SALE AND SERVICING AGREEMENT
Dated as of June 1, 1998
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B
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
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ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.4. Section References . . . . . . . . . . . . . . . . . . 25
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.6. Material Adverse Effect . . . . . . . . . . . . . . . . 25
ARTICLE II - CONVEYANCE OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.1. Conveyance of Initial Receivables . . . . . . . . . . . 25
SECTION 2.2. Custody of Receivable Files . . . . . . . . . . . . . . 26
SECTION 2.3. Conditions to Acceptance by Owner Trustee . . . . . . . 27
SECTION 2.4 Conveyance of Subsequent Receivables . . . . . . . . . 28
SECTION 2.5. Representations and Warranties of Seller . . . . . . . 31
SECTION 2.6. Repurchase of Receivables Upon Breach of Warranty . . . 34
SECTION 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . . . 35
SECTION 2.8. Collecting Lien Certificates Not Delivered on the
Closing Date or Subsequent Transfer Date. . . . . . . . 35
SECTION 2.9. Trust's Assignment of Administrative Receivables and
Warranty Receivables. . . . . . . . . . . . . . . . . . 35
ARTICLE III - ADMINISTRATION AND SERVICING OF RECEIVABLES . . . . . . . . . . . 36
SECTION 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . 36
SECTION 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements . . . . . . . . . . . . 37
SECTION 3.3. Realization Upon Receivables . . . . . . . . . . . . . 40
SECTION 3.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.5. Maintenance of Security Interests in Vehicles . . . . . 43
SECTION 3.6. Covenants, Representations, and Warranties of Servicer. 44
SECTION 3.7. Purchase of Receivables Upon Breach of Covenant . . . . 46
SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . 47
SECTION 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event. . . . . . . . . . . . . . . 48
SECTION 3.11. Annual Independent Accountants' Report . . . . . . . . 49
SECTION 3.12. Access to Certain Documentation and Information
Regarding Receivables . . . . . . . . . . . . . . . . . 49
SECTION 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.14. Retention and Termination of Servicer . . . . . . . . . 51
SECTION 3.15. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . 51
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SECTION 3.16. Duties of the Servicer under the Indenture . . . . . . 51
SECTION 3.17. Duties of the Servicer under the Insurance Agreement. . 53
SECTION 3.18. Certain Duties of the Servicer under the Trust
Agreement. . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IV - DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS . . . . . . . . . . . . . 54
SECTION 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.2. Collections . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.3. Application of Collections . . . . . . . . . . . . . . 57
SECTION 4.4. Monthly Advances . . . . . . . . . . . . . . . . . . . 58
SECTION 4.5. Additional Deposits . . . . . . . . . . . . . . . . . . 59
SECTION 4.6. Distributions . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.7. Pre-Funding Account . . . . . . . . . . . . . . . . . . 60
SECTION 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . . . 62
SECTION 4.9. Statements to Noteholders . . . . . . . . . . . . . . . 62
SECTION 4.10. Indenture Trustee as Agent . . . . . . . . . . . . . . 63
SECTION 4.11. Eligible Accounts . . . . . . . . . . . . . . . . . . . 63
ARTICLE V - THE RESERVE ACCOUNT; THE SPREAD ACCOUNT . . . . . . . . . . . . . . 64
SECTION 5.1. Withdrawals from the Reserve Account . . . . . . . . . 64
SECTION 5.2. Withdrawals from Spread Account . . . . . . . . . . . . 64
ARTICLE VI - THE SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.1. Liability of Seller . . . . . . . . . . . . . . . . . . 65
SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Amendment of Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.3. Limitation on Liability of Seller and Others . . . . . 66
SECTION 6.4. Seller May Own Notes . . . . . . . . . . . . . . . . . 66
ARTICLE VII - THE SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.1. Liability of Servicer; Indemnities . . . . . . . . . . 67
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer . . . . 68
SECTION 7.3. Limitation on Liability of Servicer, Backup Servicer
and Others. . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . 70
SECTION 7.5. Servicer and Backup Servicer Not to Resign . . . . . . 70
ARTICLE VIII - SERVICER TERMINATION EVENTS . . . . . . . . . . . . . . . . . . . 71
SECTION 8.1. Servicer Termination Event . . . . . . . . . . . . . . 71
SECTION 8.2. Consequences of a Servicer Termination Event . . . . . 73
SECTION 8.3. Appointment of Successor . . . . . . . . . . . . . . . 74
SECTION 8.4. Notification to Noteholders . . . . . . . . . . . . . . 76
SECTION 8.5. Waiver of Past Defaults . . . . . . . . . . . . . . . . 76
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ARTICLE IX - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.1. Optional Purchase of All Receivables; Liquidation of
Trust Estate. . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.2. Protection of Title to Trust Property . . . . . . . . . 79
SECTION 10.3. Governing Law . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.4. Severability of Provisions . . . . . . . . . . . . . . 81
SECTION 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . 81
SECTION 10.7. Disclaimer by Security Insurer . . . . . . . . . . . . 82
SECTION 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.9. Intention of Parties . . . . . . . . . . . . . . . . . 82
SECTION 10.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.11. Limitation of Liability . . . . . . . . . . . . . . . . 83
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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 June 1, 1998, is
made among Arcadia Automobile Receivables Trust, 1998-B (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.
ARCC PURCHASE AGREEMENT: The Receivables Purchase Agreement and
Assignment, dated as of December 3, 1996, as amended, between AFL and the
Seller.
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.
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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.
BASIC SERVICING FEE RATE: 1.25% per annum.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of
any successor Servicer, successor Owner Trustee, successor Indenture Trustee
or successor Collateral Agent are authorized or obligated by law, executive
order or governmental decree to be closed.
CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE: July 15, 1999 (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
------------------------ -----------------------------
June 23 - July 14 $476,549,423.18
July 15 - August 14 $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.
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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: 5.6275% per annum.
CLASS A-1 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, the product of (x) the Class A-1 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed from and
including the most recent date to which interest has been paid (or, in the case
of the first Distribution Date, interest accrued for 22 days, which is the
number of days elapsed from and including the Closing Date to but excluding
July 15, 1998) 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 September 21,
1998 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 LIBOR due September 21, 1998. 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: August 15, 2001
(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
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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: 5.789% per annum.
CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, the product of (x) the Class A-2 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed from and
including the most recent date to which interest has been paid (or, in the case
of the first Distribution Date, interest accrued for 22 days, which is the
number of days elapsed from and including the Closing Date to but excluding
July 15, 1998) 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 June 18,
1999, 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 12 month LIBOR due June 18, 1999. Such excess shall be discounted to present
value to such Distribution Date at the yield described in clause (ii) above.
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CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: November 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: 5.950% per annum.
CLASS A-3 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 22 days, which is the number of days
elapsed from and including the Closing Date to but excluding July 15, 1998)
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.
