SALE AND SERVICING AGREEMENT
Dated as of March 1, 1999
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1999-A
Issuer
ARCADIA RECEIVABLES FINANCE CORP.
Seller
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.4. Section References . . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.5. No Recourse. . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.6. Material Adverse Effect. . . . . . . . . . . . . . . . . . . 23
ARTICLE II CONVEYANCE OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.1. Conveyance of Initial Receivables. . . . . . . . . . . . . . 24
SECTION 2.2. Custody of Receivable Files. . . . . . . . . . . . . . . . . 24
SECTION 2.3. Conditions to Acceptance by Owner Trustee. . . . . . . . . . 26
SECTION 2.4. Conveyance of Subsequent Receivables . . . . . . . . . . . . 26
SECTION 2.5. Representations and Warranties of Seller . . . . . . . . . . 29
SECTION 2.6. Repurchase of Receivables Upon Breach of Warranty. . . . . . 31
SECTION 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.8. Collecting Lien Certificates Not Delivered on the
Closing Date or Subsequent Transfer Date . . . . . . . . . . 32
SECTION 2.9. Trust's Assignment of Administrative Receivables and
Warranty Receivables . . . . . . . . . . . . . . . . . . . . 32
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES. . . . . . . . . . . . . 33
SECTION 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . . . . 33
SECTION 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements. . . . . . . . . . . . . . . 34
SECTION 3.3. Realization Upon Receivables . . . . . . . . . . . . . . . . 37
SECTION 3.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.5. Maintenance of Security Interests in Vehicles. . . . . . . . 39
SECTION 3.6. Covenants, Representations, and Warranties of Servicer . . . 40
SECTION 3.7. Purchase of Receivables Upon Breach of Covenant. . . . . . . 42
SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . . . . 43
SECTION 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 3.11. Annual Independent Accountants' Report . . . . . . . . . . . 45
SECTION 3.12. Access to Certain Documentation and Information Regarding
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.14. Retention and Termination of Servicer. . . . . . . . . . . . 47
SECTION 3.15. Fidelity Bond. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.16. Duties of the Servicer under the Indenture . . . . . . . . . 47
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SECTION 3.17. Duties of the Servicer under the Insurance Agreement . . . . 48
SECTION 3.18. Certain Duties of the Servicer under the Trust Agreement . . 49
ARTICLE IV DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS. . . . . . . . . . . . . . . 50
SECTION 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.2. Collections. . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.3. Application of Collections . . . . . . . . . . . . . . . . . 54
SECTION 4.4. Monthly Advances . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.5. Additional Deposits. . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.6. Distributions. . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.7. Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.9. Statements to Noteholders. . . . . . . . . . . . . . . . . . 59
SECTION 4.10. Indenture Trustee as Agent . . . . . . . . . . . . . . . . . 60
SECTION 4.11. Eligible Accounts. . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE V THE RESERVE ACCOUNT; THE SPREAD ACCOUNT. . . . . . . . . . . . . . . . 60
SECTION 5.1. Withdrawals from the Reserve Account . . . . . . . . . . . . 60
SECTION 5.2. Withdrawals from Spread Account. . . . . . . . . . . . . . . 61
ARTICLE VI THE SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.1. Liability of Seller. . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Amendment of Certificate
of Incorporation . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.3. Limitation on Liability of Seller and Others . . . . . . . . 63
SECTION 6.4. Seller May Own Notes . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VII THE SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.1. Liability of Servicer; Indemnities . . . . . . . . . . . . . 63
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer. . . . . . . 65
SECTION 7.3. Limitation on Liability of Servicer, Backup Servicer
and Others . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.5. Servicer and Backup Servicer Not to Resign . . . . . . . . . 66
SECTION 7.6. Advancing Obligations of Successor Servicer. . . . . . . . . 67
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ARTICLE VIII SERVICER TERMINATION EVENTS . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.1. Servicer Termination Event . . . . . . . . . . . . . . . . . 67
SECTION 8.2. Consequences of a Servicer Termination Event . . . . . . . . 69
SECTION 8.3. Appointment of Successor . . . . . . . . . . . . . . . . . . 70
SECTION 8.4. Notification to Noteholders. . . . . . . . . . . . . . . . . 71
SECTION 8.5. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . 71
ARTICLE IX TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.1. Optional Purchase of All Receivables; Liquidation of
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.2. Protection of Title to Trust Property. . . . . . . . . . . . 74
SECTION 10.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.4. Severability of Provisions . . . . . . . . . . . . . . . . . 76
SECTION 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.6. Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . 77
SECTION 10.7. Disclaimer by Security Insurer . . . . . . . . . . . . . . . 77
SECTION 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.9. Intention of Parties . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.10. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.11. Limitation of Liability. . . . . . . . . . . . . . . . . . . 78
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SCHEDULES
Schedule A -- Representations and Warranties of Seller and AFL
Schedule B -- Servicing Policies and Procedures
EXHIBITS
Exhibit A -- Schedule of Initial Receivables
Exhibit B -- Form of Custodian Agreement (AFL)
Exhibit C -- Form of Spread Account Agreement
Exhibit D -- Form of Receivables Purchase Agreement
Exhibit E -- Form of Servicer's Certificate
Exhibit F -- Form of Subsequent Transfer Agreement
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THIS SALE AND SERVICING AGREEMENT, dated as of March 1, 1999, is
made among Arcadia Automobile Receivables Trust, 1999-A (the "Issuer"), Arcadia
Receivables Finance Corp., a Delaware corporation, as Seller (the "Seller"),
Arcadia Financial Ltd., a Minnesota corporation, in its individual capacity and
as Servicer (in its individual capacity, "AFL"; in its capacity as Servicer, the
"Servicer"), and Norwest Bank Minnesota, National Association, a national
banking association, as Backup Servicer (the "Backup Servicer").
In consideration of the mutual agreements herein contained, and
of other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All terms defined in the Spread
Account Agreement, the Indenture or the Trust Agreement (each as defined below)
shall have the same meaning in this Agreement. Whenever capitalized and used in
this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally
recognized independent accountants described in Section 3.11.
ACCOUNTING DATE: With respect to a Distribution Date, the last
day of the Monthly Period immediately preceding such Distribution Date.
ACTUAL FUNDS: With respect to a Distribution Date, the sum of
(i) Available Funds for such Distribution Date, plus (ii) the portion of the
Reserve Amount, if any, deposited pursuant to Section 5.1(a) into the Collection
Account with respect to such Distribution Date.
ADDITION NOTICE: With respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.4, a notice, which shall be given
not later than 15 days prior to the related Subsequent Transfer Date, of the
Seller's designation of Subsequent Receivables to be transferred to the Issuer
and the aggregate Principal Balance of such Subsequent Receivables.
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period,
a Receivable which the Servicer is required to purchase pursuant to Section 3.7
or which the Servicer has elected to purchase pursuant to Section 3.4(c).
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AFL: Arcadia Financial Ltd., a Minnesota corporation.
AGGREGATE PRINCIPAL BALANCE: With respect to any Determination
Date, the sum of the Principal Balances (computed as of the related Accounting
Date) for all Receivables (other than (i) any Receivable that became a
Liquidated Receivable during the related Monthly Period and (ii) any Receivable
that became a Purchased Receivable as of the immediately preceding Accounting
Date).
AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing
Agreement, all amendments and supplements thereto and all exhibits and schedules
to any of the foregoing.
AMOUNT FINANCED: With respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs. The term "Amount Financed" shall not include any
Insurance Add-On Amounts.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable,
the rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If
after the Closing Date, the rate per annum with respect to a Receivable as of
the Closing Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.
ASSUMED REINVESTMENT RATE: 2.5% per annum.
AVAILABLE FUNDS: With respect to any Determination Date, the
sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account as of the related Deposit Date,
(iii) all Monthly Advances made by the Servicer as of the related Deposit Date,
and (iv) all net income from investments of funds in the Trust Accounts during
the related Monthly Period.
BACKUP SERVICER: Norwest Bank Minnesota, National Association,
or its successor in interest pursuant to Section 8.2, or such Person as shall
have been appointed as Backup Servicer or successor Servicer pursuant to Section
8.3.
BASIC SERVICING FEE: With respect to any Monthly Period, the
fee payable to the Servicer for services rendered during such Monthly Period,
which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied
by the Aggregate Principal Balance as of the Determination Date falling in such
Monthly Period.
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BASIC SERVICING FEE RATE: 1.25% per annum.
BOA PURCHASE AGREEMENT: The Amended and Restated Purchase
Agreement and Assignment, date as of July 21, 1998, between AFL and the Seller.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of any
successor Servicer, successor Owner Trustee, successor Indenture Trustee or
successor Collateral Agent are authorized or obligated by law, executive order
or governmental decree to be closed.
CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE: March 15, 2000 (or,
if such day is not a Business Day, the next succeeding Business Day thereafter).
CLASS A-1 HOLDBACK AMOUNT: As of any Subsequent Transfer Date,
an amount equal to 2.5% of the amount, if any, by which the applicable "Target
Original Pool Balance" specified below is greater than the Original Pool Balance
after giving effect to the transfer of Subsequent Receivables on such Subsequent
Transfer Date:
SUBSEQUENT TRANSFER DATE TARGET ORIGINAL POOL BALANCE
------------------------ ----------------------------
April 15, 1999 $475,590,633.99
May 15, 1999 $550,000,000.00
CLASS A-1 HOLDBACK SUBACCOUNT: The subaccount of the Reserve
Account, the funds in which shall consist of all Class A-1 Holdback Amounts
deposited therein during the Funding Period, other than investment earnings
thereon. Any funds in the Class A-1 Holdback Subaccount shall be withdrawn
on the Class A-1 Final Scheduled Distribution Date and distributed as
specified in Section 5.1(b).
CLASS A-1 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-1 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-1 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-1 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-1 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-1 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-1 INTEREST RATE: 4.960% per annum.
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CLASS A-1 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, the product of (x) the Class A-1 Interest
Rate, (y) a fraction, the numerator of which is the number of days elapsed
from and including the most recent date to which interest has been paid (or,
in the case of the first Distribution Date, interest accrued for 29 days,
which is the number of days elapsed from and including the Closing Date to
but excluding April 15, 1999) to but excluding such Distribution Date and the
denominator of which is 360 and (z) the outstanding principal balance of the
Class A-1 Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-1 Noteholders on or prior to
such immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
CLASS A-1 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-1 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-1 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-1 Prepayment Amount
at the Class A-1 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-1 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding June 16, 1999 over (ii) the amount of interest that would have
accrued on the Class A-1 Prepayment Amount over the same period at a per
annum rate of interest equal to the bond equivalent yield to maturity on the
Determination Date preceding such Distribution Date on 3 month London
Interbank Offered Rate ("LIBOR") due June 16, 1999. Such excess shall be
discounted to present value to such Distribution Date at the yield described
in clause (ii) above.
CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE: January 15, 2002
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-2 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-2 Interest Distributable Amount
for the preceding Distribution Date, over the amount in respect of interest
on the Class A-2 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-2 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-2 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-2 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-2 INTEREST RATE: 5.373% per annum.
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CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, the product of (x) the Class A-2 Interest
Rate, (y) a fraction, the numerator of which is the number of days elapsed
from and including the most recent date to which interest has been paid (or,
in the case of the first Distribution Date, interest accrued for 29 days,
which is the number of days elapsed from and including the Closing Date to
but excluding April 15, 1999) to but excluding such Distribution Date and
the denominator of which is 360 and (z) the outstanding principal balance of
the Class A-2 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-2 Noteholders on or prior to
such immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
CLASS A-2 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-2 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-2 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-2 Prepayment Amount
at the Class A-2 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-2 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding February 28, 2000 over (ii) the amount of interest that would have
accrued on the Class A-2 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 11 month Eurodollar Synthetic
Forward due February 28, 2000. Such excess shall be discounted to present
value to such Distribution Date at the yield described in clause (ii) above.
CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: September 15,
2002 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-3 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-3 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-3 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-3 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-3 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-3 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-3 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-3 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-3 INTEREST RATE: 5.750% per annum.
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CLASS A-3 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued for 28 days, which is the number of
days elapsed from and including the Closing Date to but excluding April 15,
1999, assuming that the last day of each month is the 30th) at the Class A-3
Interest Rate on the outstanding principal balance of the Class A-3 Notes on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments
of principal to Class A-3 Noteholders on or prior to such immediately
preceding Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date).
CLASS A-3 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-3 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-3 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-3 Prepayment Amount
at the Class A-3 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-3 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding November 30, 2000, over (ii) the amount of interest that would have
accrued on the Class A-3 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 5.625% U.S. Treasury Note due
November 30,2000. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLASS A-4 FINAL SCHEDULED DISTRIBUTION DATE: August 15, 2003
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-4 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-4 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-4 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-4 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-4 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-4 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-4 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-4 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-4 INTEREST RATE: 5.940% per annum.
CLASS A-4 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest
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accrued for 28 days, which is the number of days elapsed from and including
the Closing Date to but excluding April 15, 1999, assuming that the last day
of each month is the 30th) at the Class A-4 Interest Rate on the outstanding
principal balance of the Class A-4 Notes on the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date), after giving effect to all payments of principal to Class A-4
Noteholders on or prior to such immediately preceding Distribution Date.
CLASS A-4 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-4 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-4 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-4 Prepayment Amount
at the Class A-4 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-4 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding July 31, 2001, over (ii) the amount of interest that would have
accrued on the Class A-4 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 6.625% U.S. Treasury Note due
July 31, 2001. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLASS A-5 FINAL SCHEDULED DISTRIBUTION DATE: December 15,
2006 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-5 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-5 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-5 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-5 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-5 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-5 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-5 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-5 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-5 INTEREST RATE: 6.120% per annum.
CLASS A-5 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued for 28 days, which is the number of
days elapsed from and including the Closing Date to but excluding April 15,
1999, assuming that the last day of each month is the 30th) at the Class A-5
Interest Rate on the outstanding principal balance of the Class A-5 Notes on
the immediately preceding Distribution Date (or, in the case of the
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first Distribution Date, on the Closing Date), after giving effect to all
payments of principal to Class A-5 Noteholders on or prior to such
immediately preceding Distribution Date.
CLASS A-5 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-5 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-5 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i)
the amount of interest that would accrue on the Class A-5 Prepayment Amount
at the Class A-5 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-5 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding September 30, 2002, over (ii) the amount of interest that would
have accrued on the Class A-5 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 5.875% U.S. Treasury Note due
September 30, 2002. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLOSING DATE: March 17, 1999.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase
Agreement and Assignment, dated as of March 1, 1999, between AFL and the
Seller.
COLLATERAL AGENT: The Collateral Agent named in the Spread
Account Agreement, and any successor thereto pursuant to the terms of the
Spread Account Agreement.
COLLATERAL INSURANCE: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy, pursuant to Section 3.4(e).
COLLECTED FUNDS: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during the related Monthly Period, including all Liquidation
Proceeds collected during the related Monthly Period (but excluding any
Monthly Advances and any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section
4.1(a).
COLLECTION RECORDS: All manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.
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COMPUTER TAPE: The computer tape generated on behalf of the
Seller which provides information relating to the Receivables and which was
used by the Seller and AFL in selecting the Receivables conveyed to the Trust
hereunder.
CORPORATE TRUST OFFICE: With respect to the Owner Trustee,
the principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing
Date is located at ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇; the telecopy number for the Corporate Trust Administration of
the Owner Trustee on the date of the execution of this Agreement is (302)
651-8882; with respect to the Indenture Trustee, the principal office of the
Indenture Trustee at which at any particular time its corporate trust
business shall be administered, which office is located at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate
Trust Services--Asset Backed Administration; the telecopy number for the
Corporate Trust Services of the Indenture Trustee on the date of execution of
this Agreement is (▇▇▇) ▇▇▇-▇▇▇▇.
CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on a Receivable, an amount
equal to the excess of the Principal Balance of such Receivable immediately
prior to such order over the Principal Balance of such Receivable as so
reduced or the net present value (using as the discount rate the higher of
the contract rate or the rate of interest, if any, specified by the court in
such order) of the Scheduled Payments as so modified or restructured. A
"Cram Down Loss" shall be deemed to have occurred on the date of issuance of
such order.
CREDIT ENHANCEMENT FEE: With respect to any Distribution
Date, the amount to be paid to the Security Insurer pursuant to Section
4.6(vi) and the amount to which the Seller is entitled pursuant to Section
4.6(vii).
CUSTODIAN: AFL and any other Person named from time to time
as custodian in any Custodian Agreement acting as agent for the Trust, which
Person must be (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to
time in effect between the Custodian named therein and the Trust,
substantially in the form of Exhibit B hereto, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, which Custodian Agreement and any amendments, supplements or
modifications thereto shall (so long as an Insurer Default shall not have
occurred and be continuing) be acceptable to the Security Insurer.
DEALER: A seller of new or used automobiles or light trucks
that originated one or more of the Receivables and sold the respective
Receivable, directly or indirectly, to AFL under an existing agreement
between such seller and AFL.
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DEALER AGREEMENT: An agreement between AFL and a Dealer
relating to the sale of retail installment sale contracts and installment
notes to AFL and all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the
executed assignment executed by a Dealer conveying such Receivable to AFL.
DEFICIENCY CLAIM AMOUNT: As defined in Section 5.2(a).
DEFICIENCY CLAIM DATE: With respect to any Distribution
Date, the fourth Business Day immediately preceding such Distribution Date.
DEFICIENCY NOTICE: As defined in Section 5.2(a).
DEPOSIT DATE: With respect to any Monthly Period, the
Business Day immediately preceding the related Determination Date.
DETERMINATION DATE: With respect to any Monthly Period, the
sixth Business Day immediately preceding the related Distribution Date.
DISTRIBUTION AMOUNT: With respect to a Distribution Date,
the sum of (i) the Actual Funds for such Distribution Date, and (ii) the
Deficiency Claim Amount, if any, received by the Indenture Trustee with
respect to such Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or
if such 15th day is not a Business Day, the next succeeding Business Day,
commencing April 15, 1999, to and including the Final Scheduled Distribution
Date.
DRAW DATE: With respect to any Distribution Date, the third
Business Day immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the
retail installment sales contracts or installment loans of AFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution
acceptable to the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing), or (ii) a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America, or any of the States thereof, or the
District of Columbia, having a certificate of deposit, short term deposit or
commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by
Moody's and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types
of investments:
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(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States, the obligations of which are backed by the full faith and credit of
the United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation, but only if, at the time of investment, such
obligations are assigned a rating in the highest credit rating category by
each Rating Agency;
(b) demand or time deposits in, certificates of deposit
of, or bankers' acceptances issued by any depository institution or trust
company organized under the laws of the United States or any State and
subject to supervision and examination by federal and/or State banking
authorities (including, if applicable, the Indenture Trustee, the Owner
Trustee or any agent of either of them acting in their respective commercial
capacities); provided that the short-term unsecured debt obligations of such
depository institution or trust company at the time of such investment, or
contractual commitment providing for such investment, are assigned a rating
in the highest credit rating category by each Rating Agency;
(c) repurchase obligations pursuant to a written
agreement (i) with respect to any obligation described in clause (a) above,
where the Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 4.1, and (ii) entered into with the
corporate trust department of a depository institution or trust company
organized under the laws of the United States or any State thereof, the
deposits of which are insured by the Federal Deposit Insurance Corporation
and the short-term unsecured debt obligations of which are rated "A-1+" by
Standard & Poor's and "P-1" by Moody's (including, if applicable, the
Indenture Trustee, the Owner Trustee or any agent of either of them acting in
their respective commercial capacities);
(d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States or
any State whose long-term unsecured debt obligations are assigned a rating in
the highest credit rating category by each Rating Agency at the time of such
investment or contractual commitment providing for such investment; PROVIDED,
HOWEVER, that securities issued by any particular corporation will not be
Eligible Investments to the extent that an investment therein will cause the
then outstanding principal amount of securities issued by such corporation
and held in the Trust Accounts to exceed 10% of the Eligible Investments held
in the Trust Accounts (with Eligible Investments held in the Trust Accounts
valued at par);
(e) commercial paper that (i) is payable in United States
dollars and (ii) is rated in the highest credit rating category by each
Rating Agency;
(f) units of money market funds rated in the highest
credit rating category by each Rating Agency; provided that all Eligible
Investments shall be held in the name of the Indenture Trustee; or
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(g) any other demand or time deposit, obligation,
security or investment as may be acceptable to the Rating Agencies and the
Security Insurer, as evidenced by the prior written consent of the Security
Insurer, as may from time to time be confirmed in writing to the Indenture
Trustee by the Security Insurer; PROVIDED, HOWEVER, that securities issued by
any entity (except as provided in paragraph (a)) will not be Eligible
Investments to the extent that an investment therein will cause the then
outstanding principal amount of securities issued by such entity and held in
the Pre-Funding Account to exceed $25 million (with Eligible Investments held
in the Pre-Funding Account valued at par), unless and for so long as such
securities are acceptable to the Rating Agencies and the Security Insurer, as
evidenced by the prior written consent of the Security Insurer, as may from
time to time be confirmed in writing to the Indenture Trustee by the Security
Insurer.
Eligible Investments may be purchased by or through the Indenture Trustee or
any of its Affiliates. No Eligible Investment shall have an "r" highlighter
affixed to the rating of Standard & Poor's.
ELIGIBLE SERVICER: AFL, the Backup Servicer or another
Person which at the time of its appointment as Servicer (i) is servicing a
portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally
and competently to service a portfolio of motor vehicle retail installment
sales contracts and/or motor vehicle installment loans similar to the
Receivables with reasonable skill and care, and (iv) is qualified and
entitled to use, pursuant to a license or other written agreement, and agrees
to maintain the confidentiality of, the software which the Servicer uses in
connection with performing its duties and responsibilities under this
Agreement or otherwise has available software which is adequate to perform
its duties and responsibilities under this Agreement.
FINAL SCHEDULED DISTRIBUTION DATE: With respect to each
class of Notes, the Class A-1 Final Scheduled Distribution Date, the Class
A-2 Final Scheduled Distribution Date, the Class A-3 Final Scheduled
Distribution Date, the Class A-4 Final Scheduled Distribution Date and the
Class A-5 Final Scheduled Distribution Date, respectively.
FINANCED VEHICLE: A new or used automobile or light truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.
FORCE-PLACED INSURANCE: The meaning set forth in Section
3.4(b).
FUNDING PERIOD: The period beginning on the Closing Date and
ending on the first to occur of (a) the Distribution Date on which the
Pre-Funded Amount (after giving effect to any reduction in the Pre-Funded
Amount in connection with the transfer of Subsequent Receivables to the Trust
on such Distribution Date) is less than $100,000, (b) the date on which an
Event of Default or a Servicer Termination Event occurs, (c) the date on
which an Insolvency Event occurs with respect to AFL and (d) the close of
business on the Distribution Date occurring in May 1999.
