INSURANCE AND INDEMNITY AGREEMENT
dated as of December 3, 1996
amended and restated as of July 21, 1998
among
FINANCIAL SECURITY ASSURANCE INC.,
ARCADIA FINANCIAL LTD.,
ARCADIA RECEIVABLES FINANCE CORP.,
and
ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Floating Rate Variable Funding
FSA Insured
Automobile Receivables-Backed Notes
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
SECTION 1.01. DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.01. REPRESENTATIONS AND WARRANTIES OF AFL AND ARFC. . . . . . . . . 2
SECTION 2.02. AFFIRMATIVE COVENANTS OF AFL AND ARFC.. . . . . . . . . . . . . 7
SECTION 2.03. NEGATIVE COVENANTS OF AFL AND ARFC. . . . . . . . . . . . . . .13
SECTION 2.04. REPRESENTATIONS AND WARRANTIES OF AFL AND THE ISSUER. . . . . .17
SECTION 2.05. AFFIRMATIVE COVENANTS OF AFL AND THE ISSUER.. . . . . . . . . .20
SECTION 2.06. NEGATIVE COVENANTS OF AFL AND THE ISSUER. . . . . . . . . . . .25
ARTICLE III THE POLICY; REIMBURSEMENT; INDEMNIFICATION
SECTION 3.01. ISSUANCE OF THE POLICY. . . . . . . . . . . . . . . . . . . . .26
SECTION 3.02. PAYMENT OF FEES AND PREMIUM.. . . . . . . . . . . . . . . . . .26
SECTION 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.. . . . . . . .27
SECTION 3.04. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 3.05. SUBROGATION.. . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 3.06. CERTAIN OBLIGATIONS NOT RECOURSE TO AFL AND ARFC. . . . . . . .30
SECTION 3.07. LIMITED RECOURSE TO ISSUER. . . . . . . . . . . . . . . . . . .30
ARTICLE IV FURTHER AGREEMENTS
SECTION 4.01. EFFECTIVE DATE; TERM OF AGREEMENT.. . . . . . . . . . . . . . .31
SECTION 4.02. OBLIGATIONS ABSOLUTE. . . . . . . . . . . . . . . . . . . . . .31
SECTION 4.03. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. . . . . . . . . .32
SECTION 4.04. LIABILITY OF FINANCIAL SECURITY.. . . . . . . . . . . . . . . .33
ARTICLE V EVENTS OF DEFAULT; REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . .33
SECTION 5.02. REMEDIES; WAIVERS.. . . . . . . . . . . . . . . . . . . . . . .35
ARTICLE VI MISCELLANEOUS
SECTION 6.01. AMENDMENTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 6.02. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 6.03. PAYMENT PROCEDURE.. . . . . . . . . . . . . . . . . . . . . . .38
SECTION 6.04. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 6.05. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 6.06. CONSENT TO JURISDICTION.. . . . . . . . . . . . . . . . . . . .39
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SECTION 6.07. CONSENT OF FINANCIAL SECURITY.. . . . . . . . . . . . . . . . .40
SECTION 6.08. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.09. TRIAL BY JURY WAIVED. . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.10. LIMITED LIABILITY.. . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.11. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.12. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Appendix A Definitions
Appendix B Conditions Precedent to Issuance of the Policy
Exhibit I Form of Policy
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INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of December 3, 1996,
amended and restated as of July 21, 1998, among FINANCIAL SECURITY ASSURANCE
INC. ("FINANCIAL SECURITY"), ARCADIA FINANCIAL LTD. ("AFL"), ARCADIA
RECEIVABLES FINANCE CORP. ("ARFC") and ARCADIA AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST (the "ISSUER").
INTRODUCTORY STATEMENTS
1. ARFC has agreed from time to time to purchase from AFL, and AFL has
agreed from time to time to sell and assign to ARFC, Receivables pursuant to
the Receivables Purchase Agreement and Assignment.
2. ARFC proposes to transfer Receivables to the Issuer against the
transfer of funds by the Issuer in accordance with the terms of the Sale and
Servicing Agreement.
3. The Issuer will issue Securities pursuant to the Indenture. Each
Security will be secured by the Receivables and other collateral.
4. The Issuer has requested that Financial Security issue a financial
guaranty insurance policy guarantying scheduled payments of interest and
ultimate payment of principal on the Securities (including any such payments
subsequently avoided as a preference under applicable bankruptcy law) upon
the terms and subject to the conditions provided herein.
5. The parties hereto desire to specify the conditions precedent to
the issuance of the Policy by Financial Security, the payment of premium in
respect of the Policy, the indemnity and reimbursement to be provided to
Financial Security in respect of certain amounts paid by Financial Security
under the Policy or otherwise and certain other matters.
In consideration of the premises and of the agreements herein
contained, Financial Security, AFL, ARFC and the Issuer hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS.
Capitalized terms used herein shall have the meanings provided in
Appendix A hereto, or the meanings given such terms in the Sale and Servicing
Agreement, unless the context otherwise requires.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATIONS AND WARRANTIES OF AFL AND ARFC.
AFL and ARFC jointly and severally represent, warrant and covenant,
as of the date hereof and as of the Date of Issuance, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. Each of AFL and ARFC is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota or the laws of the State of Delaware,
respectively, with power and authority to own its properties and conduct
its business. Each of AFL and ARFC is duly qualified to do business, is in
good standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "APPROVALS") necessary for the
conduct of its business as currently conducted and the performance of its
obligations under the Transaction Documents, in each jurisdiction in which
the failure to be so qualified or to obtain such approvals would render any
Receivable unenforceable in such jurisdiction or any Transaction Document
unenforceable in any respect or would otherwise have a material adverse
effect upon the Transaction.
(b) POWER AND AUTHORITY. Each of AFL and ARFC has all necessary
corporate power and authority to conduct its business as currently
conducted, to execute, deliver and perform its obligations under this
Agreement and each other Transaction Document to which it is a party and to
carry out the terms of each such Transaction Document and has full power
and authority to sell and assign the Receivables as contemplated by the
Transaction Documents and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance by
each of AFL and ARFC of this Agreement and each other Transaction Document
to which it is a party have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents or other
action by or any notice to or filing with any Person, including, without
limitation, any governmental entity, the stockholders of AFL or the
stockholder of ARFC.
(d) NONCONTRAVENTION. Neither the execution nor delivery of this
agreement and each other Transaction Document to which AFL or ARFC is a
party, nor the consummation of the Transaction nor the satisfaction of the
terms and conditions of this agreement and each other Transaction Documents
to which AFL or ARFC is a party,
(i) conflicts with or results, or will conflict with or
result, in any breach or violation of any provision of the
Certificate of Incorporation or Bylaws of AFL or ARFC or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect
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having applicability to AFL or ARFC, or any of their respective
properties,
(ii) constitutes or will constitute a default by AFL or
ARFC under or a breach of any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which AFL
or ARFC or any of their respective Subsidiaries is a party or by
which it or any of its or their properties is or may be bound or
affected, or
(iii) results in or requires, or will result in or require,
the creation of any Lien upon or in respect of any of the assets of
AFL or ARFC or any of their respective Subsidiaries except as
otherwise expressly contemplated by the Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation pending, or to the best knowledge of AFL and ARFC after
reasonable inquiry, threatened by or before any court, regulatory body,
governmental or administrative agency or arbitrator against or affecting
AFL or ARFC, or any properties or rights of AFL or ARFC, including without
limitation, the Receivables: (A) asserting the invalidity of this Agreement
or any other Transaction Document to which the AFL or ARFC is a party, (B)
seeking to prevent the issuance of the Securities or the consummation of
the Transaction, (C) seeking any determination or ruling that might
materially and adversely affect the validity or enforceability of this
Agreement or any other Transaction Document to which AFL or ARFC is a party
or (D) which might result in a Material Adverse Change with respect to AFL
or ARFC.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which either AFL or ARFC is a party, when executed and
delivered by it, and assuming due authorization, execution and delivery by
the other parties thereto, will constitute the legal, valid and binding
obligations of such Person, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles. The Securities when
executed, authenticated and delivered in accordance with the Indenture,
will be entitled to the benefits of the Indenture and will constitute
legal, valid and binding obligations of the Issuer, enforceable in
accordance with their terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution,
delivery and performance by AFL or ARFC of this Agreement or of any other
Transaction Document to which it is a
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party, except (in each case) such as have been obtained and are in full
force and effect.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by AFL or ARFC in the conduct of their
respective businesses violates any law, regulation, judgment, agreement,
order or decree applicable to it which, if enforced, would result in a
Material Adverse Change with respect to such Person.
(i) GOOD TITLE; VALID TRANSFER ABSENCE OF LIENS; SECURITY
INTEREST.
(i) Immediately prior to the transfer of any Receivables
and related Other Conveyed Property to ARFC pursuant to the
Receivables Purchase Agreement and Assignment, AFL was or will have
been the owner of, and had or will have had good and marketable
title to, such Receivables free and clear of all Liens and
Restrictions on Transferability, and had or will have had full
right, corporate power and lawful authority to assign, transfer and
pledge such Receivables and related Other Conveyed Property and
immediately following such transfer ARFC will be the owner of, and
have good and marketable title to, such Receivables and related
Other Conveyed Property free and clear of all Liens and
Restrictions on Transferability. Each such transfer pursuant to the
Receivables Purchase Agreement and Assignment constitutes or will
constitute a valid sale, transfer and assignment of such
Receivables and related Other Conveyed Property to ARFC enforceable
against creditors of and purchasers from AFL. In the event that, in
contravention of the intention of the parties, a transfer of
Receivables and related Other Conveyed Property by AFL to ARFC is
characterized as other than a sale, such transfer shall be
characterized as a secured financing, and ARFC shall have a valid
and perfected first priority security interest in such Receivables
and related Other Conveyed Property free and clear of all Liens and
Restrictions on Transferability, subject to the provisions of the
Sale and Servicing Agreement.
(ii) Immediately prior to the transfer of any Receivables
and related Other Conveyed Property to the Issuer pursuant to the
Sale and Servicing Agreement, ARFC was or will have been the owner
of, and had good and marketable title to, such property free and
clear of all Liens and Restrictions on Transferability, and had or
will have had full right, corporate power and lawful authority to
assign, transfer and pledge such Receivables. In the event that a
transfer of the Receivables and related Other Conveyed Property by
ARFC to the Issuer is characterized as other than a sale, such
transfer shall be characterized as a secured financing, and the
Issuer shall have a valid and perfected first priority security
interest in such Receivables and related Other Conveyed Property
free and clear of all Liens and Restrictions on Transferability,
other than the Lien of the Security Agreement in favor of the
Collateral Agent.
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(j) ACCURACY OF INFORMATION. None of the Transaction Documents
nor any of the other Provided Documents provided by AFL or ARFC contain any
statement of a material fact with respect to AFL or ARFC or the Transaction
that was untrue or misleading in any material respect when made (except
insofar as any such Document was connected or superseded by a subsequent
Provided Document and Financial Security has not detrimentally relied on
the original Provided Document). There is no fact known to AFL or ARFC
which has a material possibility of causing a Material Adverse Change with
respect to either of them or which has a material possibility of impairing
the value or marketability of the Receivables, taken as a whole, or
decreasing the possibility that amounts due in respect of the Receivables
will be collected as due. Since the furnishing of the Provided Documents,
there has been no change, or any development or event involving a
prospective change known to AFL or ARFC that would render any
representation or warranty or other statement made by either of them in any
of the Provided Documents untrue or misleading in any material respect.
(k) FINANCIAL STATEMENTS. The Financial Statements of AFL, copies
of which have been furnished to Financial Security, (i) are, as of the
dates and for the periods referred to therein, complete and correct in all
material respects, (ii) present fairly the financial condition and results
of operations of such Person as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments). Since
the date of the most recent Financial Statements with respect to such
Person, there has been no material adverse change in such financial
condition or results of operations of such Person. Except as disclosed in
the Financial Statements, AFL is not subject to any contingent liabilities
or commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Change in respect of AFL.
