Exhibit 10.1
[EXECUTION COPY]
CARMAX AUTO OWNER TRUST 2001-2,
as Issuer,
POOLED AUTO SECURITIES SHELF LLC,
as Depositor,
and
CARMAX AUTO SUPERSTORES, INC.,
as Seller and Servicer
__________________________________
SALE AND SERVICING AGREEMENT
Dated as of November 1, 2001
__________________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.................................................................... 1
SECTION 1.2 Other Definitional Provisions ................................................. 16
ARTICLE II
TRUST PROPERTY
SECTION 2.1 Conveyance of Trust Property .................................................. 17
SECTION 2.2 Representations and Warranties of the Seller as to the Receivables ............ 18
SECTION 2.3 Representations and Warranties of the Depositor as to the Receivables ......... 18
SECTION 2.4 Repurchase by Seller upon Breach .............................................. 19
SECTION 2.5 Custody of Receivable Files ................................................... 20
SECTION 2.6 Duties of Servicer as Custodian ............................................... 21
SECTION 2.7 Instructions; Authority to Act ................................................ 21
SECTION 2.8 Indemnification of the Custodian .............................................. 22
SECTION 2.9 Effective Period and Termination .............................................. 22
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES AND OTHER TRUST PROPERTY
SECTION 3.1 Duties of Servicer ............................................................ 22
SECTION 3.2 Collection and Allocation of Receivable Payments .............................. 23
SECTION 3.3 Realization upon Receivables .................................................. 24
SECTION 3.4 Physical Damage Insurance ..................................................... 24
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles ........................ 24
SECTION 3.6 Amendment of Receivable Terms ................................................. 24
SECTION 3.7 Purchase by Servicer upon Breach .............................................. 25
SECTION 3.8 Servicing Compensation ........................................................ 25
SECTION 3.9 Servicer's Certificate ........................................................ 25
SECTION 3.10 Annual Statement as to Compliance; Notice of Event of Servicing Termination ... 26
SECTION 3.11 Annual Independent Certified Public Accountants' Reports ...................... 26
SECTION 3.12 Access to Certain Documentation and Information Regarding Receivables ........ 27
SECTION 3.13 Reports to the Commission ..................................................... 27
SECTION 3.14 Reports to Rating Agencies .................................................... 27
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ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS
TO NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1 Accounts..................................................................... 28
SECTION 4.2 Collections ................................................................. 29
SECTION 4.3 Application of Collections .................................................. 30
SECTION 4.4 [RESERVED] .................................................................. 30
SECTION 4.5 Additional Deposits ......................................................... 30
SECTION 4.6 Determination Date Calculations; Application of Available Funds ............. 30
SECTION 4.7 Reserve Account ............................................................. 33
SECTION 4.8 Net Deposits ................................................................ 35
SECTION 4.9 Statements to Noteholders and Certificateholders ............................ 35
SECTION 4.10 Control of Securities Accounts .............................................. 36
SECTION 4.11 Policy Matters .............................................................. 36
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR
SECTION 6.1 Representations and Warranties of Depositor ................................. 37
SECTION 6.2 Liability of Depositor; Indemnities ......................................... 38
SECTION 6.3 Merger or Consolidation of, or Assumption of the Obligations of, Depositor .. 39
SECTION 6.4 Limitation on Liability of Depositor and Others ............................. 40
SECTION 6.5 Depositor May Own Notes or Certificates ..................................... 40
SECTION 6.6 RESERVED .................................................................... 41
SECTION 6.7 Certain Limitations ......................................................... 41
ARTICLE VII
THE SERVICER
SECTION 7.1 Representations and Warranties of Servicer .................................. 42
SECTION 7.2 Liability of Servicer; Indemnities .......................................... 44
SECTION 7.3 Merger or Consolidation of, or Assumption of the Obligations of, Servicer ... 45
SECTION 7.4 Limitation on Liability of Servicer and Others .............................. 45
SECTION 7.5 Delegation of Duties ........................................................ 46
SECTION 7.6 Servicer Not to Resign ...................................................... 46
SECTION 7.7 Servicer May Own Notes or Certificates ...................................... 46
ARTICLE VIII
SERVICING TERMINATION
SECTION 8.1 Events of Servicing Termination ............................................. 47
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SECTION 8.2 Indenture Trustee to Act; Appointment of Successor Servicer ............................. 49