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INDENTURE: The Indenture, dated as of March 1, 1999, among
the Trust, the Indenture Trustee and the Indenture Collateral Agent, as the
same may be amended and supplemented from time to time.
INDENTURE COLLATERAL AGENT: The Person acting as Indenture
Collateral Agent under the Indenture, its successors in interest and any
successor Indenture Collateral Agent under the Indenture.
INDENTURE TRUSTEE: The Person acting as Trustee under the
Indenture, its successors in interest and any successor Trustee under the
Indenture.
INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).
INITIAL CUTOFF DATE: March 5, 1999.
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $401,181,267.98.
INITIAL RECEIVABLES: The Receivables listed on the Schedule
of Initial Receivables on the Closing Date.
INSOLVENCY EVENT: With respect to a specified Person, (a)
the commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law, and such case
is not dismissed within 60 days; or (b) the filing of a decree or entry of an
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case
under any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs; or (c) the commencement
by such Person of a voluntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for
any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due, or the taking of
action by such Person in furtherance of any of the foregoing.
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor
in the event that the Servicer obtains Force-Placed Insurance pursuant to
Section 3.4.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement,
dated as of March 17, 1999, among the Security Insurer, the Trust, the Seller
and AFL.
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INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default"
as defined in the Insurance Agreement.
INSURANCE POLICY: With respect to a Receivable, any
insurance policy benefitting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown
or similar coverage with respect to the Financed Vehicle or the Obligor.
INSURER DEFAULT: The occurrence and continuance of any of the
following:
(a) the Security Insurer shall have failed to make a
payment required under the Note Policy;
(b) The Security Insurer shall have (i) filed a
petition or commenced any case or proceeding under any provision or
chapter of the United States Bankruptcy Code, the New York State
Insurance Law, or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization,
(ii) made a general assignment for the benefit of its creditors, or
(iii) had an order for relief entered against it under the United States
Bankruptcy Code, the New York State Insurance Law, or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority shall
have entered a final and nonappealable order, judgment or decree
(i) appointing a custodian, trustee, agent or receiver for the Security
Insurer or for all or any material portion of its property or
(ii) authorizing the taking of possession by a custodian, trustee, agent
or receiver of the Security Insurer (or the taking of possession of all
or any material portion of the property of the Security Insurer).
LIEN: Any security interest, lien, charge, pledge,
preference, equity or encumbrance of any kind, including tax liens,
mechanics' liens and any liens that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the original certificate of title is required to be given to the Obligor, the
term "Lien Certificate" shall mean only a certificate or notification issued
to a secured party.
LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer
repossessed the related Financed Vehicle, (ii) the Servicer has determined in
good faith that all amounts it expects to recover have been received, or
(iii) all or any portion of a Scheduled Payment shall have become more than
180 days past due.
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LIQUIDATION PROCEEDS: With respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from the Spread Account or the Reserve Account and drawings
under the Note Policy) net of (i) reasonable expenses incurred by the
Servicer in connection with the collection of such Receivable and the
repossession and disposition of the Financed Vehicle and (ii) amounts that
are required to be refunded to the Obligor on such Receivable; PROVIDED,
HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall
in no event be less than zero.
LOCKBOX ACCOUNT: The segregated account maintained on behalf
of the Trust by the Lockbox Bank in accordance with Section 3.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of
November 13, 1992 by and among ▇▇▇▇▇▇ Trust and Savings Bank, AFL, Shawmut
Bank, N.A., as Trustee, Saturn Financial Services, Inc. and the Program
Parties (as defined therein), taken together with the Retail Lockbox
Agreement, dated as of November 13, 1992, among such parties, and the
Counterpart to Agency Agreement and Retail Lockbox Agreement, dated as of
March 17, 1999, among ▇▇▇▇▇▇ Trust and Savings Bank, AFL, the Trust, the
Indenture Trustee and the Security Insurer, as such agreements may be amended
from time to time, unless the Indenture Trustee hereunder shall cease to be a
Program Party thereunder, or such agreement shall be terminated in accordance
with its terms, in which event "Lockbox Agreement" shall mean such other
agreement, in form and substance acceptable to the Security Insurer, or if an
Insurer Default shall have occurred and be continuing, to a Note Majority,
among the Servicer, the Trust, the Indenture Trustee and the Lockbox Bank.
LOCKBOX BANK: A depository institution named by the Servicer
and, so long as an Insurer Default shall not have occurred and be continuing,
acceptable to the Security Insurer, or, if an Insurer Default shall have
occurred and be continuing, to a Note Majority.
MONTHLY ADVANCE: The amount that the Servicer is required to
advance on any Receivable pursuant to Section 4.4(a).
MONTHLY PERIOD: With respect to a Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs
(such calendar month being referred to as the "related" Monthly Period with
respect to such Distribution Date). With respect to an Accounting Date, the
calendar month in which such Accounting Date occurs is referred to herein as
the "related" Monthly Period to such Accounting Date.
MONTHLY RECORDS: All records and data maintained by the
Servicer with respect to the Receivables, including the following with
respect to each Receivable: the account number; the identity of the
originating Dealer; Obligor name; Obligor address; Obligor home phone number;
Obligor business phone number; original Principal Balance; original term;
Annual Percentage Rate; current Principal Balance; current remaining term;
origination date; first payment date; final scheduled payment date; next
payment due date; date of most recent payment; new/used classification;
collateral description; days currently delinquent; number of contract
extensions (months) to date; amount, if any, of Force-Placed Insurance
payable monthly;
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amount of the Scheduled Payment; current Insurance Policy expiration date;
and past due late charges, if any.
MOODY'S: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor
thereto.
NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.1(c).
NOTE MAJORITY: As to each class of Notes, Holders of Notes
representing a majority of the outstanding principal balance of such class of
Notes.
NOTE POLICY: The financial guaranty insurance policy issued
by the Security Insurer to the Indenture Trustee on behalf of the Noteholders.
NOTE POOL FACTOR: With respect to any Distribution Date and
each class of Notes, an eight-digit decimal figure equal to the outstanding
principal balance of such class of Notes as of such Distribution Date (after
giving effect to all distributions on such date) divided by the original
outstanding principal balance of such class of Notes as of the Closing Date.
NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-1 Interest Distributable
Amount, the Class A-2 Interest Distributable Amount, the Class A-3 Interest
Distributable Amount, the Class A-4 Interest Distributable Amount and the
Class A-5 Interest Distributable Amount.
NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 100% of the Principal Distribution Amount.
NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close
of business on any Distribution Date, the excess of the sum of the
Noteholders' Monthly Principal Distributable Amount and any outstanding
Noteholders' Principal Carryover Shortfall from the immediately preceding
Distribution Date over the amount in respect of principal that is actually
deposited in the Note Distribution Account on such immediately preceding
Distribution Date.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date (other than the Final Scheduled Distribution Date with
respect to any class of Notes), the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and any Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. The Noteholders' Principal Distributable Amount on the Final Scheduled
Distribution Date for any class of Notes will equal the sum of (i) the
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date, (ii) the Noteholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date, and (iii) the excess of the outstanding
principal balance of such class of Notes, if any, over the amounts in clauses
(i) and (ii). In no event may the Noteholders' Principal Distributable
Amount for any Distribution Date exceed the outstanding principal balance of
the Notes immediately prior to such Distribution Date.
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NOTES: The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes and the Class A-5 Notes.
OBLIGOR: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.
OPINION OF COUNSEL: A written opinion of counsel acceptable
in form and substance and from counsel acceptable to the Owner Trustee and,
if such opinion or a copy thereof is required to be delivered to the
Indenture Trustee or the Security Insurer, to the Indenture Trustee or the
Security Insurer, as applicable.
ORIGINAL POOL BALANCE: As of any date, the sum of the
Initial Cutoff Date Principal Balance plus the aggregate Principal Balance
(as of the related Subsequent Cutoff Date) of all Subsequent Receivables sold
to the Trust on any Subsequent Transfer Date.
OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable
and a Determination Date, the sum of all Monthly Advances made on any
Determination Date prior to such Determination Date relating to that
Receivable which have not been reimbursed pursuant to Section 4.6(i) or
Section 4.8.
OWNER TRUSTEE: Wilmington Trust Company, acting not
individually but solely as trustee, or its successor in interest, and any
successor Owner Trustee appointed as provided in the Trust Agreement.
PERSON: Any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.
PRE-FUNDED AMOUNT: As of any date, $148,818,732.02 minus the
aggregate Principal Balance (as of the related Subsequent Cutoff Date) of all
Subsequent Receivables sold to the Trust on or prior to such date.
PRE-FUNDING ACCOUNT: The account designated as the
Pre-Funding Account in, and which is established and maintained pursuant to,
Section 4.1(b).
PREFERENCE CLAIM: The meaning specified in Section 5.4(b).
PRINCIPAL BALANCE: With respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on
or prior to such date and allocable to principal in accordance with the terms
of the Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the amount equal to the sum of the following amounts with
respect to the related Monthly Period, in each
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case computed with respect to each Receivable in accordance with the method
specified in the related retail installment sale contract or promissory note:
(i) that portion of all collections on Receivables (other than Liquidated
Receivables and Purchased Receivables) allocable to principal, including all
full and partial principal prepayments, (ii) the Principal Balance (as of the
related Accounting Date) of all Receivables that became Liquidated
Receivables during the related Monthly Period (other than Purchased
Receivables), (iii) the Principal Balance of all Receivables that became
Purchased Receivables as of the related Accounting Date, and, in the sole
discretion of the Security Insurer, provided no Insurer Default shall have
occurred and be continuing, the Principal Balance as of the related
Accounting Date of all Receivables that were required to be purchased as of
the related Accounting Date but were not so purchased, and (iv) the aggregate
amount of Cram Down Losses that shall have occurred during the related
Monthly Period.
PURCHASE AGREEMENTS: (i) The Closing Date Purchase Agreement
and (ii) one or more Assignment Agreements pursuant to the BOA Purchase
Agreement, pursuant to which, together, AFL transferred the Initial
Receivables to the Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable (without regard
to any Monthly Advances that may have been made with respect to the
Receivable) as of the Accounting Date on which the obligation to purchase
such Receivable arises.
PURCHASED RECEIVABLE: As of any Accounting Date, any
Receivable (including any Liquidated Receivable) that became a Warranty
Receivable or Administrative Receivable as of such Accounting Date (or which
AFL or the Servicer has elected to purchase as of an earlier Accounting Date,
as permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has
been deposited in the Collection Account by the Seller, AFL or the Servicer,
as applicable, on or before the related Deposit Date.
RATING AGENCY: Each of Moody's and Standard & Poor's, so
long as such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller
and (so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.
RATING AGENCY CONDITION: With respect to any action, that
each Rating Agency shall have been given 10 days' prior notice thereof and
that each of the Rating Agencies shall have notified the Seller, the
Servicer, the Security Insurer, the Owner Trustee and the Indenture Trustee
in writing that such action will not result in a reduction or withdrawal of
the then current rating of the Notes.
RECEIVABLE: A retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of
calculating
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Noteholders' Distributable Amounts hereunder and for the purpose of
determining the obligations pursuant to Section 2.6 and 3.7 to purchase
Receivables), or (ii) any Purchased Receivable on or after the Accounting
Date immediately preceding the Deposit Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 4.5.
RECEIVABLE FILE: The documents, electronic entries,
instruments and writings listed in Section 2.2 pertaining to a particular
Receivable.
REFERENCE BANKS: Three major banks in the London interbank
market selected by the Servicer.
REGISTRAR OF TITLES: With respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens
thereon.
RELATED DOCUMENTS: The Trust Agreement, the Indenture, the
Notes, the Purchase Agreements, each Subsequent Purchase Agreement, each
Subsequent Transfer Agreement, the Custodian Agreement, the Note Policy, the
Spread Account Agreement, the Insurance Agreement, the Lockbox Agreement, the
Depository Agreement, the Stock Pledge Agreement and the Underwriting
Agreement among the Seller, AFL and the underwriters of the Notes. The
Related Documents executed by any party are referred to herein as "such
party's Related Documents," "its Related Documents" or by a similar
expression.
REPURCHASE EVENTS: The occurrence of a breach of any of
AFL's, the Seller's or the Servicer's representations and warranties in this
Agreement or in the Purchase Agreement or in any Subsequent Purchase
Agreement which requires the repurchase of a Receivable by AFL or the Seller
pursuant to Section 2.6 or by the Servicer pursuant to Section 3.7.
REQUIRED DEPOSIT RATING: A rating on short-term unsecured
debt obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's
(or such other rating as may be acceptable to the Rating Agencies and, so
long as an Insurer Default shall not have occurred and be continuing, the
Security Insurer) so as to not affect the rating on the Notes.
REQUISITE RESERVE AMOUNT: As of the Closing Date,
$795,575.47 and as of any Distribution Date or Subsequent Transfer Date
thereafter during the Funding Period an amount equal to the difference between
(a) the product of (x) the weighted average of the
Class A-1 Interest Rate, the Class A-2 Interest Rate, the Class A-3
Interest Rate, the Class A-4 Interest Rate and the Class A-5 Interest
Rate (based on the outstanding principal balance of the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the
Class A-5 Notes on such date), divided by 360, (y) the Pre-Funded Amount
on such date and (z) the number of days until the Distribution Date in
May 1999, and
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(b) the product of (x) the Assumed Reinvestment
Rate, divided by 360, (y) the Pre-Funded Amount on such date and (z) the
number of days until the Distribution Date in May 1999.
The Requisite Reserve Amount for any Subsequent Transfer Date (i) shall be
calculated after taking into account the transfer of Subsequent Receivables
to the Trust on such Subsequent Transfer Date (unless such Subsequent
Transfer Date does not coincide with a Distribution Date and does not occur
between a Distribution Date and the related Determination Date) and (ii) (A)
if such Subsequent Transfer Date does not coincide with a Distribution Date
but occurs between a Distribution Date and the related Determination Date,
shall be calculated as of the Distribution Date immediately following such
Subsequent Transfer Date as if such Subsequent Transfer Date occurred on such
Distribution Date, (B) if such Subsequent Transfer Date coincides with a
Distribution Date, shall be calculated as of such Distribution Date or (C) if
such Subsequent Transfer Date does not coincide with a Distribution Date and
does not occur between a Distribution Date and the related Determination
Date, shall be calculated as of the immediately preceding Distribution Date
(or as of the Closing Date, if such Subsequent Transfer Date occurs before
the Determination Date in May 1999) as if such Subsequent Transfer Date
occurred on such immediately preceding Distribution Date (or the Closing
Date).
RESERVE ACCOUNT: The account designated as the Reserve
Account in, and which is established and maintained pursuant to, Section
4.1(d), including the Class A-1 Holdback Subaccount.
RESERVE AMOUNT: As of any date of determination, the amount
on deposit in the Reserve Account (other than the amount on deposit in the
Class A-1 Holdback Subaccount) on such date.
RESPONSIBLE OFFICER: When used with respect to the Owner
Trustee, any officer of the Owner Trustee assigned by the Owner Trustee to
administer its corporate trust affairs relating to the Trust. When used with
respect to the Indenture Trustee, any officer assigned to Corporate Trust
Services (or any successor thereto), including any Vice President, Assistant
Vice President, Trust Officer, any Assistant Secretary, any trust officer or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of the Trust. When used with
respect to any other Person that is not an individual, the President, any
Vice-President or Assistant Vice-President or the Controller of such Person,
or any other officer or employee having similar functions.
SCHEDULE OF INITIAL RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to this Agreement which is attached hereto as Schedule A.
SCHEDULE OF RECEIVABLES: The Schedule of Initial Receivables
attached hereto as Schedule A as supplemented by each Schedule of Subsequent
Receivables attached as Schedule A to each Subsequent Transfer Agreement.
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SCHEDULE OF REPRESENTATIONS: The Schedule of Representations
and Warranties attached hereto as Schedule B.
SCHEDULE OF SUBSEQUENT RECEIVABLES: The schedule of all
retail installment sales contracts and promissory notes sold and transferred
to the Trust pursuant to a Subsequent Transfer Agreement which is attached as
Schedule A to such Subsequent Transfer Agreement, which Schedule of
Subsequent Receivables shall supplement the Schedule of Initial Receivables.
SCHEDULED PAYMENT: With respect to any Monthly Period for
any Receivable, the amount set forth in such Receivable as required to be
paid by the Obligor in such Monthly Period. If after the Closing Date, the
Obligor's obligation under a Receivable with respect to a Monthly Period has
been modified so as to differ from the amount specified in such Receivable as
a result of (i) the order of a court in an insolvency proceeding involving
the Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of
1940 or (iii) modifications or extensions of the Receivable permitted by
Section 3.2(b), the Scheduled Payment with respect to such Monthly Period
shall refer to the Obligor's payment obligation with respect to such Monthly
Period as so modified.
SECURITY INSURER: Financial Security Assurance Inc., a
monoline insurance company incorporated under the laws of the State of New
York, or any successor thereto, as issuer of the Note Policy.
SELLER: Arcadia Receivables Finance Corp., a Delaware
corporation, or its successor in interest pursuant to Section 6.2.
SERVICER: Arcadia Financial Ltd., its successor in interest
pursuant to Section 8.2 or, after any termination of the Servicer upon a
Servicer Termination Event, the Backup Servicer or any other successor
Servicer.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to
Section 3.14.
SERVICER TERMINATION EVENT: An event described in Section
8.1.
SERVICER'S CERTIFICATE: With respect to each Determination
Date, a certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached hereto as
Exhibit E.
SPREAD ACCOUNT: The Spread Account established and
maintained pursuant to the Spread Account Agreement.
SPREAD ACCOUNT ADDITIONAL DEPOSIT: With respect to any
transfer of Subsequent Receivables to the Trust pursuant to Section 2.4, the
amount required to be deposited in the Spread Account pursuant to the terms
of the Spread Account Agreement.
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SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement,
dated as of March 25, 1993, as thereafter amended and restated, among the
Seller, AFL, the Security Insurer, the Collateral Agent and the trustees
specified therein, as the same may be amended, supplemented or otherwise
modified in accordance with the terms thereof.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as
of March 25, 1993, as thereafter amended and restated, among the Security
Insurer, AFL and the Collateral Agent, as the same may be amended,
supplemented or otherwise modified in accordance with the terms thereof
SUBCOLLECTION ACCOUNT: The account designated as the
Subcollection Account in, and which is established and maintained pursuant to
Section 4.2(a).
SUBSEQUENT CUTOFF DATE: With respect to any Subsequent
Receivables, the date specified in the related Subsequent Transfer Agreement,
which may in no event be later than the Subsequent Transfer Date.
SUBSEQUENT PURCHASE AGREEMENT: With respect to any
Subsequent Receivables, either (i) the agreement between AFL and the Seller
pursuant to which AFL transferred the Subsequent Receivables to the Seller,
the form of which is attached to the Purchase Agreement as Exhibit A, or (ii)
one or more Assignment Agreements pursuant to the BOA Purchase Agreement,
pursuant to which AFL transferred the Subsequent Receivables to the Seller.
SUBSEQUENT RECEIVABLES: All Receivables sold and transferred
to the Trust pursuant to Section 2.4.
SUBSEQUENT TRANSFER AGREEMENT: With respect to any
Subsequent Receivables, the related agreement described in Section 2.4.
SUBSEQUENT TRANSFER DATE: Any date during the Funding Period
on which Subsequent Receivables are transferred to the Trust pursuant to
Section 2.4.
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly
Period, all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, collected on the Receivables during such
Monthly Period.
TELERATE PAGE 3750: The display page currently so designated
on the Dow ▇▇▇▇▇ Telerate Service (or such other page as may replace that
page on that service for the purpose of displaying comparable rates or
prices).
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and
the Supplemental Servicing Fee.
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TRUST: Arcadia Automobile Receivables Trust, 1999-A.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of March 1,
1999, among the Seller, the Security Insurer and the Owner Trustee, as the
same may be amended and supplemented from time to time.
UCC: The Uniform Commercial Code as in effect in the
relevant jurisdiction.
WARRANTY RECEIVABLE: With respect to any Monthly Period, a
Receivable which AFL has become obligated to repurchase pursuant to Section
2.6.
SECTION 1.2. USAGE OF TERMS. With respect to all terms used
in this Agreement, the singular includes the plural and the plural the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of
reproducing words in a visible form; references to agreements and other
contractual instruments include all subsequent amendments thereto or changes
therein entered into in accordance with their respective terms and not
prohibited by this Agreement; references to Persons include their permitted
successors and assigns; and the terms "include" or "including" mean "include
without limitation" or "including without limitation."
SECTION 1.3. CALCULATIONS. All calculations of the amount
of interest accrued on the Notes and all calculations of the amount of the
Basic Servicing Fee shall be made on the basis of a 360-day year consisting
of twelve 30-day months, except that calculations of interest accrued on the
Class A-1 Notes and the Class A-2 Notes shall be made on the basis of actual
days elapsed in a 360-day year. All references to the Principal Balance of a
Receivable as of an Accounting Date shall refer to the close of business on
such day.
SECTION 1.4. SECTION REFERENCES. All references to
Articles, Sections, paragraphs, subsections, exhibits and schedules shall be
to such portions of this Agreement unless otherwise specified.
SECTION 1.5. NO RECOURSE. No recourse may be taken,
directly or indirectly, under this Agreement or any certificate or other
writing delivered in connection herewith or therewith, against any
stockholder, officer, or director, as such, of the Seller, AFL, the Servicer,
the Indenture Trustee, the Backup Servicer or the Owner Trustee or of any
predecessor or successor of the Seller, AFL, the Servicer, the Indenture
Trustee, the Backup Servicer or the Owner Trustee.
SECTION 1.6. MATERIAL ADVERSE EFFECT. Whenever a
determination is to be made under this Agreement as to whether a given event,
action, course of conduct or set of facts or circumstances could or would
have a material adverse effect on the Trust or the Noteholders (or any
similar or analogous determination), such determination shall be made without
taking into account the insurance provided by the Note Policy.