(l) ERISA. AFL is in compliance with ERISA in all material
respects and has not incurred and does not reasonably expect to incur any
material liabilities to the PBGC under ERISA in connection with any Plan or
Multiemployer Plan or to contribute now or in the future in respect of any
Plan or Multiemployer Plan.
(m) COMPLIANCE WITH SECURITIES LAWS. ARFC is not required to be
registered as an "investment company" under the Investment Company Act and
is not subject to the information reporting requirements of the Exchange
Act.
(n) TRANSACTION DOCUMENTS. Each of the representations and
warranties of AFL and ARFC contained in the Transaction Documents is true
and correct in all material respects and each of AFL and ARFC hereby makes
each such representation and warranty made by it to, and for the benefit
of, Financial Security as if the same were set forth in full herein.
(o) SPECIAL PURPOSE ENTITY.
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(i) The capital of ARFC is adequate for the business and
undertakings of ARFC.
(ii) Other than with respect to the ownership by AFL of
the stock of ARFC and as provided in this Agreement and the
Receivables Purchase Agreement and Assignment, the Sale and
Servicing Agreement, the Security Agreement and the Spread Account
Agreement, and in connection with the Term Transactions, ARFC is
not engaged in any business transactions with AFL or any affiliate
of AFL.
(iii) At least one director of ARFC shall be a person who
is not, and will not be, a director, officer, employee or holder of
any equity securities of AFL or any of its affiliates or
Subsidiaries.
(iv) The funds and assets of ARFC are not, and will not
be, commingled with the funds of any other person.
(v) The bylaws of ARFC require it to maintain (A) correct
and complete minute books and records of account, and (B) minutes
of the meetings and other proceedings of its shareholders and board
of directors.
(p) SOLVENCY; FRAUDULENT CONVEYANCE. Each of AFL and ARFC is
solvent and will not be rendered insolvent by the Transaction and, after
giving effect to the Transaction, neither AFL nor ARFC will be left with an
unreasonably small amount of capital with which to engage in its business.
Neither AFL nor ARFC intends to incur, or believes that it has incurred,
debts beyond its ability to pay such debts as they mature. Neither AFL nor
ARFC contemplates the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of AFL or ARFC or any
of its assets. The amount of consideration being received by ARFC upon the
transfer of Receivables and related Other Conveyed Property to the Issuer
constitutes reasonably equivalent value and fair consideration for the
Receivables and such Other Conveyed Property. The amount of consideration
being received by AFL upon the sale of the Receivables and related Other
Conveyed Property to ARFC constitutes reasonably equivalent value and fair
consideration for the Receivables and such Other Conveyed Property. Neither
AFL nor ARFC is entering into the Transaction Documents or consummating the
transactions contemplated thereby with any intent to hinder, delay or
defraud any of the Issuer's creditors.
(q) TAXES. Each of AFL and ARFC has, and each member of the
respective affiliated groups of corporations of which such Person is a
member has, filed all federal and state tax returns which are required to
be filed and paid all taxes, including any assessments received by such
Person, to the extent that such taxes have become due other than taxes that
such Person shall currently be contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto. Any taxes, fees
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and other governmental charges payable by AFL or ARFC in connection with
the Transaction, the execution and delivery of the Transaction Documents
and the issuance of the Securities have been paid or shall have been
paid at or prior to the Date of Issuance.
(r) PLEDGE OF SHARES. The shares of stock of ARFC which have been
pledged pursuant to the Stock Pledge Agreement constitute all of the issued
and outstanding shares of ARFC.
(s) PERFECTION OF LIENS AND SECURITY INTEREST. The Lien and
security interest in favor of the Collateral Agent with respect to the
Receivables and Other Conveyed Property will be perfected by the filing of
financing statements on Form UCC-1 on or prior to the Date of Issuance in
each jurisdiction where such recording or filing is necessary for the
perfection thereof, the delivery of the Receivable Files for the
Receivables to the Custodian, and the establishment of the Collection
Account, the Note Distribution Account and the Spread Account in accordance
with the provisions of the Transaction Documents, and no other filings in
any jurisdiction or any other actions (except as expressly provided herein)
are necessary to perfect the Collateral Agent's Lien on and security
interest in the Receivables and Other Conveyed Property as against any
third parties.
(t) SECURITY INTEREST IN ACCOUNTS. Assuming the retention of
funds in the Collection Account, the Note Distribution Account and the
Spread Account and the acquisition of Eligible Investments, in each case,
in accordance with the Transaction Documents, such funds and Eligible
Investments will be subject to a valid and perfected, first priority
security interest in favor of the Collateral Agent on behalf of Financial
Security and the Trustee for the benefit of the Noteholders.
Section 2.02. AFFIRMATIVE COVENANTS OF AFL AND ARFC.
AFL and ARFC jointly and severally hereby agree, during the Term of
this Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each of AFL
and ARFC shall perform each of its respective obligations under the
Transaction Documents and shall comply with all material requirements of
any law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the Transaction
Documents. Neither AFL nor ARFC will cause or permit to become effective
any amendment to or modification of any of the Transaction Documents to
which it is a party unless (i) so long as no Insurer Default shall have
occurred and be continuing Financial Security shall have previously
approved in writing the form of such amendment or modification or (ii) if
an Insurer Default shall have occurred and be continuing such amendment
would not adversely affect the interests of Financial Security. Neither
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AFL nor ARFC shall take any action or fall to take any action that would
interfere with the enforcement of any rights under the Transaction
Documents.
(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; BOOKS AND RECORDS;
OTHER INFORMATION. Each of AFL and ARFC shall keep or cause to be kept in
reasonable detail books and records of account of its assets and business.
Each of AFL and ARFC shall furnish or cause to be furnished to Financial
Security:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available,
and in any event within 90 days after the close of each fiscal year
of AFL, the audited balance sheets of AFL, as of the end of such
fiscal year and the audited statements of income, changes in
shareholders' equity and cash flows of AFL, for such fiscal year,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied, and
accompanied by the certificate of independent accountants (which
shall be a nationally recognized firm or otherwise acceptable to
Financial Security) for AFL, and by the certificate specified in
Section 2.02(c) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as
available, and in any event within 45 days after the close of each
of the first three quarters of each fiscal year of AFL, the
unaudited balance sheets of AFL as of the end of such quarter and
the unaudited statements of income, changes in shareholders' equity
and cash flows of AFL for the portion of the fiscal year then
ended, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied (subject to
normal year-end adjustments), and accompanied by the certificate
specified in Section 2.02(c) hereof if such certificate is required
to be provided pursuant to such Section.
(iii) ACCOUNTANTS' REPORTS. If a Special Event specified
in clauses (a) or (d) of the definition thereof or clause (b) or
(c) of the definition thereof with respect to AFL or ARFC has
occurred, copies of any reports submitted to AFL or ARFC by their
respective independent accountants in connection with any
examination of the financial statements of AFL or ARFC promptly
upon receipt thereof.
(iv) OTHER INFORMATION. Promptly upon receipt thereof,
copies of all reports, statements, certifications, schedules, or
other similar items delivered to or by AFL or ARFC pursuant to the
terms of the Transaction Documents and, promptly upon request, such
other data as Financial Security may reasonably request; PROVIDED,
HOWEVER, that neither AFL nor ARFC shall be required to deliver any
such items if provision by some other party to Financial Security
is required under the Transaction
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Documents unless such other party wrongfully fails to deliver such
item. AFL and ARFC shall, upon the request of Financial Security,
permit Financial Security and its authorized agents (A) to inspect
its books, records and operations as they may relate to the
Securities, the Receivables, the obligations of AFL or ARFC under
the Transaction Documents, the Transaction and AFL's business; (B)
to discuss the affairs, finances and accounts of AFL and ARFC with
its Chief Operating Officer and Chief Financial Officer upon
Financial Security's reasonable request; and (C) to discuss the
affairs, finances and accounts of AFL and ARFC with their
respective independent accountants, PROVIDED that an officer of
such Person shall have the right to be present during such
discussions. Such inspections and discussions shall be conducted
during normal business hours and shall not unreasonably disrupt the
business of such Person. The fees and expenses of any such
authorized agents of Financial Security shall be for the account of
AFL. In addition, AFL and ARFC shall promptly (but in no case more
than 30 days following issuance or receipt by a Commonly Controlled
Entity) provide to Financial Security a copy of all correspondence
between a Commonly Controlled Entity and the PBGC, IRS, Department
of Labor or the administrators of a Multiemployer Plan relating to
any Reportable Event or the underfunded status, termination or
possible termination of a Plan or a Multiemployer Plan. The books
and records of AFL and ARFC with respect to the Receivables will be
maintained at 0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx,
Xxxxxxxxx 00000-0000, unless AFL or ARFC shall otherwise advise the
parties hereto in writing.
(v) AFL shall provide or cause to be provided to
Financial Security an executed original copy of each document
executed in connection with the Transaction within 30 days after
the date of closing.
(c) COMPLIANCE CERTIFICATE. AFL shall deliver to Financial
Security concurrently with the delivery of the financial statements
required pursuant to Section 2.02(b)(i) hereof (and concurrently with the
delivery of the financial statements required pursuant to Section
2.02(b)(ii) hereof, if a Special Event specified in clauses (a) or (d) of
the definition thereof or clause (b) or (c) of the definition thereof with
respect to AFL or ARFC has occurred), a certificate signed by its Chief
Financial Officer stating that:
(i) a review of such Person's performance under the
Transaction Documents during such period has been made under such
officer's supervision;
(ii) to the best of such officer's knowledge following
reasonable inquiry, no Special Event, Default or Event of Default
has occurred with respect to such Person, or if a Special Event,
Default or Event of Default has occurred with respect to such
Person, specifying the nature thereof and, if such Person has a
right to cure any such Default or Event of
9
Default pursuant to Section 5.01, stating in reasonable detail the
steps, if any, being taken by such Person to cure such Default or
Event of Default or to otherwise comply with the terms of the
agreement to which such Default or Event of Default relates; and
(iii) the attached financial reports submitted in
accordance with Section 2.02(b)(i) or (ii) hereof, as applicable,
are complete and correct in all material respects and present
fairly the financial condition and results of operations of AFL as
of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied
(subject as to interim statements to normal year-end adjustments).
(d) NOTICE OF MATERIAL EVENTS. AFL and ARFC shall promptly inform
Financial Security in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation against AFL or ARFC involving potential damages or
penalties in an uninsured amount in excess of $5,000 in any one
instance or $25,000 in the aggregate with respect to ARFC and in
excess of $10,000 in any one instance or $25,000 in the aggregate
with respect to AFL;
(ii) any change in the location of such Person's principal
office or any change in the location of the books and records of
AFL or ARFC;
(iii) the occurrence of any Default or Special Event (which
notice shall also be delivered to the Rating Agencies);
(iv) the commencement of any proceedings by or against AFL
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may
be, appointed or requested for AFL or ARFC or any of their assets;
(v) the receipt of notice that (A) AFL or ARFC is being
placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of
AFL's or ARFC's business is to be, or may be, suspended or revoked,
or (C) AFL or ARFC is to cease and desist any practice, procedure
or policy employed by AFL or ARFC in the conduct of its business,
and such cessation may result in a Material Adverse Change with
respect to AFL or ARFC; or
(vi) any other event, circumstance or condition that has
resulted, or which such Person reasonably believes might result, in
a Material Adverse Change in respect of AFL or ARFC.