SECTION 8.3 Effect of Servicing Transfer ............................................................ 49
SECTION 8.4 Notification to Insurer, Noteholders, Certificateholders and Rating Agencies ............ 50
SECTION 8.5 Waiver of Past Events of Servicing Termination .......................................... 50
ARTICLE IX
TERMINATION
SECTION 9.1 Optional Purchase of All Receivables .................................................... 50
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendment ............................................................................... 51
SECTION 10.2 Protection of Title to Trust ............................................................ 53
SECTION 10.3 GOVERNING LAW ........................................................................... 55
SECTION 10.4 Notices ................................................................................. 56
SECTION 10.5 Severability of Provisions .............................................................. 56
SECTION 10.6 Assignment .............................................................................. 56
SECTION 10.7 Further Assurances ...................................................................... 56
SECTION 10.8 No Waiver; Cumulative Remedies .......................................................... 56
SECTION 10.9 Third-Party Beneficiaries ............................................................... 57
SECTION 10.10 Actions by Noteholder or Certificateholders ............................................. 57
SECTION 10.11 Counterparts ............................................................................ 57
SECTION 10.12 No Bankruptcy Petition .................................................................. 57
SECTION 10.13 Limitation of Liability of Owner Trustee and Indenture Trustee .......................... 57
SECTION 10.14 Insurer Defense Costs ................................................................... 58
SCHEDULES
SCHEDULE 1 Receivable Schedule
SCHEDULE 2 Location of Receivable Files
EXHIBITS
EXHIBIT A Representations and Warranties
EXHIBIT B Form of Servicer's Certificate
EXHIBIT C Form of Statement to Noteholders
EXHIBIT D Form of Statement to Certificateholders
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SALE AND SERVICING AGREEMENT, dated as of November 1, 2001 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), by and among CARMAX AUTO OWNER TRUST 2001-2, a Delaware
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statutory business trust (the "Trust"), POOLED AUTO SECURITIES SHELF LLC, a
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Delaware limited liability company (the "Depositor"), and CARMAX AUTO
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SUPERSTORES, INC., a Virginia corporation, as seller (in such capacity, the
"Seller") and servicer (in such capacity, the "Servicer").
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WHEREAS, the Trust desires to purchase certain motor vehicle retail
installment sale contracts originated by CarMax Auto Superstores, Inc. in the
ordinary course of business and sold to the Depositor as of the date hereof;
WHEREAS, the Depositor is willing to sell such contracts to the Trust
as of the date hereof; and
WHEREAS, the Servicer is willing to service such contracts on behalf
of the Trust;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Whenever used in this Agreement, the
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following words and phrases, unless the context otherwise requires, whenever
capitalized shall have the following meanings:
"Additional Certificate Interest" shall mean, for any Distribution
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Date, the sum of (i) all accrued but unpaid Monthly Certificate Interest for
previous Distribution Dates plus (ii) to the extent permitted by law, interest
----
on such accrued but unpaid Monthly Certificate Interest at the Certificate Rate.
"Additional Note Interest" shall mean, for any Distribution Date and
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any class of Notes, the sum of (i) all accrued but unpaid Monthly Note Interest
for previous Distribution Dates for such class plus (ii) to the extent permitted
by law, interest on such accrued but unpaid Monthly Note Interest at the Note
Rate applicable to such class.
"Additional Servicing Fee" shall mean, for any Collection Period, if a
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successor Servicer has been appointed pursuant to Section 8.2, the amount, if
any, by which (i) the compensation payable to such successor Servicer for such
Collection Period exceeds (ii) the Monthly Servicing Fee for such Collection
Period (but only to the extent such excess has been approved by the Insurer in
accordance with Section 8.2).
"Affiliate" shall mean, with respect to any Person, any other Person
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directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person. For purposes of this definition, "control" when
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used with respect to any Person shall mean the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Amount Financed" shall mean, with respect to any Receivable, the
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aggregate amount advanced under such Receivable toward the purchase price of the
related Financed Vehicle and any related costs, including accessories, extended
warranty contracts, insurance premiums and other items customarily financed as
part of a motor vehicle retail installment sale contract.
