to the Depositor,
and its officers, directors and affiliates, and with the knowledge and intent
that they will rely upon this certification, that:
(i) The Indenture Trustee has reviewed the [ ] reports on
Form 8-K containing distribution reports filed in respect of periods included
in the fiscal year ending in [ ], relating to the above-referenced trust
(collectively, the "Reports"); and
(ii) Based on my knowledge, the distribution information
required to be provided by the Indenture Trustee under the Sale and Servicing
Agreement is included in these Reports. Based on my knowledge, the information
in the Reports, taken as a whole, does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading.
In giving the certifications above, I have reasonably relied on
information provided to me by the following unaffiliated party: The Huntington
National Bank, as Servicer.
Date:
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
By:____________________________________
Name:__________________________________
Title:_________________________________
E-1
EXHIBIT F
LOST NOTE AFFIDAVIT
I, the undersigned, do hereby state that:
1. I, a duly authorized Officer of The Huntington National
Bank, (the "Bank"), am authorized to make this Affidavit on behalf of the
Bank.
2. The Bank is the owner of the following installment note
or loan agreement (the "Contract"):
Loan No:
Obligor:
Automobile Make and Model:
Year Model:
Body Style:
Vehicle Identification Number:
Date:
Original Amount:
3. The Bank is the lawful owner of the Contract, and the
Bank has not assigned or hypothecated the Contract.
4. The original Contract could not be located after a
thorough and diligent search, which consisted of searching through such
records of the Bank as were reasonable and appropriate.
5. ( ) Attached is a true and correct copy of the
original Contract.
6. This affidavit is intended to be relied on by the
purchaser of the Contract from the Bank and such purchaser's successors and
assigns.
7. The Bank agrees immediately and without further
consideration to surrender the original Contract to the foregoing purchaser,
its successor or the assignee thereof if such original Contract ever comes
into the Bank's possession, custody or power.
8. The Bank further agrees to indemnify and hold harmless
the foregoing purchaser and its successors and assigns from any and all
losses, liabilities, costs, damages, reasonable attorney's fees and expenses
in connection with the inability of the Bank to locate the original Contract.
F-1
EXECUTED THIS _____day of _________, 200[ ]
On behalf of:
-----------------------------------------
Name:
Title:
STATE OF
COUNTY OF
Before me, a Notary Public in and for said County and State,
personally appeared __________________________________, a duly authorized
Officer of ___________________, who acknowledges the signing thereof to be
his/her free and voluntary act and deed and the free act and deed of said
board.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my official seal on the day and year last aforesaid.
________________________________________________________
Notary Public
F-2
EXHIBIT G
SERVICING STANDARDS
The Servicer shall provide the loan accounting and servicing functions
described in this document for the Portfolio(s) attached hereto, and for any
other Portfolios that may become subject to this Agreement from time to time.
Servicing Fees shall cover all servicing costs (including various borrower
account maintenance updates and title cures). The Servicer shall provide
reconstitution support to the Purchaser if accounts in the Portfolio are sold
pursuant to a Pass Through Transfer or a Whole Loan Transfer.
Servicing Environment Setup:
Set up unique identification for the Portfolio in the Servicer loan accounting
and servicing system to provide servicing and process standards, reporting of
results, data, and reports as mutually agreed upon for this Portfolio.
Establish procedures for calculating and assigning Deficiency Balances to HNB
recovery units or through a third party vendor.
All customer statements, forms, letter, correspondence and default notices and
resulting actions will be identified in the name of the Servicer and the
Purchaser name shall not be conveyed in any written or verbal correspondence
unless required by law.
Report monthly to the 3 major credit bureaus in the name of the Servicer and
not the Purchaser.
Loan Account Servicing and Reporting:
Maintain appropriate customer and loan account records for all accounts on the
Servicer Accounting System. The system will accurately account for interest
accruals, payoff calculations, late charge processing, payment application
processing, delinquency processing and closed loan processing.
Process all loan payments in compliance with the Retail Installment Loan
Contracts.
Process on a daily basis all payments received from customers.
Perform all exception processing for non exact items, misapplied payments, or
other correspondence received from the customers.
Appropriately staff (including with Bilingual counselors) the toll free
customer service and collection line to respond to customer inquiries using
live operators (define and agree upon working hours and days).
Respond to and resolve written customer inquiries regarding their accounts.
Process account maintenance changes to the loan accounting system.
G-1
Generate and mail late notices to customers when their account becomes past
due.