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 August 15, 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 6.000% U.S. Treasury Note due
August 15, 2000. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
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CLASS A-4 FINAL SCHEDULED DISTRIBUTION DATE: November 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: 6.000% 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 accrued for 22 days, which is the number of days
elapsed from and including the Closing Date to but excluding July 15, 1998)
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 September 30, 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 6.375% U.S. Treasury Note due
September 30, 2001. Such excess shall be
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discounted to present value to such Distribution Date at the yield described
in clause (ii) above.
CLASS A-5 FINAL SCHEDULED DISTRIBUTION DATE: June 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: 6.060% 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 22 days, which is the number of days
elapsed from and including the Closing Date to but excluding July 15, 1998)
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 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 April 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
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maturity on the Determination Date preceding such Distribution Date on the
6.625% U.S. Treasury Note due April 30, 2002. Such excess shall be
discounted to present value to such Distribution Date at the yield described
in clause (ii) above.
CLOSING DATE: June 23, 1998.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase
Agreement and Assignment, dated as of June 1, 1998, between AFL and the
Seller.
COLLATERAL AGENT: The Collateral Agent named in the Spread
Account Agreement, and any successor thereto pursuant to the terms of the
Spread Account Agreement.
COLLATERAL INSURANCE: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy, pursuant to Section 3.4(e).
COLLECTED FUNDS: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during the related Monthly Period, including all Liquidation
Proceeds collected during the related Monthly Period (but excluding any
Monthly Advances and any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section
4.1(a).
COLLECTION RECORDS: All manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.
COMPUTER TAPE: The computer tape generated on behalf of the
Seller which provides information relating to the Receivables and which was
used by the Seller and AFL in selecting the Receivables conveyed to the Trust
hereunder.
CORPORATE TRUST OFFICE: With respect to the Owner Trustee,
the principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing
Date is located at Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000; the telecopy number for the Corporate Trust Administration of
the Owner Trustee on the date of the execution of this Agreement is
(000) 000-0000; 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 Xxxxx Xxxxxx xxx
Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, 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 (000) 000-0000.
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CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on a Receivable, an amount
equal to the excess of the Principal Balance of such Receivable immediately
prior to such order over the Principal Balance of such Receivable as so
reduced or the net present value (using as the discount rate the higher of
the contract rate or the rate of interest, if any, specified by the court in
such order) of the Scheduled Payments as so modified or restructured. A
"Cram Down Loss" shall be deemed to have occurred on the date of issuance of
such order.
CREDIT ENHANCEMENT FEE: With respect to any Distribution
Date, the amount to be paid to the Security Insurer pursuant to Section
4.6(vi) and the amount to which the Seller is entitled pursuant to Section
4.6(vii).
CUSTODIAN: AFL and any other Person named from time to time
as custodian in any Custodian Agreement acting as agent for the Trust, which
Person must be (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to
time in effect between the Custodian named therein and the Trust,
substantially in the form of Exhibit B hereto, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, which Custodian Agreement and any amendments, supplements or
modifications thereto shall (so long as an Insurer Default shall not have
occurred and be continuing) be acceptable to the Security Insurer.
DEALER: A seller of new or used automobiles or light trucks
that originated one or more of the Receivables and sold the respective
Receivable, directly or indirectly, to AFL under an existing agreement
between such seller and AFL.
DEALER AGREEMENT: An agreement between AFL and a Dealer
relating to the sale of retail installment sale contracts and installment
notes to AFL and all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to AFL.
DEFICIENCY CLAIM AMOUNT: As defined in Section 5.2(a).
DEFICIENCY CLAIM DATE: With respect to any Distribution Date,
the fourth Business Day immediately preceding such Distribution Date.
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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 July 15, 1998, to and including the Final Scheduled Distribution
Date.
DRAW DATE: With respect to any Distribution Date, the third
Business Day immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution
acceptable to the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing), or (ii) a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America, or any of the States thereof, or the
District of Columbia, having a certificate of deposit, short term deposit or
commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by
Moody's and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types
of investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States, the obligations of which are backed by the full faith and credit of
the United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation, but only if, at the time of investment, such
obligations are assigned a rating in the highest credit rating category by
each Rating Agency;
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(b) demand or time deposits in, certificates of deposit of,
or bankers' acceptances issued by any depository institution or trust company
roganized 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
(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
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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.
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 August 1998.
INDENTURE: The Indenture, dated as of June 1, 1998, among the
Trust, the Indenture Trustee and the Indenture Collateral Agent, as the same
may be amended and supplemented from time to time.
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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: June 11, 1998.
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $403,098,846.35.
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 June 23, 1998, among the Security Insurer, the Trust, the Seller
and AFL.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default"
as defined in the Insurance Agreement.
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INSURANCE POLICY: With respect to a Receivable, any insurance
policy benefiting 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
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related Financed Vehicle, (ii) the Servicer has determined in good faith that
all amounts it expects to recover have been received, or (iii) all or any
portion of a Scheduled Payment shall have become more than 180 days past due.
LIQUIDATION PROCEEDS: With respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from the Spread Account or the Reserve Account and drawings
under the Note Policy) net of (i) reasonable expenses incurred by the
Servicer in connection with the collection of such Receivable and the
repossession and disposition of the Financed Vehicle and (ii) amounts that
are required to be refunded to the Obligor on such Receivable; PROVIDED,
HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall
in no event be less than zero.
LOCKBOX ACCOUNT: The segregated account maintained on behalf
of the Trust by the Lockbox Bank in accordance with Section 3.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of November
13, 1992 by and among Xxxxxx 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 June 23, 1998, among
Xxxxxx 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.
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MONTHLY RECORDS: All records and data maintained by the
Servicer with respect to the Receivables, including the following with
respect to each Receivable: the account number; the identity of the
originating Dealer; Obligor name; Obligor address; Obligor home phone number;
Obligor business phone number; original Principal Balance; original term;
Annual Percentage Rate; current Principal Balance; current remaining term;
origination date; first payment date; final scheduled payment date; next
payment due date; date of most recent payment; new/used classification;
collateral description; days currently delinquent; number of contract
extensions (months) to date; amount, if any, of Force-Placed Insurance
payable monthly; amount of the Scheduled Payment; current Insurance Policy
expiration date; and past due late charges, if any.
MOODY'S: Xxxxx'x 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.
With respect to the Distribution Date on which the outstanding principal
balance of the Class A-1 Notes is reduced to zero, the "Noteholders' Monthly
Principal Distributable Amount" shall equal the sum of (i) the outstanding
principal balance of the Class A-1 Notes plus (ii) 100% (after giving effect
to the retirement of the Class A-1 Notes) of the Principal Distribution
Amount less the outstanding principal balance of the Class A-1 Notes
immediately prior to such Distribution Date.
NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the sum of the Noteholders'
Monthly
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Principal Distributable Amount and any outstanding Noteholders' Principal
Carryover Shortfall from the immediately preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on such immediately preceding Distribution Date.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date (other than the Final Scheduled Distribution Date with
respect to any class of Notes), the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and any Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. The Noteholders' Principal Distributable Amount on the Final Scheduled
Distribution Date for any class of Notes will equal the sum of (i) the
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date, (ii) the Noteholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date, and (iii) the excess of the outstanding
principal balance of such class of Notes, if any, over the amounts in clauses
(i) and (ii). In no event may the Noteholders' Principal Distributable
Amount for any Distribution Date exceed the outstanding principal balance of
the Notes immediately prior to such Distribution Date.