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ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES. Subject to
the terms and conditions of this Agreement, the Seller, pursuant to the
mutually agreed upon terms contained herein, hereby sells, transfers,
assigns, and otherwise conveys to the Trust, without recourse (but without
limitation of its obligations in this Agreement), all of the right, title and
interest of the Seller in and to the Initial Receivables, all monies at any
time paid or payable thereon or in respect thereof after the Initial Cutoff
Date (including amounts due on or before the Initial Cutoff Date but received
by AFL or the Seller after the Initial Cutoff Date), an assignment of
security interests of AFL in the related Financed Vehicles, the Insurance
Policies and any proceeds from any Insurance Policies relating to the Initial
Receivables, the Obligors or the related Financed Vehicles, including rebates
of premiums, all Collateral Insurance and any Force-Placed Insurance relating
to the Initial Receivables, an assignment of the rights of AFL or the Seller
against Dealers with respect to the Initial Receivables under the Dealer
Agreements and the Dealer Assignments, all items contained in the related
Receivable Files, any and all other documents that AFL keeps on file in
accordance with its customary procedures relating to the Initial Receivables,
the Obligors or the related Financed Vehicles, an assignment of the rights of
the Seller under the Purchase Agreements, property (including the right to
receive future Liquidation Proceeds) that secures an Initial Receivable and
that has been acquired by or on behalf of the Trust pursuant to liquidation
of such Receivable, all funds on deposit from time to time in the Trust
Accounts and all investments therein and proceeds thereof, and all proceeds
of the foregoing. It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement and each Subsequent Transfer
Agreement shall constitute a sale of the Receivables and other Trust Property
from the Seller to the Trust and the beneficial interest in and title to the
Receivables and the other Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that, notwithstanding the
intent of the Seller, the transfer and assignment contemplated hereby and
each Subsequent Transfer Agreement is held not to be a sale, this Agreement
and each Subsequent Transfer Agreement shall constitute a grant of a security
interest to the Trust in the property referred to in this Section 2.1 or
transferred to the Trust pursuant to the related Subsequent Transfer
Agreement.
SECTION 2.2. CUSTODY OF RECEIVABLE FILES.
(a) In connection with the sale, transfer and assignment
of the Receivables and the other Trust Property to the Trust pursuant to this
Agreement and each Subsequent Transfer Agreement, and simultaneously with the
execution and delivery of this Agreement, the Trust shall enter into the
Custodian Agreement with the Custodian, dated as of the Closing Date,
pursuant to which the Owner Trustee, on behalf of the Trust, shall revocably
appoint the Custodian, and the Custodian shall accept such appointment, to
act as the agent of the Trust as Custodian of the following documents or
instruments in its possession which shall be delivered to the Custodian as
agent of the Trust on or before the Closing Date (with respect to each
Initial
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Receivable) or the applicable Subsequent Transfer Date (with respect to each
Subsequent Receivable):
(i) The fully executed original of the Receivable
(together with any agreements modifying the Receivable, including
without limitation any extension agreements) or a microfiche copy
thereof;
(ii) Documents evidencing or related to any Insurance
Policy, or copies (including but not limited to microfiche copies)
thereof;
(iii) The original credit application, or a copy
thereof, of each Obligor, fully executed by each such Obligor on AFL's
customary form, or on a form approved by AFL, for such application; and
(iv) The original certificate of title (when
received) and otherwise such documents, if any, that AFL keeps on file
in accordance with its customary procedures indicating that the Financed
Vehicle is owned by the Obligor and subject to the interest of AFL as
first lienholder or secured party (including any Lien Certificate
received by AFL), or, if such original certificate of title has not yet
been received, a copy of the application therefor, showing AFL as
secured party.
In connection with the grant of the security interest in the
Trust Estate to the Issuer Secured Parties pursuant to the Indenture, the
Trust agrees that from and after the Closing Date through the date of release
of such security interest pursuant to the terms of the Indenture, the
Custodian shall not be acting as agent of the Trust, but rather shall be
acting as agent of the Issuer Secured Parties.
The Indenture Trustee may act as the Custodian, in which case
the Indenture Trustee shall be deemed to have assumed the obligations of the
Custodian specified in the Custodian Agreement.
(b) Upon payment in full on any Receivable, the Servicer
will notify the Custodian by certification of an officer of the Servicer
(which certification shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited
in the Collection Account pursuant to Section 3.1 have been so deposited) and
shall request delivery of the Receivable and Receivable File to the Servicer.
From time to time as appropriate for servicing and enforcing any Receivable,
the Custodian shall, upon written request of an officer of the Servicer and
delivery to the Custodian of a receipt signed by such officer, cause the
original Receivable and the related Receivable File to be released to the
Servicer. The Servicer's receipt of a Receivable and/or Receivable File
shall obligate the Servicer to return the original Receivable and the related
Receivable File to the Custodian when its need by the Servicer has ceased
unless the Receivable shall be repurchased as described in Section 2.6 or 3.7.
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SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As
conditions to Owner Trustee's execution and delivery of the Notes on behalf
of the Trust on the Closing Date, the Owner Trustee shall have received the
following on or before the Closing Date:
(a) The Schedule of Initial Receivables certified by
the President, Controller or Treasurer of the Seller;
(b) The acknowledgment of the Custodian that it
holds the Receivable File relating to each Initial Receivable;
(c) Copies of resolutions of the Board of Directors
of the Seller approving the execution, delivery and performance of this
Agreement, the Related Documents and the transactions contemplated
hereby and thereby, certified by a Secretary or an Assistant Secretary
of the Seller;
(d) Copies of resolutions of the Board of Directors
of AFL approving the execution, delivery and performance of this
Agreement, the Related Documents and the transactions contemplated
hereby and thereby, certified by a Secretary or an Assistant Secretary
of AFL;
(e) Evidence that all filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction
(other than those actions to be taken with respect to Subsequent
Receivables pursuant to Section 2.4) to give the Owner Trustee a first
priority perfected lien on, or ownership interest in, the Receivables
and the other Trust Property have been made, taken or performed; and
(f) An executed copy of the Spread Account Agreement
and evidence of the deposit of $795,575.47 in the Reserve Account.
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b)
below, the Seller, pursuant to the mutually agreed upon terms contained herein
and pursuant to one or more Subsequent Transfer Agreements, shall sell,
transfer, assign, and otherwise convey to the Trust, without recourse (but
without limitation of its obligations in this Agreement), all of the right,
title and interest of the Seller in and to the Subsequent Receivables, all
monies at any time paid or payable thereon or in respect thereof after the
related Subsequent Cutoff Date (including amounts due on or before the related
Subsequent Cutoff Date but received by AFL or the Seller after the related
Subsequent Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Subsequent Receivables, the Obligors or the
related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Subsequent Receivables,
rights of AFL or the Seller against Dealers with respect to the Subsequent
Receivables under the Dealer Agreements and the Dealer Assignments, all items
contained in the
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Receivable Files relating to the Subsequent Receivables, any and all other
documents that AFL keeps on file in accordance with its customary procedures
relating to the Subsequent Receivables, the Obligors or the related Financed
Vehicles, the rights of the Seller under the related Subsequent Purchase
Agreement, property (including the right to receive future Liquidation
Proceeds) that secures a Subsequent Receivable and that has been acquired by
or on behalf of the Trust pursuant to liquidation of such Subsequent
Receivable, and all proceeds of the foregoing.
(b) The Seller shall transfer to the Trust the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) The Seller shall have provided the Owner
Trustee, the Indenture Trustee, the Security Insurer and the Rating
Agencies with a timely Addition Notice and shall have provided any
information reasonably requested by any of the foregoing with respect to
the Subsequent Receivables;
(ii) the Funding Period shall not have terminated;
(iii) the Security Insurer (so long as an Insurer
Default shall not have occurred and be continuing) shall in its sole and
absolute discretion have given its prior written approval of the
transfer of such Subsequent Receivables to the Trust;
(iv) the Seller shall have delivered to the Owner
Trustee and the Indenture Trustee a duly executed written assignment
(including an acceptance by the Indenture Trustee and the Owner Trustee)
in substantially the form of Exhibit G (the "Subsequent Transfer
Agreement"), which shall include a Schedule of Subsequent Receivables
listing the Subsequent Receivables and shall specify the Spread Account
Additional Deposit, if any, the Requisite Reserve Amount, and the Class
A-1 Holdback Amount, if any, as of or for such Subsequent Transfer Date;
(v) the Seller shall have delivered to the Custodian
the Receivable Files relating to the Subsequent Receivables, and the
Custodian shall have delivered to the Seller, the Owner Trustee, the
Security Insurer and the Indenture Collateral Agent an acknowledgment of
receipt of such Receivable Files;
(vi) the Seller shall, to the extent required by
Section 4.1, have deposited in the Collection Account collections in
respect of the Subsequent Receivables;
(vii) as of each Subsequent Transfer Date, neither AFL
nor the Seller shall be insolvent nor shall either of them have been
made insolvent by such transfer nor shall either of them be aware of any
pending insolvency;
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(viii) the applicable Spread Account Additional Deposit
for such Subsequent Transfer Date shall have been made pursuant to the
Spread Account Agreement.
(ix) the Reserve Amount on such Subsequent Transfer
Date, after taking into account any transfers of funds from the Reserve
Account to the Depositor in respect of the sale of the Subsequent
Receivables to the Trust, shall be no less than the Requisite Reserve
Amount for such Subsequent Transfer Date;
(x) each Rating Agency shall have notified the
Security Insurer that following such transfer the Notes will be rated in
the highest short-term or long-term rating category, as applicable, by
such Rating Agency;
(xi) such addition will not result in a material
adverse tax consequence to the Trust or the Noteholders as evidenced by
an Opinion of Counsel to be delivered by the Seller;
(xii) the Seller shall have delivered to the Owner
Trustee and the Indenture Trustee an Officer's Certificate confirming
the satisfaction of each condition precedent specified in this
paragraph (b);
(xiii) the Seller shall have delivered to the Rating
Agencies and to the Security Insurer one or more Opinions of Counsel
with respect to the transfer of the Subsequent Receivables substantially
in the form of the Opinions of Counsel delivered to such Persons on the
Closing Date;
(xiv) (A) the Receivables in the Trust, including the
Subsequent Receivables to be conveyed to the Trust on the Subsequent
Transfer Date, shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cutoff Date
and the Subsequent Receivables on each related Subsequent Cutoff Date):
(1) the weighted average APR of such Receivables will not be less than
16.29%, (2) the weighted average remaining term of such Receivables will
not be greater than 68 months nor less than 60 months, (3) not more than
90% of the Aggregate Principal Balance of such Receivables will
represent loans secured by used Financed Vehicles, (4) not more than 4%
of the Aggregate Principal Balance of such Receivables will be
attributable to Receivables with an APR in excess of 21%, (5) not more
than 0.25% of the Aggregate Principal Balance of such Receivables will
represent loans in excess of $50,000.00, (6) not more than 3% of the
Aggregate Principal Balance of such Receivables will represent loans
with original terms greater than 72 months and (7) not more than 2.0% of
the Aggregate Principal Balance of such Receivables will represent loans
secured by Financed Vehicles that previously secured a loan originated
by AFL with an obligor other than the current Obligor, and (B) the
Trust, the Owner Trustee, the Indenture Trustee and the Security Insurer
shall have received written confirmation from a firm of certified
independent public accountants as to the satisfaction of such criteria;
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(xv) the Seller shall have taken any action necessary
or, if requested by the Security Insurer, advisable to maintain the
first perfected ownership interest of the Trust in the Trust Property
and the first perfected security interest of the Indenture Collateral
Agent in the Indenture Collateral; and
(xvi) no selection procedures adverse to the interests
of the Noteholders shall have been utilized in selecting the Subsequent
Receivables.
(c) On such Subsequent Transfer Date, if all the
conditions specified in paragraph (b) above have been satisfied, the Trust
shall accept the transfer of such Subsequent Receivables and shall pay to the
Seller from the Pre-Funding Account an amount equal to (i) the Principal
Balance as of the related Subsequent Cutoff Date of the Subsequent
Receivables transferred to the Trust as of such date, minus (ii) the Spread
Account Additional Deposit, if any, for such Subsequent Transfer Date, minus
(iii) the amount, if any, by which the Requisite Reserve Amount for such
Subsequent Transfer Date exceeds the Reserve Amount as of such Subsequent
Transfer Date, and minus (iv) the Class A-1 Holdback Amount, if any, for such
Subsequent Transfer Date.
(d) The Seller covenants to transfer to the Trust
pursuant to paragraph (a) above Subsequent Receivables with an aggregate
Principal Balance equal to approximately $148,818,732.02; PROVIDED, HOWEVER,
that the sole remedy of the Trust, the Owner Trustee, the Indenture Trustee
or the Noteholders with respect to a failure of such covenant shall be to
enforce the provisions of Sections 2.3(c) and 6.2 of the Closing Date
Purchase Agreement, Section 2.4(c) hereof (with respect to Class A-1 Holdback
Amounts) and Section 4.7(c) hereof, Section 10.01(b) of the Indenture and
Section 5.2 of the Trust Agreement with respect to payment of the Class A-1
Prepayment Premium, Class A-2 Prepayment Premium, Class A-3 Prepayment
Premium, Class A-4 Prepayment Premium and Class A-5 Prepayment Premium.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By
its execution of this Agreement and each Subsequent Transfer Agreement, the
Seller makes the following representations and warranties on which the Trust
relies in accepting the Receivables and the other Trust Property in trust and
on which the Owner Trustee relies in issuing on behalf of the Trust, Notes
and upon which the Security Insurer relies in issuing the Note Policy.
Unless otherwise specified, such representations and warranties speak as of
the Closing Date or Subsequent Transfer Date, as appropriate, but shall
survive the sale, transfer, and assignment of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The
representations and warranties set forth on the Schedule of
Representations are true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has
been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently conducted,
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and had at all relevant times, and now has, power, authority and legal
right to acquire, own and sell the Receivables and the other property
transferred to the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified
to do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of its property or the conduct of its
business requires such qualification.
(d) POWER AND AUTHORITY. The Seller has the power
and authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, respectively; the
Seller has full power and authority to sell and assign the Trust
Property to be sold and assigned to and deposited with the Trust by it
and has duly authorized such sale and assignment to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement and the Seller's Related Documents have been duly
authorized by the Seller by all necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement
and the related Subsequent Transfer Agreement, if any, effects a valid
sale, transfer and assignment of the Receivables and the other Trust
Property, enforceable against the Seller and creditors of and purchasers
from the Seller; and this Agreement and the related Subsequent Transfer
Agreement, if any, and the Seller's Related Documents, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of the Seller enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the related Subsequent
Transfer Agreement, if any, and the Related Documents and the
fulfillment of the terms of this Agreement and the related Subsequent
Transfer Agreement, if any, and the Related Documents shall not conflict
with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default
under the certificate of incorporation or by-laws of the Seller, or any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Seller is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or violate any law,
order, rule or regulation applicable to the Seller of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or any
of its properties.
(g) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Seller's knowledge, threatened against
the Seller or AFL, before any court, regulatory body, administrative
agency or other tribunal or governmental
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instrumentality having jurisdiction over the Seller or its properties
(A) asserting the invalidity of this Agreement or any of the Related
Documents, (B) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement
or any of the Related Documents, (C) seeking any determination or ruling
that might materially and adversely affect the performance by the Seller
of its obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents, or (D) seeking to adversely
affect the federal income tax or other federal, state or local tax
attributes of the Notes.
(h) CHIEF EXECUTIVE OFFICE. The chief executive
office of the Seller is at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
(i) REGISTRATION STATEMENT. No stop order
suspending the effectiveness of the Registration Statement relating to
the Notes has been issued, and no proceeding for that purpose has been
instituted or is threatened by the Securities and Exchange Commission.
(j) FILINGS. Since the effective date of the
Registration Statement relating to the Notes, there has occurred no
event required to be set forth in an amendment or supplement to the
Registration Statement or Prospectus that has not been so set forth, and
there has been no document required to be filed under the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder that upon such filing
would be deemed to be incorporated by reference in the Prospectus that
has not been so filed.
SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF
WARRANTY. Concurrently with the execution and delivery of this Agreement or
the applicable Subsequent Transfer Agreement, as appropriate, AFL and the
Seller have entered into the Purchase Agreements or Subsequent Purchase
Agreement, as applicable, the rights of the Seller under which have been
assigned by the Seller to the Trust. Under the Purchase Agreements and each
Subsequent Purchase Agreement, if applicable, AFL has made the same
representations and warranties to the Seller with respect to the Receivables
as those made by Seller pursuant to the Schedule of Representations, upon
which the Owner Trustee has relied in accepting the Trust Property in trust
and executing the Notes and upon which the Security Insurer has relied in
issuing the Note Policy and upon which the Indenture Trustee has relied in
authenticating the Notes. Upon discovery by any of AFL, the Seller, the
Servicer, the Security Insurer, the Indenture Trustee or the Owner Trustee of
a breach of any of the representations and warranties contained in Section
2.5 that materially and adversely affects the interests of the Noteholders,
the Security Insurer or the Trust in any Receivable (including any Liquidated
Receivable), the party discovering such breach shall give prompt written
notice to the others; PROVIDED, HOWEVER, that the failure to give any such
notice shall not affect any obligation of AFL or the Seller. As of the
second Accounting Date (or, at AFL's election, the first Accounting Date)
following its discovery or its receipt of notice of any breach of the
representations and warranties set forth on the Schedule of Representations
that materially and adversely affects the interests of the Noteholders, the
Security Insurer or the Trust in any Receivable (including any Liquidated
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Receivable), AFL shall, unless such breach shall have been cured in all
material respects, purchase such Receivable from the Trust and, on or before
the related Deposit Date, AFL shall pay the Purchase Amount to the Owner
Trustee pursuant to Section 4.5. The obligations of the Seller with respect
to any such breach of representations and warranties shall be limited to
taking any and all actions necessary to enable the Owner Trustee to enforce
directly the obligations of AFL under the Purchase Agreement or Subsequent
Purchase Agreement, as applicable. It is understood and agreed that, except
as set forth in this Section 2.6, the obligation of AFL to repurchase any
Receivable as to which a breach has occurred and is continuing shall, if such
obligation is fulfilled, constitute the sole remedy against AFL or the Seller
for such breach available to the Security Insurer or the Indenture Trustee on
behalf of the Noteholders.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller or AFL, AFL shall
indemnify the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust and the Noteholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach.
SECTION 2.7. NONPETITION COVENANT. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), the Backup Servicer nor AFL shall petition or otherwise invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust or
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust.
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON
THE CLOSING DATE OR SUBSEQUENT TRANSFER DATE. In the case of any Receivable
in respect of which written evidence from the Dealer selling the related
Financed Vehicle that the Lien Certificate for such Financed Vehicle showing
AFL as first lienholder has been applied for from the Registrar of Titles was
delivered to the Custodian on the Closing Date or Subsequent Transfer Date,
as appropriate, in lieu of a Lien Certificate, the Servicer shall use its
best efforts to collect such Lien Certificate from the Registrar of Titles as
promptly as practicable. If such Lien Certificate showing AFL as first
lienholder is not received by the Custodian within 180 days after the Closing
Date or Subsequent Transfer Date, as appropriate, then the representation and
warranty in Paragraph 18 of the Schedule of Representations in respect of
such Receivable shall be deemed to have been incorrect in a manner that
materially and adversely affects the Noteholders, the Security Insurer and
the Trust.
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE
RECEIVABLES AND WARRANTY RECEIVABLES. With respect to all Administrative
Receivables and all Warranty Receivables purchased by the Servicer, the
Seller or AFL, the Owner Trustee shall take any and all actions reasonably
requested by the Seller, AFL or Servicer, at the expense of the requesting
party, to assign, without recourse, representation or warranty, to the
Seller, AFL or the Servicer, as applicable, all the Trust's right, title and
interest in and to such purchased Receivable, all monies
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due thereon, the security interests in the related Financed Vehicles,
proceeds from any Insurance Policies, proceeds from recourse against Dealers
on such Receivables and the interests of the Trust in certain rebates of
premiums and other amounts relating to the Insurance Policies and any
documents relating thereto, such assignment being an assignment outright and
not for security; and the Seller, AFL or the Servicer, as applicable, shall
thereupon own such Receivable, and all such security and documents, free of
any further obligation to the Owner Trustee, the Trust, the Indenture
Trustee, the Security Insurer, the Indenture Collateral Agent or the
Noteholders with respect thereto.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicle retail installment sales contracts and, to the extent more
exacting, the degree of skill and attention that the Servicer exercises from
time to time with respect to all comparable motor vehicle receivables that it
services for itself or others. In performing such duties, so long as AFL is
the Servicer, it shall comply with the policies and procedures attached
hereto as Schedule B. The Servicer's duties shall include, without
limitation, collection and posting of all payments, responding to inquiries
of Obligors on the Receivables, investigating delinquencies, sending payment
coupons to Obligors, reporting any required tax information to Obligors,
policing the collateral, complying with the terms of the Lockbox Agreement,
accounting for collections and furnishing monthly and annual statements to
the Owner Trustee, the Indenture Trustee and the Security Insurer with
respect to distributions, monitoring the status of Insurance Policies with
respect to the Financed Vehicles and performing the other duties specified
herein. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements (and shall maintain possession of the Dealer Agreements, to the
extent it is necessary to do so), the Dealer Assignments and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments and
Insurance Policies relate to the Receivables, the Financed Vehicles or the
Obligors. To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its customary
standards, policies, and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Owner Trustee to execute and deliver,
on behalf of the Trust, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and with respect to
the Financed Vehicles; PROVIDED, HOWEVER, that notwithstanding the foregoing,
the Servicer shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Receivable or waive the right to collect the unpaid
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balance of any Receivable from the Obligor, except that the Servicer may
forego collection efforts if the amount subject to collection is DE MINIMIS
and if it would forego collection in accordance with its customary
procedures. The Servicer is hereby authorized to commence, in its own name
or in the name of the Trust (provided the Servicer has obtained the Owner
Trustee's consent, which consent shall not be unreasonably withheld), a legal
proceeding to enforce a Receivable pursuant to Section 3.3 or to commence or
participate in any other legal proceeding (including, without limitation, a
bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a
Financed Vehicle. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trust shall thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant,
and the Servicer is authorized and empowered by the Owner Trustee to execute
and deliver in the Servicer's name any notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with
any such proceeding. The Owner Trustee shall furnish the Servicer with any
powers of attorney and other documents which the Servicer may reasonably
request and which the Servicer deems necessary or appropriate and take any
other steps which the Servicer may deem necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement.
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS
OF RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and
procedures required by this Agreement, the Servicer shall make reasonable
efforts to collect all payments called for under the terms and provisions of
the Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with
respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
the Insurance Policies and the other Trust Property in such manner as will,
in the reasonable judgment of the Servicer, maximize the amount to be
received by the Trust with respect thereto. The Servicer is authorized in
its discretion to waive any prepayment charge, late payment charge or any
other similar fees that may be collected in the ordinary course of servicing
any Receivable.
(b) The Servicer may at any time agree to a modification,
amendment or extension of a Receivable in order to (i) change the Obligor's
regular due date to a date within the Monthly Period in which such due date
occurs, (ii) re-amortize the scheduled payments on the Receivable following a
partial prepayment of principal and (iii) grant extensions on a Receivable,
provided that the Servicer shall not be permitted to extend the monthly
payments on a Receivable more than two times in any twelve-month period, and
provided further that the aggregate period of all extensions on a Receivable
shall not exceed six months.