Generate and maintain an interface to the Servicer Collection Management
System for all accounts that are past due to initiate collection efforts.
Investigate and process refunds on overpayment accounts.
Process and address any credit bureau disputes received from customers
directly or the credit bureaus.
Update the credit bureau risk score for each account within the portfolio on a
quarterly basis, and provide updates to Purchaser.
Periodically update the behavior score (as applicable) for each account in the
portfolio.
Generate and mail appropriate forms and letters to customers throughout the
life of the loan (i.e. payoff letters, final payment bills, paid letters,
etc.).
Send any notices provided by the Purchaser or its designee to maintain
compliance with the Privacy Act.
Maintain customer accounts in an automated loan accounting system ensuring the
information contained in the account records is accurate and authorized change
requests are processed.
Provide all payment processing for loan accounts including ACH, other
electronic payment processes currently available and supported, and Lock box
account for receipt of customer payments.
Provide 24/7 toll-free incoming call service to loan customers for inquiries
on their accounts.
Establish access to a VRU to provide automated balance and payoff information
for loan customers.
Perform paid loan processing functions including credit bureau updates.
Process lien satisfactions for paid out/closed installment loans.
Archive all loan documents on hard copy or film for the appropriate retention
period.
Loan Account Collection:
Establish and maintain collection records in the Servicer Collection
Management System for all past due accounts. Record all collection efforts
within the collection history for each account.
Process extensions in accordance with Purchaser or its designee's guidelines.
Skip a Payment or other deferment programs (other than as provided in Section
4.01(b)) may not exceed the number allowed in the existing pass-a-payment
program in current coupon books.
G-2
Early Stage Delinquency:
Utilize the Servicer's STRATA Decisioning System including any Behavior
Scoring System and updated FICO scores to assign collection strategies as
specified herein. Loans will have phone calls start as early as 1 day past due
depending on the account level strategy. First payment default loans must be
called between the fifth and tenth day. Minimum Right Party Contact Rates of
25% monthly, and call penetration rates to be actively managed to achieve
these results.
Customer contact inquiries will be made to determine and provide the reason(s)
for default including but not limited to status of employment and household
income, any insurance claims in process, status of insurance on and location
and condition of collateral if applicable.
Collection actions and contact attempts will be taken in accordance collection
strategies as often as necessary and at various times of the day, evening, and
weekend in compliance with applicable law.
Accounts with no contact after 10 days (or earlier, if there is no phone
number in service for the related Account) will be escalated to manual review
to determine on-going strategy. If account has still not been contacted
through the dialer, account will be assigned to an off-dialer collection
resource for the purpose of direct scheduled calling sequence which may
include a targeted call period (evenings, weekends, breaks, etc.). This
process will occur approximately 17-20 days after scheduled due date.
At any stage (either by on-dialer recognition or through off-dialer review)
the account can be forwarded to an off-dialer resource or to a supervisor. No
promise in excess of ten days will be allowed. An account is currently
considered a broken promise 3 days after the date made. Advanced collection
resources will become involved if the customer has broken an existing promise
to pay. These resources will work the account within two business days after
the broken promise. In special circumstances, the account can be issued
directly to supervisor for review for repossession, or to the skip department
for advance location review. Broken promises are sent to a specific queue and
will be prioritized in CACS to maximize the next day call rate.
Skip tracing will commence as soon as indicated (telephone disconnected, mail
returned), and no later than 10 days after no contact. Making borrower
contacts attempts based on information obtained through methods such as credit
reports, internet services, place of employment and co-signer information,
door knocks, etc. If all account information is still considered to be valid,
account will be placed back into the dialer for 2nd random call sequencing.
Mid-Stage and Off-Dialer Collections:
A supervisor reviews most accounts that progress to beyond 30-days delinquent,
or that have been referred to the supervisor by the collector due to an
adverse situation or unacceptable customer request. No accounts (other than,
potentially, accounts with a balance of less than $2,500) will remain on the
dialer for longer than 45 days.
For accounts 30 or more days past due, continued regular phone attempts to
contact the Borrower will be made.
Customers 30 or more days past due will be requested to send payments via
overnight mail or through an automatic payment service.
G-3
Exclusive of any on-line automated late notices, the collection resource will
have the ability to generate an on-line collection letter to the debtor. These
notices to range from a friendly reminder to a firm demand letter based upon
the severity of the delinquency and the history of the account.
Account will remain in the collection resource's queue with a follow-up code.