"Applicable Tax State" shall mean, as of any date,(i) any State in
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which the Owner Trustee maintains the Corporate Trust Office, (ii) any State in
which the Owner Trustee maintains its principal executive offices and (iii) any
State in which the Servicer regularly conducts servicing and collection
activities (other than purely ministerial activities) with respect to a material
portion of the Receivables.
"APR" shall mean, with respect to any Receivable, the annual
---
percentage rate of interest stated in such Receivable.
"Authorized Officer" shall mean any officer within the Corporate Trust
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Office of the Indenture Trustee, including any vice president, assistant vice
president, secretary or assistant secretary, or any financial services officer
of the Indenture Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer of the Indenture Trustee to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Available Collections" shall mean, for any Distribution Date, (i) all
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Obligor payments received with respect to the Receivables during the preceding
Collection Period, (ii) all Liquidation Proceeds received with respect to the
Receivables during the preceding Collection Period, (iii) all interest earned on
funds on deposit in the Collection Account during the preceding Collection
Period, (iv) the aggregate Purchase Amount deposited in the Collection Account
on the Business Day preceding such Distribution Date and (v) all prepayments
received with respect to the Receivables during the preceding Collection Period
attributable to any refunded item included in the Amount Financed (including
amounts received as a result of rebates of extended warranty contract costs and
insurance premiums and proceeds received under physical damage, theft, credit
life and credit disability insurance policies); provided, however, that
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Available Collections for any Distribution Date shall not include any payments
or other amounts (including Liquidation Proceeds) received with respect to any
Purchased Receivable the Purchase Amount for which was included in Available
Collections for a previous Distribution Date.
"Available Funds" shall mean, for any Distribution Date, the sum of
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(i) the Available Collections for such Distribution Date plus (ii) the Reserve
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Account Draw Amount, if any, for such Distribution Date (to the extent deposited
in the Collection Account) plus (iii) the Policy Claim Amount, if any, for such
----
Distribution Date (to the extent deposited in the Collection Account) plus (iv)
----
the amount, if any, deposited by the Insurer in the Collection Account on the
Business Day preceding such Distribution Date pursuant to Section 5.2(d) or (e)
of the Indenture.
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"Business Day" shall mean any day other than a Saturday, a Sunday or a
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day on which banking institutions or trust companies in New York, New York,
Wilmington, Delaware, Charlotte, North Carolina or Richmond, Virginia are
authorized or obligated by law, executive order or governmental decree to remain
closed.
"CarMax" shall mean CarMax Auto Superstores, Inc., a Virginia
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corporation, and its successors and assigns.
"Certificate" shall have the meaning specified in the Trust Agreement.
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"Certificate Balance" shall mean, at any time, as the context may
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require, (i) with respect to all of the Certificates, an amount equal to,
initially, the Initial Certificate Balance and, thereafter, an amount equal to
the Initial Certificate Balance as reduced from time to time by all amounts
allocable to principal previously distributed to the Certificateholders or (ii)
with respect to any Certificate, an amount equal to, initially, the initial
denomination of such Certificate and, thereafter, an amount equal to such
initial denomination as reduced from time to time by all amounts allocable to
principal previously distributed in respect of such Certificate; provided,
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however, that in determining whether the Holders of Certificates evidencing the
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requisite percentage of the Certificate Balance have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any other
Transaction Document, Certificates owned by the Trust, any other obligor upon
the Certificates, the Depositor, the Seller, the Servicer or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed to be excluded from
the Certificate Balance (unless such Persons own 100% of the Certificate Balance
of the Certificates), except that, in determining whether the Indenture Trustee
or the Owner Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates that a
Responsible Officer of the Indenture Trustee or the Owner Trustee, as
applicable, knows to be so owned shall be so disregarded; and, provided further,
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that Certificates that have been pledged in good faith may be regarded as
included in the Certificate Balance if the pledgee establishes to the
satisfaction of the Indenture Trustee or the Owner Trustee, as applicable, the
pledgee's right so to act with respect to such Certificates and that the pledgee
is not the Trust, any other obligor upon the Certificates, the Depositor, the
Seller, the Servicer or any Affiliate of any of the foregoing Persons.
"Certificate Final Distribution Date" shall mean the May 2008
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Distribution Date.
"Certificate Payment Account" shall mean the account established and
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maintained as such pursuant to Section 4.1(c).