NOTES: The Class A-1 Notes, the Class A-2 Notes, 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.
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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, $146,901,153.65 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 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 ARCC 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.
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PURCHASED RECEIVABLE: As of any Accounting Date, any
Receivable (including any Liquidated Receivable) that became a Warranty
Receivable or Administrative Receivable as of such Accounting Date (or which
AFL or the Servicer has elected to purchase as of an earlier Accounting Date,
as permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has
been deposited in the Collection Account by the Seller, AFL or the Servicer,
as applicable, on or before the related Deposit Date.
RATING AGENCY: Each of Moody's and Standard & Poor's, so long
as such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller
and (so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.
RATING AGENCY CONDITION: With respect to any action, that
each Rating Agency shall have been given 10 days' prior notice thereof and
that each of the Rating Agencies shall have notified the Seller, the
Servicer, the Security Insurer, the Owner Trustee and the Indenture Trustee
in writing that such action will not result in a reduction or withdrawal of
the then current rating of the Notes.
RECEIVABLE: A retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of
calculating Noteholders' Distributable Amounts hereunder and for the purpose
of determining the obligations pursuant to Section 2.6 and 3.7 to purchase
Receivables), or (ii) any Purchased Receivable on or after the Accounting
Date immediately preceding the Deposit Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 4.5.
RECEIVABLE FILE: The documents, electronic entries,
instruments and writings listed in Section 2.2 pertaining to a particular
Receivable.
REFERENCE BANKS: Three major banks in the London interbank
market selected by the Servicer.
REGISTRAR OF TITLES: With respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens
thereon.
RELATED DOCUMENTS: The Trust Agreement, the Indenture, the
Notes, the Purchase Agreements, each Subsequent Purchase Agreement, each
Subsequent Transfer Agreement, the 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
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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, $744,946.40 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 August 1998, and
(b) the product of (x) the Assumed Reinvestment Rate, divided by
360, (y) the Pre-Funded Amount on such date and (z) the number of days
until the Distribution Date in August 1998.
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
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Date in August 1998) 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.
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
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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.
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 XxXxxx-Xxxx Companies, Inc., or any successor thereto.
STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of March
25, 1993, as amended and restated as of December 3, 1996, among the Security
Insurer, AFL and the Collateral Agent, as the same may be amended from time to
time.
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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 ARCC 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 Xxxxx Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRUST: Arcadia Automobile Receivables Trust, 1998-B.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of June 1, 1998, 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.
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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.
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
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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 Receivable) or the
applicable Subsequent Transfer Date (with respect to each Subsequent
Receivable):
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(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.
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
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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 acknowledgement 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 $744,946.40 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
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Agreements and the Dealer Assignments, all items contained in the 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 acknowledgement
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;
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(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;
(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 16.31%, (2) the weighted average remaining term of such
Receivables will not be greater than 67 months nor less than 63
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 73% of the Aggregate Principal Balance of
such Receivables will represent Receivables originated under AFL's
"Classic" program (excluding loans for the purchase of repossessed
automobiles that would otherwise be deemed originated under
the "Classic" program), (5) not more than 4% of the Aggregate
Principal Balance of such Receivables will be attributable to
Receivables with an APR in excess of 21%, (6) not more than 0.25% of
the
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Aggregate Principal Balance of such Receivables will represent loans
in excess of $50,000.00, (7) not more than 3.0% of the Aggregate
Principal Balance of such Receivables will represent loans with
original terms greater than 72 months and (8) not more than 4.0% 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;
(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 $146,901,153.65; 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
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Owner Trustee relies in issuing on behalf of the Trust, Notes and upon which
the Security Insurer relies in issuing the Note Policy. Unless otherwise
specified, such representations and warranties speak as of the Closing Date
or Subsequent Transfer Date, as appropriate, but shall survive the sale,
transfer, and assignment of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations
and warranties set forth on the Schedule of Representations are
true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables
and the other property transferred to the Trust.
(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.
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(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the related Subsequent Transfer
Agreement, if any, and the Related Documents and the fulfillment of
the terms of this Agreement and the related Subsequent Transfer
Agreement, if any, and the Related Documents shall not conflict
with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a
default under the certificate of incorporation or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than
this Agreement, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties.
(g) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Seller's knowledge, threatened
against the Seller or AFL, before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement or any of
the Related Documents, (B) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated
by 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 0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxxx, XX 00000-0000.
(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
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thereunder that upon such filing would be deemed to be incorporated
by reference in the Prospectus that has not been so filed.
SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement or the applicable
Subsequent Transfer Agreement, as appropriate, AFL and the Seller have entered
into the Purchase Agreements or Subsequent Purchase Agreement, as applicable,
the rights of the Seller under which have been assigned by the Seller to the
Trust. Under the Purchase Agreements and each Subsequent Purchase Agreement, if
applicable, AFL has made the same representations and warranties to the Seller
with respect to the Receivables as those made by Seller pursuant to the Schedule
of Representations, upon which the Owner Trustee has relied in accepting the
Trust Property in trust and executing the Notes and upon which the Security
Insurer has relied in issuing the Note Policy and upon which the Indenture
Trustee has relied in authenticating the Notes. Upon discovery by any of AFL,
the Seller, the Servicer, the Security Insurer, the Indenture Trustee or the
Owner Trustee of a breach of any of the representations and warranties contained
in Section 2.5 that materially and adversely affects the interests of the
Noteholders, the Security Insurer or the Trust in any Receivable (including any
Liquidated Receivable), the party discovering such breach shall give prompt
written notice to the others; PROVIDED, HOWEVER, that the failure to give any
such notice shall not affect any obligation of AFL or the Seller. As of the
second Accounting Date (or, at AFL's election, the first Accounting Date)
following its discovery or its receipt of notice of any breach of the
representations and warranties set forth on the Schedule of Representations that
materially and adversely affects the interests of the Noteholders, the Security
Insurer or the Trust in any Receivable (including any Liquidated Receivable),
AFL shall, unless such breach shall have been cured in all material respects,
purchase such Receivable from the Trust and, on or before the related Deposit
Date, AFL shall pay the Purchase Amount to the Owner Trustee pursuant to Section
4.5. The obligations of the 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.
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SECTION 2.7. NONPETITION COVENANT. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), the Backup Servicer nor AFL shall petition or otherwise invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust or
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust.