This code will only be changed if the customer makes a payment, or the
collection resource performs an action on the account. Accounts are typically
sorted based upon the oldest follow-up date and the outstanding balance of
delinquency. Account follow-up should not exceed two days without the account
being reviewed.
Between the 45th and 60th day of delinquency of accounts where no payment
arrangements have been made, Servicer will order a current credit bureau
report if appropriate, verify title lien if applicable, and value of
collateral if applicable and order a copy of the Contract as needed.
The supervisor can submit the account for repossession during the standard
review process, or during special request by the off-dialer collection
resource. This will occur when the account has progressed to approximately 55
days, but no more than 70 days contractually delinquent, but may occur at any
time based upon the supervisor's/portfolio manager's determination.
Advance Collections:
Late Stage Collectors will be dedicated to collect on accounts at or near 45
days contractually delinquent. No more than 200 accounts will be assigned to
any one Late Stage Collector at any one time.
Advance collections include:
o Accounts that are skip and cannot be located
o Accounts that have broken multiple promises to pay without activity by
the customer
o Accounts that are out for repossession or liquidation
o Accounts with pending insurance activity
For most accounts that becomes 60 days past due, a supervisor shall review the
account and determine and execute a collection strategy. Strategies will be
based upon the borrowers ability to pay, delinquency status, payment history
and the asset's value/location. If it is not conceivable that arrangements can
be made to bring the customer current over a period of time through a
repayment plan or extension (in accordance with the agreed upon procedures),
the supervisor will submit the account to the collateral management group for
review for asset liquidation.
The account is placed into a special queue, where a mini-skip routine is
performed to secure the whereabouts of the asset prior to assigning the
account for repossession. This process is designed to expedite the recovery
and sale process, and minimizes acquisition and storage costs.
The collector will examine the collateral type and value, and make an
evaluation as to the time necessary to liquidate the asset, and estimate the
potential selling price prior to the final decision to liquidate.
G-4
Servicer will charge off accounts from the Servicer Loan Accounting System at
the earliest of:
i) when the account is deemed uncollectible, or
ii) when the asset has been sold and proceeds received, or
iii) 60 days after repossession, if the asset is still in inventory, or
iv) by the end of the month during which a loan becomes 120 days past
due and is not in repossession inventory, or
v) by the end of the month during which a loan becomes 180 days past
due.
Unrecovered balances will be charged off promptly after collateral liquidation
and receipt of funds. Servicing functions supporting the collection,
repossession and remarketing, or securing of insurance or other proceeds due
on the account will continue regardless of the charge off designation.
Servicing and Accounting systems, reports and data files must contain an
identifier for Repossession, and/or Charge-off status.
In cases of loan default and charge offs only, Servicer will apply for and use
reasonable efforts to realize upon insurance proceeds, including GAP insurance
and rebates on insurance and warranty policies in order to mitigate the loss
incurred. In all other cases, customers will be directed to the originating
dealership for cancellations, refunds, and all other insurance and warranty
matters.
Accounts in repossession and bankruptcy status remain in special queues that
are not accessed by the general collection resources unless redemption,
reaffirmation, dismissal, or other action has occurred which would qualify the
account for general collection processing.
Repossession:
Servicer will provide a repossession and remarketing network and contract with
such third party service providers.
Contracts assigned for repossession shall be handled in accordance with the
following standards and procedures:
o Verify lien on title.
o Order copy of contract and original title, if appropriate.
o Complete assignment to repossessor with borrower and collateral
information within 48 hours of receipt in repossession department.
o Follow up with repossessor on progress weekly.
o Continue to attempt contact and payment arrangements with borrower.
o When contacted by repossessor that property has been repossessed,
obtain condition report, storage location and costs.
o Follow state requirements regarding borrower notification and
redemption or reinstatement periods.
o If appropriate, negotiate redemption, notify storage lot of
redemption and terms. Provide borrower with redemption release to
claim property once terms have been met.
o If no redemption, determine value of collateral, set floor price and
proceed with sale at auction.
G-5
o All auction expenses to be netted from proceeds of sale and net
proceeds applied to the loan balance. Repossession expenses are paid
by invoice and added to account balance.
o Calculate deficiency balance and send deficiency letter to borrower.
o Obtain any warranty or insurance proceeds due on account.
o Charge off deficiency, or if overage exists after full payment of
account and expenses, send overage to borrower with notice of sale.
Servicer remarketing specialist to attend auctions to inspect collateral,
validate the auction process, and/or evaluate the remarketing strategy.