"Certificate Pool Factor" shall mean, as of any Distribution Date, a
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seven-digit decimal figure equal to the Certificate Balance as of such
Distribution Date (after giving effect to any reductions of the Certificate
Balance to be made on such Distribution Date) divided by the Initial Certificate
Balance.
"Certificate Rate" shall mean 4.18% per annum.
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"Certificateholder" shall have the meaning specified in the Trust
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Agreement.
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"Class A-1 Final Distribution Date" shall mean the November
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2002 Distribution Date.
"Class A-1 Monthly Interest" shall mean (i) for the initial
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Distribution Date, $164,526.67, and (ii) for any Distribution Date thereafter,
the product of (A) the actual number of days elapsed during the period from and
including the preceding Distribution Date to but excluding such Distribution
Date divided by 360, (B) the Class A-1 Rate and (C) the outstanding principal
balance of the Class A-1 Notes as of the preceding Distribution Date (after
giving effect to all payments of principal made to the Holders of the Class A-1
Notes on or before such preceding Distribution Date).
"Class A-1 Notes" shall mean the 2.001% Class A-1 Asset-Backed
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Notes issued by the Trust pursuant to the Indenture in the initial aggregate
principal amount of $148,000,000.
"Class A-1 Rate" shall mean 2.00100% per annum.
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"Class A-2 Final Distribution Date" shall mean the August 2004
---------------------------------
Distribution Date.
"Class A-2 Monthly Interest" shall mean (i) for the initial
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Distribution Date, $224,280.00, and (ii) for any Distribution Date thereafter,
one-twelfth of the product of (A) the Class A-2 Rate and (B) the outstanding
principal balance of the Class A-2 Notes as of the preceding Distribution Date
(after giving effect to all payments of principal made to the Holders of the
Class A-2 Notes on or before such preceding Distribution Date).
"Class A-2 Notes" shall mean the 2.52% Class A-2 Asset-Backed
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Notes issued by the Trust pursuant to the Indenture in the initial aggregate
principal amount of $178,000,000.
"Class A-2 Rate" shall mean 2.52% per annum.
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"Class A-3 Final Distribution Date" shall mean the November
---------------------------------
2005 Distribution Date.
"Class A-3 Monthly Interest" shall mean (i) for the initial
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Distribution Date, $295,480.00, and (ii) for any Distribution Date thereafter,
one-twelfth of the product of (A) the Class A-3 Rate and (B) the outstanding
principal balance of the Class A-3 Notes as of the preceding Distribution Date
(after giving effect to all payments of principal made to the Holders of the
Class A-3 Notes on or before such preceding Distribution Date).
"Class A-3 Notes" shall mean the 3.32% Class A-3 Asset-Backed
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Notes issued by the Trust pursuant to the Indenture in the initial aggregate
principal amount of $178,000,000.
"Class A-3 Rate" shall mean 3.32% per annum.
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"Class A-4 Final Distribution Date" shall mean the December
---------------------------------
2006 Distribution Date.
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"Class A-4 Monthly Interest" shall mean (i) for the initial
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Distribution Date, $246,033.30, and (ii) for any Distribution Date thereafter,
one-twelfth of the product of (A) the Class A-4 Rate and (B) the outstanding
principal balance of the Class A-4 Notes as of the preceding Distribution Date
(after giving effect to all payments of principal made to the Holders of the
Class A-4 Notes on or before such preceding Distribution Date).
"Class A-4 Notes" shall mean the 3.94% Class A-4 Asset-Backed
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Notes issued by the Trust pursuant to the Indenture in the initial aggregate
principal amount of $124,890,000.
"Class A-4 Rate" shall mean 3.94% per annum.
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"Closing Date" shall mean November 27, 2001.
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"Collection Account" shall mean the account established and
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maintained as such pursuant to Section 4.1(a).
"Collection Period" shall mean each calendar month during the
-----------------
term of this Agreement or, in the case of the initial Collection Period, the
period from but excluding the Cutoff Date to and including November 30, 2001.
"Commission" shall mean the Securities and Exchange
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Commission, and its successors.
"Computer Tape" shall mean any computer tape or compact disk
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generated by the Seller which provides information relating to the Receivables
and which was used by the Seller in selecting the Receivables sold to the
Depositor under the Receivables Purchase Agreement on the Closing Date.