(c) The Servicer may grant payment extensions or
deferrals on, or other modifications or amendments to, a Receivable (in
addition to those modifications permitted by Section 3.2(b)) in accordance
with its customary procedures if the Servicer believes in good faith that
such extension, deferral, modification or amendment is necessary to avoid a
default on such
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Receivable, will maximize the amount to be received by the Trust with respect
to such Receivable, and is otherwise in the best interests of the Trust;
PROVIDED, HOWEVER, that:
(i) In no event may a Receivable be extended beyond
the Monthly Period immediately preceding the Final Scheduled
Distribution Date;
(ii) So long as an Insurer Default shall not have
occurred and be continuing, the Servicer shall not amend or modify a
Receivable (except as provided in Section 3.2(b)) without the consent of
the Security Insurer;
(iii) So long as an Insurer Default shall not have
occurred and be continuing, the Aggregate Principal Balance of
Receivables which have been extended during any Monthly Period (A) shall
not exceed 6.5% of the Aggregate Principal Balance of Receivables during
such Monthly Period (computed as of the Accounting Date immediately
prior to the first day of the related Monthly Period) and (B) shall not
exceed 4.0% of the average of the Aggregate Principal Balance of
Receivables for such Monthly Period and the three prior Monthly Periods
(computed as of the Accounting Date immediately prior to the first day
of the related Monthly Period);
(iv) So long as an Insurer Default shall not have
occurred and be continuing, the Aggregate Principal Balance of
Receivables for which payment deferrals have been granted during any
Monthly Period (A) shall not exceed 3.0% of the Aggregate Principal
Balance of Receivables during such Monthly Period (computed as of the
Accounting Date immediately prior to the first day of the related
Monthly Period) and (B) shall not exceed 2.0% of the average of the
Aggregate Principal Balance of Receivables for such Monthly Period and
the three prior Monthly Periods (computed as of the Accounting Date
immediately prior to the first day of the related Monthly Period);
(v) No such extension, modification or amendment
shall be granted if such action, when aggregated with all previous
extensions, modifications and amendments of Receivables, would have the
effect of causing any Notes to be deemed to have been exchanged for
other Notes within the meaning of Section 1001 of the Internal Revenue
Code of 1986, as amended, or any proposed, temporary or final Treasury
Regulations issued thereunder; and
(vi) If an Insurer Default shall have occurred and be
continuing, the Servicer may not extend or modify any Receivable (other
than as permitted by Section 3.2(b)).
(d) The Servicer shall use its reasonable best efforts to
cause Obligors to make all payments on the Receivables, whether by check or
by direct debit of the Obligor's bank account, to be made directly to one or
more Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox
Agreement. Amounts received by a Lockbox Bank in respect of the Receivables
may initially be deposited into a demand deposit account maintained by the
Lockbox Bank as agent for the Trust and for other owners of automobile
receivables serviced by
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the Servicer. The Servicer shall use its reasonable best efforts to cause
any Lockbox Bank to deposit all payments on the Receivables in the Lockbox
Account no later than the Business Day after receipt, and to cause all
amounts credited to the Lockbox Account on account of such payments to be
transferred to the Collection Account no later than the second Business Day
after receipt of such payments. The Lockbox Account shall be a demand
deposit account held by the Lockbox Bank, or at the request of the Security
Insurer (unless an Insurer Default shall have occurred and be continuing) an
Eligible Account satisfying clause (i) of the definition thereof.
Prior to the Closing Date and each Subsequent Transfer Date,
as applicable, the Servicer shall have notified each Obligor that makes its
payments on the Receivables by check to make such payments thereafter
directly to the Lockbox Bank (except in the case of Obligors that have
already been making such payments to the Lockbox Bank), and shall have
provided each such Obligor with a supply of mailing address labels in order
to enable such Obligors to make such payments directly to the Lockbox Bank
for deposit into the Lockbox Account, and the Servicer will continue, not
less often than every three months, to so notify those Obligors who have
failed to make payments to the Lockbox Bank. If and to the extent requested
by the Security Insurer (unless an Insurer Default shall have occurred and be
continuing), the Servicer shall request each Obligor that makes payment on
the Receivables by direct debit of such Obligor's bank account, to execute a
new authorization for automatic payment which in the judgment of the Security
Insurer is sufficient to authorize direct debit by the Lockbox Bank on behalf
of the Trust. If at any time the Lockbox Bank is unable to directly debit an
Obligor's bank account that makes payment on the Receivables by direct debit
and if such inability is not cured within 15 days or cannot be cured by
execution by the Obligor of a new authorization for automatic payment, the
Servicer shall notify such Obligor that it cannot make payment by direct
debit and must thereafter make payment by check.
Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to the Lockbox Agreement, the Servicer
shall remain obligated and liable to the Owner Trustee, Indenture Trustee and
Noteholders for servicing and administering the Receivables and the other
Trust Property in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue thereof.
In the event the Servicer shall for any reason no longer be
acting as such, the successor Servicer shall thereupon assume all of the
rights and obligations of the outgoing Servicer under the Lockbox Agreement.
In such event, the successor Servicer shall be deemed to have assumed all of
the outgoing Servicer's interest therein and to have replaced the outgoing
Servicer as a party to each such Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under
such Lockbox Agreement. The outgoing Servicer shall, upon request of the
Owner Trustee but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such Agreement
and an accounting of amounts collected and held by the Lockbox Bank and
otherwise use its best efforts to effect the orderly and efficient transfer
of any Lockbox Agreement to the successor Servicer. In the event that the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note
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Majority (if an Insurer Default shall have occurred and be continuing) elects
to change the identity of the Lockbox Bank, the outgoing Servicer, at its
expense, shall cause the Lockbox Bank to deliver, at the direction of the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note Majority (if an Insurer Default shall have occurred
and be continuing) to the Owner Trustee or a successor Lockbox Bank, all
documents and records relating to the Receivables and all amounts held (or
thereafter received) by the Lockbox Bank (together with an accounting of such
amounts) and shall otherwise use its best efforts to effect the orderly and
efficient transfer of the lockbox arrangements and the Servicer shall notify
the Obligors to make payments to the Lockbox established by the successor.
(e) The Servicer shall remit all payments by or on behalf
of the Obligors received directly by the Servicer to the Subcollection
Account or to the Lockbox Bank for deposit into the Collection Account
without deposit into any intervening account as soon as practicable, but in
no event later than the Business Day after receipt thereof.
SECTION 3.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and
procedures required by this Agreement, the Servicer shall use its best
efforts to repossess (or otherwise comparably convert the ownership of) and
liquidate any Financed Vehicle securing a Receivable with respect to which
the Servicer has determined that payments thereunder are not likely to be
resumed, as soon as is practicable after default on such Receivable but in no
event later than the date on which all or any portion of a Scheduled Payment
has become 91 days delinquent. The Servicer is authorized to follow such
customary practices and procedures as it shall deem necessary or advisable,
consistent with the standard of care required by Section 3.1, which practices
and procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private sale,
the submission of claims under an Insurance Policy and other actions by the
Servicer in order to realize upon such a Receivable. The foregoing is subject
to the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with any
repair or towards the repossession of such Financed Vehicle unless it shall
determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the related Receivable by an amount
greater than the amount of such expenses. All amounts received upon
liquidation of a Financed Vehicle shall be remitted directly by the Servicer
to the Subcollection Account without deposit into any intervening account as
soon as practicable, but in no event later than the Business Day after
receipt thereof. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle into cash proceeds, but only out of the cash proceeds of
such Financed Vehicle, any deficiency obtained from the Obligor or any
amounts received from the related Dealer, which amounts may be retained by
the Servicer (and shall not be required to be deposited as provided in
Section 3.2(e)) to the extent of such expenses. The Servicer shall pay on
behalf of the Trust any personal property taxes assessed on repossessed
Financed Vehicles; the Servicer shall be entitled to reimbursement of any
such tax from Liquidation Proceeds with respect to such Receivable.
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(b) If the Servicer elects to commence a legal proceeding
to enforce a Dealer Agreement or Dealer Assignment, the act of commencement
shall be deemed to be an automatic assignment from the Trust to the Servicer
of the rights under such Dealer Agreement and Dealer Assignment for purposes
of collection only. If, however, in any enforcement suit or legal
proceeding, it is held that the Servicer may not enforce a Dealer Agreement
or Dealer Assignment on the grounds that it is not a real party in interest
or a Person entitled to enforce the Dealer Agreement or Dealer Assignment,
the Owner Trustee, at the Servicer's expense, or the Seller, at the Seller's
expense, shall take such steps as the Servicer deems necessary to enforce the
Dealer Agreement or Dealer Assignment, including bringing suit in its name or
the name of the Seller or of the Indenture Collateral Agent for the benefit
of the Issuer Secured Parties. All amounts recovered shall be remitted
directly by the Servicer as provided in Section 3.2(e).
SECTION 3.4. INSURANCE.
(a) The Servicer shall require that each Financed Vehicle
be insured by the Insurance Policies referred to in Paragraph 24 of the
Schedule of Representations and Warranties and shall monitor the status of
such physical loss and damage insurance coverage thereafter, in accordance
with its customary servicing procedures. Each Receivable requires the
Obligor to maintain such physical loss and damage insurance, naming AFL and
its successors and assigns as additional insureds, and permits the holder of
such Receivable to obtain physical loss and damage insurance at the expense
of the Obligor if the Obligor fails to maintain such insurance. If the
Servicer shall determine that an Obligor has failed to obtain or maintain a
physical loss and damage Insurance Policy covering the related Financed
Vehicle which satisfies the conditions set forth in clause (1)(A) of such
Paragraph 24 (including, without limitation, during the repossession of such
Financed Vehicle) the Servicer shall enforce the rights of the holder of the
Receivable under the Receivable to require the Obligor to obtain such
physical loss and damage insurance.
(b) The Servicer may, if an Obligor fails to obtain or
maintain a physical loss and damage Insurance Policy, obtain insurance with
respect to the related Financed Vehicle and advance on behalf of such
Obligor, as required under the terms of the insurance policy, the premiums
for such insurance (such insurance being referred to herein as "Force-Placed
Insurance"). All policies of Force-Placed Insurance shall be endorsed with
clauses providing for loss payable to the Owner Trustee. Any cost incurred
by the Servicer in maintaining such Force-Placed Insurance shall only be
recoverable out of premiums paid by the Obligors or Liquidation Proceeds with
respect to the Receivable, as provided in Section 3.4(c).
(c) In connection with any Force-Placed Insurance
obtained hereunder, the Servicer may, in the manner and to the extent
permitted by applicable law, require the Obligors to repay the entire premium
to the Servicer. In no event shall the Servicer include the amount of the
premium in the Amount Financed under the Receivable. For all purposes of
this Agreement, the Insurance Add-On Amount with respect to any Receivable
having Force-Placed Insurance will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable,
and amounts allocable thereto will not be available for distribution on the
Notes. The Servicer shall retain and separately administer the right to
receive payments
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from Obligors with respect to Insurance Add-On Amounts or rebates of
Force-Placed Insurance premiums. If an Obligor makes a payment with respect
to a Receivable having Force-Placed Insurance, but the Servicer is unable to
determine whether the payment is allocable to the Receivable or to the
Insurance Add-On Amount, the payment shall be applied first to any unpaid
Scheduled Payments and then to the Insurance Add-On Amount. Liquidation
Proceeds on any Receivable will be used first to pay the Principal Balance
and accrued interest on such Receivable and then to pay the related Insurance
Add-On Amount. If an Obligor under a Receivable with respect to which the
Servicer has placed Force-Placed Insurance fails to make scheduled payments
of such Insurance Add-On Amount as due, and the Servicer has determined that
eventual payment of the Insurance Add-On Amount is unlikely, the Servicer
may, but shall not be required to, purchase such Receivable from the Trust
for the Purchase Amount on any subsequent Deposit Date. Any such Receivable,
and any Receivable with respect to which the Servicer has placed Force-Placed
Insurance which has been paid in full (excluding any Insurance Add-On
Amounts) will be assigned to the Servicer.
(d) The Servicer may ▇▇▇ to enforce or collect upon the
Insurance Policies, in its own name, if possible, or as agent of the Trust.
If the Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment
of the rights of the Trust under such Insurance Policy to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce an Insurance Policy
on the grounds that it is not a real party in interest or a holder entitled
to enforce the Insurance Policy, the Owner Trustee, on behalf of the Trust,
at the Servicer's expense, or the Seller, at the Seller's expense, shall take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Indenture Collateral
Agent for the benefit of the Issuer Secured Parties.
(e) The Servicer shall maintain a vendor's single
interest or other collateral protection insurance policy with respect to all
Financed Vehicles, which policy shall by its terms insure against physical
damage in the event any Obligor fails to maintain physical loss and damage
insurance with respect to the related Financed Vehicle. Costs incurred by
the Servicer in maintaining such insurance shall be paid by the Servicer.
The Servicer will cause itself to be named as named insured and the Owner
Trustee to be named a loss payee under all such policies. The Servicer may,
with the consent of the Security Insurer, elect not to maintain such
insurance policy but in such event will be obligated to indemnify the Trust
against any losses arising from an Obligor's failure to maintain physical
loss and damage insurance with respect to the related Financed Vehicle.
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required
by this Agreement, the Servicer shall take such steps as are necessary to
maintain perfection of the security interest created by each Receivable in
the related Financed Vehicle on behalf of the Trust, including but not
limited to obtaining the execution by the Obligors and the recording,
registering, filing, re-recording, re-filing, and re-registering of all
security agreements, financing statements and continuation statements as are
necessary to maintain the security interest granted by the Obligors
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under the respective Receivables. The Owner Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest on behalf of the Trust as necessary because
of the relocation of a Financed Vehicle or for any other reason. In the
event that the assignment of a Receivable to the Owner Trustee on behalf of
the Trust is insufficient, without a notation on the related Financed
Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the state in which the Financed
Vehicle is located, to perfect a security interest in the related Financed
Vehicle in favor of the Trust, the Servicer hereby agrees that the Servicer's
designation as the secured party on the certificate of title is in its
capacity as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event
of Default, the Security Insurer may (so long as an Insurer Default shall not
have occurred and be continuing) instruct the Owner Trustee and the Servicer
to take or cause to be taken, or, if an Insurer Default shall have occurred,
upon the occurrence of a Servicer Termination Event, the Owner Trustee and
the Servicer shall take or cause to be taken such action as may, in the
opinion of counsel to the Security Insurer (or, if an Insurer Default shall
have occurred and be continuing, counsel to the Owner Trustee), be necessary
to perfect or re-perfect the security interests in the Financed Vehicles
securing the Receivables in the name of the Trust by amending the title
documents of such Financed Vehicles or by such other reasonable means as may,
in the opinion of counsel to the Security Insurer or the Owner Trustee (as
applicable), be necessary or prudent. AFL hereby agrees to pay all expenses
related to such perfection or re-perfection and to take all action necessary
therefor. In addition, prior to the occurrence of an Insurance Agreement
Event of Default, the Security Insurer may (unless an Insurer Default shall
have occurred and be continuing) instruct the Owner Trustee and the Servicer
to take or cause to be taken such action as may, in the opinion of counsel to
the Security Insurer, be necessary to perfect or re-perfect the security
interest in the Financed Vehicles underlying the Receivables in the name of
the Trust, including by amending the title documents of such Financed
Vehicles or by such other reasonable means as may, in the opinion of counsel
to the Security Insurer, be necessary or prudent; PROVIDED, HOWEVER, that
(unless an Insurer Default shall have occurred and be continuing) if the
Security Insurer requests that the title documents be amended prior to the
occurrence of an Insurance Agreement Event of Default, the out-of-pocket
expenses of the Servicer or the Owner Trustee in connection with such action
shall be reimbursed to the Servicer or the Owner Trustee, as applicable, by
the Security Insurer.
SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF
SERVICER. By its execution and delivery of this Agreement, the Servicer
makes the following representations, warranties and covenants on which the
Owner Trustee relies in accepting the Receivables in trust and issuing the
Notes on behalf of the Trust, on which the Indenture Trustee relies in
authenticating the Notes and on which the Security Insurer relies in issuing
the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle
securing each Receivable shall not be released in whole or in
part from the security interest
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granted by the Receivable, except upon payment in full of the
Receivable or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do
nothing to impair the rights of the Trust, the Noteholders in
the Receivables, the Dealer Agreements, the Dealer Assignments,
the Insurance Policies or the other Trust Property; and
(iii) NO AMENDMENTS. The Servicer shall not
extend or otherwise amend the terms of any Receivable, except in
accordance with Section 3.2.
(b) The Servicer represents, warrants and covenants
as of the Closing Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The
Servicer has been duly organized and is validly existing and in
good standing under the laws of its jurisdiction of
organization, with power, authority and legal right to own its
properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and
had at all relevant times, and now has, power, authority and
legal right to enter into and perform its obligations under this
Agreement;
(ii) DUE QUALIFICATION. The Servicer is duly
qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses and approvals,
in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) requires or shall
require such qualification;
(iii) POWER AND AUTHORITY. The Servicer has
the power and authority to execute and deliver this Agreement
and its Related Documents and to carry out its terms and their
terms, respectively, and the execution, delivery and performance
of this Agreement and the Servicer's Related Documents have been
duly authorized by the Servicer by all necessary corporate
action;
(iv) BINDING OBLIGATION. This Agreement and
the Servicer's Related Documents shall constitute legal, valid
and binding obligations of the Servicer enforceable in
accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at
law;
(v) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the Servicer's
Related Documents, and the
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fulfillment of the terms of this Agreement and the Servicer's
Related Documents, shall not conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles
of incorporation or bylaws of the Servicer, or any indenture,
agreement, mortgage, deed of trust or other instrument to which
the Servicer is a party or by which it is bound, or result in
the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over
the Servicer or any of its properties;
(vi) NO PROCEEDINGS. There are no
proceedings or investigations pending or, to the Servicer's
knowledge, threatened against the Servicer, before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the
Servicer or its properties (A) asserting the invalidity of this
Agreement or any of the Related Documents, (B) seeking to
prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of the
Related Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by
the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related
Documents or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the
Notes;
(vii) NO CONSENTS. The Servicer is not
required to obtain the consent of any other party or any
consent, license, approval or authorization, or registration or
declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance,
validity or enforceability of this Agreement;
(viii) COLLATERAL INSURANCE. The Collateral
Insurance is in full force and effect.
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF
COVENANT. Upon discovery by any of the Servicer, the Security Insurer, the
Owner Trustee or the Indenture Trustee of a breach of any of the covenants
set forth in Sections 3.5(a) or 3.6(a), the party discovering such breach
shall give prompt written notice to the others; PROVIDED, HOWEVER, that the
failure to give any such notice shall not affect any obligation of the
Servicer. As of the second Accounting Date following its discovery or
receipt of notice of any breach of any covenant set forth in Sections 3.5(a)
or 3.6(a) which materially and adversely affects the interests of the
Noteholders, the Trust or the Security Insurer in any Receivable (including
any Liquidated Receivable) (or, at the Servicer's election, the first
Accounting Date so following), the Servicer shall, unless it shall have cured
such breach in all material respects, purchase from the Trust the Receivable
affected by such breach and, on the related Deposit Date, the Servicer shall
pay the
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related Purchase Amount. It is understood and agreed that the obligation of
the Servicer to purchase any Receivable (including any Liquidated Receivable)
with respect to which such a breach has occurred and is continuing shall, if
such obligation is fulfilled, constitute the sole remedy against the Servicer
for such breach available to the Security Insurer, the Noteholders, or the
Indenture Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that the
Servicer shall indemnify the Owner Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust, the Indenture Trustee and
the Noteholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN
EXPENSES BY SERVICER. On each Distribution Date, the Servicer shall be
entitled to receive out of the Collection Account the Basic Servicing Fee and
any Supplemental Servicing Fee for the related Monthly Period pursuant to
Section 4.6. The Servicer shall be required to pay all expenses incurred by
it in connection with its activities under this Agreement (including taxes
imposed on the Servicer, expenses incurred in connection with distributions
and reports to Noteholders and the Security Insurer and all other fees and
expenses of the Trust, including taxes levied or assessed against the Trust,
and claims against the Trust in respect of indemnification, unless such fees,
expenses or claims in respect of indemnification are expressly stated to be
for the account of AFL or not to be for the account of the Servicer). The
Servicer shall be liable for the fees and expenses of the Owner Trustee, the
Administrator, the Indenture Collateral Agent, the Indenture Trustee, the
Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and
any fees under the Lockbox Agreement) and the Independent Accountants.
Notwithstanding the foregoing, if the Servicer shall not be AFL, a successor
to AFL as Servicer permitted by Section 7.2 or an Affiliate of any of the
foregoing, such Servicer shall not be liable for taxes levied or assessed
against the Trust or claims against the Trust in respect of indemnification.
SECTION 3.9. SERVICER'S CERTIFICATE. No later than 10:00
a.m. New York City time on each Determination Date, the Servicer shall
deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, the Collateral Agent and each Rating Agency a Servicer's
Certificate executed by a Responsible Officer of the Servicer containing,
among other things, (i) all information necessary to enable the Indenture
Trustee to make any withdrawal and deposit required by Section 5.1, to give
any notice required by Section 5.2, to make the distributions required by
Sections 4.6 and 4.7(b), to make the withdrawals, distributions and
deliveries required by Section 4.7(a) and to determine the amount to which
the Servicer is entitled to be reimbursed or has been reimbursed during the
related Monthly Period for Monthly Advances pursuant to Section 4.4(c), (ii)
all information necessary to enable the Indenture Trustee to send the
statements to Noteholders required by Section 4.9, (iii) a listing of all
Warranty Receivables and Administrative Receivables purchased as of the
related Deposit Date, identifying the Receivables so purchased, and (iv) all
information necessary to enable the Indenture Trustee to reconcile all
deposits to, and withdrawals from, the Collection Account for the related
Monthly Period and Distribution Date, including the accounting required by
Section 4.8. Receivables purchased by the Servicer or by the Seller or AFL
on the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the
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related Monthly Period shall be identified by account number (as set forth in
the Schedule of Receivables). A copy of such certificate may be obtained by
any Noteholder (or by a Note Owner, upon certification that such Person is a
Note Owner and payment of any expenses associated with the distribution
thereof) by a request in writing to the Indenture Trustee addressed to the
Corporate Trust Office. In addition to the information set forth in the
preceding sentence, the Servicer's Certificate delivered to the Security
Insurer, the Collateral Agent and the Indenture Trustee on the Determination
Date shall also contain the following information: (a) the Delinquency Ratio,
Average Delinquency Ratio, Cumulative Default Rate and Cumulative Net Loss
Rate for such Determination Date; (b) whether any Trigger Event has occurred
as of such Determination Date; (c) whether any Trigger Event that may have
occurred as of a prior Determination Date is Deemed Cured as of such
Determination Date; (d) whether to the knowledge of the Servicer an Insurance
Agreement Event of Default has occurred, (e) if AFL shall be the Servicer,
whether a Capture Event shall have occurred and be continuing, and (f) if AFL
shall be the Servicer, whether any Capture Event specified in any prior
Servicer's Certificate has been cured by a permanent waiver, effective in
accordance with the terms of the Purchase Agreements.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
SERVICER TERMINATION EVENT.