10
(e) FURTHER ASSURANCES. Each of AFL and ARFC will file all
necessary financing statements, assignments or other instruments, and any
amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by law
to preserve and protect fully the Lien on and security interest in, and all
rights of the Collateral Agent, for the benefit of the Trustee for the
Noteholders and Financial Security, with respect to, the Receivables, the
Collection Account, the Note Distribution Account and the Spread Account.
In addition, each of AFL and ARFC shall, upon the request of Financial
Security, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Collateral Agent, for the benefit of the Trustee for
Noteholders and Financial Security, in the Receivables, the Collection
Account, the Note Distribution Account and the Spread Account, free and
clear of all Liens and Restrictions on Transferability except the
Restrictions on Transferability imposed by the Transaction Documents. In
addition, each of AFL and ARFC agrees to cooperate with S&P and Xxxxx'x in
connection with any review of the Transaction which may be undertaken by
S&P and Xxxxx'x after the date hereof.
(f) THIRD-PARTY BENEFICIARY. Each of AFL and ARFC agrees that
Financial Security shall have all rights of a third-party beneficiary in
respect of the Sale and Servicing Agreement and hereby incorporates and
restates its representations, warranties and covenants as set forth therein
for the benefit of Financial Security.
(g) CORPORATE EXISTENCE. Each of AFL and ARFC shall maintain its
corporate existence and shall at all times continue to be duly organized
under the laws of the State of Minnesota or laws of the State of Delaware,
respectively, and duly qualified and duly authorized (as described in
Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its Certificate of Incorporation and Bylaws.
(h) SPECIAL PURPOSE ENTITY.
(i) ARFC shall conduct its business solely in its own
name through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which those
others are concerned. It particularly will use its best efforts to
avoid the appearance of conducting business on behalf of AFL or any
affiliate of AFL and to avoid the appearance that the assets of
ARFC are available to pay the creditors of AFL or any affiliate
thereof. Without limiting the generality of the foregoing, all oral
and written communications, including, without limitation, letters,
invoices, purchase orders, contracts, statements and loan
applications, will be made solely in the name of ARFC.
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(ii) ARFC shall maintain corporate records and books of
account separate from those of AFL and the affiliates thereof.
ARFC's books and records shall clearly reflect the transfer of the
Receivables to the Issuer.
(iii) ARFC shall obtain proper authorization from its Board
of Directors of all corporate action requiring such authorization,
meetings of the board of directors of ARFC shall be held not less
frequently than three times per annum and copies of the minutes of
each such board meeting shall be delivered to Financial Security
within two weeks of such meeting.
(iv) ARFC shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder
approval, meetings of the shareholders of ARFC shall be held not
less frequently than one time per annum and copies of each such
authorization and the minutes of each such shareholder meeting
shall be delivered to Financial Security within two weeks of such
authorization or meeting, as the case may be.
(v) Although the organizational expenses of ARFC have
been paid by AFL, operating expenses and liabilities of ARFC shall
be paid from its own funds. If AFL transfers funds to ARFC which
funds ARFC applies to the satisfaction of an obligation under the
Transaction Documents, such transfer shall be characterized by ARFC
and AFL as a loan recourse only to amounts available for payment to
AFL pursuant to Section 2.08 of the Spread Account Agreement, shall
be pursuant to documentation substantially in the form set forth as
Exhibit C to the Sale and Servicing Agreement, and ARFC's
obligation to AFL with respect to such loan shall be limited to the
amounts so available; ARFC and AFL covenant and agree that any such
available amounts shall be applied to the satisfaction of any
amounts outstanding under any such loan, prior to distribution by
ARFC on or in respect of the capital stock of ARFC.
(vi) The annual financial statements of ARFC shall
disclose the effects of its transactions in accordance with
generally accepted accounting principles and shall disclose that
the assets of ARFC are not available to pay creditors of AFL or any
affiliate of AFL.
(vii) The resolutions, agreements and other instruments of
ARFC underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously maintained by
ARFC as official records of ARFC separately identified and held
apart from the records of AFL and each affiliate of AFL.
(viii) ARFC shall maintain an arm's-length relationship
with AFL and the affiliates thereof and will not hold itself out as
being liable for the debts of AFL or any of AFL's affiliates.
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(ix) ARFC shall keep its assets and liabilities wholly
separate from those of all other entities, including, but not
limited to, AFL and its affiliates.
(x) The books and records of ARFC will be maintained at
0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx
00000-0000, unless it shall otherwise advise the parties hereto in
writing. ARFC shall, upon the request of Financial Security, permit
Financial Security or its authorized agents to inspect its books
and records.
(i) MAINTENANCE OF LICENSES. Each of AFL and ARFC shall maintain
all licenses, permits, charters and registrations which are material to the
performance by it of its obligations under this Insurance Agreement and
each other Transaction Document to which is a party or by which it is
bound.
(j) MAINTENANCE OF WAREHOUSING FACILITIES. AFL and its
Subsidiaries shall at all times have warehousing facilities (other than
that contemplated by the Transaction) under which the amount of credit
available (including amounts outstanding) to finance the purchase of
automobile receivables originated by AFL, together with the sum of the
amount of unrestricted cash on AFL's balance sheet and the aggregate
principal balance of automobile receivables eligible to be pledged by AFL
(but not pledged) under the Transaction or such warehouse facilities as of
the end of the immediately preceding calendar quarter, at least equal to
$250,000,000.
(k) PROVISION OF INFORMATION. ARFC shall provide the Independent
Accountants with such information as is necessary to conduct the review
required by Section 3.18 of the Sale and Servicing Agreement.
(l) CLOSING DOCUMENTS. AFL shall provide or cause to be provided
to Financial Security an executed original copy of each document executed
in connection with the Transaction within 30 days after the Closing Date,
except that AFL shall cause a copy of the Sale and Servicing Agreement, the
Purchase Agreement, the Indenture, and each Transaction Document to which
Financial Security is a party to be provided to Financial Security on the
Closing Date.
(m) INCORPORATION OF COVENANTS. Each of AFL and ARFC agrees to
comply with their respective covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each
were set forth herein.
Section 2.03. NEGATIVE COVENANTS OF AFL AND ARFC.
AFL and ARFC hereby jointly and severally agree, during the Term of
the Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:
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(a) RESTRICTIONS ON LIENS. Neither AFL nor ARFC shall (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien
or Restriction on Transferability of the Receivables and related Other
Conveyed Property except for (w) the Liens imposed by the Transaction
Documents, and (x) Liens for taxes if such taxes shall not at the time be
due and payable or if the Issuer shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set aside
on its books adequate reserves with respect thereto, and (y) the
Restrictions on Transferability imposed by the Transaction Documents, or
(ii) sign or file under the Uniform Commercial Code of any jurisdiction any
financing statement which names either AFL, ARFC or the Issuer as a debtor,
or sign any security agreement authorizing any secured party thereunder to
file such financing statement, with respect to the Receivables, except in
each case any such instrument solely securing the rights and preserving the
Lien of the Issuer or of the Collateral Agent for the benefit of the
Trustee for the Noteholders and Financial Security.
(b) IMPAIRMENT OF RIGHTS. Neither AFL nor ARFC shall take any
action, or fail to take any action, if such action or failure to take
action may (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Noteholders or Financial Security, (ii)
result in a Material Adverse Change in respect of the Receivables or (iii)
impair the ability of AFL or ARFC to perform their respective obligations
under the Transaction Documents.
(c) LIMITATION ON MERGERS. AFL shall not consolidate with or
merge with or into any Person or transfer all or any material part of its
assets to any Person (except as contemplated by the Transaction Documents)
or liquidate or dissolve, provided that AFL may consolidate with, merge
with or into, or transfer all or a material part of its assets to, another
corporation if (i) the acquiror of its assets, or the corporation surviving
such merger or consolidation, shall be organized and existing under the
laws of any state and shall be qualified to transact business in each
jurisdiction in which failure to qualify would render any Transaction
Document unenforceable or would result in a Material Adverse Change in
respect of AFL or the Other Conveyed Property; (ii) after giving effect to
such consolidation, merger or transfer of assets, no Default or Event of
Default shall have occurred or be continuing; (iii) such acquiring or
surviving entity can lawfully perform the obligations of AFL under the
Transaction Documents and shall expressly assume in writing all of the
obligations of AFL, including, without limitation, its obligations under
the Transaction Documents; and (iv) such acquiring or surviving entity and
the consolidated group of which it is a part shall each have a net worth
immediately subsequent to such consolidation, merger or transfer of assets
at least equal to the net worth of AFL immediately prior to such
consolidation, merger or transfer of assets; and AFL shall give Financial
Security written notice of any such consolidation, merger or transfer of
assets on the earlier of: (A) the date upon which any publicly available
filing or release is made with respect to such action or (B) 10 Business
Days prior to the date of consummation
14
of such action. AFL shall furnish to Financial Security all information
requested by it that is reasonably necessary to determine compliance with
this paragraph.
(d) WAIVER, AMENDMENTS, ETC. Neither AFL nor ARFC shall waive,
modify, amend, supplement or consent to any waiver, modification or
amendment of, any of the provisions of any of the Transaction Documents or
the certificate of incorporation or by-laws of ARFC (i) unless, if no
Insurer Default shall have occurred and be continuing, Financial Security
shall have consented thereto in writing or (ii) if an Insurer Default shall
have occurred and be continuing, which would adversely affect the interests
of Financial Security.
(e) SUCCESSORS. Neither AFL nor ARFC shall terminate or
designate, or consent to the termination or designation of, the servicer,
back-up servicer or collateral agent or any successor thereto without the
prior approval of Financial Security.
(f) CREATION OF INDEBTEDNESS; GUARANTEES. ARFC shall not create,
incur, assume or suffer to exist any Indebtedness, other than in connection
with Term Transactions, the Sale and Servicing Agreement, Indebtedness
permitted by Section 2.02(j) hereof and any other Indebtedness guaranteed
or approved in writing by Financial Security. Without the prior written
consent in writing by Financial Security, ARFC shall not assume, guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital.
(g) SUBSIDIARIES. ARFC shall not form, or cause to be formed, any
Subsidiaries.
(h) ISSUANCE OF STOCK. ARFC shall not issue any shares of capital
stock or rights, warrants or options in respect of capital stock or
securities convertible into or exchangeable for capital stock.
(i) NO MERGERS. ARFC shall not consolidate with or merge into any
Person or (except as contemplated in the Transaction Documents or any Term
Transaction) transfer all or any material amount of its assets to any
Person or liquidate or dissolve.
(j) ERISA. (A) AFL shall not contribute or incur any obligation
to contribute to, or incur any liability in respect of, any Plan or
Multiemployer Plan, except that AFL may make such a contribution or incur
such a liability provided that neither AFL nor any Commonly Controlled
Entity will:
(i) terminate any Plan so as to incur any material
liability to the PBGC;
15
(ii) knowingly participate in any "prohibited transaction"
(as defined in ERISA) involving any Plan or Multiemployer Plan or
any trust created thereunder which would subject any of them to a
material tax or penalty on prohibited transactions imposed under
Section 4975 of the Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such
Plan or Multiemployer Plan, if such failure would cause such Plan
to have any material Accumulated Funding Deficiency, whether or not
waived; or
(iv) allow or suffer to exist any occurrence of a
Reportable Event, or any other event or condition, which presents a
material risk of termination by the PBGC of any Plan or
Multiemployer Plan, to the extent that the occurrence or
nonoccurrence of such Reportable Event or other event or condition
is within the control of it or any Commonly Controlled Entity.
(B) ARFC shall not contribute or incur any obligation to contribute to
any Multiemployer Plan.
(k) OTHER ACTIVITIES. ARFC shall not:
(i) sell, transfer, exchange or otherwise dispose of any
of its assets except as permitted under the Transaction Documents
and the Term Transactions; or
(ii) engage in any business or activity other than in
connection with the Sale and Servicing Agreement, the Trust
Agreement, the Security Agreement, the Spread Account Agreement,
the Receivables Purchase Agreement and Assignment and the Term
Transactions, and as permitted by its certificate of incorporation.