"Corporate Trust Office" shall mean, as applicable, (i) the
----------------------
principal office of the Indenture Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date of the
execution of this Agreement is located at Four Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Corporate Trust and Agency Group - Structured Finance, or at
such other address as the Indenture Trustee may designate from time to time by
notice to the Noteholders, the Owner Trustee, the Depositor, the Seller and the
Servicer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders, the Owner Trustee, the Depositor, the Seller and the
Servicer or (ii) the principal office of the Owner Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the date of the execution of this Agreement is located at Xxxxxx Square
North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention:
Corporate Trust Administration, or at such other address as the Owner Trustee
may designate from time to time by notice to the Certificateholders, the
Indenture Trustee, the Depositor, the Seller and the Servicer, or the principal
corporate trust office of any successor Owner Trustee at the address designated
by such successor Owner Trustee by notice to the Certificateholders, the
Indenture Trustee, the Depositor, the Seller and the Servicer.
"Cutoff Date" shall mean October 15, 2001.
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5
"Defaulted Receivable" shall mean a Receivable as to which (i)
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any payment, or any part of any payment, due under such Receivable has become
120 days or more delinquent (whether or not the Servicer has repossessed the
related Financed Vehicle), (ii) the Servicer has repossessed and sold the
related Financed Vehicle or (iii) the Servicer has determined in accordance with
its customary practices that such Receivable is uncollectible; provided,
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however, that a Receivable shall not be classified as a Defaulted Receivable
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until the last day of the Collection Period during which one of the foregoing
events first occurs; and, provided further, that a Purchased Receivable shall
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not be deemed to be a Defaulted Receivable.
"Depositor" shall mean Pooled Auto Securities Shelf LLC, a
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Delaware limited liability company, and its successors.
"Determination Date" shall mean the sixth day preceding each
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Distribution Date or, if such sixth day is not a Business Day, the following
Business Day, commencing on December 11, 2001.
"Distribution Date" shall mean the 15th day of each month or,
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if such 15th day is not a Business Day, the following Business Day, commencing
on December 17, 2001.
"Eligible Institution" shall mean (i) the corporate trust
--------------------
department of the Indenture Trustee or the Owner Trustee or (ii) any other
depository institution organized under the laws of the United States of America
or any State or incorporated under the laws of a foreign jurisdiction with a
branch or agency located in the United States of America or any State qualified
to take deposits and subject to supervision and examination by federal or state
banking authorities which at all times has either a long-term unsecured debt
rating of at least Baa3 from Moody's or a long-term unsecured debt rating, a
short-term unsecured debt rating or a certificate of deposit rating acceptable
to Moody's and whose deposits are insured by the Federal Deposit Insurance
Corporation; provided, however, that (A) the commercial paper, short-term debt
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obligations or other short-term deposits of the depository institution described
in clause (ii) above must be rated at least Prime-1 by Moody's and at least A-1+
by Standard & Poor's if deposits are to be held in an account maintained with
such depository institution pursuant to this Agreement for fewer than 30 days
and (B) the long-term unsecured debt obligations of the depository institution
described in clause (ii) above must be rated at least AA- by Standard & Poor's
if deposits are to be held in an account maintained with such depository
institution pursuant to this Agreement for more than 30 days.
"Eligible Servicer" shall mean a Person which, at the time of
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its appointment as Servicer, (i) has a net worth of not less than $50,000,000,
(ii) is servicing a portfolio of motor vehicle retail installment sale contracts
and/or motor vehicle loans, (iii) is legally qualified, and has the capacity, to
service the Receivables, (iv) has demonstrated the ability to service a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle loans similar to the Receivables professionally and competently in
accordance with standards of skill and care that are consistent with prudent
industry standards and (v) is qualified and entitled to use pursuant to a
license or other written agreement, and agrees to maintain the confidentiality
of, the software which the Servicer uses in connection with performing its
duties and responsibilities under this Agreement or obtains rights to use, or
develops at its own expense, software which is adequate to perform its duties
and responsibilities under this Agreement.
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"ERISA" shall mean the Employee Retirement Income Security Act
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of 1974, as amended.
"Event of Servicing Termination" shall mean an event specified
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in Section 8.1.
"Excess Collections" shall have the meaning specified in
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Section 4.6(d)(xi).