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON
THE CLOSING DATE OR SUBSEQUENT TRANSFER DATE. In the case of any Receivable
in respect of which written evidence from the Dealer selling the related
Financed Vehicle that the Lien Certificate for such Financed Vehicle showing
AFL as first lienholder has been applied for from the Registrar of Titles was
delivered to the Custodian on the Closing Date or Subsequent Transfer Date,
as appropriate, in lieu of a Lien Certificate, the Servicer shall use its
best efforts to collect such Lien Certificate from the Registrar of Titles as
promptly as practicable. If such Lien Certificate showing AFL as first
lienholder is not received by the Custodian within 180 days after the Closing
Date or Subsequent Transfer Date, as appropriate, then the representation and
warranty in Paragraph 18 of the Schedule of Representations in respect of
such Receivable shall be deemed to have been incorrect in a manner that
materially and adversely affects the Noteholders, the Security Insurer and
the Trust.
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES
AND WARRANTY RECEIVABLES. With respect to all Administrative Receivables and
all Warranty Receivables purchased by the Servicer, the Seller or AFL, the
Owner Trustee shall take any and all actions reasonably requested by the
Seller, AFL or Servicer, at the expense of the requesting party, to assign,
without recourse, representation or warranty, to the Seller, AFL or the
Servicer, as applicable, all the Trust's right, title and interest in and to
such purchased Receivable, all monies due thereon, the security interests in
the related Financed Vehicles, proceeds from any Insurance Policies, proceeds
from recourse against Dealers on such Receivables and the interests of the
Trust in certain rebates of premiums and other amounts relating to the
Insurance Policies and any 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.
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ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out in accordance
with customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the degree
of skill and attention that the Servicer exercises from time to time with
respect to all comparable motor vehicle receivables that it services for itself
or others. In performing such duties, so long as AFL is the Servicer, it shall
comply with the policies and procedures attached hereto as Schedule B. The
Servicer's duties shall include, without limitation, collection and posting of
all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting any
required tax information to Obligors, policing the collateral, complying with
the terms of the Lockbox Agreement, accounting for collections and furnishing
monthly and annual statements to the Owner Trustee, the Indenture Trustee and
the Security Insurer with respect to distributions, monitoring the status of
Insurance Policies with respect to the Financed Vehicles and performing the
other duties specified herein. The Servicer shall also administer and enforce
all rights and responsibilities of the holder of the Receivables provided for in
the Dealer Agreements (and shall maintain possession of the Dealer Agreements,
to the extent it is necessary to do so), the Dealer Assignments and the
Insurance Policies, to the extent that such Dealer Agreements, Dealer
Assignments and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors. To the extent consistent with the standards, policies
and procedures otherwise required hereby, the Servicer shall follow its
customary standards, policies, and procedures and shall have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Owner Trustee to execute and deliver, on
behalf of the Trust, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables and with respect to the Financed Vehicles;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not,
except pursuant to an order from a court of competent jurisdiction, release an
Obligor from payment of any unpaid amount under any Receivable or waive the
right to collect the unpaid balance of any Receivable from the Obligor, except
that the Servicer may forego collection efforts if the amount subject to
collection is DE MINIMIS and if it would forego collection in accordance with
its customary procedures. The Servicer is hereby authorized to commence, in 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
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enforce a Receivable pursuant to Section 3.3 or to commence or participate in
any other legal proceeding (including, without limitation, a bankruptcy
proceeding) relating to or involving a Receivable, an Obligor or a Financed
Vehicle. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trust shall thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant,
and the Servicer is authorized and empowered by the Owner Trustee to execute
and deliver in the Servicer's name any notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with
any such proceeding. The Owner Trustee shall furnish the Servicer with any
powers of attorney and other documents which the Servicer may reasonably
request and which the Servicer deems necessary or appropriate and take any
other steps which the Servicer may deem necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement.
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with
respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
the Insurance Policies and the other Trust Property in such manner as will,
in the reasonable judgment of the Servicer, maximize the amount to be
received by the Trust with respect thereto. The Servicer is authorized in its
discretion to waive any prepayment charge, late payment charge or any other
similar fees that may be collected in the ordinary course of servicing any
Receivable.
(b) The Servicer may at any time agree to a modification,
amendment or extension of a Receivable in order to (i) change the Obligor's
regular due date to a date within the Monthly Period in which such due date
occurs, (ii) re-amortize the scheduled payments on the Receivable following a
partial prepayment of principal and (iii) grant extensions on a Receivable,
provided that the Servicer shall not be permitted to extend the monthly
payments on a Receivable more than two times in any twelve-month period, and
provided further that the aggregate period of all extensions on a Receivable
shall not exceed six months.
(c) The Servicer may grant payment extensions or deferrals
on, or other modifications or amendments to, a Receivable (in addition to
those modifications permitted by Section 3.2(b)) in accordance with its
customary procedures if the Servicer believes in good faith that such
extension, deferral, modification or amendment is necessary to avoid a
default on such Receivable, will
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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
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Obligor's bank account, to be made directly to one or more Lockbox Banks,
acting as agent for the Trust pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Receivables may initially be
deposited into a demand deposit account maintained by the Lockbox Bank as
agent for the Trust and for other owners of automobile receivables serviced
by the Servicer. The Servicer shall use its reasonable best efforts to cause
any Lockbox Bank to deposit all payments on the Receivables in the Lockbox
Account no later than the Business Day after receipt, and to cause all
amounts credited to the Lockbox Account on account of such payments to be
transferred to the Collection Account no later than the second Business Day
after receipt of such payments. The Lockbox Account shall be a demand
deposit account held by the 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
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Lockbox Agreement to the same extent as if such Lockbox Agreement had been
assigned to the successor Servicer, except that the outgoing Servicer shall
not thereby be relieved of any liability or obligations on the part of the
outgoing Servicer to the Lockbox Bank under such Lockbox Agreement. The
outgoing Servicer shall, upon request of the Owner Trustee but at the expense
of the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to each such Agreement and an accounting of amounts
collected and held by the Lockbox Bank and otherwise use its best efforts to
effect the orderly and efficient transfer of any Lockbox Agreement to the
successor Servicer. In the event that the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or a Note Majority
(if an Insurer Default shall have occurred and be continuing) elects to
change the identity of the Lockbox Bank, the outgoing Servicer, at its
expense, shall cause the Lockbox Bank to deliver, at the direction of the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note Majority (if an Insurer Default shall have occurred
and be continuing) to the Owner Trustee or a successor Lockbox Bank, all
documents and 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
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related Receivable by an amount greater than the amount of such expenses.
All amounts received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer to the Subcollection Account without deposit into
any intervening account as soon as practicable, but in no event later than
the Business Day after receipt thereof. The Servicer shall be entitled to
recover all reasonable expenses incurred by it in the course of repossessing
and liquidating a Financed Vehicle into cash proceeds, but only out of the
cash proceeds of such Financed Vehicle, any deficiency obtained from the
Obligor or any amounts received from the related Dealer, which amounts may be
retained by the Servicer (and shall not be required to be deposited as
provided in Section 3.2(e)) to the extent of such expenses. The Servicer
shall pay on behalf of the Trust any personal property taxes assessed on
repossessed Financed Vehicles; the Servicer shall be entitled to
reimbursement of any such tax from Liquidation Proceeds with respect to such
Receivable.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement
shall be deemed to be an automatic assignment from the Trust to the Servicer
of the rights under such Dealer Agreement and Dealer Assignment for purposes
of collection only. If, however, in any enforcement suit or legal proceeding,
it is held that the Servicer may not enforce a Dealer Agreement or Dealer
Assignment on the grounds that it is not a real party in interest or a Person
entitled to enforce the Dealer Agreement or Dealer Assignment, the Owner
Trustee, at the Servicer's expense, or the Seller, at the Seller's expense,
shall take such steps as the Servicer deems necessary to enforce the 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.