(l) INSOLVENCY. Neither AFL nor ARFC shall commence with respect
to ARFC or the Issuer, as the case may be, any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to the bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, corporation or other relief with respect to it or
(B) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or make a
general assignment for the benefit of its creditors. Neither AFL nor ARFC
shall take any action in furtherance of, or indicating the consent to,
approval of, or acquiescence in any of the acts set forth above. ARFC shall
not admit in writing its inability to pay its debts.
(m) DIVIDENDS. ARFC shall not declare or make payment of (i) any
dividend or other distribution on any shares of its capital stock, or (ii)
any
16
payment on account of the purchase, redemption, retirement or
acquisition of any option, warrant or other right to acquire shares of its
capital stock, unless (in each case) at the time of such declaration or
payment (and after giving effect thereto) no amount payable by ARFC under
any Transaction Document is then due and owing but unpaid.
Section 2.04. REPRESENTATIONS AND WARRANTIES OF AFL AND THE ISSUER.
Each of AFL and the Issuer represent and warrant as of the date
hereof and as of the Date of Issuance, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is duly
formed and validly existing as a Delaware statutory business trust and
is in good standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business. The
Issuer is duly qualified to do business, is in good standing and has
obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its
business as described in the Transaction Documents and the performance
of its obligations under the Transaction Documents, in each jurisdiction
in which the failure to be so qualified or to obtain such approvals
would render the Receivables in such jurisdiction or any Transaction
Document unenforceable in any respect or would otherwise have a material
adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. The Issuer has all necessary trust
power and authority to conduct its business as currently conducted, to
execute, deliver and perform its obligations under this Agreement and
each other Transaction Document to which the Issuer is a party and to
carry out the terms of each such Transaction Document, and has full
power and authority to sell and assign the Receivables as contemplated
by the Transaction Documents and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of this Agreement and each other Transaction Document to which the
Issuer is a party has been duly authorized by all necessary action on
the part of the Issuer and does not require any additional approvals or
consents or other action by or any notice to or filing with any Person
by or on behalf of the Issuer, including, without limitation, any
governmental entity.
(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement and each other Transaction Document to which the Issuer
is a party, the consummation of the Transaction nor the satisfaction of
the terms and conditions of this Agreement and each other Transaction
Document to which the Issuer is a party,
(i) conflicts with or results in any breach or violation
of any provision of the Certificate of Trust or the Trust Agreement
or any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or
17
award currently in effect having applicability to the Issuer or any
of its properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Issuer,
(ii) constitutes a default by the Issuer under or a breach
of any provision of any loan agreement, mortgage, indenture or
other agreement or instrument to which the Issuer is a party or by
which it or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon
or in respect of any of the Issuer's assets except as otherwise
expressly contemplated by the Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation pending, or, to the Issuer's best knowledge, threatened,
before any court, regulatory body, administrative agency, arbitrator or
governmental agency or instrumentality having jurisdiction over the
Issuer or its properties: (A) asserting the invalidity of this Agreement
or any other Transaction Document to which the Issuer is a party, (B)
seeking to prevent the issuance of the Securities or the consummation of
the Transaction, (C) seeking any determination or ruling that might
materially and adversely affect the validity or enforceability of this
Agreement or any other Transaction Document to which the Issuer is a
party, (D) which might result in a Material Adverse Change with respect
to the Issuer or (E) which might adversely affect the federal or state
tax attributes of the Securities or the Issuer.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which the Issuer is a party, when executed and delivered by
the Issuer, and assuming due authorization, execution and delivery by
the other parties thereto, will constitute the legal, valid and binding
obligation of the Issuer enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles. The Securities, when
executed, authenticated and delivered in accordance with the Indenture,
will be validly issued and outstanding and entitled to the benefits of
the Indenture, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
(g) NO CONSENTS. No consent, license, approval or
authorization from, or registration, filing or declaration with, any
regulatory body, administrative agency, or other governmental
instrumentality, nor any consent, approval, waiver or notification of
any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by the Issuer of
this Agreement or of any other Transaction Document to which the Issuer
is a party, except (in each case) such as have been obtained and are in
full force and effect.
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(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Issuer which, if enforced, would result in a
Material Adverse Change with respect to the Issuer.
(i) ACCURACY OF INFORMATION. None of the Provided Documents
contain any statement of a material fact with respect to the Issuer or
the Transaction that was untrue or misleading in any material respect
when made (except insofar as any such Document was connected or
superseded by a subsequent Provided Document). There is no fact known to
AFL or the Issuer which has a material possibility of causing a Material
Adverse Change with respect to either of them or which has a material
possibility of impairing the value or marketability of the Receivables
and related Other Conveyed Property, taken as a whole, or decreasing the
profitability that amounts due in respect of the Receivables and related
Other Conveyed Property will be collected as due. Since the furnishing
of the Provided Documents, there has been no change, or any development
or event involving a prospective change known to AFL or the Issuer that
would render any representation or warranty or other statement made by
either of them in any of the Provided Documents untrue or misleading in
any material respect.
(j) ERISA. The Issuer does not maintain or contribute to, or
have any obligation to maintain or contribute to, any Plan.
(k) COMPLIANCE WITH SECURITIES LAWS. The Issuer is not
required to be registered as an "investment company" under the
Investment Company Act and is not subject to the information reporting
requirements of the Exchange Act.
(l) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Issuer contained in the Transaction Documents is true
and correct in all material respects and the Issuer hereby makes each
such representation and warranty made by it to, and for the benefit of,
Financial Security as if the same were set forth in full herein.
(m) SPECIAL PURPOSE ENTITY.
(i) The capital of the Issuer is adequate for the business
and undertakings of the Issuer.
(ii) Other than as provided in this Agreement, the
Indenture, the Sale and Servicing Agreement, the Security Agreement
and the Trust Agreement, the Issuer is not engaged in any business
transactions with AFL or any affiliate of AFL.
(iii) The Issuer's funds and assets are not, and will not
be, commingled with the funds of any other Person, except as
provided in the Transaction Documents.
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(n) SOLVENCY; FRAUDULENT CONVEYANCE. The Issuer is solvent and
will not be rendered insolvent by the Transaction and, after giving
effect to the Transaction, the Issuer will not be left with an
unreasonably small amount of capital with which to engage in its
business. The Issuer does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. The
Issuer does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in
respect of the Issuer or any of its assets. The Issuer is not entering
into the Transaction Documents or consummating the transactions
contemplated thereby with any intent to hinder, delay or defraud any of
the Issuer's creditors.
(o) NO PRIOR ACTIVITIES. The Issuer has not engaged in any
activities or entered into any agreements prior to this Transaction.
Section 2.05. AFFIRMATIVE COVENANTS OF AFL AND THE ISSUER.
Each of AFL and the Issuer hereby agree that during the Term of this
Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer
shall perform each of its respective obligations under the Transaction
Documents and shall comply with all material requirements of, and the
Securities shall be offered and sold in accordance with, any law, rule
or regulation applicable to it or thereto, or that are required in
connection with its performance under any of the Transaction Documents.
The Issuer will not cause or permit to become effective any amendment to
or modification of any of the Transaction Documents to which it is a
party unless (i) so long as no Insurer Default shall have occurred and
be continuing Financial Security shall have previously approved in
writing the form of such amendment or modification or (ii) if an Insurer
Default shall have occurred and be continuing such amendment would not
adversely affect the interests of Financial Security. The Issuer shall
not take any action or fail to take any action that would interfere with
the enforcement of any rights under the Transaction Documents.
(b) BOOKS AND RECORDS; OTHER INFORMATION. The Issuer shall
keep or cause to be kept in reasonable detail books and records of
account of its assets and business. The Issuer shall furnish or cause
to be furnished to Financial Security promptly upon receipt thereof,
copies of all reports, statements, certifications, schedules, or other
similar items delivered to or by the Issuer pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
Financial Security may reasonably request; PROVIDED, HOWEVER, that the
Issuer shall not be required to deliver any such items if provision by
some other party to Financial Security is required under the Transaction
Documents unless such other party wrongfully fails to deliver such item.
The Issuer shall, upon the request of Financial Security, permit
Financial Security or its authorized agents (A) to
20
inspect its books and records as they may relate to the Securities, the
Receivables, the obligations of the Issuer under the Transaction
Documents, the Transaction; (B) to discuss the affairs, finances and
accounts of the Issuer with its officers upon Financial Security's
reasonable request; and (C) upon the occurrence of a Special Event, to
discuss the affairs, finances and accounts of the Issuer with its
independent accountants, PROVIDED that an officer of the Issuer shall
have the right to be present during such discussions. Such inspections
and discussions shall be conducted during normal business hours and
shall not unreasonably disrupt the business of such Person. The books
and records of the Issuer will be maintained at Wilmington Trust
Company, Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx, unless such Person shall otherwise advise the parties hereto
in writing.
(c) COMPLIANCE CERTIFICATE. The Issuer shall deliver to
Financial Security within 90 days after the close of each fiscal year of
the Issuer (and, if a Special Event has occurred, within 45 days after
the close of each of the first three quarters of each fiscal year of the
Issuer), a certificate signed by a President, Vice President or duly
authorized agent stating that:
(i) a review of the Issuer's performance under the
Transaction Documents during such period has been made under such
officer's supervision; and
(ii) to the best of such officer's knowledge following
reasonable inquiry, no Special Event, Default or Event of Default
has occurred with respect to such Person, or if a Special Event,
Default or Event of Default has occurred with respect to such
Person, specifying the nature thereof and, if such Person has a
right to cure any such Default or Event of Default pursuant to
Section 5.01, stating in reasonable detail the steps, if any, being
taken by such Person to cure such Default or Event of Default or to
otherwise comply with the terms of the agreement to which such
Default or Event of Default relates.
(d) NOTICE OF MATERIAL EVENTS. The Issuer shall promptly inform
Financial Security in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation (A) against the Issuer pertaining to the Receivables
in general, (B) with respect to a material portion of the
Receivables or (C) in which a request has been made for
certification as a class action (or equivalent relief) that would
involve a material portion of the Receivables;
(ii) any change in the location of such Person's principal
office or any change in the location of the books and records of the
Issuer;
21
(iii) the occurrence of any Default or Special Event (which
notice shall also be delivered to the Rating Agencies);
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or
against the Issuer in any federal, state or local court or before
any governmental body or agency, or before any arbitration board,
or the promulgation of any proceeding or any proposed or final rule
which, if adversely determined, would result in a Material Adverse
Change with respect to the Issuer;
(v) the commencement of any proceedings by or against the
Issuer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a receiver,
liquidator, conservator, trustee or similar official shall have
been, or may be, appointed or requested for the Issuer or any of
its assets;
(vi) the receipt of notice that (A) the Issuer is being
placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of the
Issuer's business is to be, or may be, suspended or revoked, or (C)
the Issuer is to cease and desist any practice, procedure or policy
employed by the Issuer in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to
the Issuer; or
(vii) any other event, circumstance or condition that has
resulted, or which such Person reasonably believes might result, in
a Material Adverse Change in respect of the Issuer.
(e) FURTHER ASSURANCES. The Issuer will file all necessary
financing statements, assignments or other instruments, and any
amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by
law to preserve and protect fully the Lien on and security interest in,
and all rights of the Collateral Agent, for the benefit of the Trustee
for the Noteholders and Financial Security, with respect to, the
Receivables, the Collection Account and the Note Distribution Account.
In addition, the Issuer shall, upon the request of Financial Security,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take
such further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction Documents or to
protect the interest of the Collateral Agent, for the benefit of the
Trustee for the Noteholders and Financial Security, in the Receivables,
free and clear of all Liens and Restrictions on Transferability, except
the Restrictions on Transferability imposed by the Transaction
Documents. In addition, the Issuer agrees to cooperate with the Rating
Agencies in connection
22
with any review of the Transaction which may be undertaken by the Rating
Agencies after the date hereof.