"Final Order" shall mean a final, non-appealable order of a
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court exercising jurisdiction in an Insolvency Proceeding with respect to the
Depositor, the Seller or the Servicer to the effect that all or any portion of
any payment made to the Noteholders or the Certificateholders must be returned
prior to the Termination Date (as defined in the Policy) as a voidable
preference under the United States Bankruptcy Code (11 U.S.C.), as amended from
time to time.
"Final Scheduled Maturity Date" shall mean the May 2008
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Distribution Date.
"Financed Vehicle" shall mean a new or used motor vehicle,
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together with all accessions thereto, securing an Obligor's indebtedness under a
Receivable.
"Fiscal Agent" shall have the meaning specified in the Policy.
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"Fiscal Year" shall mean the period commencing on March 1 of
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any year and ending on February 28 (or February 29, if applicable) of the
following year.
"Holder" shall mean a Noteholder or a Certificateholder, as
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the case may be.
"Indenture" shall mean the Indenture, dated as of November 1,
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2001, between the Trust and the Indenture Trustee, as amended, supplemented or
otherwise modified and in effect from time to time.
"Indenture Trustee" shall mean Bankers Trust Company, a New
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York banking corporation, not in its individual capacity but solely as Indenture
Trustee under the Indenture, and any successor Indenture Trustee under the
Indenture.
"Initial Certificate Balance" shall mean, as the context may
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require, (i) with respect to all of the Certificates, $12,835,000, or (ii) with
respect to any Certificate, an amount equal to the initial denomination of such
Certificate.
"Initial Note Balance" shall mean, as the context may require,
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(i) with respect to all of the Notes, $628,890,000, or (ii) with respect to any
Note, an amount equal to the initial denomination of such Note.
"Initial Reserve Account Deposit" shall mean $3,208,625.
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"Insolvency Event" shall mean, with respect to any Person, (i)
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the making by such Person of a general assignment for the benefit of creditors,
(ii) the filing by such Person of a voluntary petition in bankruptcy, (iii) such
Person being adjudged bankrupt or insolvent, or having had entered against such
Person an order for relief in any bankruptcy or insolvency
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proceeding, (iv) the filing by such Person of a petition or answer seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, (v) the filing by such
Person of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against such Person in any proceeding
specified in clause (vii) below, (vi) seeking, consenting to or acquiescing in
the appointment of a trustee, receiver or liquidator of such Person or of all or
any substantial part of the assets of such Person or (vii) the failure to obtain
dismissal within 60 days of the commencement of any proceeding against such
Person seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
or the entry of any order appointing a trustee, liquidator or receiver of such
Person of all or any substantial portion of the assets of such Person.
"Insurance Agreement" shall mean the Insurance and
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Reimbursement Agreement, dated as of November 27, 2001, by and among the
Insurer, CarMax, in its individual capacity and as seller and servicer, and the
Depositor, as amended, supplemented or otherwise modified and in effect from
time to time.
"Insurance Payment Amount" shall have, for any Distribution
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Date, the meaning specified for such Distribution Date in Section 4.6(a).
"Insurer" shall mean MBIA Insurance Corporation, a stock
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insurance company incorporated under the laws of the State of New York, and its
successors.
"Insurer Defense Costs" shall mean all reasonable costs and
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expenses of the Insurer (including reasonable costs and expenses of the Owner
Trustee paid by the Insurer) incurred in connection with any action, proceeding
or investigation that could reasonably be expected to adversely affect the Trust
or the Owner Trust Estate or the rights or obligations of the Insurer under any
of the Transaction Documents or under the Policy, including any judgment or
settlement entered into in connection with any such action, proceeding or
investigation; provided, however, that Insurer Defense Costs shall not include
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costs or expenses incurred as a result of the willful misfeasance, bad faith or
negligence of the Insurer.
"Lien" shall mean a security interest, lien, charge, pledge,
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equity or encumbrance of any kind, other than tax liens, mechanics' or
materialmen's liens, judicial liens and any liens that may attach to a Financed
Vehicle by operation of law.
"Liquidation Proceeds" shall mean all amounts received by the
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Servicer with respect to any Defaulted Receivable, net of the sum of (i) any
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expenses incurred by the Servicer in connection with collection of such
Receivable and the disposition of the related Financed Vehicle (to the extent
determinable by the Servicer and not previously reimbursed) plus (ii) any
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amounts required by law to be remitted to the related Obligor.