(a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and each Rating
Agency, on or before March 31 (or 90 days after the end of the Servicer's
fiscal year, if other than December 31) of each year, beginning on March 31,
2000, an officer's certificate signed by any Responsible Officer of the
Servicer, dated as of December 31 (or other applicable date) of the
immediately preceding year, stating that (i) a review of the activities of
the Servicer during the preceding 12-month period (or such other period as
shall have elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral
Agent, and each Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than two Business Days thereafter, written
notice in an officer's certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 8.1(a). The Seller or the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer,
the Collateral Agent, the Servicer or the Seller (as applicable) and each
Rating Agency promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an officer's
certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under any other clause of
Section 8.1.
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SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally
recognized independent certified public accountants (the "Independent
Accountants"), who may also render other services to the Servicer or to the
Seller, to deliver to the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Security Insurer and each Rating Agency, on or before March 31
(or 90 days after the end of the Servicer's fiscal year, if other than
December 31) of each year, beginning on March 31, 2000, with respect to the
twelve months ended the immediately preceding December 31 (or other
applicable date) (or such other period as shall have elapsed from the Closing
Date to the date of such certificate), a statement (the "Accountant's
Report") addressed to the Board of Directors of the Servicer, to the Owner
Trustee, the Indenture Trustee, the Backup Servicer and to the Security
Insurer, to the effect that such firm has audited the financial statements of
the Servicer and issued its report thereon and that such audit was made in
accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing
procedures as such firm considered necessary in the circumstances, including
procedures as determined by the Independent Accountants related to (1) the
documents and records concerning the servicing of automobile installment
sales contracts under pooling and servicing agreements and sale and servicing
agreements substantially similar one to another (such statement to have
attached thereto a schedule setting forth the pooling and servicing
agreements and sale and servicing agreements covered thereby, including this
Agreement); and (2) the delinquency and loss statistics relating to the
Servicer's portfolio of automobile installment sales contracts; and except as
described in the statement, disclosed no exceptions or errors in the records
relating to automobile and light truck loans serviced for others that, in the
firm's opinion, generally accepted auditing standards requires such firm to
report. The Accountants' Report shall further state that (1) a review in
accordance with agreed upon procedures was made of three randomly selected
Servicer's Certificates for each Trust and (2) except as disclosed in the
Report, no exceptions or errors in the Servicer's Certificates so examined
were found.
(b) The Accountants' Report shall also indicate that the
firm is independent of the Seller and the Servicer within the meaning of the
Code of Professional Ethics of the American Institute of Certified Public
Accountants.
(c) A copy of the Accountants' Report may be obtained by
any Noteholder (or by any Note Owner, upon certification that such Person is
a Note Owner and payment of any expenses associated with the distribution
thereof) by a request in writing to the Indenture Trustee addressed to the
Corporate Trust Office.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND
INFORMATION REGARDING RECEIVABLES. The Servicer shall provide to
representatives of the Owner Trustee, Indenture Trustee, the Backup Servicer
and the Security Insurer reasonable access to the documentation regarding the
Receivables. The Servicer shall provide such access to any Noteholder (or
Note Owner) only in such cases where the Servicer is required by applicable
statutes or regulations (whether applicable to the Servicer or to such
Noteholder or Note Owner) to permit such Noteholder (or Note Owner) to review
such documentation. In each case, such access shall be
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afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation
shall not constitute a breach of this Section. Any Noteholder (or Note
Owner), by its acceptance of a Note (or by acquisition of its beneficial
interest therein), as applicable, shall be deemed to have agreed to keep
confidential and not to use for its own benefit any information obtained by
it pursuant to this Section, except as may be required by applicable law.
SECTION 3.13. MONTHLY TAPE. On or before the third Business
Day, but in no event later than the fifth calendar day, of each month, the
Servicer will deliver to the Indenture Trustee and the Backup Servicer a
computer tape and a diskette (or any other electronic transmission acceptable
to the Indenture Trustee and the Backup Servicer) in a format acceptable to
the Indenture Trustee and the Backup Servicer containing the information with
respect to the Receivables as of the preceding Accounting Date necessary for
preparation of the Servicer's Certificate relating to the immediately
succeeding Determination Date and necessary to determine the application of
collections as provided in Section 4.3. The Backup Servicer shall use such
tape or diskette (or other electronic transmission acceptable to the
Indenture Trustee and the Backup Servicer) to verify the Servicer's
Certificate delivered by the Servicer (based on the information contained in
such tape or diskette), and the Backup Servicer shall certify to the Security
Insurer that it has verified the Servicer's Certificate in accordance with
this Section 3.13 and shall notify the Servicer and the Security Insurer of
any discrepancies, in each case, on or before the second Business Day
following the Determination Date. In the event that the Backup Servicer
reports any discrepancies, the Servicer and the Backup Servicer shall attempt
to reconcile such discrepancies prior to the related Deficiency Claim Date,
but in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to the
related Distribution Date. In the event that the Backup Servicer and the
Servicer are unable to reconcile discrepancies with respect to a Servicer's
Certificate by the related Distribution Date, the Servicer shall cause the
Independent Accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the third Business Day, but in no event later than
the fifth calendar day, of the following month, reconcile the discrepancies.
The effect, if any, of such reconciliation shall be reflected in the
Servicer's Certificate for such next succeeding Determination Date. In
addition, the Servicer shall, if so requested by the Security Insurer (unless
an Insurer Default shall have occurred and be continuing) deliver to the
Backup Servicer its Collection Records and its Monthly Records within one
Business Day of demand therefor and a computer tape containing as of the
close of business on the date of demand all of the data maintained by the
Servicer in computer format in connection with servicing the Receivables.
Other than the duties specifically set forth in this Agreement, the Backup
Servicer shall have no obligations hereunder, including, without limitation,
to supervise, verify, monitor or administer the performance of the Servicer.
The Backup Servicer shall have no liability for any actions taken or omitted
by the Servicer. The duties and obligations of the Backup Servicer shall be
determined solely by the express provisions of this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Backup
Servicer.
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The
Servicer hereby covenants and agrees to act as such under this Agreement for
an initial term, commencing on the
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Closing Date and ending on June 30, 1999, which term shall be extendible by
the Security Insurer for successive quarterly terms ending on each successive
September 30, December 31, March 31 and June 30 (or, pursuant to revocable
written standing instructions from time to time to the Servicer, the
Indenture Trustee and the Owner Trustee, for any specified number of terms
greater than one), until the termination of the Trust. Each such notice
(including each notice pursuant to standing instructions, which shall be
deemed delivered at the end of successive quarterly terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be
delivered by the Security Insurer to the Owner Trustee, the Indenture Trustee
and the Servicer. The Servicer hereby agrees that, as of the date hereof and
upon its receipt of any such Servicer Extension Notice, the Servicer shall
become bound, for the initial term beginning on the Closing Date and for the
duration of the term covered by such Servicer Extension Notice, to continue
as the Servicer subject to and in accordance with the other provisions of
this Agreement. Until such time as an Insurer Default shall have occurred
and be continuing, the Indenture Trustee agrees that if as of the fifteenth
day prior to the last day of any term of the Servicer the Indenture Trustee
shall not have received any Servicer Extension Notice from the Security
Insurer, the Indenture Trustee will, within five days thereafter, give
written notice of such non-receipt to the Owner Trustee, the Security Insurer
and the Servicer.
SECTION 3.15. FIDELITY BOND. The Servicer shall maintain a
fidelity bond in such form and amount as is customary for entities acting as
custodian of funds and documents in respect of consumer contracts on behalf
of institutional investors.
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE.
The Servicer shall, and hereby agrees that it will, perform on behalf of the
Trust and the Owner Trustee the following duties of the Trust or the Owner
Trustee, as applicable, under the Indenture (references are to the applicable
Sections in the Indenture):
(a) the direction to the Paying Agents, if any, to
deposit moneys with the Indenture Trustee (Section 3.03);
(b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Indenture Collateral and
each other instrument and agreement included in the Trust Estate
(Section 3.04);
(c) the preparation of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of the
Indenture, necessary to protect the Trust Estate (Section 3.05);
(d) the delivery of the Opinion of Counsel on the
Closing Date and the annual delivery of Opinions of Counsel, in
accordance with Section 3.06 of the Indenture, as to the Trust Estate,
and the annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
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(e) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its obligations
under the Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to
the satisfaction and discharge of the Indenture and the preparation of
an Officers' Certificate and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(g) the preparation of any written instruments
required to confirm more fully the authority of any co-trustee or
separate trustee and any written instruments necessary in connection
with the resignation or removal of any co-trustee or separate trustee
(Sections 6.08 and 6.10);
(h) the opening of one or more accounts in the
Trust's name, the preparation of Issuer Orders, Officers' Certificates
and Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections
8.02 and 8.03);
(i) the preparation of Trust Orders and the
obtaining of Opinions of Counsel with respect to the execution of
supplemental indentures (Sections 9.01, 9.02 and 9.03);
(j) the preparation of all Officers' Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee or the Indenture
Collateral Agent to take any action under the Indenture (Section
11.01(a));
(k) the preparation and delivery of Officers'
Certificates and the obtaining of Independent Certificates, if
necessary, for the release of property from the lien of the Indenture
(Section 11.01(b)); and
(l) the recording of the Indenture, if applicable
(Section 11.15).
In addition to the duties of the Servicer set forth above, the Servicer
shall, and hereby agrees that it will, prepare, distribute and file any
reports required by Section 313(b) of the Trust Indenture Act of 1939, as
amended, as a result of any transfer of Subsequent Receivables. Such
distribution and filing is to be effected by the Servicer's distribution and
filing of the Servicer's Certificate.
SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE
AGREEMENT. The Servicer shall, and hereby agrees that it will, perform on
behalf of the Trust and the Owner Trustee the following duties of the Trust
under the Insurance Agreement (references are to the applicable Sections in
the Insurance Agreement):
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(a) the maintenance of books and records of accounts
of the Trust's assets and business and the furnishing to the Security
Insurer of reports, certificates, statements, financial statements or
notices furnished to the Indenture Trustee or the Noteholders pursuant
to the Related Documents (Section 2.02(b));
(b) the delivery to the Security Insurer and, upon
request, any Noteholder, of certificates with respect to compliance
with, and other matters under, the Related Documents (Section 2.02(c));
(c) the filing of financing statements, assignments
or other instruments, and amendments or continuation statements relating
thereto to preserve and protect fully the lien and security interest in,
and all rights of the Indenture Trustee and the Security Insurer with
respect to, the Trust Estate (Section 2.02(f));
(d) the maintenance of licenses, permits, charters
and registrations of the Trust material to the performance by the Trust
of its obligations under the Insurance Agreement and the Related
Documents (Section 2.02(g));
(e) the provision to the Security Insurer of
executed original copies of the documents executed in connection with
the closing of the offering of the Notes (Section 2.02(k)); and
(f) the taking of actions to ensure that the Trust
is taxable as a partnership for federal and state income tax purposes
and not as an association (or publicly traded partnership) taxable as a
corporation (Section 2.02(l)).
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (as defined in the
Trust Agreement) of any actions to be taken by the Trust necessary for
compliance with such laws and prepare on behalf of the Trust and the
Administrator all notices, filings or other documents or instruments required
to be filed under such laws.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
SECTION 4.1. TRUST ACCOUNTS.
(a) The Servicer shall establish the Collection Account
in the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties (as defined in the Indenture). The Collection Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.
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(b) The Servicer shall establish the Pre-Funding Account
in the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties. The Pre-Funding Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Collateral Agent and maintained with the Indenture Collateral Agent.
(c) The Servicer shall establish the Note Distribution
Account in the name of the Indenture Collateral Agent for the benefit of the
Issuer Secured Parties. The Note Distribution Account shall be an Eligible
Account and initially shall be a segregated trust account established with
the Indenture Collateral Agent and maintained with the Indenture Collateral
Agent.
(d) The Servicer shall establish the Reserve Account
(including the Class A-1 Holdback Subaccount) in the name of the Indenture
Collateral Agent for the benefit of the Issuer Secured Parties. The Reserve
Account shall be an Eligible Account and initially shall be a segregated
trust account established with the Indenture Collateral Agent and maintained
with the Indenture Collateral Agent.
(e) All amounts held in the Collection Account, the
Pre-Funding Account, the Note Distribution Account and the Reserve Account
(collectively, the "Trust Accounts") shall, to the extent permitted by
applicable laws, rules and regulations, be invested, as directed in writing
by the Servicer, in Eligible Investments that, in the case of amounts held in
the Collection Account, the Note Distribution Account and the Reserve
Account, mature not later than one Business Day prior to the Distribution
Date for the Monthly Period to which such amounts relate, and, in the case of
amounts held in the Pre-Funding Account, mature in such amounts and on such
dates, not later than one Business Day prior to the last day of the Funding
Period, as the Servicer may direct in writing; PROVIDED, HOWEVER, that the
amounts held in the Trust Accounts shall be invested by the Indenture
Collateral Agent on behalf of the Trust in overnight or next-day funds in
such Eligible Investments as may be acceptable to the Rating Agencies and the
Security Insurer (which initially shall be the Indenture Collateral Agent's
U.S. Government Fund and, from time to time, shall include such other
proprietary Eligible Investments of the Indenture Collateral Agent as shall
be confirmed in writing by the Security Insurer to the Indenture Collateral
Agent) for the period of time from the Business Day prior to the Distribution
Date or the end of the Funding Period, as applicable, until such Distribution
Date or the end of the Funding Period, as applicable. Any such written
direction shall certify that any such investment is authorized by this
Section 4.1. Investments in Eligible Investments shall be made in the name
of the Indenture Collateral Agent on behalf of the Trust, and such
investments shall not be sold or disposed of prior to their maturity. Any
investment of funds in the Trust Accounts shall be made in Eligible
Investments held by a financial institution in accordance with the following
requirements:
(i) all Eligible Investments shall be held in an account
with such financial institution in the name of the Indenture Collateral
Agent;
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(ii) all Eligible Investments held in such account shall be
delivered to the Indenture Collateral Agent in the following manner:
(A) with respect to bankers' acceptances, commercial
paper, negotiable certificates of deposit and other obligations
that constitute "instruments" within the meaning of Section
9-105(1)(i) of the UCC (other than certificated securities) and
are susceptible of physical delivery, transferred to the
Indenture Collateral Agent by physical delivery to the Indenture
Collateral Agent, indorsed to, or registered in the name of, the
Indenture Collateral Agent or its nominee or indorsed in blank;
or such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership
of any such Eligible Investments to the Indenture Collateral
Agent free of any adverse claims, consistent with changes in
applicable law or regulations or the interpretation thereof;
(B) with respect to a "certificated security" (as
defined in Section 8-102(a)(4) of the UCC), transferred:
(1) by physical delivery of such
certificated security to the Indenture Collateral Agent,
provided that if the certificated security is in
registered form, it shall be indorsed to, or registered
in the name of, the Indenture Collateral Agent or
indorsed in blank;
(2) by physical delivery of such
certificated security in registered form to a
"securities intermediary" (as defined in Section
8-102(a)(14) of the UCC) acting on behalf of the
Indenture Collateral Agent if the certificated security
has been specially indorsed to the Indenture Collateral
Agent by an effective indorsement.
(C) with respect to any security issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the
Federal National Mortgage Association that is a book-entry
security held through the Federal Reserve System pursuant to
Federal book entry regulations, the following procedures, all in
accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: book-entry
registration of such property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a securities
intermediary which is also a "depositary" pursuant to applicable
federal regulations and issuance by such securities intermediary
of a deposit advice or other written confirmation of such
book-entry registration to the Indenture Collateral Agent of the
purchase by the securities intermediary on behalf of the
Indenture Collateral Agent of such book-entry security; the
making by such securities intermediary of entries in its books
and records identifying such book-entry security held through
the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Indenture Collateral Agent and
indicating that such securities intermediary holds such
book-entry security solely as agent
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for the Indenture Collateral Agent; or such additional or
alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Eligible
Investments to the Indenture Collateral Agent free of any
adverse claims, consistent with changes in applicable law
or regulations or the interpretation thereof;
(D) with respect to any "uncertificated security"
(as defined in Section 8-102(a)(18) of the UCC) that is not
governed by clause (C) above, transferred:
(1)(A) by registration to the Indenture
Collateral Agent as the registered owner thereof, on the
books and records of the issuer thereof, or
(B) by another Person (not a securities
intermediary) either becomes the registered owner of the
uncertificated security on behalf of the Indenture
Collateral Agent, or having become the registered owner
acknowledges that it holds for the Indenture Collateral
Agent; or
(2) by the issuer thereof having agreed that
it will comply with instructions originated by the
Indenture Collateral Agent without further consent of
the registered owner thereof;
(E) with respect to any "security entitlement" (as
defined in Section 8-102(a)(17) of the UCC):
(1) if a securities intermediary
(A) indicates by book entry that a "financial asset" (as
defined in Section 8-102(a)(9) of the UCC) has been
credited to the Indenture Collateral Agent's "securities
account" (as defined in Section 8-501(a) of the UCC),
(B) receives a financial asset (as so defined) from the
Indenture Collateral Agent or acquires a financial asset
for the Indenture Collateral Agent, and in either case,
accepts it for credit to the Indenture Collateral
Agent's securities account (as so defined), (C) becomes
obligated under other law, regulation or rule to credit
a financial asset to the Indenture Collateral Agent's
securities account, or (D) has agreed that it will
comply with "entitlement orders" (as defined in Section
8-102(a)(8) of the UCC) originated by the Indenture
Collateral Agent, without further consent by the
"entitlement holder" (as defined in Section 8-102(a)(7)
of the UCC), of a confirmation of the purchase and the
making by such securities intermediary of entries on its
books and records identifying as belonging to the
Indenture Collateral Agent of (I) a specific
certificated security in the securities intermediary's
possession, (II) a quantity of securities that
constitute or are part of a fungible bulk of
certificated securities in the securities intermediary's
possession, or (III) a quantity of securities that
constitute or are part of a fungible bulk of securities
shown on the account of the securities intermediary on
the books of another securities intermediary.
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(F) in each case of delivery contemplated pursuant
to clauses (A) through (E) of subsection (ii) hereof, the
Indenture Collateral Agent shall make appropriate notations on
its records, and shall cause the same to be made on the records
of its nominees, indicating that such Eligible Investment is
held in trust pursuant to and as provided in this Indenture.
Any cash held by the Indenture Collateral Agent shall not be considered a
"financial asset" for purposes of this Section 4.1(e). Subject to the other
provisions hereof, the Indenture Collateral Agent shall have sole control over
each such investment and the income thereon, and any certificate or other
instrument evidencing any such investment, if any, shall be delivered directly
to the Indenture Collateral Agent or its agent, together with each document of
transfer, if any, necessary to transfer title to such investment to the
Indenture Collateral Agent in a manner which complies with this Section 4.1.
All interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Trust Accounts shall be deposited in the Collection
Account and distributed on the next Distribution Date pursuant to Section 4.6.
The Servicer shall deposit in the applicable Trust Account an amount equal to
any net loss on such investments immediately as realized.
(f) On the Closing Date, the Servicer shall deposit in the
Collection Account (i) all Scheduled Payments and prepayments of Initial
Receivables received by the Servicer after the Initial Cutoff Date and on or
prior to the Business Day immediately preceding the Closing Date or received by
the Lockbox Bank after the Initial Cutoff Date and on or prior to the second
Business Day immediately preceding the Closing Date and (ii) all Liquidation
Proceeds and proceeds of Insurance Policies realized in respect of a Financed
Vehicle and applied by the Servicer after the Initial Cutoff Date. On each
Subsequent Transfer Date, the Servicer shall deposit in the Collection Account
(x) all Scheduled Payments and prepayments of the related Subsequent Receivables
received by the Servicer after the related Subsequent Cutoff Date and on or
prior to the Business Day immediately preceding the related Subsequent Transfer
Date or received by the Lockbox Bank after the related Subsequent Cutoff Date
and on or prior to the second Business Day immediately preceding the related
Subsequent Transfer Date and (y) all Liquidation Proceeds and proceeds of
Insurance Policies related in respect of a Financed Vehicle and applied by the
Servicer after the related Subsequent Cutoff Date.
SECTION 4.2. COLLECTIONS.
(a) The Servicer shall establish the Subcollection Account
in the name of the Indenture Trustee for the benefit of the Noteholders. The
Subcollection Account shall be an Eligible Account satisfying clause (ii) of the
definition of "Eligible Account," and shall initially be established with the
Lockbox Bank. The Servicer shall remit directly to the Subcollection Account
without deposit into any intervening account all payments by or on behalf of the
Obligors on the Receivables and all Liquidation Proceeds received by the
Servicer, in each case, as soon as practicable, but in no event later than the
Business Day after receipt thereof. Within two days of deposit of payments into
the Subcollection Account, the Servicer shall cause the Lockbox Bank to transfer
all amounts credited to the Subcollection Account on account of such
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payments to the Collection Account. Amounts in the Subcollection Account
shall not be invested. Notwithstanding the foregoing, the Servicer may
utilize an alternative remittance schedule acceptable to the Servicer if the
Security Insurer consents in writing (so long as an Insurer Default shall not
have occurred and be continuing) and the Servicer provides to the Indenture
Trustee written confirmation from each Rating Agency that such alternative
remittance schedule will not result in the downgrading or withdrawal by the
Rating Agency of the rating then assigned to the Notes.