(f) REDEMPTION OF SECURITIES. The Issuer shall, upon the
repayment of outstanding Advances and termination of the Issuer's
obligation to make further Advances pursuant to the Sale and Servicing
Agreement or otherwise, furnish to Financial Security a notice of such
repayment and termination, and, upon payment of all of the Securities
and the expiration of the term of the Policy, surrender the Policy to
Financial Security for cancellation.
(g) THIRD-PARTY BENEFICIARY. The Issuer agrees that Financial
Security shall have all rights of a third-party beneficiary in respect
of the Sale and Servicing Agreement and hereby incorporates and restates
its representations, warranties and covenants as set forth therein for
the benefit of Financial Security.
(h) DISCLOSURE DOCUMENT. Any Offering Document delivered with
respect to the Securities shall clearly disclose that the Policy is not
covered by the property/casualty Insurance Security Fund specified in
Article 76 of the New York Insurance Law. In addition, any Offering
Document delivered with respect to the Securities which includes
financial statements of Financial Security prepared in accordance with
generally accepted accounting principles shall include the following
statement immediately preceding such financial statements:
The New York State Insurance Department
recognizes only statutory account practices for
determining and reporting the financial
condition and results of operations of an
insurance company, for determining its solvency
under the New York Insurance Law, and for
determining where its financial condition
warrants the payment of a dividend to its
stockholders. No consideration is given by the
New York State Insurance Department to
financial statements prepared in accordance
with generally accepted accounting principles
in making such determinations.
(i) SPECIAL PURPOSE ENTITY.
(i) The Issuer shall conduct its business solely in its
own name through its duly authorized officers or agents so as not
to mislead others as to the identity of the entity with which those
others are concerned. It particularly will use its best efforts to
avoid the appearance of conducting business on behalf of AFL or any
affiliate thereof or and to avoid the appearance that the assets of
the Issuer are available to pay the creditors of AFL or any
affiliate thereof. Without limiting the generality of the
foregoing, all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts,
statements and loan applications, will be made solely in the name
of the Issuer.
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(ii) The Issuer shall maintain trust records and books of
account separate from those of AFL and any affiliate thereof. The
Issuer's books and records shall clearly reflect the transfer of
the Receivables and related Other Conveyed Property to the Issuer.
(iii) The Issuer shall obtain proper authorization from its
equity owners of all trust action requiring such authorization and
copies of such authorization shall be delivered to Financial
Security within two weeks of such authorization.
(iv) Although the organizational expenses of the Issuer
have been paid by AFL, operating expenses and liabilities of the
Issuer shall be paid from its own funds.
(v) The annual financial statements of the Issuer shall
disclose the effects of its transactions in accordance with
generally accepted accounting principles and shall disclose that
the assets of the Issuer are not available to pay creditors of AFL
or any affiliate thereof.
(vi) The resolutions, agreements and other instruments of
the Issuer underlying the transactions described in this Agreement
and in the other Transaction Documents shall be continuously
maintained by the Issuer as official records of the Issuer
separately identified and held apart from the records of AFL and
each affiliate thereof.
(vii) The Issuer shall maintain an arm's-length
relationship with AFL and the affiliates thereof and will not hold
itself out as being liable for the debts of AFL or any affiliate
thereof.
(viii) The Issuer shall keep its assets and liabilities
wholly separate from those of all other entities, including, but
not limited to, AFL and the affiliates thereof.
(ix) The books and records of the Issuer will be
maintained at Wilmington Trust Company, Xxxxxx Square North, 1100
North Market Street, Wilmington, Delaware, unless it shall
otherwise advise the parties hereto in writing. The Issuer shall,
upon the request of Financial Security, permit Financial Security
or its authorized agents to inspect its books and records.
(j) MAINTENANCE OF LICENSES. The Issuer shall maintain all
licenses, permits, charters and registrations which are material to the
performance by of its obligations under this Agreement and each other
Transaction Document to which is a party or by which it is bound.
(k) INCORPORATION OF COVENANTS. The Issuer agrees to comply
with each of the Issuer's covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each
were set forth herein.
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(l) TAX MATTERS. The Issuer will not take any action that will
cause the Issuer to be taxable as an association (or publicly traded
partnership) or taxable as a corporation for federal and state income
tax purposes.
Section 2.06. NEGATIVE COVENANTS OF AFL AND THE ISSUER.
Each of AFL and the Issuer hereby agree that during the Term of this
Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:
(a) RESTRICTIONS ON LIENS. The Issuer shall not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist,
or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or Restriction on Transferability of the Receivables except for (w)
the Lien in favor of the Collateral Agent, for the benefit of the
Trustee for the Noteholders and Financial Security, (x) Liens for taxes
if such taxes shall not at the time be due and payable or if the Issuer
shall currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto, and (y) the Restrictions on
Transferability imposed by the Transaction Documents or (ii) sign or
file under the Uniform Commercial Code of any jurisdiction any financing
statement which names the Issuer as a debtor, or sign any security
agreement authorizing any secured party thereunder to file such
financing statement, with respect to the Receivables, except in each
case any such instrument solely securing the rights and preserving the
Lien of the Collateral Agent, for the benefit of the Trustee for the
Noteholders and Financial Security.
(b) IMPAIRMENT OF RIGHTS. The Issuer shall not take any
action, or fail to take any action, if such action or failure to take
action may (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Noteholders or Financial Security, (ii)
result in a Material Adverse Change in respect of the Receivables or
(iii) impair the ability of the Issuer to perform its obligations under
the Transaction Documents, including any consolidation, merger with any
Person or any transfer of all or any material amount of the assets of
the Issuer to any other Person if such consolidation, merger or transfer
would materially impair the net worth of the Issuer or any successor
Person obligated, after such event, to perform such Person's obligations
under the Transaction Documents.
(c) WAIVER, AMENDMENTS, ETC. The Issuer shall not waive,
modify or amend, or consent to any waiver, modification or amendment of,
any of the provisions of any of the Transaction Documents unless (i) if
no Insurer Default shall have occurred and be continuing Financial
Security shall have occurred and be continuing Financial Security shall
have consented thereto in writing or (ii) if an Issuer Default shall
have occurred and be continuing which would adversely affect the
interests of Financial Security.
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(d) SUCCESSORS. The Issuer shall not terminate or designate,
or consent to the termination or designation of, the servicer, back-up
servicer or collateral agent or any successor thereto without the prior
approval of Financial Security.
(e) OTHER ACTIVITIES. The Issuer shall not issue securities
other than the Securities or create, incur, assume or suffer to exist
any Indebtedness or sell, transfer, exchange or otherwise dispose of any
of its assets, or engage in any business or activity, except for the
Transaction and otherwise only if the following conditions are met: (i)
no other securities of the Issuer will be downgraded or listed for
credit review for possible downgrade by reason of such transaction, (ii)
the shadow rating of the Securities is not reduced by reason of such
transaction, (iii) all parties to such transaction enter into agreements
with the Issuer (and satisfactory to Financial Security), with Financial
Security as a named third-party beneficiary, not to commence a
bankruptcy, reorganization or similar proceeding against the Issuer.
(f) SUBSIDIARIES. The Issuer shall not form, or cause to be
formed, any Subsidiaries.
(g) NO MERGERS. The Issuer shall not consolidate with or merge
into any Person or transfer all or any material amount of its assets to
any Person or liquidate or dissolve.
(h) INSOLVENCY. The Issuer shall not commence with respect to
ARFC any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to the
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, corporation or other relief with respect to it or (B)
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. Neither AFL
nor the Issuer shall take any action in furtherance of, or indicating
the consent to, approval of, or acquiescence in any of the acts set
forth above. The Issuer shall not admit in writing its inability to pay
its debts.
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION; LIMITED RECOURSE
Section 3.01. ISSUANCE OF THE POLICY.
Financial Security agrees to issue the Policy subject to satisfaction
of each and all of the conditions precedent set forth in Appendix B hereto.
Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) PREMIUM LETTER FEES AND EXPENSES. On the Date of Issuance,
AFL shall pay or cause to be paid the amounts specified with respect to
fees, expenses
26
and disbursements in the Premium Letter, unless otherwise agreed between
AFL and Financial Security.
(b) LEGAL FEES. On the Date of Issuance, AFL shall pay or
cause to be paid legal fees and disbursements incurred by Financial
Security in connection with the issuance of the Policy, unless otherwise
agreed between AFL and Financial Security.
(c) RATING AGENCY FEES. The initial fees of S&P and Moody's
with respect to the Securities and the Transaction shall be paid by AFL
in full on the Date of Issuance, or otherwise provided for to the
satisfaction of Financial Security. All periodic and subsequent fees of
S&P or Moody's with respect to, and directly allocable to, the
Securities and the Transaction shall be for the account of, and shall be
billed to, AFL. The fees for any other rating agency shall be paid by
the party requesting such other agency's rating, unless such other
agency is a substitute for S&P or Moody's in the event that S&P or
Xxxxx'x is no longer determining a capital charge with respect to the
Policy by Financial Security, in which case the cost for such agency
shall be paid by AFL.
(d) AUDITORS' FEES. AFL shall pay on demand any fees of
Financial Security's auditors payable in respect of any Offering
Document that are incurred after the Date of Issuance. It is understood
that Financial Security's auditors shall not incur any additional fees
in respect of future Offering Documents except at the request of or with
the consent of AFL.
(e) PREMIUM. In consideration of the issuance by Financial
Security of the Policy, Financial Security shall be entitled to receive
the Premium as and when due in accordance with the terms of the Premium
Letter. The Premium paid hereunder or under the Sale and Servicing
Agreement shall be nonrefundable without regard to whether Financial
Security makes any payment under the Policy or any other circumstances
relating to the Securities or provision being made for payment of the
Securities prior to maturity.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.
AFL agrees to pay to Financial Security the following amounts as and
when incurred:
(a) a sum equal to the total of all amounts paid by Financial
Security under the Policy;
(b) any and all out-of-pocket charges, fees, costs and expenses
which Financial Security may reasonably pay or incur, including, but not
limited to, attorneys' and accountants' fees and expenses, in connection
with (i) in the event of payments under the Policy, any accounts
established to facilitate payments under the Policy, to the extent
Financial Security has not been immediately reimbursed on the date that
any amount is paid by Financial Security under the Policy, or other
administrative expenses relating to such payments under the
27
Policy, (ii) the enforcement, defense or preservation of any rights in
respect of any of the Transaction Documents, including defending,
monitoring or participating in any litigation or proceeding (including
any insolvency or bankruptcy proceeding in respect of any Transaction
participant or any affiliate thereof) relating to any of the Transaction
Documents, any party to any of the Transaction Documents or the
Transaction, (iii) any amendment, waiver or other action with respect
to, or related to, any Transaction Document whether or not executed or
completed, or (iv) any review or investigation made by Financial
Security in those circumstances where its approval or consent is sought
under any of the Transaction Documents;
(c) interest on any and all amounts described in Section
3.03(a) or (b) or Section 3.02(e) from the date due to Financial
Security pursuant to the provisions hereof until payment thereof in
full, payable to Financial Security at the Late Payment Rate per annum;
and
(d) any payments made by Financial Security on behalf of, or
advanced to, AFL, in its capacity as Servicer, or the Trustee,
including, without limitation, any amounts payable by AFL, in its
capacity as Servicer, or the Trustee pursuant to the Securities or any
other Transaction Documents; and any payments made by Financial Security
as, or in lieu of, any servicing, management, trustee, custodial or
administrative fees payable, in the sole discretion of Financial
Security to third parties in connection with the Transaction.