Recovery:
Account collection activities will continue after charge-off by following
recovery procedures in accordance with this Agreement, including:
Option 1:
o Attempt to collect on the Deficiency Balance for an account for a
period of no more than 120 days, which may be extended an additional
60 days if, in the Servicer's reasonable judgment such extension will
maximize recovery of the Deficiency Balance; and then
o Refer the related account to a Collector to collect on the Deficiency
Balance for an account; or
Option 2:
o Immediately refer the related account to a Collector to collect on
the Deficiency Balance, if, in the Servicer's reasonable judgment
referral of such account to the Collector will maximize recovery of
the Deficiency Balance.
In any event, remittances collected or received from servicer or Collector
shall be included in the Remittance Amounts.
Guideline Costs associated with repossession and remarketing process
(estimated):
Judicial Fees: $500
Repossessor charge: $285 per unit (includes keys) average of voluntary and
involuntary
Storage Fee: $10 average per unit repossessed and sold
Standard Auction Clean-Up Fee: $83 per vehicle
Auction or Sale fee: Average of $105 per unit sold
Title conversion or Duplicate Title (if applicable): $45 per unit sold
Move collateral to auction: $37 per vehicle
Impound fees if applicable: Average of $45 per account processed
G-6
All costs are to be recouped from the liquidation sale proceeds. Net
liquidation proceeds cannot be less than zero.
Bankruptcy:
In the event that a debtor declares bankruptcy, servicer enters the bankruptcy
transaction on the account the same or following business day that the
notification is received. The account is placed into the bankruptcy
department's worklist, where follow-up dates and codes are placed on the
account to ensure that the servicer is following state and federal law in the
handling of these accounts. Servicer will perform all necessary actions for
bankruptcy including, at a minimum, the following:
o Acknowledge receipt of bankruptcy notice
o Stop all collection activity to comply with Federal Stay Order,
including property sale
o Conduct initial review verifying payment status, collateral, account
balance and debtor's attorney
o Obtain knowledge and understanding of the customer's plan
o Lift stay on collateral, as needed
o Motion to discharge/dismiss, as needed
o Objection to confirmation, as needed
o File proof of claim on all BKs as necessary
o Monitor customer's compliance to the confirmed plan
o Aggressively pursue reaffirmation of debt
o Process Cram Down amount when received from the court
G-7
Performance Standards:
The following Performance Standards will be measured on a calendar month basis
during the term of this Agreement. Servicer and Purchaser will jointly develop
specific measurement process and documentation during the implementation.
------------------------------------------------------------ ------------------
Performance
Customer Service Standard
------------------------------------------------------------ ------------------
Timeliness: % of calls answered in under 30 seconds 70%
------------------------------------------------------------ ------------------
Timeliness: % incoming calls answered. Manage to 5% 95%
abandonment rate or better
------------------------------------------------------------ ------------------
For routine customer service inquiries (e.g. due date
changes, automatic deductions) fulfillment confirmation
letters will be sent within 2 business days. All written 90%
service inquiries will be processed within the standard
day guidelines detailed by Servicer.
------------------------------------------------------------ ------------------
% of payments posted same business day if received in lock 95%
box by 10:00 AM EST with payment coupon. Payments
received after 10:00 AM EST, will be posted the next
business day. All other exception payments will be posted
not more than 5 business days after receipt.
------------------------------------------------------------ ------------------
G-8
------------------------------------------------------------ ------------------
Collections Performance
Standard
------------------------------------------------------------ ------------------
Timeliness: Percent of incoming calls to the defined 800# 70%
answered within 30 seconds
------------------------------------------------------------ ------------------
Adherence to Collection Standards specified herein 90%
------------------------------------------------------------ ------------------
Right Party Contact Rate for Early Stage Delinquent
Accounts (1 to 29 Days Past Due) based on 200% file
penetration and complete and accurate borrower contact 25%
information.