"Monthly Certificate Interest" shall mean (i) for the initial
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Distribution Date, $26,825.15, and (ii) for any Distribution Date thereafter,
one-twelfth of the product of (A) the Certificate Rate and (B) the Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to all payments of principal made to the Certificateholders on or before such
preceding Distribution Date).
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"Monthly Certificate Principal" shall mean, for any
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Distribution Date on or after which the Notes have been paid in full, the lesser
of (i) the Certificate Balance as of the day preceding such Distribution Date
and (ii) the amount necessary to reduce the Certificate Balance as of the day
preceding such Distribution Date to the Pool Balance as of the last day of the
preceding Collection Period; provided, however, that the Monthly Certificate
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Principal for the Certificate Final Distribution Date shall equal the amount
necessary to reduce the outstanding principal balance of the Certificates to
zero.
"Monthly Note Interest" shall mean, for any Distribution Date,
---------------------
the sum of the Class A-1 Monthly Interest, the Class A-2 Monthly Interest, the
Class A-3 Monthly Interest and the Class A-4 Monthly Interest, in each case for
such Distribution Date.
"Monthly Note Principal" shall mean, for any Distribution
----------------------
Date, the lesser of (i) the Note Balance as of the day preceding such
Distribution Date and (ii) the amount necessary to reduce the sum of the Note
Balance plus the Certificate Balance as of the day preceding such Distribution
----
Date to the Pool Balance as of the last day of the preceding Collection Period;
provided, however, that the Monthly Note Principal for the Note Final
-------- -------
Distribution Date for any class of Notes shall equal the greater of (i) the
amount otherwise calculated pursuant to this definition and (ii) the outstanding
principal balance of the Notes of such class as of the day preceding such
Distribution Date.
"Monthly Remittance Condition" shall have the meaning
----------------------------
specified in Section 4.2.
"Monthly Servicing Fee" shall mean, for any Collection Period,
---------------------
the fee payable to the Servicer on the following Distribution Date for services
rendered during such Collection Period as determined pursuant to Section 3.8.
"Moody's" shall mean Xxxxx'x Investors Service, Inc., and its
-------
"Motor Vehicle Receivables" shall have the meaning specified
-------------------------
in Section 6.7(a).
"Net Losses" shall mean, with respect to any Collection
----------
Period, the excess, if any, of (i) the aggregate Principal Balance of all
Receivables that became Defaulted Receivables during such Collection Period over
(ii) the aggregate Liquidation Proceeds received by the Servicer during such
Collection Period.
"Note Balance" shall mean, at any time, as the context may
------------
require, (i) with respect to all of the Notes, an amount equal to, initially,
the Initial Note Balance and, thereafter, an amount equal to the Initial Note
Balance as reduced from time to time by all amounts allocable to principal
previously distributed to the Noteholders or (ii) with respect to any Note, an
amount equal to, initially, the initial denomination of such Note and,
thereafter, an amount equal to such initial denomination as reduced from time to
time by all amounts allocable to principal previously distributed in respect of
such Note; provided, however, that in determining whether the Holders of Notes
-------- -------
evidencing the requisite percentage of the Note Balance have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any other Transaction Document, Notes owned by the Trust, any other obligor upon
the Notes, the Depositor, the Seller, the Servicer or any Affiliate of any of
the foregoing Persons shall be disregarded and deemed to be excluded from the
Note Balance (unless such Persons own 100%
9
of the Note Balance), except that, in determining whether the Indenture Trustee
or the Owner Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Indenture Trustee or the Owner Trustee, as
applicable, knows to be so owned shall be so disregarded; and, provided further,
-------- -------
that Notes that have been pledged in good faith may be regarded as included in
the Note Balance if the pledgee establishes to the satisfaction of the Indenture
Trustee or the Owner Trustee, as applicable, the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Trust, any other obligor
upon the Notes, the Depositor, the Seller, the Servicer or any Affiliate of any
of the foregoing Persons.
"Note Final Distribution Date" shall mean, as applicable, the
----------------------------
Class A-1 Final Distribution Date, the Class A-2 Final Distribution Date, the
Class A-3 Final Distribution Date or the Class A-4 Final Distribution Date.