Section 3.04. INDEMNIFICATION.
(a) INDEMNIFICATION BY AFL. In addition to any and all rights
of reimbursement, indemnification, subrogation and any other rights
pursuant hereto or under law or in equity, AFL hereby agrees to pay, and
to protect, indemnify and save harmless, Financial Security and its
officers, directors, shareholders, employees, agents and each Person, if
any, who controls Financial Security within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or
expenses (including, without limitation, fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any
nature arising out of or relating to the transactions contemplated by
the Transaction Documents by reason of:
(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of AFL, ARFC or the Issuer;
(ii) the breach by AFL, ARFC or the Issuer of any
representation, warranty or covenant under any of the Transaction
Documents or the occurrence, in respect of AFL, ARFC or the Issuer
under any of the Transaction Documents of any "event of default" or
any event which, with
28
the giving of notice or the lapse of time or both, would constitute
any "event of default"; or
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such claims arise out of or are based
upon any untrue statement or omission in information included in an
Offering Document and furnished by Financial Security in writing
expressly for use therein (all such information so furnished by
Financial Security being referred to herein as "FINANCIAL SECURITY
INFORMATION").
(b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought
or asserted against Financial Security, any officer, director,
shareholder, employee or agent of Financial Security or any Person
controlling Financial Security (individually, an "INDEMNIFIED PARTY"
and, collectively, the "INDEMNIFIED PARTIES") in respect of which
indemnity may be sought from AFL (the "INDEMNIFYING PARTY") hereunder,
Financial Security shall promptly notify the Indemnifying Party in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to Financial Security
and the payment of all expenses. An Indemnified Party shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof at the expense of the Indemnified Party;
PROVIDED, HOWEVER, that the fees and expenses of such separate counsel
shall only be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party shall have failed to assume the defense of such
action or proceeding and employ counsel satisfactory to Financial
Security in any such action or proceeding or (iii) the named parties to
any such action or proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party, and the
Indemnified Party shall have been advised by counsel that (A) there may
be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party and (B) the
representation of the Indemnifying Party and the Indemnified Party by
the same counsel would be inappropriate or contrary to prudent practice
(in which case, if the Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or to proceedings
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by Financial
Security). The Indemnifying Party shall not be liable for any settlement
of any such action or proceeding effected without its
29
written consent but, if settled with its written consent, or if there be
a final judgment for the plaintiff in any such action or proceeding with
respect to which the Indemnifying Party shall have received notice in
accordance with this subsection (b), the Indemnifying Party agrees to
indemnify and hold the Indemnified Parties harmless from and against any
loss or liability by reason of such settlement or judgment.
(c) CONTRIBUTION. To provide for just and equitable
contribution if the indemnification provided by the Indemnifying Party
is determined to be unavailable for any Indemnified Party (other than
due to application of this Section), the Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis
of the relative fault of the Indemnifying Party, on the one hand, and
the Indemnified Party, on the other hand.
Section 3.05. SUBROGATION.
Subject only to the priority of payment provisions of the Indenture
and the Security Agreement, each of the parties hereto acknowledges that, to the
extent of any payment made by Financial Security pursuant to the Policy,
Financial Security is to be fully subrogated to the extent of such payment and
any additional interest due on any late payment, to the rights of the
Noteholders to any moneys paid or payable in respect of the Securities under the
Transaction Documents or otherwise. Each of the parties hereto agrees to such
subrogation and, further, agrees to execute such instruments and to take such
actions as, in the sole judgment of Financial Security, are necessary to
evidence such subrogation and to perfect the rights of Financial Security to
receive any moneys paid or payable in respect of the Securities under the
Transaction Documents or otherwise.
Section 3.06. CERTAIN OBLIGATIONS NOT RECOURSE TO AFL AND ARFC.
Notwithstanding any provision of this Agreement to the contrary, the
payment obligations provided in Section 3.03(a) and (d), in each case, to the
extent that such payment obligations do not arise from any failure or default in
the performance by AFL or ARFC of any of its obligations under the Transaction
Documents, and any interest on the foregoing in accordance with Section 3.03(c),
shall be non-recourse obligations with respect to AFL and ARFC, respectively,
and shall be payable only from monies available for such payment in accordance
with the provisions of the Sale and Servicing Agreement.
Section 3.07. LIMITED RECOURSE TO ISSUER.
Financial Security covenants and agrees that it shall not look to any
property or assets of the Issuer, other than amounts paid to the Issuer under
the Transaction Documents and to amounts payable to Financial Security pursuant
to the Transaction Documents in respect of the Issuer's obligations hereunder.
To the extent that such funds are insufficient, any payment obligation or claim
arising hereunder shall not constitute a claim against the Issuer.
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ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT.
This Agreement shall take effect on the Date of Issuance and shall
remain in effect until the later of (a) such time as Financial Security is no
longer subject to a claim under the Policy and the Policy shall have been
surrendered to Financial Security for cancellation and (b) all amounts payable
to Financial Security and the Noteholders under the Transaction Documents and
under the Securities have been paid in full; PROVIDED, HOWEVER, that the
provisions of Sections 3.02, 3.03 and 3.04 hereof shall survive any termination
of this Agreement.
Section 4.02. OBLIGATIONS ABSOLUTE.
(a) The payment obligations of AFL, ARFC and the Issuer
hereunder shall be absolute and unconditional, and shall be paid
strictly in accordance with this Agreement under all circumstances
irrespective of (i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver with respect to, any of
the Transaction Documents, the Securities or the Policy; (ii) any
exchange or release of any other obligations hereunder; (iii) the
existence of any claim, setoff, defense, reduction, abatement or other
right which AFL, ARFC or the Issuer may have at any time against
Financial Security or any other Person; (iv) any document presented in
connection with the Policy proving to be forged, fraudulent, invalid or
insufficient in any respect, including any failure to strictly comply
with the terms of the Policy, or any statement therein being untrue or
inaccurate in any respect; (v) any failure of the Issuer to receive the
proceeds from the sale of the Securities; (vi) any breach by AFL, ARFC
or the Issuer of any representation, warranty or covenant contained in
any of the Transaction Documents; or (vii) any other circumstances,
other than payment in full, which might otherwise constitute a defense
available to, or discharge of, AFL, ARFC or the Issuer in respect of any
Transaction Document.
(b) AFL, ARFC and the Issuer and any and all others who are now
or may become liable for all or part of the obligations of such Persons
under this Agreement agree to be bound by this Agreement and (i) to the
extent permitted by law, waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness, if any, and obligations evidenced
by any Transaction Document or by any extension or renewal thereof, (ii)
waive presentment and demand for payment, notices of nonpayment and of
dishonor, protest of dishonor and notice of protest; (iii) waive all
notices in connection with the delivery and acceptance hereof and all
other notices in connection with the performance, default or enforcement
of any payment hereunder except as required by the Transaction
Documents; (iv) waive all rights of abatement, diminution, postponement
or deduction, or to any defense other than payment, or to any right of
setoff or recoupment arising out of any
31
breach under any of the Transaction Documents, by any party thereto or
any beneficiary thereof, or out of any obligation at any time owing to
AFL, ARFC or the Issuer; (v) agree that any consent, waiver or
forbearance hereunder with respect to an event shall operate only for
such event and not for any subsequent event; (vi) consent to any and all
extensions of time that may be granted by Financial Security with
respect to any payment hereunder or other provisions hereof and to the
release of any security at any time given for any payment hereunder, or
any part thereof, with or without substitution, and to the release of
any Person or entity liable for any such payment; and (vii) consent to
the addition of any and all other makers, endorsers, guarantors and
other obligors for any payment hereunder, and to the acceptance of any
and all other security for any payment hereunder, and agree that the
addition of any such obligors or security shall not affect the liability
of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting AFL, ARFC
or the Issuer from pursuing any rights or remedies it may have against
any Person other than Financial Security in a separate legal proceeding.
Section 4.03. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
None of AFL, ARFC nor the Issuer may assign its rights under this
Agreement, or delegate any of its duties hereunder, without the prior
written consent of Financial Security. Any assignment made in violation
of this Agreement shall be null and void.
(b) Financial Security shall have the right to give
participations in its rights under this Agreement and to enter into
contracts of reinsurance with respect to the Policy upon such terms and
conditions as Financial Security may in its discretion determine;
PROVIDED, HOWEVER, that no such participation or reinsurance agreement
or arrangement shall relieve Financial Security of any of its
obligations hereunder or under the Policy.
(c) In addition, Financial Security shall be entitled to assign
or pledge to any bank or other lender providing liquidity or credit with
respect to the Transaction or the obligations of Financial Security in
connection therewith any rights of Financial Security under the
Transaction Documents or with respect to any real or personal property
or other interests pledged to Financial Security, or in which Financial
Security has a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder, other than Financial Security, against AFL, ARFC or the
Issuer, and all the terms, covenants, conditions, promises and
agreements contained herein shall be for the
32
sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Neither the Trustee nor any Noteholder shall have
any right to payment from any premiums paid or payable hereunder or from
any other amounts paid by AFL or the Issuer pursuant to Section 3.02,
3.03 or 3.04 hereof.
Section 4.04. LIABILITY OF FINANCIAL SECURITY.
Neither Financial Security nor any of its officers, directors or
employees shall be liable or responsible for: (a) the use which may be made of
the Policy by the Trustee or for any acts or omissions of the Trustee in
connection therewith or (b) the validity, sufficiency, accuracy or genuineness
of documents delivered to Financial Security (or its Fiscal Agent) in connection
with any claim under the Policy, or of any signatures thereon, even if such
documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless Financial Security had
actual knowledge thereof). In furtherance and not in limitation of the
foregoing, Financial Security (or its Fiscal Agent) may accept documents that
appear on their face to be in order, without responsibility for further
investigation.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an
Event of Default hereunder:
(a) any demand for payment shall be made under the Policy;
(b) any representation or warranty made by AFL, ARFC or the
Issuer under any of the Transaction Documents, or in any certificate or
report furnished under any of the Transaction Documents, shall prove to
be untrue or incorrect in any material respect; PROVIDED, HOWEVER, that
if AFL, ARFC or the Issuer effectively cures any such defect in any
representation or warranty under any Transaction Document, or
certificate or report furnished under any Transaction Document, within
the time period specified in the relevant Transaction Document as the
cure period therefor, such defect shall not in and of itself constitute
an Event of Default hereunder;
(c) (i) AFL, ARFC or the Issuer shall fail to pay when due any
amount payable by it, shall fall to effect any purchase or repurchase
required to be made by it, in each case, hereunder or under any of the
Transaction Documents unless such amounts are paid in full within any
applicable cure period explicitly provided for under the relevant
Transaction Document; (ii) AFL, ARFC or the Issuer shall have asserted
that any material provision of the Transaction Documents to which it is
a party is not valid and binding on the parties thereto; or (iii) any
court, governmental authority or agency having jurisdiction over any of
the parties to any of the Transaction Documents or any property thereof
shall find
33
or rule that any material provision of any of the Transaction
Documents is not valid and binding on the parties thereto;
(d) AFL, ARFC or the Issuer shall fail to perform or observe
any other covenant or agreement contained in any of the Transaction
Documents (except for the obligations described under clause (c) above)
and such failure shall continue beyond any applicable cure period
explicitly provided for under the relevant Transaction Document;
(e) any of AFL, ARFC or the Issuer shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the
benefit of creditors, or shall institute any proceeding seeking to
adjudicate it insolvent or seeking a liquidation, or shall take
advantage of any insolvency act, or shall commence a case or other
proceeding naming it as debtor under the United States Bankruptcy Code
or similar law, domestic or foreign, or a case or other proceeding shall
be commenced against any of AFL, ARFC or the Issuer under the United
States Bankruptcy Code or similar law, domestic or foreign, or any
proceeding shall be instituted against any of AFL, ARFC or the Issuer
seeking liquidation of its assets and such Person shall fail to take
appropriate action resulting in the withdrawal or dismissal of such
proceeding within 30 days or there shall be appointed or any of AFL,
ARFC or the Issuer shall consent to, or acquiesce in, the appointment of
a receiver, liquidator, conservator, trustee or similar official in
respect of such Person or the whole or any substantial part of its
properties or assets or such Person shall take any corporate action in
furtherance of any of the foregoing;
(f) the occurrence of an Insurance Agreement Event of Default
with respect to any Term Transaction, which Insurance Agreement Event of
Default is not defined as a "Portfolio Performance Event of Default" in
the related Insurance Agreement;
(g) ARFC shall fall to make a deposit with respect to any WAC
Deficiency Amount in accordance with the provisions of Section 4.1(f) of
the Sale and Servicing Agreement, and such failure shall continue for
one Business Day;
(h) it shall be determined on any Determination Date that the
Collateral Test shall fail to have been satisfied as of the immediately
preceding Accounting Date, after taking into account any deposit made by
ARFC to the Collection Account on such Determination Date and such
failure shall continue for one Business Day;
(i) a Servicer Termination Event shall occur;
(j) the occurrence of an "Event of Default" under the Sale and
Servicing Agreement and either (x) the Repurchase Date or the
Amortization Date (each as defined in the Sale and Servicing Agreement)
shall have been deemed to automatically occur or (y) the Issuer shall
have exercised its option to have the
34
Repurchase Date or the Amortization Date, as the case may be,
immediately occur pursuant to Section 2.6(a) of the Sale and Servicing
Agreement; or
(k) if on any Distribution Date, after giving effect to
distributions made on such Distribution Date, the amount on deposit in
the Spread Account is less than the Spread Account Minimum Amount.