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(b) The Servicer may, if an Obligor fails to obtain or
maintain a physical loss and damage Insurance Policy, obtain insurance with
respect to the related Financed Vehicle and advance on behalf of such
Obligor, as required under the terms of the insurance policy, the premiums
for such insurance (such insurance being referred to herein as "Force-Placed
Insurance"). All policies of Force-Placed Insurance shall be endorsed with
clauses providing for loss payable to the Owner Trustee. Any cost incurred
by the Servicer in maintaining such Force-Placed Insurance shall only be
recoverable out of premiums paid by the Obligors or Liquidation Proceeds with
respect to the Receivable, as provided in Section 3.4(c).
(c) In connection with any Force-Placed Insurance obtained
hereunder, the Servicer may, in the manner and to the extent permitted by
applicable law, require the Obligors to repay the entire premium to the
Servicer. In no event shall the Servicer include the amount of the premium
in the Amount Financed under the Receivable. For all purposes of this
Agreement, the Insurance Add-On Amount with respect to any Receivable having
Force-Placed Insurance will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable,
and amounts allocable thereto will not be available for distribution on the
Notes. The Servicer shall retain and separately administer the right to
receive payments from Obligors with respect to Insurance Add-On Amounts or
rebates of Force-Placed Insurance premiums. If an Obligor makes a payment
with respect to a Receivable having Force-Placed Insurance, but the Servicer
is unable to determine whether the payment is allocable to the Receivable or
to the Insurance Add-On Amount, the payment shall be applied first to any
unpaid Scheduled Payments and then to the Insurance Add-On Amount.
Liquidation Proceeds on any Receivable will be used first to pay the
Principal Balance and accrued interest on such Receivable and then to pay the
related Insurance Add-On Amount. If an Obligor under a 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 xxx 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,
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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 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
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the title documents of such Financed Vehicles or by such other reasonable
means as may, in the opinion of counsel to the Security Insurer or the Owner
Trustee (as applicable), be necessary or prudent. AFL hereby agrees to pay
all expenses related to such perfection or re-perfection and to take all
action necessary therefor. In addition, prior to the occurrence of an
Insurance Agreement Event of Default, the Security Insurer may (unless an
Insurer Default shall have occurred and be continuing) instruct the Owner
Trustee and the Servicer to take or cause to be taken such action as may, in
the opinion of counsel to the Security Insurer, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of the Trust, including by amending the title
documents of such Financed Vehicles or by such other reasonable means as may,
in the opinion of counsel to the Security Insurer, be necessary or prudent;
PROVIDED, HOWEVER, that (unless an Insurer Default shall have occurred and be
continuing) if the Security Insurer requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default,
the out-of-pocket expenses of the Servicer or the Owner Trustee in connection
with such action shall be reimbursed to the Servicer or the Owner Trustee, as
applicable, by the Security Insurer.
SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF
SERVICER. By its execution and delivery of this Agreement, the Servicer makes
the following representations, warranties and covenants on which the Owner
Trustee relies in accepting the Receivables in trust and issuing the Notes on
behalf of the Trust, on which the Indenture Trustee relies in authenticating
the Notes and on which the Security Insurer relies in issuing the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing
each Receivable shall not be released in whole or in part from
the security interest granted by the Receivable, except upon
payment in full of the Receivable or as otherwise contemplated
herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to
impair the rights of the Trust, the Noteholders in the
Receivables, the Dealer Agreements, the Dealer Assignments, the
Insurance Policies or the other Trust Property; and
(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
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the laws of its jurisdiction of organization, with power,
authority and legal right to own its properties and to conduct
its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times,
and now has, power, authority and legal right to enter into and
perform its obligations under this Agreement;
(ii) DUE QUALIFICATION. The Servicer is duly
qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses and approvals,
in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) requires or shall
require such qualification;
(iii) POWER AND AUTHORITY. The Servicer has the power
and authority to execute and deliver this Agreement and its
Related Documents and to carry out its terms and their terms,
respectively, and the execution, delivery and performance of this
Agreement and the Servicer's Related Documents have been duly
authorized by the Servicer by all necessary corporate action;
(iv) BINDING OBLIGATION. This Agreement and the
Servicer's Related Documents shall constitute legal, valid and
binding obligations of the Servicer enforceable in accordance
with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law;
(v) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the Servicer's
Related Documents, and the fulfillment of the terms of this
Agreement and the Servicer's Related Documents, shall not
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of
the Servicer, or any indenture, agreement, mortgage, deed of
trust or other instrument to which the Servicer is a party or by
which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order,
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;
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(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 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
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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 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
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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,
1999, 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, 1999, 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
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access to the documentation regarding the Receivables. The Servicer shall
provide such access to any Noteholder (or Note Owner) only in such cases
where the Servicer is required by applicable statutes or regulations (whether
applicable to the Servicer or to such Noteholder or Note Owner) to permit
such Noteholder (or Note Owner) to review such documentation. In each case,
such access shall be afforded without charge but only upon reasonable request
and during normal business hours. Nothing in this Section shall derogate
from the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. Any Noteholder (or
Note Owner), by its acceptance of a Note (or by acquisition of its beneficial
interest therein), as applicable, shall be deemed to have agreed to keep
confidential and not to use for its own benefit any information obtained by
it pursuant to this Section, except as may be required by applicable law.
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
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maintained by the Servicer in computer format in connection with servicing
the Receivables. Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder,
including, without limitation, to supervise, verify, monitor or administer
the performance of the Servicer. The Backup Servicer shall have no liability
for any actions taken or omitted by the Servicer. The duties and obligations
of the Backup Servicer shall be determined solely by the express provisions
of this Agreement and no implied covenants or obligations shall be read into
this Agreement against the Backup Servicer.
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The
Servicer hereby covenants and agrees to act as such under this Agreement for
an initial term, commencing on the Closing Date and ending on September 30,
1998, which term shall be extendible by the Security Insurer for successive
quarterly terms ending on each successive December 31, March 31, June 30 and
September 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);
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(b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Indenture Collateral
and each other instrument and agreement included in the Trust Estate
(Section 3.04);
(c) the preparation of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of
the Indenture, necessary to protect the Trust Estate (Section 3.05);
(d) the delivery of the Opinion of Counsel on the Closing
Date and the annual delivery of Opinions of Counsel, in accordance
with Section 3.06 of the Indenture, as to the Trust Estate, and the
annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its
obligations under the Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officers' Certificate and the 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));
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(k) the preparation and delivery of Officers' Certificates
and the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture (Section 11.01(b));
and
(l) the recording of the Indenture, if applicable (Section
11.15).