------------------------------------------------------------ ------------------
Maximum Late Stage Accounts (60+ Days Past Due) assigned 200
per Collector
------------------------------------------------------------ ------------------
New bankruptcy filings assigned per Bankruptcy Specialist 120 - 150
------------------------------------------------------------ ------------------
Repossession Performance
Standard
------------------------------------------------------------ ------------------
Maximum number of repossessed Financed Vehicles in 50%
inventory for more than 60 days
------------------------------------------------------------ ------------------
Mainframe Systems Performance
Standard
------------------------------------------------------------ ------------------
Availability 98%
------------------------------------------------------------ ------------------
G-9
EXHIBIT H
FORM OF
SUBSEQUENT TRANSFER AGREEMENT
THIS SUBSEQUENT TRANSFER AGREEMENT is dated as of ____________, 2004,
(as amended, this "Agreement") among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AUTO LOAN TRUST 2004-HB2,
a Delaware statutory trust (the "Issuer"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS CAPITAL II INC.,
a Delaware corporation, as depositor (the "Depositor"), THE HUNTINGTON
NATIONAL BANK, as servicer ("HNB," and in such capacity, the "Servicer") and
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as
indenture trustee (the "Indenture Trustee"), and is made pursuant to the Sale
and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, the Issuer, the Depositor and the Servicer are parties to
the Sale and Servicing Agreement, dated as of June 30, 2004 (as amended,
modified or supplemented, the "Sale and Servicing Agreement");
WHEREAS, pursuant to the Sale and Servicing Agreement, the Depositor
wishes to convey the Subsequent Receivables referred to in Section 2 below to
the Issuer; and
WHEREAS, the Issuer is willing to accept such conveyance subject to
the terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Depositor and the Servicer hereby
agree as follows:
SECTION 1. Defined Terms. Capitalized terms used herein have the
meanings ascribed to them in the Sale and Servicing Agreement unless otherwise
defined herein.
"Subsequent Cut-Off Date" means, with respect to the Subsequent
Receivables conveyed hereby, ____________ 2004.
"Subsequent Transfer Date" means, with respect to the Subsequent
Receivables conveyed hereby, __________, 2004.
SECTION 2. Schedule of Receivables. Annexed hereto as Schedule A is a
schedule listing the Receivables that constitute the Subsequent Receivables to
be conveyed pursuant to this Agreement on the Subsequent Transfer Date.
SECTION 3. Conveyance of Subsequent Receivables. In consideration of
the Issuer's delivery to or upon the order of the Depositor of $____________,
the Depositor does hereby sell, transfer, assign, set over and otherwise
convey to the Issuer on the Subsequent Transfer Date, without recourse
(subject to the obligations of the Depositor set forth in the Sale and
Servicing
H-1
Agreement), and the Issuer hereby purchases, all right, title and interest of
the Depositor in, to and under each of the Subsequent Receivables listed on
Schedule A hereto, including:
(i) all interest, principal, and any other amounts received
on or with respect to each of such Subsequent Receivables after the
Subsequent Cut-Off Date;
(ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to such Subsequent Receivables and any other
interest of the Depositor in such Financed Vehicles;
(iii) all other security interests or other property
interests created by or constituting each such Subsequent Receivable
and on any property that shall have secured the Subsequent Receivable
and that shall have been acquired by or on behalf of the Depositor;
(iv) all of the Depositor's rights with respect to each such
Subsequent Receivable and the documentation relating to such
Subsequent Receivables, including, without limitation, all rights
under the VSI Policy with respect to such Subsequent Receivable and
the contents of each Receivable File, including, without limitation,
all of the Depositor's enforcement and other rights under the UCC and
other Applicable Law;
(v) rebates of premiums on insurance policies and all other
items financed as part of such Subsequent Receivables in effect as of
the related Subsequent Cut-Off Date, including but not limited to,
service warranties;
(vi) all Servicing Rights with respect to, and all proceeds
of and rights to enforce, any of the foregoing, including, without
limitation, any Insurance Proceeds and Liquidation Proceeds;
(vii) all of the Depositor's rights (but not its
obligations) under the Assignment, Assumption and Recognition
Agreement (as supplemented), the Flow Purchase Agreement and the
related Assignment with respect to such Subsequent Receivables;
(viii) all accounts, money, chattel paper, securities,
instruments, documents, deposit accounts, certificates of deposit,
letters of credit, advices of credit, banker's acceptances,
uncertificated securities, general intangibles, contract rights,
goods and other property consisting of, arising from or relating to
any and all of the foregoing; and
(ix) the proceeds of any and all of the foregoing.
SECTION 4. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Issuer as of the date of this
Agreement and as of the Subsequent Transfer Date that:
(a) Organization and Good Standing. The Depositor is duly
organized and validly existing as a corporation in good standing under the
laws of the State of Delaware, with
H-2
the corporate power and authority to own its properties and to conduct its
business. as such properties are currently owned and such business is
presently conducted.
(b) Due Qualification. The Depositor is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership
or lease of property, including the Receivables, or the conduct of its
business shall require such qualifications.