Section 5.02. REMEDIES; WAIVERS.
(a) Upon the occurrence of an Event of Default, Financial
Security may exercise any one or more of the rights and remedies set
forth below:
(i) declare the Premium Supplement to be immediately due
and payable, and the same shall thereupon be immediately due and
payable, whether or not Financial Security shall have declared an
"Event of Default" or shall have exercised, or be entitled to
exercise, any other rights or remedies hereunder;
(ii) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as the
Person entitled to exercise the rights of the Noteholders in
respect of the Securities; or
(iii) take whatever action at law or in equity may appear
necessary or desirable in its judgment to enforce performance of
any obligation of AFL, ARFC or the Issuer under the Transaction
Documents.
(b) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of any other
available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under the Transaction Documents or
existing at law or in equity. No delay or failure to exercise any right
or power accruing under any Transaction Document upon the occurrence of
any Event of Default or otherwise shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle Financial Security to exercise any remedy
reserved to Financial Security in this Article, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Article.
(c) If any proceeding has been commenced to enforce any right
or remedy under this Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to
Financial Security, then and in every such case the parties hereto
shall, subject to any determination in such proceeding, be restored to
their respective former positions hereunder, and, thereafter, all rights
and remedies of Financial Security shall continue as though no such
proceeding had been instituted.
35
(d) Financial Security shall have the right, to be exercised in
its complete discretion, to waive any covenant, Default or Event of
Default by a writing setting forth the terms, conditions and extent of
such waiver signed by Financial Security and delivered to AFL, ARFC and
the Issuer. Any such waiver may only be effected in writing duly
executed by Financial Security, and no other course of conduct shall
constitute a waiver of any provision hereof. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence so waived and not to any other
similar event or occurrence.
(e) Upon the declaration of an Event of Default by Financial
Security, Financial Security shall provide written notice of such Event
of Default to the Rating Agencies.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, ETC.
This Agreement may be amended, modified or terminated only by written
instrument or written instruments signed by the parties hereto. No act or course
of dealing shall be deemed to constitute an amendment, modification or
termination hereof.
Section 6.02. NOTICES.
All demands, notices and other communications to be given hereunder
shall be in writing (except as otherwise specifically provided herein) and shall
be mailed by registered mail or personally delivered or telecopied to the
recipient as follows:
36
(a) To Financial Security: Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Surveillance Department
Re: Arcadia Automobile Receivables
Warehouse Trust, Floating Rate
Variable Funding Automobile
Receivables-Backed Notes/Arcadia
Structured Warehouse Facility
Confirmation: (000) 000-0000
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 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 each
of the General Counsel and the
Head--Financial Guaranty Group and
shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
(b) To AFL: Arcadia Financial Ltd.
Arcadia Financial Center
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Treasurer
(c) To ARFC: Arcadia Receivables Finance Corp.
Arcadia Financial Center
0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000-0000
Attention: Treasurer
37
(d) To the Issuer: Arcadia Automobile Receivables Warehouse
Trust
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust
Administration
with a copy to
Arcadia Financial Ltd.
Arcadia Financial Center
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Treasurer
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. PAYMENT PROCEDURE.
In the event of any payment by Financial Security for which it is
entitled to be reimbursed or indemnified as provided herein, each party
obligated hereunder to make such reimbursement or provide such indemnification
agrees to accept the voucher or other evidence of payment as prima facie
evidence of the propriety thereof and the liability therefor to Financial
Security. All payments to be made to Financial Security under this Agreement
shall be made to Financial Security in lawful currency of the United States of
America in immediately available funds to the account number provided in the
Premium Letter before 1:00 p.m. (New York, New York time) on the date when due
or as Financial Security shall otherwise direct by written notice to AFL. In the
event that the date of any payment to Financial Security or the expiration of
any time period hereunder occurs on a day which is not a Business Day, then such
payment or expiration of time period shall be made or occur on the next
succeeding Business Day with the same force and effect as if such payment was
made or time period expired on the scheduled date of payment or expiration date.
Payments to be made to Financial Security under this Agreement shall bear
interest at the Late Payment Rate from the date due to the date paid.
Section 6.04. SEVERABILITY.
In the event that any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, the parties
hereto agree that such holding shall not invalidate or render unenforceable any
other provision hereof. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by any party hereto is
unavailable or unenforceable shall not affect in any way the ability of such
party to pursue any other remedy available to it.
38
Section 6.05. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 6.06. CONSENT TO JURISDICTION.
(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN
THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR
IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE
HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OF, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A
FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE SUBJECT
MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties
hereto shall not seek and hereby waive the right to any review of the
judgment of any such court by any court of any other nation or
jurisdiction which may be called upon to grant an enforcement of such
judgment.
(c) Each of AFL, ARFC and the Issuer hereby irrevocably
appoints and designates CT Corporation System, whose address is 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its true and lawful attorney and
duly authorized agent for acceptance of service of legal process. Each
of AFL, ARFC and the Issuer agrees that service of such process upon
such Person shall constitute personal service of such process upon it.
39
(d) Nothing contained in the Agreement shall limit or affect
Financial Security's right to serve process in any other manner
permitted by law or to start legal proceedings relating to any of the
Transaction Documents against AFL, ARFC or the Issuer or its property in
the courts of any jurisdiction.
Section 6.07. CONSENT OF FINANCIAL SECURITY.
In the event that Financial Security's consent is required under any
of the Transaction Documents, the determination whether to grant or withhold
such consent shall be made by Financial Security in its sole discretion without
any implied duty towards any other Person, except as otherwise expressly
provided therein.
Section 6.08. COUNTERPARTS.
This Agreement may be executed in counterparts by the parties hereto,
and all such counterparts shall constitute one and the same instrument.
Section 6.09. TRIAL BY JURY WAIVED.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY
OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE TRANSACTION
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
BY, AMONG OTHER THINGS, THIS WAIVER.
Section 6.10. LIMITED LIABILITY.
No recourse under any Transaction Document shall be had against, and
no personal liability. shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise in respect of any of the Transaction Documents, the Securities or the
Policy, it being expressly agreed and understood that each Transaction Document
is solely a corporate obligation of each party hereto, and that any and all
personal liability, either at common law or in equity, or by statute or
constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under any
Transaction Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Agreement.
Section 6.11. ENTIRE AGREEMENT.
40
This Agreement, the Premium Letter and the Policy set forth the entire
agreement between the parties with respect to the subject matter thereof, and
this Agreement supersedes and replaces any agreement or understanding that may
have existed between the parties prior to the date hereof in respect of such
subject matter.
Section 6.12. HEADINGS.
The headings of articles and sections and the table of contents
contained in this Agreement are provided for convenience only. They form no
part of this Agreement and shall not affect its construction or interpretation.
Unless otherwise indicated, all references to articles and sections in this
Agreement refer to the corresponding articles and sections of this Agreement.
41
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
------------------------------------------
Authorized Officer
ARCADIA FINANCIAL LTD.
By:
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President and Chief
Financial Officer
ARCADIA RECEIVABLES FINANCE CORP.
By:
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President and Chief
Financial Officer
ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee
By:
------------------------------------------
Name:
Title:
APPENDIX A
DEFINITIONS
"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the
assignment agreement between AFL and ARFC pursuant to which AFL sells and
assigns Receivables to ARFC, in such form as is attached to the Receivables
Purchase Agreement and Assignment as Exhibit A.
"BUSINESS DAY" means any day other than (a) a Saturday or Sunday or
(b) a day on which banking institutions in the City of New York, New York or
the City of Minneapolis, Minnesota are authorized or obligated by law or
executive order to be closed.
"CODE" means the Internal Revenue Code of 1986, including, unless
the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMONLY CONTROLLED ENTITY" means ARFC and each entity, whether or
not incorporated, which is affiliated with such Person pursuant to Section
414(b), (c), (m) or (o) of the Code.
"CUSTODIAN AGREEMENT" means any Custodian Agreement as defined in
the Sale and Servicing Agreement.
"DATE OF ISSUANCE" means the date on which the Policy is issued as
specified therein.
"DEFAULT" means any event which results, or which with the giving
of notice or the lapse of time or both would result, in an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"EVENT OF DEFAULT" means any event of default specified in Section
5.01 of the Insurance Agreement.
"EXPIRATION DATE" means the final date of the Term of the Policy,
as specified in the Policy.
"FINANCIAL SECURITY" means Financial Security Assurance Inc., a New
York stock insurance company, its successors and assigns.
A-1
"FINANCIAL STATEMENTS" means with respect to each of AFL and ARFC
the balance sheets as of December 31, 1997 and the statements of income,
retained earnings and cash flows for the 12-month period then ended and the
notes thereto and the balance sheets as of June 30, 1998 and the statements
of income, retained earnings and cash flows for the fiscal quarter then ended.
"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant
to the terms of the Policy.
"INDEBTEDNESS" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee under any capital leases, (v) all Indebtedness of others secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, (vi) all Indebtedness of others guaranteed by such Person or
with respect to which such Person shall agree to become directly or
contingently liable by, and (vii) all obligations of such Person in
connection with the repurchase of motor vehicle retail installment sales
contracts.
"INSURANCE AGREEMENT" means this Insurance and Indemnity Agreement,
as the same may be amended from time to time, and, with respect to a Term
Transaction, any Insurance and Indemnity Agreement entered into in connection
with such Term Transaction.
"INSURANCE AGREEMENT EVENT OF DEFAULT" means an "Event of Default"
under any Insurance and Indemnity Agreement among Financial Security, AFL and
ARFC entered into with respect to a Term Transaction.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"LATE PAYMENT RATE" means the lesser of (a) the greater of (i) the
per annum rate of interest, publicly announced from time to time by Chemical
Bank at its principal office in the City of New York, as its prime or base
lending rate (any change in such rate of interest to be effective on the date
such change is announced by Chemical Bank) plus 3%, and (ii) the then
applicable highest rate of interest on the Securities and (b) the maximum
rate permissible under applicable usury or similar laws limiting interest
rates. The Late Payment Rate shall be computed on the basis of the actual
number of days elapsed over the actual number of days in the current calendar
year.