In addition to the duties of the Servicer set forth above, the Servicer
shall, and hereby agrees that it will, prepare, distribute and file any
reports required by Section 313(b) of the Trust Indenture Act of 1939, as
amended, as a result of any transfer of Subsequent Receivables. Such
distribution and filing is to be effected by the Servicer's distribution and
filing of the Servicer's Certificate.
SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE
AGREEMENT. The Servicer shall, and hereby agrees that it will, perform on
behalf of the Trust and the Owner Trustee the following duties of the Trust
under the Insurance Agreement (references are to the applicable Sections in
the Insurance Agreement):
(a) the maintenance of books and records of accounts of the
Trust's assets and business and the furnishing to the Security Insurer
of reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee or the Noteholders pursuant to the
Related Documents (Section 2.02(b));
(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
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association (or publicly traded partnership) taxable as a corporation
(Section 2.02(l)).
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (as defined in the
Trust Agreement) of any actions to be taken by the Trust necessary for
compliance with such laws and prepare on behalf of the Trust and the
Administrator all notices, filings or other documents or instruments required
to be filed under such laws.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
SECTION 4.1. TRUST ACCOUNTS.
(a) The Servicer shall establish the Collection Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties (as defined in the Indenture). The Collection Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.
(b) The Servicer shall establish the Pre-Funding Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties. The Pre-Funding Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Collateral Agent and maintained with the Indenture Collateral Agent.
(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
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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 Trustee 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 Trustee's U.S. Government Fund and, from time to time, shall
include such other proprietary Eligible Investments of the Indenture Trustee
as shall be confirmed in writing by the Security Insurer to the Indenture
Trustee) 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 Trustee 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: (a) all
Eligible Investments shall be held in an account with such financial
institution in the name of the Indenture Trustee, (b) with respect to
securities held in such account, such securities shall be (i) certificated
securities (as such term is used in N.Y. UCC Section 8-313(1)(d)(i)),
securities deemed to be certificated securities under applicable regulations
of the United States government, or uncertificated securities issued by an
issuer organized under the laws of the State of New York or the State of
Delaware, (ii) either (A) in the possession of such institution, (B) in the
possession of a clearing corporation (as such term is used in N.Y. UCC
Section 8-313(1)(g)) in the State of New York, registered in the name of such
clearing corporation or its nominee, not endorsed for collection or surrender
or any other purpose not involving transfer, not containing any evidence of a
right or interest inconsistent with the Indenture Trustee's security interest
therein, and held by such clearing corporation in an account of such
institution, (C) held in an account of such institution with the Federal
Reserve Bank of New York or the Federal Reserve Bank of Minneapolis, or (D)
in the case of uncertificated securities, issued in the name of such
institution, and (iii) identified, by book entry or otherwise, as held for
the account of, or pledged to, the Indenture Trustee on the records of such
institution, and such institution shall have sent the Indenture Trustee a
confirmation thereof, (c) with respect to repurchase obligations held in such
account, such repurchase obligations shall be identified by such institution,
by book entry or otherwise, as held for the account of, or pledged to, the
Indenture Trustee on the records of such institution, and the related
securities shall be held in accordance with the requirements of clause (b)
above, and (d) with respect to other Eligible Investments other than
securities and repurchase agreements, such Eligible Investments shall be held
in a manner acceptable to the Indenture Collateral Agent. Subject to the
other provisions hereof, the Indenture Collateral Agent shall have sole
control over each such investment
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and the income thereon, and any certificate or other instrument evidencing
any such investment, if any, shall be delivered directly to the Indenture
Collateral Agent or its agent, together with each document of transfer, if
any, necessary to transfer title to such investment to the Indenture
Collateral Agent in a manner which complies with this Section 4.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Trust Accounts shall be deposited in the
Collection Account and distributed on the next Distribution Date pursuant to
Section 4.6. The Servicer shall deposit in the applicable Trust Account an
amount equal to any net loss on such investments immediately as realized.
(f) On the Closing Date, the Servicer shall deposit in the
Collection Account (i) all Scheduled Payments and prepayments of Initial
Receivables received by the Servicer after the Initial Cutoff Date and on or
prior to the Business Day immediately preceding the Closing Date or received
by the Lockbox Bank after the Initial Cutoff Date and on or prior to the
second Business Day immediately preceding the Closing Date and (ii) all
Liquidation Proceeds and proceeds of Insurance Policies realized in respect
of a Financed Vehicle and applied by the Servicer after the Initial Cutoff
Date. On each Subsequent Transfer Date, the Servicer shall deposit in the
Collection Account (x) all Scheduled Payments and prepayments of the related
Subsequent Receivables received by the Servicer after the related Subsequent
Cutoff Date and on or prior to the Business Day immediately preceding the
related Subsequent Transfer Date or received by the Lockbox Bank after the
related Subsequent Cutoff Date and on or prior to the second Business Day
immediately preceding the related Subsequent Transfer Date and (y) all
Liquidation Proceeds and proceeds of Insurance Policies related in respect of
a Financed Vehicle and applied by the Servicer after the related Subsequent
Cutoff Date.
SECTION 4.2. COLLECTIONS.
(a) The Servicer shall establish the Subcollection Account in
the name of the Indenture Trustee for the benefit of the Noteholders. The
Subcollection Account shall be an Eligible Account satisfying clause (ii) of
the definition of "Eligible Account," and shall initially be established with
the Lockbox Bank. The Servicer shall remit directly to the Subcollection
Account without deposit into any intervening account all payments by or on
behalf of the Obligors on the Receivables and all Liquidation Proceeds
received by the Servicer, in each case, as soon as practicable, but in no
event later than the Business Day after receipt thereof. Within two days of
deposit of payments into the Subcollection Account, the Servicer shall cause
the Lockbox Bank to transfer all amounts credited to the Subcollection
Account on account of such payments to the Collection Account. Amounts in
the Subcollection Account shall not be invested. Notwithstanding the
foregoing, the Servicer may utilize an alternative remittance schedule
acceptable to the Servicer if the Security Insurer consents in writing (so
long as an Insurer Default shall not have occurred and be continuing) and the
Servicer provides to the Indenture Trustee written confirmation from each
Rating Agency that such
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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
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reimbursement from collections on Receivables other than the Receivable in
respect of which such Outstanding Monthly Advance shall have been made.
SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Deposit
Date, the Servicer or AFL shall deposit in the Collection Account the
aggregate Purchase Amounts with respect to Administrative Receivables and
Warranty Receivables, respectively. All such deposits of Purchase Amounts
shall be made in immediately available funds. On or before each Draw Date,
the Indenture Trustee shall deposit in the Collection Account any amounts
delivered to the Indenture Trustee by the Collateral Agent.