(b) Notwithstanding the provisions of subsection (a)
hereof, the Servicer will be entitled to be reimbursed from amounts on
deposit in the Collection Account with respect to a Monthly Period for
amounts previously deposited in the Collection Account but later determined
by the Servicer or the Lockbox Bank to have resulted from mistaken deposits
or postings or checks returned for insufficient funds. The amount to be
reimbursed hereunder shall be paid to the Servicer on the related
Distribution Date pursuant to Section 4.6(iii) upon certification by the
Servicer of such amounts and the provision of such information to the
Indenture Trustee and the Security Insurer as may be necessary in the opinion
of the Indenture Trustee and the Security Insurer to verify the accuracy of
such certification. In the event that the Security Insurer has not received
evidence satisfactory to it of the Servicer's entitlement to reimbursement
pursuant to this Section 4.2(b), the Security Insurer shall (unless an
Insurer Default shall have occurred and be continuing) give the Indenture
Trustee notice to such effect, following receipt of which the Indenture
Trustee shall not make a distribution to the Servicer in respect of such
amount pursuant to Section 4.6, or if the Servicer prior thereto has been
reimbursed pursuant to Section 4.6 or Section 4.8, the Indenture Trustee
shall withhold such amounts from amounts otherwise distributable to the
Servicer on the next succeeding Distribution Date.
SECTION 4.3. APPLICATION OF COLLECTIONS. For the purposes
of this Agreement, all collections for a Monthly Period shall be applied by
the Servicer as follows:
(a) With respect to each Receivable, payments by or
on behalf of the Obligor thereof (other than of Supplemental Servicing
Fees with respect to such Receivable, to the extent collected) shall be
applied to interest and principal with respect to such Receivable in
accordance with the terms of such Receivable. With respect to each
Liquidated Receivable, Liquidation Proceeds shall be applied to interest
and principal with respect to such Receivable in accordance with the
terms of such Receivable, and then to any Insurance Add-On Amount due
and payable with respect to such Receivable. The Servicer shall not be
entitled to any Supplemental Servicing Fees with respect to a Liquidated
Receivable.
(b) With respect to each Receivable that has become
a Purchased Receivable on any Deposit Date, the Purchase Amount shall be
applied, for purposes of this Agreement only, to interest and principal
on the Receivable in accordance with the terms of the Receivable as if
the Purchase Amount had been paid by the Obligor on the Accounting Date.
The Servicer shall not be entitled to any Supplemental Servicing Fees
with respect to such a Receivable. Nothing contained herein shall
relieve any Obligor of any obligation relating to any Receivable.
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(c) All amounts collected that are payable to the
Servicer as Supplemental Servicing Fees hereunder shall be deposited in
the Collection Account and paid to the Servicer in accordance with
Section 4.6(iii).
(d) All payments by or on behalf of an Obligor
received with respect to any Purchased Receivable after the Accounting
Date immediately preceding the Deposit Date on which the Purchase Amount
was paid by the Seller, AFL or the Servicer shall be paid to the Seller,
AFL or the Servicer, respectively, and shall not be included in the
Available Funds.
SECTION 4.4. MONTHLY ADVANCES.
(a) If with respect to a Receivable, the amount deposited
into the Collection Account during a Monthly Period in respect of such
Receivable and allocable to interest (determined in accordance with Section
4.3) is less than an amount of interest equal to interest accrued on such
Receivable (for the number of calendar days in such Monthly Period)
(calculated according to the method specified in the related retail
installment sale contract or promissory note at the APR on the Principal
Balance of such Receivable as of the Accounting Date preceding such
Distribution Date), the Servicer shall make a Monthly Advance equal to the
amount of such shortfall; PROVIDED, HOWEVER, that the Servicer shall not be
required to make a Monthly Advance with respect to a Receivable extended
pursuant to Section 3.2(b) for any Monthly Period during which no Scheduled
Payment is due according to the terms of such extension; and PROVIDED
FURTHER, that the Servicer shall not be required to make a Monthly Advance
with respect to a Receivable that is less than 31 days delinquent.
(b) On or before each Determination Date and prior to the
delivery of the Servicer's Certificate for such Determination Date pursuant
to Section 3.9, the Servicer shall deposit in the Collection Account the
aggregate amount of Monthly Advances required for the related Monthly Period
in immediately available funds (subject to Section 4.8).
(c) The Servicer shall be entitled to be reimbursed for
Outstanding Monthly Advances with respect to a Receivable pursuant to Section
4.6(i) or pursuant to Section 4.8 from the following sources with respect to
such Receivable on any day subsequent to the Distribution Date in respect of
which such Monthly Advance was made: (i) subsequent payments by or on behalf
of the Obligor with respect to such Receivable, (ii) collections of
Liquidation Proceeds with respect to such Receivable if such Receivable
becomes a Liquidated Receivable and (iii) payment of any Purchase Amount with
respect to such Receivable if such Receivable becomes a Purchased Receivable.
If any Receivable shall become a Liquidated Receivable and the Servicer
shall not have been fully reimbursed for Outstanding Monthly Advances with
respect to such Receivable from the sources of funds previously described in
this paragraph, the Servicer shall be entitled to reimbursement from
collections on Receivables other than the Receivable in respect of which such
Outstanding Monthly Advance shall have been made.
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SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Deposit
Date, the Servicer or AFL shall deposit in the Collection Account the
aggregate Purchase Amounts with respect to Administrative Receivables and
Warranty Receivables, respectively. All such deposits of Purchase Amounts
shall be made in immediately available funds. On or before each Draw Date,
the Indenture Trustee shall deposit in the Collection Account any amounts
delivered to the Indenture Trustee by the Collateral Agent.
SECTION 4.6. DISTRIBUTIONS. On each Distribution Date, the
Indenture Trustee shall (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) distribute the
following amounts and in the order of priority specified below. Within each
order of priority, amounts shall be deemed withdrawn first from Available
Funds, second from the Reserve Account and third from any Deficiency Claim
Amounts.
(i) first, from the Distribution Amount, (A) to the
Trust for payment of any taxes due and unpaid with respect to the Trust,
to the extent such taxes have not been previously paid by AFL or by the
Servicer pursuant to Section 3.8, and (B) then to the Servicer, the
amount of Outstanding Monthly Advances for which the Servicer is
entitled to be reimbursed pursuant to Section 4.4(c) and for which the
Servicer has not previously been reimbursed pursuant to Section 4.8;
(ii) second, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Owner Trustee,
any accrued and unpaid fees of the Owner Trustee in accordance with the
Trust Agreement and including amounts with respect to which the
Administrator is entitled to be reimbursed pursuant to the
Administration Agreement; to the Indenture Trustee, any accrued and
unpaid fees of the Indenture Trustee in accordance with the Indenture;
to any Lockbox Bank, Custodian, Backup Servicer, Collateral Agent,
Indenture Collateral Agent or Administrator (including the Owner Trustee
or Indenture Trustee if acting in any such additional capacity), any
accrued and unpaid fees (in each case, to the extent such Person has not
previously received such amount from the Servicer or AFL), to the Backup
Servicer, any transition expenses (not to exceed $100,000) in accordance
with Section 8.3; PROVIDED, HOWEVER, in the event that the rating
assigned by Standard & Poor's to the claims-paying ability of the
Security Insurer is not AAA, the accrued and unpaid fees of the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Collateral
Agent, the Indenture Collateral Agent and the Administrator shall be
distributed pursuant to this clause (ii) to the extent such fees are not
in excess of the amount (the "Servicer Fee Threshold") obtained by
dividing (x) .20% of the Aggregate Principal Balance by (y) twelve, and
any accrued and unpaid fees in excess of the Servicer Fee Threshold
remaining to be distributed pursuant to this clause (ii) shall not be
distributed pursuant to this clause (ii) but shall be distributed after
the distributions to be made pursuant to clause (v) below but before the
distributions to be made pursuant to clause (vi) below;
(iii) third, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Servicer, the
Basic Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any
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amounts specified in Section 4.2(b), to the extent the Servicer has not
reimbursed itself in respect of such amounts pursuant to Section 4.8;
(iv) fourth, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Note Distribution
Account, an amount equal to the Noteholders' Interest Distributable
Amount for such Distribution Date;
(v) fifth, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Note Distribution
Account, an amount equal to the Noteholders' Principal Distributable
Amount for such Distribution Date;
(vi) sixth, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Security Insurer,
to the extent of any amounts owing to the Security Insurer under the
Insurance Agreement and not paid, whether or not AFL is also obligated
to pay such amounts, such amounts representing a portion of the Credit
Enhancement Fee otherwise payable on a subordinated basis to the Seller;
and
(vii) seventh, any remaining Available Funds to the
Collateral Agent for deposit in the Spread Account, such amounts
representing a portion of the Credit Enhancement Fee payable on a
subordinated basis to the Seller.
SECTION 4.7. PRE-FUNDING ACCOUNT.
(a) On the Closing Date, the Indenture Trustee will
deposit, on behalf of the Seller, in the Pre-Funding Account $148,818,732.02
from the proceeds of the sale of the Notes. On each Subsequent Transfer
Date, the Servicer shall instruct the Indenture Trustee in writing:
(i) to withdraw from the Pre-Funding Account the
Spread Account Additional Deposit, if any, on such Subsequent Transfer
Date, and to deliver such funds to the Collateral Agent for deposit in
the Spread Account,
(ii) to withdraw from the Pre-Funding Account the
amount, if any, by which the Requisite Reserve Amount for such
Subsequent Transfer Date exceeds the Reserve Amount, and to deposit such
funds in the Reserve Account,
(iii) to withdraw from the Pre-Funding Account the
Class A-1 Holdback Amount, if any, for such Subsequent Transfer Date,
and to deposit such funds in the Class A-1 Holdback Subaccount,
(iv) to withdraw from the Pre-Funding Account the
amount, if any, on deposit therein in excess of the remaining Pre-Funded
Amount, after giving effect to the withdrawals specified in clauses
(i) - (iii) above, and to distribute such amount to or upon the order of
the Seller upon satisfaction of the conditions set forth in Section 2.4
with respect to such transfer, and
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(v) to withdraw from the Reserve Account an amount
equal to the excess, if any, of the Reserve Amount (after giving effect
to withdrawals from the Reserve Account pursuant to Section 5.1 on the
immediately following Distribution Date, if such Subsequent Transfer
Date falls between a Determination Date and the related Distribution
Date) over the Requisite Reserve Amount for such Subsequent Transfer
Date and to distribute such amount to or upon the order of the
Depositor.
(b) If (x) the Pre-Funded Amount has not been reduced to
zero on the Distribution Date on or immediately following the end of the
Funding Period) or (y) the Pre-Funded Amount has been reduced to $100,000 or
less on any Distribution Date, in either case after giving effect to any
reductions in the Pre-Funded Amount on such Distribution Date pursuant to
paragraph (a) above, the Servicer shall provide written instructions to the
Indenture Trustee to withdraw from the Pre-Funding Account on such
Distribution Date an amount equal to the sum of the Class A-1 Prepayment
Amount, the Class A-2 Prepayment Amount, the Class A-3 Prepayment Amount, the
Class A-4 Prepayment Amount and the Class A-5 Prepayment Amount and deposit
such amount in the Note Distribution Account. Any remaining funds on deposit
in the Pre-Funding Account shall be distributed to the Depositor. If the
funds on deposit in the Pre-Funding Account are less than the amount
described above, then the Servicer shall provide written instructions to the
Indenture Trustee to withdraw the funds on deposit in the Pre-Funding Account
and deposit such funds in the Note Distribution Account and Collection
Account, pro rata in accordance with the amount specified above.
(c) If the Pre-Funded Amount is greater than $100,000 at
the end of the Funding Period, the Seller will deposit into the Note
Distribution Account an amount equal to the sum of the Class A-1 Prepayment
Premium, the Class A-2 Prepayment Premium, the Class A-3 Prepayment Premium,
the Class A-4 Prepayment Premium and the Class A-5 Prepayment Premium;
PROVIDED, HOWEVER, that the obligation of the Seller to make the deposits
referred to in this sentence is expressly limited to the extent of the amount
of Liquidated Damages (as defined in the Closing Date Purchase Agreement)
paid to the Seller by AFL and by the Seller to the Trust.
SECTION 4.8. NET DEPOSITS. Subject to payment by the
Servicer of amounts otherwise payable pursuant to Section 4.6(ii) and
provided that no Servicer Termination Event shall have occurred and be
continuing with respect to such Servicer, the Servicer may make the
remittances to be made by it pursuant to Sections 4.2, 4.4 and 4.5 net of
amounts (which amounts may be netted prior to any such remittance for a
Monthly Period) to be distributed to it pursuant to Sections 3.8, 4.2(b) and
4.6(i); PROVIDED, HOWEVER, that the Servicer shall account for all of such
amounts in the related Servicer's Certificate as if such amounts were
deposited and distributed separately; and, PROVIDED, FURTHER, that if an
error is made by the Servicer in calculating the amount to be deposited or
retained by it, with the result that an amount less than required is
deposited in the Collection Account, the Servicer shall make a payment of the
deficiency to the Collection Account, immediately upon becoming aware, or
receiving notice from the Indenture Trustee, of such error.
SECTION 4.9. STATEMENTS TO NOTEHOLDERS.
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(a) On each Distribution Date, the Indenture Trustee
shall include with each distribution to each Noteholder, the Servicer's
Certificate (which statement shall also have been provided to the Security
Insurer and to each Rating Agency by the Servicer) delivered on the related
Determination Date pursuant to Section 3.9, setting forth for the Monthly
Period relating to such Payment Date the following information with respect
to each class of Notes:
(i) the amount of such distribution allocable to
principal;
(ii) the amount of such distribution allocable to
interest;
(iii) the amount of such distribution payable out of
amounts withdrawn from the Reserve Account, the Class A-1 Holdback
Subaccount, the Spread Account or pursuant to a claim on the Note
Policy;
(iv) the outstanding principal balance of the Notes
(after giving effect to distributions made on such Distribution Date);
(v) the Class A-1 Interest Carryover Shortfall, the
Class A-2 Interest Carryover Shortfall, the Class A-3 Interest Carryover
Shortfall, the Class A-4 Interest Carryover Shortfall, the Class A-5
Interest Carryover Shortfall, and the Noteholders' Principal Carryover
Shortfall, if any, and the change in such amounts from the preceding
statement;
(vi) the amount of fees paid by the Trust with
respect to such Monthly Period;
(vii) for Payment Dates during the Funding Period, the
remaining Pre-Funded Amount, the remaining Reserve Amount and the amount
on deposit in the Class A-1 Holdback Subaccount;
(viii) for the Payment Date on or immediately following
the end of the Funding Period, the Class A-1 Prepayment Amount, the
Class A-2 Prepayment Amount, the Class A-3 Prepayment Amount, Amount,
the Class A-4 Prepayment Amount, the Class A-5 Prepayment Amount, the
Class A-1 Prepayment Premium, the Class A-2 Prepayment Premium, the
Class A-3 Prepayment Premium, the Class A-4 Prepayment Premium and the
Class A-5 Prepayment Premium, if any, and the remaining Reserve Amount
that has not been distributed pursuant to Section 4.6 or to the
Depositor; and
(ix) the Note Pool Factor with respect to each class
of Notes (after giving effect to distributions made on such Payment
Date).
Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a
Note.
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(b) Note Owners may obtain copies of the statements
delivered by the Indenture Trustee pursuant to subsection (b) above upon
written request to the Indenture Trustee at its Corporate Trust Office
(together with a certification that such Person is a Note Owner and payment
of any expenses associated with the distribution thereof).
SECTION 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture
Trustee, in holding all funds in the Trust Accounts and in making
distributions as provided in this Agreement, shall act solely on behalf of
and as agent for the Noteholders.
SECTION 4.11. ELIGIBLE ACCOUNTS. Any account which is
required to be established as an Eligible Account pursuant to this Agreement
and which ceases to be an Eligible Account shall within five Business Days
(or such longer period, not to exceed 30 days, as to which each Rating Agency
and the Security Insurer may consent) be established as a new account which
shall be an Eligible Account and any cash and/or any investments shall be
transferred to such new account.
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT.
(a) In the event that the Servicer's Certificate with
respect to any Determination Date shall state that the amount of Available
Funds with respect to such Determination Date is less than the sum of the
amounts payable on the related Distribution Date pursuant to clauses (i)
through (vii) of Section 4.6, then on the Draw Date immediately preceding
such Distribution Date, the Indenture Trustee, in accordance with written
instructions, shall (i) withdraw amounts on deposit in the Reserve Account,
other than any funds in the Class A-1 Holdback Subaccount (up to the amount
by which the amounts payable on the related Distribution Date pursuant to
clauses (i) through (vii) of Section 4.6 exceed the amount of Available Funds
with respect to such Determination Date) and (ii) deposit the amounts so
withdrawn from the Reserve Account into the Collection Account. On each
Distribution Date, any funds on deposit in the Reserve Account (other than
funds on deposit in the Class A-1 Holdback Subaccount) in excess of the
Requisite Reserve Amount (after giving effect to any withdrawals on the
immediately preceding Draw Date as described above) shall be paid to the
Depositor.
(b) In the event that the Servicer's Certificate with
respect to the Determination Date related to the Class A-1 Final Scheduled
Distribution Date shall state that the unpaid principal balance of the Class
A-1 Notes (after giving effect to the distribution of the Available Funds
pursuant to clauses (i) - (v) of Section 4.6 for such Distribution Date), is
greater than zero, then on the Draw Date immediately preceding such
Distribution Date the Indenture Trustee, in accordance with written
instructions, shall withdraw an amount equal to such unpaid principal balance
from funds on deposit in the Class A-1 Holdback Subaccount (or the amount of
funds on deposit in the Class A-1 Holdback Subaccount, if less) and deposit
such funds in the
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Note Distribution Account for distribution to the Class A-1 Noteholders on
such Distribution Date. Funds in the Class A-1 Holdback Subaccount shall not
be available to pay any other amounts. Any funds remaining in the Class A-1
Holdback Subaccount, after withdrawal of any such amount on the Class A-1
Final Scheduled Distribution Date, shall be released to the Depositor.
SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT.
(a) In the event that the Servicer's Certificate with
respect to any Determination Date shall state that the Deficiency Claim
Amount (as defined below) with respect to the related Distribution Date is
greater than zero, then on the Deficiency Claim Date immediately preceding
such Distribution Date, the Indenture Trustee shall deliver to the Collateral
Agent, the Security Insurer, the Fiscal Agent, if any, the Owner Trustee and
the Servicer, by hand delivery, telex or facsimile transmission, a written
notice (a "Deficiency Notice"). Such Deficiency Notice shall direct the
Collateral Agent to remit such Deficiency Claim Amount (to the extent of the
funds available to be distributed pursuant to the Spread Account Agreement)
to the Indenture Trustee for deposit in the Collection Account. The
"Deficiency Claim Amount" with respect to any Distribution Date shall equal
the excess, if any, of
(i) the amount required to be distributed pursuant
to clauses (i) - (vi) of Section 4.6 (without giving effect to the
limitation of the Distribution Amount specified in each such clause)
over
(ii) the sum of (A) the Actual Funds with respect to
such Distribution Date, plus (B) if such Distribution Date is the Class
A-1 Final Scheduled Distribution Date, the amount, if any, withdrawn
from the Class A-1 Holdback Subaccount and deposited in the Note
Distribution Account pursuant to Section 5.1(b).
(b) any Deficiency Notice shall be delivered by 10:00
a.m., New York City time, on the fourth Business Day preceding such
Distribution Date. The amounts distributed by the Collateral Agent to the
Indenture Trustee pursuant to a Deficiency Notice shall be deposited by the
Indenture Trustee into the Collection Account pursuant to Section 4.5.
ARTICLE VI
THE SELLER
SECTION 6.1. LIABILITY OF SELLER.
(a) The Seller shall be liable hereunder only to the extent
of the obligations in this Agreement specifically undertaken by the Seller and
the representations made by the Seller.
SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF
THE OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION.
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(a) The Seller shall not merge or consolidate with any
other Person or permit any other Person to become the successor to the
Seller's business without (so long as an Insurer Default shall not have
occurred and be continuing) the prior written consent of the Security
Insurer. The certificate of incorporation of any corporation (i) into which
the Seller may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Seller shall be a party, or (iii) succeeding to
the business of Seller, shall contain provisions relating to limitations on
business and other matters substantively identical to those contained in the
Seller's certificate of incorporation. Any such successor corporation shall
execute an agreement of assumption of every obligation of the Seller under
this Agreement and each Related Document and, whether or not such assumption
agreement is executed, shall be the successor to the Seller under this
Agreement without the execution or filing of any document or any further act
on the part of any of the parties to this Agreement. The Seller shall
provide prompt notice of any merger, consolidation or succession pursuant to
this Section 6.2 to the Owner Trustee, the Indenture Trustee, the Security
Insurer and the Rating Agencies. Notwithstanding the foregoing, the Seller
shall not merge or consolidate with any other Person or permit any other
Person to become a successor to the Seller's business, unless (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 2.5 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become a Servicer Termination Event shall have occurred and be
continuing, (y) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and the Security Insurer an officer's certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.2 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Seller shall have delivered
to the Owner Trustee, the Indenture Trustee and the Security Insurer an
Opinion of Counsel, stating that, in the opinion of such counsel, either (A)
all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Trust Property and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) The Seller hereby agrees that it shall not (i) take
any action prohibited by Article XVI of its certificate of incorporation or
(ii) without the prior written consent of the Owner Trustee and the Indenture
Trustee and (so long as an Insurer Default shall not have occurred and be
continuing) the Security Insurer and without giving prior written notice to
the Rating Agencies, amend Article III, Article IX, Article XIV or Article
XVI of its certificate of incorporation.
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS.
The Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its
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obligations as Seller of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.
SECTION 6.4. SELLER MAY OWN NOTES. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become the
owner or pledgee of Notes with the same rights as it would have if it were not
the Seller or an Affiliate thereof except as otherwise specifically provided
herein or in the Related Documents. Notes so owned by or pledged to the Seller
or such Affiliate shall have an equal and proportionate benefit under the
provisions of this Agreement or any Related Document, without preference,
priority, or distinction as among all of the Notes, provided that any Notes
owned by the Seller or any Affiliate thereof, during the time such Notes are
owned by them, shall be without voting rights for any purpose set forth in this
Agreement or any Related Document. The Seller shall notify the Owner Trustee,
the Indenture Trustee and the Security Insurer promptly after it or any of its
Affiliates become the owner or pledgee of a Note.
ARTICLE VII
THE SERVICER
SECTION 7.1. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such and, in the
case of AFL, without limitation of its obligations under the Purchase
Agreement) shall be liable hereunder only to the extent of the obligations in
this Agreement specifically undertaken by the Servicer and the
representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold
harmless the Trust, the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Security Insurer, their respective officers, directors, agents
and employees, and the Noteholders from and against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees
and expenses of counsel and expenses of litigation arising out of or
resulting from the use, ownership or operation by the Servicer or any
Affiliate thereof of any Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold
harmless the Trust, the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Security Insurer, their respective officers, directors, agents
and employees and the Noteholders from and against any taxes that may at any
time be asserted against the Trust, the Owner Trustee, the Indenture Trustee,
the Backup Servicer, the Security Insurer or the Noteholders with respect to
the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, withholding, general corporation,
tangible personal property, privilege or license taxes (but not including (i)
income taxes on fees and expenses payable to the Owner Trustee, the Indenture
Trustee, the Backup Servicer or the Security Insurer, (ii) income taxes
arising out of distributions on the Notes or (iii) transfer taxes arising in
connection with transfers of Notes).