"LIEN" means, as applied to the property or assets (or the income
or profits therefrom) of any Person, in each case whether the same is
consensual or nonconsensual or arises by contract, operation of law, legal
process or otherwise: (a) any mortgage, lien,
A-2
pledge, attachment, charge, lease, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind or (b) any
arrangement, express or implied, under which such property or assets are
transferred, sequestered or otherwise identified for the purpose of
subjecting or making available the same for the payment of debt or
performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person.
"LOCKBOX AGREEMENT" means the Lockbox Agreement, as defined in the
Sale and Servicing Agreement.
"MATERIAL ADVERSE CHANGE" means, (a) in respect of any Person, a
material adverse change in (i) the business, financial condition, results of
operations or properties of such Person or any of its Subsidiaries or (ii)
the ability of such Person to perform its obligations under any of the
Transaction Documents to which it is a party and (b) in respect of the
Receivables, a material adverse change in (i) the value or marketability of
the Receivables, taken as a whole, or (ii) the probability that amounts now
or hereafter due in respect of a material portion of the Receivables will be
collected on a timely basis,
"MOODY'S" means Xxxxx'x Investors Service, Inc., a Delaware
corporation, and any successor thereto, and, if such corporation shall for
any reason no longer perform the functions of a securities rating agency,
"Moody's" shall be deemed to refer to any other nationally recognized rating
agency designated by Financial Security.
"MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled
Entity makes contributions or has liability.
"NOTEHOLDERS" means registered holders of the Securities.
"NOTICE OF CLAIM" means a Notice of Claim and Certificate in the
form attached as Exhibit A to Endorsement No. 1 to the Policy.
"OFFERING DOCUMENT" means any offering document in respect of the
Securities that makes reference to the Policy.
"OTHER CONVEYED PROPERTY" has the meaning provided in the
Receivables Purchase Agreement and Assignment.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency, corporation or instrumentality of the United States to
which the duties and powers of the Pension Benefit Guaranty Corporation are
transferred.
"PERSON" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business or owner
trust, partnership or other organization or entity (whether governmental or
private).
A-3
"PLAN" means any pension plan (other than a Multiemployer Plan)
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.
"POLICY" means the financial guaranty insurance policy, including
any endorsements thereto, issued by Financial Security with respect to the
Securities, substantially in the form attached as Exhibit I to this Agreement.
"PREMIUM" means the premium payable in accordance with Section 3.02
of the Insurance Agreement and the Premium Supplement, if any.
"PREMIUM LETTER" means the side letter between Financial Security,
AFL, ARFC, the Issuer and the Trustee dated July 21, 1998, in respect of the
premium payable by AFL in consideration of the issuance of the Policy.
"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to
the premium payable in accordance with Section 3.02 of the Insurance
Agreement, payable to Financial Security in monthly installments commencing
on the first Distribution Date following an Event of Default and on each
monthly anniversary thereof in accordance with the terms set forth in the
Premium Letter.
"PROVIDED DOCUMENTS" means the Transaction Documents and any
documents, agreements, instruments, schedules, certificates, statements, cash
flow schedules, number runs or other writings or data furnished to Financial
Security by or on behalf of AFL, ARFC or the Issuer with respect to
themselves, their Subsidiaries or the Transaction.
"RECEIVABLE" has the meaning provided in the Sale and Servicing
Agreement.
"RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT" means the Amended
and Restated Receivables Purchase Agreement and Assignment dated as of July
21, 1998 between ARFC and AFL, as the same may be amended from time to time.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property
or assets (or the income or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise, any material condition to, or
restriction on, the ability of such Person or any transferee therefrom to
sell, assign, transfer or otherwise liquidate such property or assets in a
commercially reasonable time and manner or which would otherwise materially
deprive such Person or any transferee therefrom of the benefits of ownership
of such property or assets.
"SALE AND SERVICING AGREEMENT" means the Amended and Restated Sale
and Servicing Agreement dated as of July 21, 1998, among the Issuer, Arcadia
A-4
Receivables Conduit Corp., ARFC, AFL, BofA, as Administrative Agent and RCC
Agent, Xxxxxx Guaranty Trust Company of New York, as DFC Agent and the
Trustee, as Backup Servicer, Collateral Agent and Indenture Trustee, as the
same may be amended from time to time.
"SECURITIES" means the Issuer's Floating Rate Variable Funding
Automobile Receivables-Backed Note issued under the Amended and Restated
Indenture, dated as of even date herewith, between the Issuer, the Original
Issuer and the Trustee, in an aggregate principal amount at any one time
outstanding not exceeding $400 million.
"SECURITIES ACT" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations thereunder,
as amended from time to time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of
XxXxxx-Xxxx, Inc., and any successor thereto, and, if such entity shall for
any reason no longer perform the functions of a securities rating agency,
"S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by Financial Security.
"SPECIAL EVENT" means the occurrence of any one of the following:
(a) an Event of Default under the Insurance Agreement has occurred and is
continuing, (b) any legal proceeding or binding arbitration is instituted
with respect to the Transaction or with respect to AFL, ARFC or the Issuer
that would result in a Material Adverse Change in respect of AFL, ARFC, the
Issuer or the Receivables, (c) any governmental or administrative
investigation, action or proceeding is instituted that would, if adversely
decided, result in a Material Adverse Change in respect of ARFC, the Issuer
or the Receivables, or (d) Financial Security pays a claim under the Policy.
"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement,
dated as of March 26, 1993, as amended and restated as of June 23, 1998 among
ARFC, AFL, the Collateral Agent named therein and the trustees specified
therein, as the same may be further amended, supplemented or otherwise
modified in accordance with the terms thereof.
"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to the
Warehousing Series and any Determination Date: (i) if no Amortization Event
with respect to the Warehousing Series has occurred as of the related
Determination Date, one percent of the Principal Balance as of such
Determination Date of the Receivables (as defined in the Sale and Servicing
Agreement); or (ii) if an Amortization Event with respect to the Warehousing
Series has occurred as of the related Determination Date, one percent of the
Principal Balance of the Receivables (as defined in the Sale and Servicing
Agreement) as of the date of the occurrence of such Amortization Event.
A-5
"STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, as
amended and restated, dated as of December 3, 1996, among Financial Security,
AFL and the Collateral Agent named therein, as the same may be amended from
time to time.
"SUBSIDIARY" means, with respect to any Person, any corporation of
which a majority of the outstanding shares of capital stock having ordinary
voting power for the election of directors is at the time owned by such
Person directly or through one or more Subsidiaries.
"TERM OF THE AGREEMENT" shall be determined as provided in Section
4.01 of the Insurance Agreement.
"TERM OF THE POLICY" has the meaning provided in the Policy.
"TERM TRANSACTION" means any transaction other than the Transaction
in connection with which Financial Security has issued a financial guaranty
insurance policy to guarantee principal and/or interest on certificates or
notes representing an interest in receivables originated by AFL.
"TRANSACTION" means the transactions contemplated by the
Transaction Documents.
"TRANSACTION DOCUMENTS" means the Insurance Agreement, the
Indenture, the Sale and Servicing Agreement, the Trust Agreement, the
Receivables Purchase Agreement and Assignment (with respect to the
Receivables), any Assignment Agreement (with respect to the Receivables), any
Custodian Agreement, the Security Agreement, the Premium Letter, the Stock
Pledge Agreement, the Lockbox Agreement and the Spread Account Agreement.
"TRUST AGREEMENT" means the Trust Agreement dated as of July 21,
1998 between ARFC and Wilmington Trust Company, as Owner Trustee.
"TRUSTEE" means Norwest Bank Minnesota, National Association, a
national banking association, as trustee under the Indenture, and any
successor thereto as trustee under the Indenture.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"UNDERFUNDED PLAN" means any Plan that has an Underfunding.
"UNDERFUNDING" means, with respect to any Plan, the excess, if any,
of (a) the present value of all benefits under the Plan (based on the
assumptions used to fund the Plan pursuant to Section 412 of the Code) as of
the most recent valuation date over (b) the fair market value of the assets
of such Plan as of such valuation date.
X-0
XXXXXXXX X
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) PAYMENT OF INITIAL PREMIUM AND EXPENSES, PREMIUM LETTER. Financial
Security shall have been paid, by or on behalf of AFL and ARFC, a
nonrefundable Premium and shall have been reimbursed, by or on behalf of AFL
and ARFC, for other fees and expenses identified in Section 3.02 of the
Insurance Agreement as payable at closing and Financial Security shall have
received a fully executed copy of the Premium Letter.
(b) TRANSACTION DOCUMENTS. Financial Security shall have received a
copy of each of the Transaction Documents (other than the Policy), in form
and substance satisfactory to Financial Security, duly authorized, executed
and delivered by each party thereto. Without limiting the foregoing, the
provisions of the Sale and Servicing Agreement and the Indenture relating to
the payment to Financial Security of Premium due on the Policy and the
reimbursement to Financial Security of amounts paid under the Policy shall be
in form and substance acceptable to Financial Security in its sole discretion.
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. Financial Security shall have
received a copy of (i) the certificate of incorporation and bylaws of each of
AFL, ARFC and the Original Issuer and (ii) the resolutions of the Board of
Directors of each of AFL, ARFC and the Original Issuer authorizing the
execution, delivery and performance by AFL, ARFC and the Original Issuer of
the Transaction Documents to which it is a party and the transactions
contemplated thereby, including, as to the Issuer, the authorization of the
issuance of the Securities, certified by the Secretary or an Assistant
Secretary of AFL, ARFC or the Original Issuer, as the case may be (which
certificate shall state that such certificate of incorporation, bylaws and
resolutions are in full force and effect without modification on December 3,
1996.
(d) INCUMBENCY CERTIFICATE. Financial Security shall have received a
certificate of the Secretary or an Assistant Secretary of each of AFL, ARFC
and the Original Issuer certifying the name and signatures of the officers of
AFL, ARFC or the Original Issuer, as the case may be, authorized to execute
and deliver the Transaction Documents and, if applicable, that shareholder
consent to the execution and delivery of such documents is not necessary or
has been obtained.
(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The representations
and warranties of AFL, ARFC or the Issuer, as the case may be, in the
Insurance Agreement shall be true and correct as of the Date of Issuance with
respect to such Person as if made on the Date of Issuance and Financial
Security shall have received a certificate of appropriate officers of AFL,
ARFC or the Issuer, as the case may be, to that effect.
(f) OPINIONS OF COUNSEL. Financial Security shall have received
opinions of counsel addressed to Financial Security, Moody's and S&P in
respect of AFL, ARFC, the Issuer, the other parties to the Transaction
Documents and the Transaction in form and
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substance satisfactory to Financial Security, addressing such matters as
Financial Security may reasonably request, and the counsel providing each
such opinion shall have been instructed by its client to deliver such opinion
to the addressees thereof.
(g) APPROVALS, ETC. Financial Security shall have received true and
correct copies of all approvals, licenses and consents, if any, including,
without limitation, the approval of the shareholders of AFL and ARFC and the
Original Issuer, required in connection with the Transaction.
(h) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.
(i) LEGALITY. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated
by any of the Transaction Documents illegal or otherwise prevent the
consummation thereof.
(j) ISSUANCE OF RATINGS. Financial Security shall have received
confirmation that the risk secured by the Policy constitutes an investment
grade risk by S&P and an insurable risk by Moody's.
(k) NO DEFAULT. No Default or Event of Default shall have occurred.
(l) ADDITIONAL ITEMS. Financial Security shall have received such
other documents, instruments, approvals or opinions requested by Financial
Security as may be reasonably necessary to effect the Transaction, including
but not limited to evidence satisfactory to Financial Security that all
conditions precedent, if any, in the Transaction Documents have been
satisfied.
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EXHIBIT I
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
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