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
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Threshold remaining to be distributed pursuant to this clause (ii)
shall not be distributed pursuant to this clause (ii) but shall be
distributed after the distributions to be made pursuant to clause
(v) below but before the distributions to be made pursuant to
clause (vi) below;
(iii) third, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Servicer,
the Basic Servicing Fee for the related Monthly Period, any
Supplemental Servicing Fees for the related Monthly Period, and any
amounts specified in Section 4.2(b), to the extent the Servicer has
not reimbursed itself in respect of such amounts pursuant to
Section 4.8;
(iv) fourth, from the Distribution Amount then remaining
on deposit in the Collection Account, to the Note Distribution
Account, an amount equal to the Noteholders' Interest Distributable
Amount for such Distribution Date;
(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 $146,901,153.65 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,
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(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
(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
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expressly limited to the extent of the amount of Liquidated Damages (as
defined in the Closing Date Purchase Agreement) paid to the Seller by AFL and
by the Seller to the Trust.
SECTION 4.8. NET DEPOSITS. Subject to payment by the
Servicer of amounts otherwise payable pursuant to Section 4.6(ii) and
provided that no Servicer Termination Event shall have occurred and be
continuing with respect to such Servicer, the Servicer may make the
remittances to be made by it pursuant to Sections 4.2, 4.4 and 4.5 net of
amounts (which amounts may be netted prior to any such remittance for a
Monthly Period) to be distributed to it pursuant to Sections 3.8, 4.2(b) and
4.6(i); PROVIDED, HOWEVER, that the Servicer shall account for all of such
amounts in the related Servicer's Certificate as if such amounts were
deposited and distributed separately; and, PROVIDED, FURTHER, that if an
error is made by the Servicer in calculating the amount to be deposited or
retained by it, with the result that an amount less than required is
deposited in the Collection Account, the Servicer shall make a payment of the
deficiency to the Collection Account, immediately upon becoming aware, or
receiving notice from the Indenture Trustee, of such error.
SECTION 4.9. STATEMENTS TO NOTEHOLDERS.
(a) On each Distribution Date, the Indenture Trustee shall
include with each distribution to each Noteholder, the Servicer's Certificate
(which statement shall also have been provided to the Security Insurer and to
each Rating Agency by the Servicer) delivered on the related Determination
Date pursuant to Section 3.9, setting forth for the Monthly Period relating
to such Payment Date the following information with respect to each class of
Notes:
(i) the amount of such distribution allocable to
principal;
(ii) the amount of such distribution allocable to
interest;
(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;
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(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, 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.
(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.
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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 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
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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.
(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
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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 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
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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, general corporation, tangible personal property,
privilege or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the sale of the Receivables and the other Trust
Property to the Trust or the issuance and original sale of the Notes and
costs and expenses in defending against the same.
(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
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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 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
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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
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pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not
protect the Servicer, the Backup Servicer or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence (excluding errors
in judgment) in the performance of duties, by reason of reckless disregard of
obligations and duties under this Agreement or any violation of law by the
Servicer, Backup Servicer or such person, as the case may be; PROVIDED
FURTHER, that this provision shall not affect any liability to indemnify the
Owner Trustee and the Indenture Trustee for costs, taxes, expenses, claims,
liabilities, losses or damages paid by the Owner Trustee or the Indenture
Trustee, each in its individual capacity. The Servicer, the Backup Servicer
and any director, officer, employee or agent of the Servicer or Backup
Servicer may rely in good faith on the advice of counsel or on any document
of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising under this Agreement.
(b) The Backup Servicer shall not be liable for any
obligation of the Servicer contained in this Agreement, and the Owner
Trustee, the Indenture Trustee, the Seller, the Security Insurer and the
Noteholders shall look only to the Servicer to perform such obligations.
SECTION 7.4. DELEGATION OF DUTIES. The Servicer may delegate
duties under this Agreement to an Affiliate of AFL with the prior written
consent of the Security Insurer, the Indenture Trustee, the Owner Trustee and
the Backup Servicer. The Servicer also may at any time perform the specific
duty of repossession of Financed Vehicles through sub-contractors who are in
the business of servicing automotive receivables and may perform other
specific duties through such sub-contractors with the prior written consent
of the Security Insurer (unless an Insurer Default shall have occurred and be
continuing), PROVIDED, HOWEVER, that no such delegation or sub-contracting
duties by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties. So long as no Insurer Default shall have occurred
and be continuing, neither AFL or any party acting as Servicer hereunder
shall appoint any subservicer hereunder without the prior written consent of
the Security Insurer, the Indenture Trustee, the Owner Trustee and the Backup
Servicer.
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.2, neither the Servicer nor the Backup
Servicer shall resign from the obligations and duties imposed on it by this
Agreement as Servicer or Backup Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements
in a manner which would have a material adverse effect on the Servicer or the
Backup Servicer, as the case may be, and the Security Insurer (so long as an
Insurer Default shall not have occurred 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
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permitting the resignation of the Servicer or Backup Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered and reasonably
acceptable to the Owner Trustee, the Indenture Trustee and the Security
Insurer (unless an Insurer Default shall have occurred and be continuing).
No resignation of the Servicer shall become effective until, so long as no
Insurer Default shall have occurred and be continuing, the Backup Servicer or
an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Servicer or, if an Insurer Default
shall have occurred and be continuing, the Backup Servicer or a successor
Servicer that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Servicer. No resignation of the Backup Servicer shall
become effective until, so long as no Insurer Default shall have occurred and
be continuing, an entity acceptable to the Security Insurer shall have
assumed the responsibilities and obligations of the Backup Servicer or, if an
Insurer Default shall have occurred and be continuing, a Person that is an
Eligible Servicer shall have assumed the responsibilities and obligations of
the Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 7.5, the Backup Servicer may petition a court for its removal.
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
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Servicer set forth in this Agreement (or, if AFL is the Servicer, the
Purchase Agreement), which failure (i) materially and adversely
affects the rights of Noteholders (determined without regard to the
availability of funds under the Note Policy), or of the Security
Insurer (unless an Insurer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by
the Owner Trustee, the Indenture Trustee or the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing,
any Noteholder); or
(d) (i) The commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar
law and such case is not dismissed within 60 days; or (ii) the entry
of a decree or order for relief by a court or regulatory authority
having jurisdiction in respect of the Servicer or the Seller in an
involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future, federal or state,
bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or the Seller or of any substantial
part of their respective properties or ordering the winding up or
liquidation of the affairs of the Servicer or the Seller; or
(e) The commencement by the Servicer or the Seller of a
voluntary case under the federal bankruptcy laws, as now or hereafter
in effect, or any other present or future, federal or state,
bankruptcy, insolvency or similar law, or the consent by the Servicer
or the Seller to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Servicer or the Seller or of any
substantial part of its property or the making by the Servicer or the
Seller of an assignment for the benefit of creditors or the failure by
the Servicer or the Seller generally to pay its debts as such debts
become due or the taking of corporate action by the Servicer or the
Seller in furtherance of any of the foregoing; or
(f) Any representation, warranty or statement of the
Servicer or the Seller made in this Agreement or any certificate,
report or other writing delivered pursuant hereto shall prove to
be incorrect in any material respect as of the time when the same
shall have been made (excluding, however, any representation or
warranty set forth in Section 2.5(a)), and the incorrectness of such
representation, warranty or statement has a material adverse effect
on the Trust and, within 30 days after written notice thereof shall
have been given to the Servicer or the Seller by the Owner Trustee,
the Indenture Trustee or the Security Insurer (or, if an Insurer
Default shall have occurred and be continuing, a Noteholder), the
circumstances or condition in
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respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have
occurred and be continuing, the Security Insurer shall not have
delivered a Servicer Extension Notice pursuant to Section 3.14
(in which case the Servicer Termination Event will be deemed to have
occurred as of the last day of the term of the most recent Servicer
Extension Notice received); or
(h) So long as an Insurer Default shall not have occurred
and be continuing, an Insurance Agreement Event of Default shall have
occurred; or
(i) A claim is made under the Note Policy.