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(d) The Servicer shall indemnify, defend and hold
harmless the Trust, the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Security Insurer, their respective officers, directors, agents
and employees and the Noteholders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such
cost, expense, loss, claim, damage, or liability arose out of, or was imposed
upon the Trust, the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Security Insurer or the Noteholders through the breach of this
Agreement, the negligence, willful misfeasance, or bad faith of the Servicer
in the performance of its duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold
harmless the Owner Trustee, in its individual capacity, its officers,
directors, agents and employees, from and against all costs, taxes (other
than income taxes on fees and expenses payable to the Owner Trustee),
expenses, losses, claims, damages and liabilities arising out of or incurred
in connection with the acceptance or performance of the trusts and duties
contained in the Trust Agreement and the Related Documents, except to the
extent that such cost, taxes (other than income taxes), expense, loss, claim,
damage or liability (A) is due to the willful misfeasance or gross negligence
of the Owner Trustee, or (B) arises from the Owner Trustee's breach of any of
its representations or warranties set forth in Section 6.2 of the Trust
Agreement; PROVIDED, HOWEVER, that amounts payable under this paragraph shall
be increased by the amount of income taxes actually paid by the Owner Trustee
in respect of any indemnity payment unless the Owner Trustee received or can
reasonably be expected to receive a tax deduction for the related loss or
cost.
(f) Indemnification under this Article shall include,
without limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer has made any indemnity payments pursuant to this
Article and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts collected to the
Servicer, without interest.
(g) AFL, in its individual capacity, hereby acknowledges
that the indemnification provisions in the Purchase Agreement benefiting the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer and the
Security Insurer are enforceable by each hereunder.
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF
THE OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any
other person, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the
successor to the Servicer's business unless, after the merger, consolidation,
conveyance, transfer, lease or succession, the successor or surviving entity
shall be an Eligible Servicer and shall be capable of fulfilling the duties
of the Servicer contained in this Agreement. Any corporation (i) into which
the Servicer may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Servicer shall be a party, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of the
Servicer, or (iv) succeeding to
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the business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under
this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall
provide notice of any merger, consolidation or succession pursuant to this
Section 7.2(a) to the Owner Trustee, the Indenture Trustee, the Security
Insurer and each Rating Agency. Notwithstanding the foregoing, the Servicer
shall not merge or consolidate with any other Person or permit any other
Person to become a successor to the Servicer's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.6 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an Insurance Agreement Event of Default shall
have occurred and be continuing, (y) the Servicer shall have delivered to the
Owner Trustee, the Indenture Trustee and the Security Insurer an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this
Section 7.2(a) and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and (z)
the Servicer shall have delivered to the Owner Trustee, the Indenture Trustee
and the Security Insurer an Opinion of Counsel, stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Owner Trustee in the
Trust Property and reciting the details of the filings or (B) no such action
shall be necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer
may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Backup Servicer shall be a party, (iii) which
acquires by conveyance, transfer or lease substantially all of the assets of
the Backup Servicer, or (iv) succeeding to the business of the Backup
Servicer, in any of the foregoing cases shall execute an agreement of
assumption to perform every obligation of the Backup Servicer under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to the Backup Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be
deemed to release the Backup Servicer from any obligation.
SECTION 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP
SERVICER AND OTHERS.
(a) Neither the Servicer, the Backup Servicer nor any of
the directors or officers or employees or agents of the Servicer or Backup
Servicer shall be under any liability to the Trust, or the Noteholders,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER,
that this provision shall not protect the Servicer, the Backup Servicer or
any such person against any liability that would otherwise be imposed by
reason of a breach of this Agreement or willful
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misfeasance, bad faith or negligence (excluding errors in judgment) in the
performance of duties, by reason of reckless disregard of obligations and
duties under this Agreement or any violation of law by the Servicer, Backup
Servicer or such person, as the case may be; PROVIDED FURTHER, that this
provision shall not affect any liability to indemnify the Owner Trustee and
the Indenture Trustee for costs, taxes, expenses, claims, liabilities, losses
or damages paid by the Owner Trustee or the Indenture Trustee, each in its
individual capacity. The Servicer, the Backup Servicer and any director,
officer, employee or agent of the Servicer or Backup Servicer may rely in
good faith on the advice of counsel or on any document of any kind PRIMA
FACIE properly executed and submitted by any Person respecting any matters
arising under this Agreement.
(b) The Backup Servicer shall not be liable for any
obligation of the Servicer contained in this Agreement, and the Owner
Trustee, the Indenture Trustee, the Seller, the Security Insurer and the
Noteholders shall look only to the Servicer to perform such obligations.
SECTION 7.4. DELEGATION OF DUTIES. The Servicer may
delegate duties under this Agreement to an Affiliate of AFL with the prior
written consent of the Security Insurer, the Indenture Trustee, the Owner
Trustee and the Backup Servicer. The Servicer also may at any time perform
the specific duty of repossession of Financed Vehicles through
sub-contractors who are in the business of servicing automotive receivables
and may perform other specific duties through such sub-contractors with the
prior written consent of the Security Insurer (unless an Insurer Default
shall have occurred and be continuing), PROVIDED, HOWEVER, that no such
delegation or sub-contracting duties by the Servicer shall relieve the
Servicer of its responsibility with respect to such duties. So long as no
Insurer Default shall have occurred and be continuing, neither AFL or any
party acting as Servicer hereunder shall appoint any subservicer hereunder
without the prior written consent of the Security Insurer, the Indenture
Trustee, the Owner Trustee and the Backup Servicer.
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.2, neither the Servicer nor the Backup
Servicer shall resign from the obligations and duties imposed on it by this
Agreement as Servicer or Backup Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements
in a manner which would have a material adverse effect on the Servicer or the
Backup Servicer, as the case may be, and the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or Note Majority
(if an Insurer Default shall have occurred and be continuing) does not elect
to waive the obligations of the Servicer or the Backup Servicer, as the case
may be, to perform the duties which render it legally unable to act or to
delegate those duties to another Person. Any such determination permitting
the resignation of the Servicer or Backup Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered and reasonably acceptable to the
Owner Trustee, the Indenture Trustee and the Security Insurer (unless an
Insurer Default shall have occurred and be continuing). No resignation of
the Servicer shall become effective until, so long as no Insurer Default
shall have occurred and be continuing, the Backup Servicer or an entity
acceptable to the Security Insurer shall have
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assumed the responsibilities and obligations of the Servicer or, if an
Insurer Default shall have occurred and be continuing, the Backup Servicer or
a successor Servicer that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Servicer. No resignation of the
Backup Servicer shall become effective until, so long as no Insurer Default
shall have occurred and be continuing, an entity acceptable to the Security
Insurer shall have assumed the responsibilities and obligations of the Backup
Servicer or, if an Insurer Default shall have occurred and be continuing, a
Person that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Backup Servicer; PROVIDED, HOWEVER, that in the event
a successor Backup Servicer is not appointed within 60 days after the Backup
Servicer has given notice of its resignation and has provided the Opinion of
Counsel required by this Section 7.5, the Backup Servicer may petition a
court for its removal.
SECTION 7.6. ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER. The
successor Servicer, if Norwest Bank Minnesota, National Association, its
successors or assigns, shall have no obligation to perform any repurchase or
advancing obligations, if any, of the Servicer hereunder.
ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the
Indenture Trustee for distribution to Noteholders any proceeds or
payment required to be so delivered under the terms of this Agreement
(or, if AFL is the Servicer, the Purchase Agreement) that continues
unremedied for a period of two Business Days (one Business Day with
respect to payment of Purchase Amounts) after written notice is received
by the Servicer from the Indenture Trustee or (unless an Insurer Default
shall have occurred and be continuing) the Security Insurer or after
discovery of such failure by a Responsible Officer of the Servicer; or
(b) Failure by the Servicer to deliver to the
Indenture Trustee, the Owner Trustee and (so long as an Insurer Default
shall not have occurred and be continuing) the Security Insurer the
Servicer's Certificate by the fourth Business Day prior to the
Distribution Date, or failure on the part of the Servicer to observe its
covenants and agreements set forth in Section 7.2(a); or
(c) Failure on the part of the Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Servicer set forth in this Agreement (or, if AFL is
the Servicer, the Purchase Agreement), which failure (i) materially and
adversely affects the rights of Noteholders (determined without regard
to the availability of funds under the Note Policy), or of the Security
Insurer (unless an Insurer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days after
the date on which written notice of such failure, requiring the
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same to be remedied, shall have been given to the Servicer by the Owner
Trustee, the Indenture Trustee or the Security Insurer (or, if an
Insurer Default shall have occurred and be continuing, any Noteholder);
or
(d) (i) The commencement of an involuntary case
under the federal bankruptcy laws, as now or hereinafter in effect, or
another present or future federal or state bankruptcy, insolvency or
similar law and such case is not dismissed within 60 days; or (ii) the
entry of a decree or order for relief by a court or regulatory authority
having jurisdiction in respect of the Servicer or the Seller in an
involuntary case under the federal bankruptcy laws, as now or hereafter
in effect, or another present or future, federal or state, bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the Servicer or the Seller or of any substantial part of their
respective properties or ordering the winding up or liquidation of the
affairs of the Servicer or the Seller; or
(e) The commencement by the Servicer or the Seller
of a voluntary case under the federal bankruptcy laws, as now or
hereafter in effect, or any other present or future, federal or state,
bankruptcy, insolvency or similar law, or the consent by the Servicer or
the Seller to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Servicer or the Seller or of any substantial part of its
property or the making by the Servicer or the Seller of an assignment
for the benefit of creditors or the failure by the Servicer or the
Seller generally to pay its debts as such debts become due or the taking
of corporate action by the Servicer or the Seller in furtherance of any
of the foregoing; or
(f) Any representation, warranty or statement of the
Servicer or the Seller made in this Agreement or any certificate, report
or other writing delivered pursuant hereto shall prove to be incorrect
in any material respect as of the time when the same shall have been
made (excluding, however, any representation or warranty set forth in
Section 2.5(a)), and the incorrectness of such representation, warranty
or statement has a material adverse effect on the Trust and, within 30
days after written notice thereof shall have been given to the Servicer
or the Seller by the Owner Trustee, the Indenture Trustee or the
Security Insurer (or, if an Insurer Default shall have occurred and be
continuing, a Noteholder), the circumstances or condition in respect of
which such representation, warranty or statement was incorrect shall not
have been eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have
occurred and be continuing, the Security Insurer shall not have
delivered a Servicer Extension Notice pursuant to Section 3.14 (in which
case the Servicer Termination Event will be deemed to have occurred as
of the last day of the term of the most recent Servicer Extension Notice
received); or
(h) So long as an Insurer Default shall not have
occurred and be continuing, an Insurance Agreement Event of Default
shall have occurred; or
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(i) A claim is made under the Note Policy.
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT.
If a Servicer Termination Event shall occur and be continuing, the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing,
either the Indenture Trustee, the Owner Trustee, or a Note Majority), by
notice given in writing to the Servicer (and to the Indenture Trustee, the
Backup Servicer and the Owner Trustee if given by the Security Insurer or the
Noteholders) may terminate all of the rights and obligations of the Servicer
under this Agreement. On or after (i) the receipt by the Servicer of such
written notice, or (ii) the receipt by the Backup Servicer (or any alternate
successor servicer appointed by the Security Insurer pursuant to Section
8.3(b)) of written notice from the Security Insurer that the Security Insurer
is not extending the Servicer's term pursuant to Section 3.14, all authority,
power, obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Notes or the Trust Property or otherwise, shall
be terminated and automatically shall pass to, be vested in and become
obligations and responsibilities of the Backup Servicer (or such other
successor Servicer appointed by the Security Insurer); PROVIDED, HOWEVER,
that the successor Servicer shall have no liability with respect to any
obligation which was required to be performed by the terminated Servicer
prior to the date that the successor Servicer becomes the Servicer or any
claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by
this Agreement to execute and deliver, on behalf of the terminated Servicer,
as attorney-in-fact or otherwise, any and all documents and other instruments
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement of the Receivables and the other Trust Property and
related documents to show the Owner Trustee as lienholder or secured party on
the related Lien Certificates, or otherwise. The terminated Servicer agrees
to cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the terminated
Servicer, in the Collection Account or thereafter received with respect to
the Receivables and the delivery to the successor Servicer of all Receivable
Files, Monthly Records and Collection Records and a computer tape in readable
form as of the most recent Business Day containing all information necessary
to enable the successor Servicer or a successor Servicer to service the
Receivables and the other Trust Property. If requested by the Security
Insurer (unless an Insurer Default shall have occurred and be continuing),
the successor Servicer shall terminate the Lockbox Agreement and direct the
Obligors to make all payments under the Receivables directly to the successor
Servicer (in which event the successor Servicer shall process such payments
in accordance with Section 3.2(e)), or to a lockbox established by the
successor Servicer at the direction of the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), at the successor
Servicer's expense. In addition to any other amounts that are then payable
to the terminated Servicer under this Agreement, the terminated Servicer
shall then be entitled to receive out of Available Funds reimbursements for
any Outstanding Monthly Advances (in accordance with Section 4.4(c)) made
during the period prior to the notice pursuant to this Section 8.2 which
terminates the obligation and rights of the terminated Servicer under this
Agreement. The Owner Trustee, the Indenture Trustee and the successor
Servicer may set
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off and deduct any amounts owed by the terminated Servicer from any amounts
payable to the terminated Servicer pursuant to the preceding sentence. The
terminated Servicer shall grant the Owner Trustee, the Indenture Trustee, the
successor Servicer and the Security Insurer reasonable access to the
terminated Servicer's premises at the terminated Servicer's expense.
SECTION 8.3. APPOINTMENT OF SUCCESSOR.
(a) On and after (i) the time the Servicer receives a
notice of termination pursuant to Section 8.2, or (ii) the resignation of the
Servicer pursuant to Section 7.5, or (iii) the receipt by the Backup Servicer
(or any alternate successor servicer appointed by the Security Insurer
pursuant to Section 8.3(b)) of written notice from the Security Insurer that
the Security Insurer is not extending the Servicer's term pursuant to Section
3.14, the Backup Servicer (unless the Security Insurer shall have exercised
its option pursuant to Section 8.3(b) to appoint an alternate successor
Servicer) shall be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and shall be subject to all the
responsibilities, restrictions, duties, liabilities and termination
provisions relating thereto placed on the Servicer by the terms and
provisions of this Agreement. The Owner Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. If a successor Servicer is acting as
Servicer hereunder, it shall be subject to termination under Section 8.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer
and shall serve from term to term as provided in Section 3.14.
(b) The Security Insurer may (so long as an Insurer
Default shall not have occurred and be continuing) exercise at any time its
right to appoint as Backup Servicer or as successor to the Servicer a Person
other than the Person serving as Backup Servicer at the time, and (without
limiting its obligations under the Note Policy) shall have no liability to
the Owner Trustee, the Indenture Trustee, AFL, the Seller, the Person then
serving as Backup Servicer, any Noteholders, any Note Owner or any other
Person if it does so. Notwithstanding the above, if the Backup Servicer shall
be legally unable or unwilling to act as Servicer and an Insurer Default
shall have occurred and be continuing, the Backup Servicer, the Indenture
Trustee, a Note Majority or the Owner Trustee may petition a court of
competent jurisdiction to appoint any Eligible Servicer as the successor to
the Servicer. Pending appointment pursuant to the preceding sentence, the
Backup Servicer shall act as successor Servicer unless it is legally unable
to do so, in which event the outgoing Servicer shall continue to act as
Servicer until a successor has been appointed and accepted such appointment.
Subject to Section 7.5, no provision of this Agreement shall be construed as
relieving the Backup Servicer of its obligation to succeed as successor
Servicer upon the termination of the Servicer pursuant to Section 8.2 or the
resignation of the Servicer pursuant to Section 7.5. If upon the termination
of the Servicer pursuant to Section 8.2 or the resignation of the Servicer
pursuant to Section 7.5, the Security Insurer appoints a successor Servicer
other than the Backup Servicer, the Backup Servicer shall not be relieved of
its duties as Backup Servicer hereunder.
(c) Any successor Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as
the Servicer would have been entitled to
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under the Agreement if the Servicer had not resigned or been terminated
hereunder, except that the Basic Servicing Fee Rate for such successor
Servicer shall be calculated on a pro rata basis at the rate of 1.00% per
annum for all loans originated under AFL's "Premier" program and 1.50% per
annum for all loans originated under AFL's "Classic" program. If any
successor Servicer is appointed as a result of the Backup Servicer's refusal
(in contravention of the terms of this Agreement) to act as Servicer although
it is legally able to do so, the Security Insurer and such successor Servicer
may agree on reasonable additional compensation to be paid to such successor
Servicer by the Backup Servicer, which additional compensation shall be paid
by the Backup Servicer in its individual capacity and solely out of its own
funds. If any successor Servicer is appointed for any reason other than the
Backup Servicer's refusal to act as Servicer although legally able to do so,
the Security Insurer and such successor Servicer may agree on additional
compensation to be paid to such successor Servicer, which additional
compensation shall be payable as provided in the Spread Account Agreement.
If the Backup Servicer is the successor Servicer, the Backup Servicer shall
be entitled to reimbursement, pursuant to Section 4.6(ii), of reasonable
transition expenses, not in excess of $100,000, incurred in acting as
successor Servicer. In addition, any successor Servicer shall be entitled to
reimbursement, as provided in the Spread Account Agreement, of reasonable
transition expenses incurred in acting as successor Servicer.
SECTION 8.4. NOTIFICATION TO NOTEHOLDERS. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to
this Article VIII, the Indenture Trustee shall give prompt written notice
thereof to Noteholders at their respective addresses appearing in the Note
Register.
SECTION 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, a Note
Majority) may, on behalf of all Holders of Notes, waive any default by the
Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall
cease to exist, and any Servicer Termination Event arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon. Nothing in this Section 8.5 shall preclude the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing, a
Note Majority) from waiving any default for a period of time or subject to
any contingency or from waiving some but not all of the consequences of such
default.
ARTICLE IX
TERMINATION
SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION
OF TRUST ESTATE.
(a) On each Determination Date as of which the Aggregate
Principal Balance is less than 10% of the Original Pool Balance, the Servicer
and the Seller each shall have the
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option to purchase the corpus of the Trust (with the consent of the Security
Insurer, if a claim has previously been made under the Note Policy or if such
purchase would result in a claim on the Note Policy or if such purchase would
result in any amount owing to the Security Insurer remaining unpaid);
PROVIDED, HOWEVER, that the amount to be paid for such purchase (as set forth
in the following sentence) shall be sufficient to pay the full amount of
principal, premium, if any, and interest then due and payable on the Notes.
To exercise such option, the Servicer or the Seller, as the case may be,
shall pay the aggregate Purchase Amounts for the Receivables, plus the
appraised value of any other property (including the right to receive any
future recoveries) held as part of the Trust, such appraisal to be conducted
by an appraiser mutually agreed upon by the Servicer or the Seller, as the
case may be, and the Security Insurer (or the Indenture Trustee, if an
Insurer Default shall have accrued and be continuing), and shall succeed to
all interests in and to the Trust Property. The fees and expenses related to
such appraisal shall be paid by the party exercising the option to purchase.
The party exercising such option to repurchase shall deposit the aggregate
Purchase Amounts for the Receivables and the amount of the appraised value of
any other property held as part of the Trust into the Collection Account, and
the Indenture Trustee shall distribute the amounts so deposited in accordance
with Section 4.6.
(b) Upon any sale of the assets of the Trust pursuant to
Section 8.2 of the Trust Agreement, the Owner Trustee shall instruct the
Indenture Trustee in writing to deposit the proceeds from such sale after all
payments and reserves therefrom have been made (the "Insolvency Proceeds") in
the Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are
not so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Owner Trustee shall instruct the Indenture
Trustee in writing to make the following deposits (after the application on
such Distribution Date of the Available Funds) from the Insolvency Proceeds:
(i) to the Note Distribution Account, any portion of
the Noteholders' Interest Distributable Amount not otherwise deposited
into the Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Class A-1
Prepayment Premium, Class A-2 Prepayment Premium, Class A-3 Prepayment
Premium, Class A-4 Prepayment Premium and Class A-5 Prepayment Premium
(only to the extent of the amount of Liquidated Damages (as defined in
the Purchase Agreement) received by the Trust from the Seller); and
(iii) to the Note Distribution Account, the
outstanding principal balance of the Notes (after giving effect to the
reduction in the outstanding principal balance of the Notes to result
from the deposits otherwise made in the Note Distribution Account on
such Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid, first, to the Security Insurer, to the extent of any amounts owing to
the Security Insurer under the Insurance Agreement and not paid, whether or
not AFL is obligated to pay such amounts, and second to the Collateral Agent
for deposit in the Spread Account.
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(c) Notice of any termination of the Trust shall be given
by the Servicer to the Owner Trustee and the Indenture Trustee as soon as
practicable after the Servicer has received notice thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT.
(a) This Agreement may be amended by the Seller, the
Servicer and the Trust, with the prior written consent of the Indenture
Trustee and the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing) but without the consent of any of the
Noteholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions in this Agreement or (iii) for the purpose of adding any provision
to or changing in any manner or eliminating any provision of this Agreement
or of modifying in any manner the rights of the Noteholders; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of the Noteholders.
(b) This Agreement may also be amended from time to time
by the Seller, the Servicer and the Trust with the prior written consent of
the Indenture Trustee and the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) and with the consent of a Note
Majority (which consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such Note
and of any Note issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the Note)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Notes; PROVIDED, HOWEVER, that, subject
to the express rights of the Security Insurer under the Related Documents,
including its rights to agree to certain modifications of the Receivables
pursuant to Section 3.2 and its rights to cause the Indenture Collateral
Agent to liquidate the Collateral under the circumstances and subject to the
provisions of Section 5.04 of the Indenture, no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions required
to be made on any Note or the Class A-1 Interest Rate, Class A-2 Interest
Rate, Class A-3 Interest Rate, Class A-4 Interest Rate or Class A-5 Interest
Rate, (b) amend any provisions of Section 4.6 in such a manner as to affect
the priority of payment of interest, principal or premium to Noteholders, or
(c) reduce the aforesaid percentage required to consent to any such amendment
or any waiver hereunder, without the consent of the Holders of all Notes then
outstanding.
(c) Prior to the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to each Rating Agency.
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(d) Promptly after the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to the Indenture Trustee.
(e) It shall not be necessary for the consent of
Noteholders pursuant to Section 10.1(b) to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents
(and any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Indenture Trustee may
prescribe, including the establishment of record dates.