(c) Power and Authority. The Depositor has the corporate 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 respective terms; the Depositor
has full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Issuer, and the Depositor shall have duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement and the
other Basic Documents to which the Depositor is a party have been, duly
authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement and the other Basic
Documents to which the Depositor is a party, when duly executed and delivered
by the other parties hereto and thereto, shall constitute legal, valid and
binding obligations of the Depositor, enforceable against the Depositor in
accordance with their respective terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or similar laws now
or hereafter in effect relating to or affecting creditors' rights generally
and to general principles of equity (whether applied in a proceeding at law or
in equity).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Basic Documents and the
fulfillment of the terms of this Agreement and the other Basic Documents shall
not conflict with, result in any breach of any of the terms or provisions of
or constitute (with or without notice or lapse of time, or both) a default
under, the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Depositor is a party or by which it is bound; or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement and the other Basic Documents; or violate any law, order,
rule or regulation applicable to the Depositor of any court or federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor.
(f) No Proceedings. No legal or governmental proceedings are
pending to which the Depositor is a party or of which any property of the
Depositor is subject and no such proceedings are, to the Depositor's
knowledge, threatened or contemplated, against the Depositor before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Depositor or its properties: (i)
asserting the invalidity of this Agreement or any other Basic Document; (ii)
seeking to prevent the issuance of the Securities or the consummation of any
of the transactions contemplated by this Agreement or any other Basic
Document; (iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Depositor of its obligations under, or
the validity or
H-3
enforceability of, this Agreement or any other Basic Document; or (iv) seeking
to adversely affect the federal income tax attributes of the Trust, the Notes
or the Certificates.
(g) No Litigation Pending. There is no action, suit, regulatory or
other proceeding of any kind pending or, to the Depositor's knowledge,
threatened against or materially affecting the Depositor or the properties of
the Depositor before any Governmental Authority which, if determined adversely
to the Depositor, would adversely affect the Depositor ability to execute,
deliver and perform its obligations under this Agreement.
(h) No Consents. The Depositor is not required to obtain the
consent of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Basic Document to which it is a
party that has not already been obtained.
(i) No Untrue Information. Neither this Agreement nor any
statement, report or other document furnished or to be furnished by the
Depositor in writing pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary to
make such statement, document or report not misleading.
(j) Principal Balance. The aggregate Principal Balance of the
Subsequent Receivables listed on Schedule A annexed hereto, which Schedule A
shall supplement Schedule A to the Sale and Servicing Agreement, and conveyed
to the Issuer pursuant to this Agreement and the Sale and Servicing Agreement
as of the Subsequent Cut-Off Date is $_________________.
SECTION 5. Conditions Precedent. The obligation of the Issuer to
acquire the Receivables hereunder is subject to the satisfaction, on or prior
to the Subsequent Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by the Depositor in Section 4 of this Agreement and in
Section 3.02 of the Sale and Servicing Agreement shall be true and correct as
of the date of this Agreement and as of the Subsequent Transfer Date.
(b) Sale and Servicing Agreement Conditions. Each of the
conditions set forth in Section 2.01(c) of the Sale and Servicing Agreement
shall have been satisfied.
(c) Additional Information. The Depositor shall have delivered to
the Issuer such information as was reasonably requested by the Issuer to
satisfy itself as to (i) the accuracy of the representations and warranties
set forth in Section 4 of this Agreement and in Section 3.02 of the Sale and
Servicing Agreement and (ii) the satisfaction of the conditions set forth in
this Section 5.
SECTION 6. Ratification of Agreement. As supplemented by this
Agreement, the Sale and Servicing Agreement. is in all respects ratified and
confirmed and the Sale and Servicing Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.
H-4
SECTION 7. Counterparts. This Agreement may be executed in two or
more counterparts (and by different parties in separate counterparts), each of
which shall be an original but all of which together shall constitute one and
the same instrument.
SECTION 8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9. Third Party Beneficiary. The Indenture Trustee and its
successors and assigns shall be an express third party beneficiary of this
Agreement.
[Signature pages follow]
H-5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AUTO LOAN
TRUST 2004-HB2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:______________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ABS CAPITAL II INC.,
as Depositor
By:______________________________
Name:
Title:
THE HUNTINGTON NATIONAL BANK,
as Servicer
By:______________________________
Name:
Title:
Acknowledged and Accepted:
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:______________________________
Name:
Title:
EXHIBIT I
ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
Schedule A
to Subsequent Transfer Agreement
List of Subsequent Receivables