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT.
If a Servicer Termination Event shall occur and be continuing, the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing,
either the Indenture Trustee, the Owner Trustee, or a Note Majority), by
notice given in writing to the Servicer (and to the Indenture Trustee, the
Backup Servicer and the Owner Trustee if given by the Security Insurer or the
Noteholders) may terminate all of the rights and obligations of the Servicer
under this Agreement. On or after (i) the receipt by the Servicer of such
written notice, or (ii) the receipt by the Backup Servicer (or any alternate
successor servicer appointed by the Security Insurer pursuant to Section
8.3(b)) of written notice from the Security Insurer that the Security Insurer
is not extending the Servicer's term pursuant to Section 3.14, all authority,
power, obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Notes or the Trust Property or otherwise, shall
be terminated and automatically shall pass to, be vested in and become
obligations and responsibilities of the Backup Servicer (or such other
successor Servicer appointed by the Security Insurer); PROVIDED, HOWEVER,
that the successor Servicer shall have no liability with respect to any
obligation which was required to be performed by the terminated Servicer
prior to the date that the successor Servicer becomes the Servicer or any
claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by
this Agreement to execute and deliver, on behalf of the terminated Servicer,
as attorney-in-fact or otherwise, any and all documents and other instruments
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement of the Receivables and the other Trust Property and
related documents to show the Owner Trustee as lienholder or secured party on
the related Lien Certificates, or otherwise. The terminated Servicer agrees
to cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the terminated
Servicer,
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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 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
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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 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.
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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 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.
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(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.
(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
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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.
(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
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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.
(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
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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 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.
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(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,
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consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Security Insurer in its sole and absolute discretion.
SECTION 10.7. DISCLAIMER BY SECURITY INSURER. The Security
Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a
written notice to the Owner Trustee and the Indenture Trustee.
SECTION 10.8. COUNTERPARTS. For the purpose of facilitating
its execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
SECTION 10.9. INTENTION OF PARTIES. The execution and
delivery of this Agreement shall constitute an acknowledgement 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., 0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, with copies to: Arcadia Financial Ltd.,
0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention:
Xxxx X. Xxxxxx, (b) in the case of the Owner Trustee, Xxxxxx Square North,
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, 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 Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000,
Attention: Corporate Trust Services--Asset Backed Administration, (d) in the
case of each Rating Agency, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (for
Xxxxx'x) and 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (for Standard & Poor's),
Attention: Asset-Backed Surveillance, and (e) in the case of the Security
Insurer, Financial Security Assurance Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention:
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Xxxxxxxxxxxx Xxxxxxxxxx, Telex No.: (000) 000-0000, Confirmation: (212)
826-0100, Telecopy Nos.: (000) 000-0000, (000) 000-0000 (in each case in
which notice or other communication to Financial Security refers to an Event
of Default, a claim on the Note Policy or with respect to which failure on
the part of Financial Security to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication
should also be sent to the attention of the General Counsel and the
Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register, and any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Noteholder receives such notice.
SECTION 10.11. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Trust under the Trust
Agreement, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein
made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but
is made and intended for the purpose for binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to this Agreement and by any person claiming
by, through or under them and (d) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Trust or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any related documents.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Issuer, the Seller, AFL, the Servicer
and the Backup Servicer have caused this Sale and Servicing Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1998-B
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Assistant Vice President
SELLER:
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ Xxxx X. Xxxxxx
----------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President and Chief
Financial Officer
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
By /s/ Xxxx X. Xxxxxx
----------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Xxxx X. Xxxxxxx
----------------------------------
Name: Xxxx X. Xxxxxxx
Title: Corporate Trust Officer
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee
By /s/ Xxxx X. Xxxxxxx
----------------------------------
Name: Xxxx X. Xxxxxxx
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
Xxxxxxxx-Xxxx 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
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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.
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
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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 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
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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.
19. ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to give
the Trust a first priority perfected lien on, or ownership interest in, the
Receivables and the proceeds thereof and the other Trust Property have been
made, taken or performed.
20. NO IMPAIRMENT. Neither AFL nor the Seller has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under the Receivable or otherwise to impair
the rights of the Trust, the Indenture Trustee and the Noteholders in any
Receivable or the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
23. NO DEFAULT. There has been no default, breach, violation
or event permitting acceleration under the terms of any Receivable (other
than payment delinquencies of not more than 30 days), and no condition exists
or event has occurred and is continuing that with notice, the lapse of time
or both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the Initial Cutoff Date or any Subsequent
Cutoff Date, as applicable, no Financed Vehicle had been repossessed.
S-A-4
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 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 August 31, 2005.
28. CERTAIN CHARACTERISTICS. (A) Each Initial Receivable had
a remaining maturity, as of the Initial Cutoff Date, of at least three months
but not more than 84 months; (B) each Initial Receivable had an original
maturity of at least six months but not more than 84 months; (C) each Initial
Receivable had an original principal balance of at least $1,500.00 and not
more than $38,613.19; (D) each Initial Receivable had a remaining Principal
Balance as of the Initial Cutoff Date of at least $784.98 and not more than
$38,613.19; (E) each Initial Receivable has an Annual Percentage Rate of at
least 8.50% and not more than 24.00%; (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 September 1, 1998; (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) 12.32% 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 87.68% of
the Initial Receivables was attributable to loans for the purchase of used
Financed Vehicles; (K) not more than 73% of the Aggregate Principal Balance
as of the Initial Cutoff Date was attributable to loans originated under
AFL's "Classic" program (excluding loans for the purchase of repossessed
automobiles that would otherwise be deemed originated under the "Classic"
program); (L) not more than 3.0% of the
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Principal Balance of the Initial Receivables as of the Initial Cutoff Date
had an Annual Percentage Rate in excess of 21.0%; (M) none of such
Receivables represented loans in excess of $50,000.00; (N) not more than
0.15% of the Aggregate Principal Balance of such Receivables represented
loans with original terms greater than 72 months; and (O) not more than 4.0%
of the Aggregate Principal Balance of such Receivables represented loans
secured by Financed Vehicles that previously secured a loan originated by AFL
with an obligor other than the current Obligor.
S-A-6
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;
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(c) Pending insurance claim - verifiable; or
(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.
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IV. CHARGE OFFS
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].
S-B-3
(3) "Service" of the Writ of Execution is handled by the Sheriff or
an Attorney.
S-B-4