(f) Prior to the execution of any amendment to this
Agreement, the Owner Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement, in addition to the Opinion of Counsel
referred to in Section 10.2(i). The Owner Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 10.2. PROTECTION OF TITLE TO TRUST PROPERTY.
(a) The Servicer shall execute and file such financing
statements and cause to be executed and filed such continuation and other
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Trust, the Owner
Trustee and the Indenture Collateral Agent in the Trust Property and in the
proceeds thereof. The Servicer shall deliver (or cause to be delivered) to
the Owner Trustee, the Indenture Collateral Agent and the Security Insurer
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Neither the Seller, the Servicer nor the Trust shall
change its name, identity or corporate structure in any manner that would,
could or might make any financing statement or continuation statement filed
by the Seller in accordance with paragraph (a) above seriously misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given
the Owner Trustee, the Indenture Trustee and the Security Insurer (so long as
an Insurer Default shall not have occurred and be continuing) at least 60
days' prior written notice thereof, and shall promptly file appropriate
amendments to all previously filed financing statements and continuation
statements.
(c) Each of the Seller, the Servicer and the Trust shall
give the Owner Trustee, the Indenture Trustee and the Security Insurer at
least 60 days' prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement. The Servicer shall at all times maintain each office from which
it services Receivables and its principal executive office within the United
States of America.
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(d) The Servicer shall maintain accounts and records as
to each Receivable accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to)
each Receivable and the amounts from time to time deposited in the Collection
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so
that, from and after the time of sale under this Agreement of the Receivables
to the Trust, the Servicer's master computer records (including any backup
archives) that refer to any Receivable indicate clearly (with reference to
the particular trust) that the Receivable is owned by the Trust. Indication
of the Trust's ownership of a Receivable shall be deleted from or modified on
the Servicer's computer systems when, and only when, the Receivable has been
paid in full or repurchased by the Seller or Servicer.
(f) If at any time the Seller or the Servicer proposes to
sell, grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender or
other transferee computer tapes, records or print-outs (including any
restored from backup archives) that, if they refer in any manner whatsoever
to any Receivable, indicate clearly that such Receivable has been sold and is
owned by the Trust unless such Receivable has been paid in full or
repurchased by the Seller or Servicer.
(g) The Servicer shall permit the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and their
respective agents, at any time to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Receivables or any other
portion of the Trust Property.
(h) The Servicer shall furnish to the Owner Trustee, the
Indenture Trustee, the Backup Servicer and the Security Insurer at any time
upon request a list of all Receivables then held as part of the Trust,
together with a reconciliation of such list to the Schedule of Receivables
and to each of the Servicer's Certificates furnished before such request
indicating removal of Receivables from the Trust. Upon request, the Servicer
shall furnish a copy of any list to the Seller. The Owner Trustee shall hold
any such list and Schedule of Receivables for examination by interested
parties during normal business hours at the Corporate Trust Office upon
reasonable notice by such Persons of their desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee and the Security Insurer simultaneously
with the execution and delivery of this Agreement and of each amendment
thereto and upon the occurrence of the events giving rise to an obligation to
give notice pursuant to Section 10.2(b) or (c), an Opinion of Counsel either
(a) stating that, in the opinion of such Counsel, all financing statements
and continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Owner Trustee and the
Indenture Collateral Agent in the Receivables and the other
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Trust Property, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (b) stating
that, in the opinion of such counsel, no such action is necessary to preserve
and protect such interest.
(j) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee and the Security Insurer, within 90 days after the
beginning of each calendar year beginning with the first calendar year
beginning more than three months after the Closing Date, an Opinion of
Counsel, either (a) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trust
and the Indenture Collateral Agent in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (b) stating that, in the opinion of such counsel,
no action shall be necessary to preserve and protect such interest.
SECTION 10.3. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York without regard to the principles of conflicts of laws thereof and the
obligations, rights and remedies of the parties under this Agreement shall be
determined in accordance with such laws.
SECTION 10.4. SEVERABILITY OF PROVISIONS. If any one or
more of the covenants, agreements, provisions or terms of this Agreement
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no
way affect the validity or enforceability of the other provisions of this
Agreement or of the Notes or the rights of the Holders thereof.
SECTION 10.5. ASSIGNMENT. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 7.2 or
Section 8.2 (and as provided in the provisions of the Agreement concerning
the resignation of the Servicer and the Backup Servicer), this Agreement may
not be assigned by the Seller or the Servicer without the prior written
consent of the Owner Trustee, the Indenture Trustee and the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, the Owner
Trustee, the Indenture Trustee and a Note Majority).
SECTION 10.6. THIRD-PARTY BENEFICIARIES. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. The Security Insurer and
its successors and assigns shall be a third-party beneficiary to the
provisions of this Agreement, and shall be entitled to rely upon and directly
to enforce such provisions of this Agreement so long as no Insurer Default
shall have occurred and be continuing. Nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement. Except as expressly stated otherwise herein or in
the Related Documents, any right of the Security Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Security Insurer in its sole and absolute discretion.
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SECTION 10.7. DISCLAIMER BY SECURITY INSURER. The Security
Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a
written notice to the Owner Trustee and the Indenture Trustee.
SECTION 10.8. COUNTERPARTS. For the purpose of facilitating
its execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
SECTION 10.9. INTENTION OF PARTIES. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Seller,
that it is intended that the assignment and transfer herein contemplated
constitute a sale and assignment outright, and not for security, of the
Receivables and the other Trust Property, conveying good title thereto free
and clear of any Liens, from the Seller to the Trust, and that the
Receivables and the other Trust Property shall not be a part of the Seller's
estate in the event of the insolvency, receivership, conservatorship or the
occurrence of another similar event, of, or with respect to, the Seller. In
the event that such conveyance is determined to be made as security for a
loan made by the Trust to the Seller, the Seller intends that it shall have
granted to the Owner Trustee a first priority security interest in all of the
Seller's right, title and interest in and to the Trust Property conveyed to
the Trust pursuant to Sections 2.1 and 2.4 of this Agreement, and that this
Agreement shall constitute a security agreement under applicable law.
SECTION 10.10. NOTICES. All demands, notices and
communications under this Agreement shall be in writing, personally
delivered, sent by facsimile or mailed by certified mail-return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in
the case of AFL, the Seller or the Servicer, at the following address:
Arcadia Receivables Finance Corp., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, with copies to: Arcadia Financial Ltd.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇, (b) in the case of the Owner Trustee, ▇▇▇▇▇▇ Square North,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate
Trust Administration, (c) in the case of the Indenture Trustee and, for so
long as the Indenture Trustee is the Backup Servicer or the Collateral Agent,
at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Corporate Trust Services--Asset Backed Administration, (d) in the
case of each Rating Agency, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (for
▇▇▇▇▇'▇) and ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (for Standard & Poor's),
Attention: Asset-Backed Surveillance, and (e) in the case of the Security
Insurer, Financial Security Assurance Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: Surveillance Department, Telex No.: (▇▇▇) ▇▇▇-▇▇▇▇,
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇, Telecopy Nos.: (▇▇▇) ▇▇▇-▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇
(in each case in which notice or other communication to Financial Security
refers to an Event of Default, a claim on the Note Policy or with respect to
which failure on the part of Financial Security to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group "URGENT
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MATERIAL ENCLOSED"), or at such other address as shall be designated by any
such party in a written notice to the other parties. Any notice required or
permitted to be mailed to a Noteholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Note Register,
and any notice so mailed within the time prescribed in this Agreement shall
be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice.
SECTION 10.11. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Trust under the Trust
Agreement, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein
made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but
is made and intended for the purpose for binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to this Agreement and by any person claiming
by, through or under them and (d) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Trust or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any related documents.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Issuer, the Seller, AFL, the Servicer
and the Backup Servicer have caused this Sale and Servicing Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1999-A
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
SELLER:
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Corporate Trust Officer
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Corporate Trust Officer
SCHEDULE A
REPRESENTATIONS AND WARRANTIES OF SELLER AND AFL
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A)
was originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and such Dealer had all necessary
licenses and permits to originate Receivables in the state where such Dealer
was located, was fully and properly executed by the parties thereto, was
purchased by AFL from such Dealer under an existing Dealer Agreement with AFL
and was validly assigned by such Dealer to AFL, (B) contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral security, and
(C) is fully amortizing and provides for level monthly payments (provided
that the payment in the first Monthly Period and the final Monthly Period of
the life of the Receivable may be minimally different from the level payment)
which, if made when due, shall fully amortize the Amount Financed over the
original term.
2. NO FRAUD OR MISREPRESENTATION. Each Receivable was
originated by a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.
3. COMPLIANCE WITH LAW. All requirements of applicable
federal, state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.
4. ORIGINATION. Each Receivable was originated in the
United States.
5. BINDING OBLIGATION. Each Receivable represents the
genuine, legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law
and (B) as such Receivable may be modified by the application after the
Initial Cutoff Date or any Subsequent Cutoff Date, as the case may be, of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties
to each Receivable had full legal capacity to execute and deliver such
Receivable and all other documents related thereto and to grant the security
interest purported to be granted thereby.
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6. NO GOVERNMENT OBLIGOR. No Obligor is the United
States of America or any State or any agency, department, subdivision or
instrumentality thereof.
7. OBLIGOR BANKRUPTCY. At the Initial Cutoff Date or
each Subsequent Cutoff Date, as applicable, no Obligor had been identified on
the records of AFL as being the subject of a current bankruptcy proceeding.
8. SCHEDULE OF RECEIVABLES. The information set forth
in the Schedule of Receivables has been produced from the Electronic Ledger
and was true and correct in all material respects as of the close of business
on the Initial Cutoff Date or each Subsequent Cutoff Date, as applicable.
9. MARKING RECORDS. By the Closing Date or by each
Subsequent Transfer Date, the Seller will have caused the portions of the
Electronic Ledger relating to the Receivables to be clearly and unambiguously
marked to show that the Receivables constitute part of the Trust Property and
are owned by the Trust in accordance with the terms of the Agreement.
10. COMPUTER TAPE. The Computer Tape made available by
the Seller to the Owner Trustee on the Closing Date or on each Subsequent
Transfer Date was complete and accurate as of the Initial Cutoff Date or
Subsequent Cutoff Date, as applicable, and includes a description of the same
Receivables that are described in the Schedule of Receivables.
11. ADVERSE SELECTION. No selection procedures adverse
to the Noteholders were utilized in selecting the Receivables from those
receivables owned by AFL which met the selection criteria contained in the
Sale and Servicing Agreement.
12. CHATTEL PAPER. The Receivables constitute chattel
paper within the meaning of the UCC as in effect in the States of Minnesota
and New York.
13. ONE ORIGINAL. There is only one original executed
copy of each Receivable.
14. RECEIVABLE FILES COMPLETE. There exists a Receivable
File pertaining to each Receivable and such Receivable File contains (a) a
fully executed original of the Receivable, (b) a certificate of insurance,
application form for insurance signed by the Obligor, or a signed
representation letter from the Obligor named in the Receivable pursuant to
which the Obligor has agreed to obtain physical damage insurance for the
related financial vehicle, or copies thereof, (c) the original Lien
Certificate or application therefor and (d) a credit application signed by
the Obligor, or a copy thereof. Each of such documents which is required to
be signed by the Obligor has been signed by the Obligor in the appropriate
spaces. All blanks on any form have been properly filled in and each form
has otherwise been correctly prepared. The complete Receivable File for each
Receivable currently is in the possession of the Custodian.
15. RECEIVABLES IN FORCE. No Receivable has been
satisfied, subordinated or rescinded, and the Financed Vehicle securing each
such Receivable has not been released from
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the lien of the related Receivable in whole or in part. No provisions of any
Receivable have been waived, altered or modified in any respect since its
origination, except by instruments or documents identified in the Receivable
File. No Receivable has been modified as a result of application of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in,
or is subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or pursuant to transfers of the Notes.
17. GOOD TITLE. No Receivable has been sold,
transferred, assigned or pledged by AFL to any Person other than the Seller
or by the Seller to any Person other than the Trust; immediately prior to the
conveyance of the Receivables pursuant to the Purchase Agreement, AFL was the
sole owner of and had good and indefeasible title thereto, free and clear of
any Lien; immediately prior to the conveyance of the Receivables to the Trust
pursuant to this Agreement or any Subsequent Purchase Agreement, as
applicable, the Seller was the sole owner thereof and had good and
indefeasible title thereto, free of any Lien and, upon execution and delivery
of this Agreement or any Subsequent Purchase Agreement, as applicable, by the
Seller, the Trust shall have good and indefeasible title to and will be the
sole owner of such Receivables, free of any Lien. No Dealer has a
participation in, or other right to receive, proceeds of any Receivable.
Neither AFL nor the Seller has taken any action to convey any right to any
Person that would result in such Person having a right to payments received
under the related Insurance Policies or the related Dealer Agreements or
Dealer Assignments or to payments due under such Receivables.
18. SECURITY INTEREST IN FINANCED VEHICLE. Each
Receivable created or shall create a valid, binding and enforceable first
priority security interest in favor of AFL in the Financed Vehicle. The Lien
Certificate and original certificate of title for each Financed Vehicle show,
or if a new or replacement Lien Certificate is being applied for with respect
to such Financed Vehicle the Lien Certificate will be received within 180
days of the Closing Date or any Subsequent Transfer Date, as applicable, and
will show AFL named as the original secured party under each Receivable as
the holder of a first priority security interest in such Financed Vehicle.
With respect to each Receivable for which the Lien Certificate has not yet
been returned from the Registrar of Titles, AFL has received written evidence
from the related Dealer that such Lien Certificate showing AFL as first
lienholder has been applied for. AFL's security interest has been validly
assigned by AFL to the Seller and by the Seller to the Owner Trustee pursuant
to this Agreement or any Subsequent Transfer Agreement, as applicable.
Immediately after the sale, transfer and assignment thereof to the Trust,
each Receivable will be secured by an enforceable and perfected first
priority security interest in the Financed Vehicle in favor of the Trust as
secured party, which security interest is prior to all other liens upon and
security interests in such Financed Vehicle which now exist or may hereafter
arise or be created (except, as to priority, for any lien for taxes, labor or
materials affecting a Financed Vehicle). As of the Initial Cutoff Date or
each Subsequent Cutoff Date, as applicable, there were no Liens or claims for
taxes, work, labor or materials affecting a Financed Vehicle which are or may
be Liens prior or equal to the lien of the related Receivable.
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▇▇. ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to give
the Trust a first priority perfected lien on, or ownership interest in, the
Receivables and the proceeds thereof and the other Trust Property have been
made, taken or performed.
20. NO IMPAIRMENT. Neither AFL nor the Seller has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under the Receivable or otherwise to impair
the rights of the Trust, the Indenture Trustee and the Noteholders in any
Receivable or the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable
by another Person in a manner which would release the Obligor thereof from
such Obligor's obligations to the Seller with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right
of rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
23. NO DEFAULT. There has been no default, breach,
violation or event permitting acceleration under the terms of any Receivable
(other than payment delinquencies of not more than 30 days), and no condition
exists or event has occurred and is continuing that with notice, the lapse of
time or both would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable, and there has been
no waiver of any of the foregoing. As of the Initial Cutoff Date or any
Subsequent Cutoff Date, as applicable, no Financed Vehicle had been
repossessed.
24. INSURANCE. As of the Closing Date or as of any
Subsequent Transfer Date, as applicable, each Financed Vehicle is covered by
a comprehensive and collision insurance policy (i) in an amount at least
equal to the lesser of (a) its maximum insurable value or (b) the principal
amount due from the Obligor under the related Receivable, (ii) naming AFL as
loss payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive
and collision coverage. Each Receivable requires the Obligor to maintain
physical loss and damage insurance, naming AFL and its successors and assigns
as additional insured parties, and each Receivable permits the holder thereof
to obtain physical loss and damage insurance at the expense of the Obligor if
the Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the Cutoff Date.
25. PAST DUE. At Initial Cutoff Date or any Subsequent
Cutoff Date, as applicable, no Receivable was more than 30 days past due.
26. REMAINING PRINCIPAL BALANCE. At the Initial Cutoff
Date or any Subsequent Cutoff Date, as applicable, each Receivable had a
remaining principal balance equal
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to or greater than $500.00, and the Principal Balance of each Receivable set
forth in the Schedule of Receivables is true and accurate in all material
respects.
27. FINAL SCHEDULED MATURITY DATE. No Receivable has a
final scheduled maturity later than May 31, 2006.
28. CERTAIN CHARACTERISTICS. (A) Each Initial Receivable
had a remaining maturity, as of the Initial Cutoff Date, of at least 3 months
but not more than 84 months; (B) each Initial Receivable had an original
maturity of at least 12 months but not more than 84 months; (C) each Initial
Receivable had an original principal balance of at least $3,129.00 and not
more than $49,772.31; (D) each Initial Receivable had a remaining Principal
Balance as of the Initial Cutoff Date of at least $554.48 and not more than
$49,772.31; (E) each Initial Receivable has an Annual Percentage Rate of at
least 7.50% and not more than 23.99%; (F) no Initial Receivable was more than
30 days past due as of the Initial Cutoff Date; (G) no funds have been
advanced by the Seller, the Servicer, any Dealer, or anyone acting on behalf
of any of them in order to cause any Receivable to qualify under clause (F)
above; (H) no Initial Receivable has a final scheduled payment date on or
before June 1, 1999; (I) the Principal Balance of each Receivable set forth
in Schedule of Receivables is true and accurate in all material respects as
of the Initial Cutoff Date; (J) 13.02% of the Initial Receivables, by
principal balance as of the Initial Cutoff Date, was attributable to loans
for the purchase of new Financed Vehicles and 86.98% of the Initial
Receivables was attributable to loans for the purchase of used Financed
Vehicles; (K) not more than 3.64% of the Principal Balance of the Initial
Receivables as of the Initial Cutoff Date had an Annual Percentage Rate in
excess of 21.00%; (L) none of such Receivables represented loans in excess of
$50,000.00; (M) not more than 0.05% of the Aggregate Principal Balance of
such Receivables represented loans with original terms greater than 72
months; and (N) not more than 1.21% of the Aggregate Principal Balance of
such Receivables represented loans secured by Financed Vehicles that
previously secured a loan originated by AFL with an obligor other than the
current Obligor.
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SCHEDULE B
SERVICING POLICIES AND PROCEDURES
NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE.
I. PAST DUE PAYMENT COLLECTIONS
A. Past due payment notices are generated and sent on the 9th and
15th day of delinquency.
B. The collection officer will make at least one phone call by day
10.
C. The collection officer will write a personalized collection
letter by day 15 and will have made at least two collection
phone calls.
D. The collection officer will make at least two (2) more phone
calls and write at least one (1) more letter between days 15 and
30.
E. The collection officer will send a final demand letter on or
about 31 days past due. The letter will allow 10 days to bring
the account current.
F. The collection officer will recommend either repossession, or
some form of reasonable forbearance (e.g., one extension in
exchange for a partial payment for cooperative debtors).
All phone calls and correspondence will require a brief
handwritten comment in the credit file. The date of each comment and the
officer's initials will be documented.
II. PAYMENT EXTENSIONS
Extensions of monthly payments must be granted only after careful
consideration and analysis. The extension is not to be used to mask
delinquencies, but rather assist in the collection and correction of
verifiable and legitimate customer problems. All extensions or modifications
require the prior approval of the Branch Manager. In the absence of the
Branch Manager, the Executive Vice President's or the President's approval is
required.
Possible qualifications for extensions to cooperative and
trustworthy customers include:
(a) Medical problems - verifiable;
(b) Temporary work loss - verifiable;
(c) Pending insurance claim - verifiable; or
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(d) Bankruptcy trustee cram down.
III. REPOSSESSIONS
Repossessions of the collateral is only to be pursued after
exhausting all other collection efforts. Once the decision is made to attempt
repossession, the following process is to be utilized:
(a) Decision on repossession.
(b) If the customer is cooperative, attempt repossession by Servicer
personnel. If uncooperative or unable to locate, utilize a
third party collection agency.
(c) Once secured, complete an inventory of personal belongings and
brief condition report on the vehicle. Return the property to
the customer and obtain a signed statement of inventory receipt.
(d) If the repossession is involuntary, notify the police department
in the city where the repossession occurred.
(e) Notify the originating dealership of repossession as soon as
possible and request a refund of all rebateable dealer adds.
(f) Send written notification to the customer regarding a 10-day
notice to redeem the loan.
(g) Decide on proper method of liquidation and plan for sale after
the 10-day redemption period has expired.
(h) If consignment, set 21-day maximum term with the dealership,
after which time, if unsold, the vehicle is returned to the
Servicer.
If wholesale, contact the appropriate auction company to make
arrangements for immediate sale.
If private sale, place advertisements in the proper media and
attempt to liquidate within one week.
(i) After the collateral is liquidated, send the debtor a letter
stating the amount of deficiency. Continued collection efforts
will take the form of voluntary payments or involuntary payments
via judgment, garnishment, and levy.
IV. CHARGE OFFS
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It is the responsibility of the collection officer to diligently
pursue any and all deficiencies which result from problem accounts. All
avenues of potential collection will be pursued, ranging from cash
settlements to amortized deficiency notes to judgment and garnishment.
A complete list of all charge offs will be maintained. The list
will be categorized into "active" and "dead" accounts. A brief action plan
will be shown for each active account. Accounts will only be designated as
"dead" with the recommendation of the collection officer and approval of the
Executive Vice President. The "dead" designation will only be granted for
those accounts which hold no potential for recovery (e.g., discharged Chapter
7).
Active charge off action plans will be presented at least monthly
to the Executive Vice President. Decisions regarding pursuit of legal action
and incurring potential legal fees will need prior approval by the Executive
Vice President.
V. DEFICIENCY COLLECTIONS
(a) Establish the exact amount of the deficiency, using the
repossession worksheet. This includes all fees and per diem
interest.
(b) Attempt verbal and/or written negotiations with the debtor to
settle the deficiency.
(c) Send a certified letter to the debtor and cosigner(s) stating
that we need $X by ___________, 19__ (7-10 days), or we will
begin legal action. If no reasonable response is received move
to (d).
(d) Complete a General Claim Form. Send the form to [applicable
local court].
(e) We should receive notification of the court's decision within
one week. If we receive notice of judgment, it is possible that
the debtor will pay the court and the court will then pay the
Servicer. As this usually does not happen, proceed to exercise
on the judgment as follows:
(1) File both the Transcript of Judgment and the Affidavit
of Identification of Judgment Debtor with [appropriate
office].
(2) Order a Writ of Execution from [appropriate office].
(3) "Service" of the Writ of Execution is handled by the
Sheriff or an Attorney.
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