"Note Payment Account" shall mean the account established and
--------------------
maintained as such pursuant to Section 4.1(b).
"Note Pool Factor" shall mean, with respect to any class of
----------------
Notes as of any Distribution Date, a seven-digit decimal figure equal to the
outstanding principal balance of such class as of such Distribution Date (after
giving effect to any reductions of such outstanding principal balance to be made
on such Distribution Date) divided by the original outstanding principal balance
of such class.
"Note Rate" shall mean, in the case of the Class A-1 Notes,
---------
the Class A-1 Rate, in the case of the Class A-2 Notes, the Class A-2 Rate, in
the case of the Class A-3 Notes, the Class A-3 Rate, and in the case of the
Class A-4 Notes, the Class A-4 Rate.
"Noteholder" shall mean a Person in whose name a Note is
----------
registered on the Note Register.
"Obligor" shall mean the purchaser or co-purchasers of a
-------
Financed Vehicle purchased in whole or in part by the execution and delivery of
a Receivable or any other Person who owes or may be liable for payments under a
Receivable.
"Officer's Certificate" shall mean a certificate signed by the
---------------------
chairman, the president, any executive vice president, any senior vice
president, any vice president or the treasurer of the Depositor or the Servicer,
as the case may be, and delivered to the Owner Trustee and the Indenture
Trustee.
"Opinion of Counsel" shall mean one or more written opinions
------------------
of counsel who may, except as otherwise expressly provided in this Agreement, be
an employee of, or outside counsel to, the Depositor or the Servicer and who
shall be acceptable to the Indenture Trustee, the Owner Trustee or the Rating
Agencies, as applicable.
"Owner Trust Estate" shall have the meaning specified in the
------------------
Trust Agreement.
10
"Owner Trustee" shall mean Wilmington Trust Company, a
-------------
Delaware banking corporation, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement, and any successor Owner Trustee under the
Trust Agreement.
"Permitted Investments" shall mean, on any date of
---------------------
determination, book-entry securities, negotiable instruments or securities
represented by instruments in bearer or registered form with maturities not
exceeding the next Distribution Date which evidence:
(i) direct obligations of, and obligations fully
guaranteed by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the full
faith and credit of the United States of America;
(ii) demand deposits, time deposits, bankers' acceptances
or certificates of deposit of any depository institution or trust
company incorporated under the laws of the United States of America or
any State (or any domestic branch of a foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that such investment shall
-------- -------
not have an `r' highlighter affixed to its rating and its terms shall
have a predetermined fixed dollar amount of principal due at maturity
that cannot vary or change; and, provided further, that, at the time of
-------- -------
the investment, the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is based
on the credit of a Person other than such depository institution or
trust company) of such depository institution or trust company shall
have a rating from each of the Rating Agencies in the highest
investment category granted thereby;
(iii) repurchase obligations with respect to any security
that is a direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(ii) above;
(iv) short-term corporate securities bearing interest or
sold at a discount issued by any corporation incorporated under the
laws of the United States of America or any state thereof; provided,
--------
however, that such investment shall not have an `r' highlighter affixed
-------
to its rating and its terms shall have a predetermined fixed dollar
amount of principal due at maturity that cannot vary or change; and,
provided further, that, at the time of the investment, the short-term
-------- -------
unsecured debt obligations (other than such obligations the rating of
which is based on the credit of a Person other than such corporation)
of such corporation shall have a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(v) commercial paper having, at the time of the
investment, a rating from each of the Rating Agencies in the highest
investment category granted thereby; provided, however, that such
-------- -------
investment shall not have an `r' highlighter affixed to its rating and
its terms shall have a predetermined fixed dollar amount of principal
due at maturity that cannot vary or change;
11
(vi) guaranteed investment contracts issued by an insurance
company or other corporation acceptable to the Rating Agencies;
(vii) investments in money market funds having a rating from
each of the Rating Agencies in the highest investment category granted
thereby (including funds for which the Indenture Trustee or the Owner
Trustee or any of their respective Affiliates is investment manager or
advisor); and
(viii) any other investment as to which the Rating Agency
Condition shall have been satisfied and, unless an Insurer Default
shall have occurred and be continuing, the written consent of the
Insurer shall have been obtained.
"Person" shall mean a legal person, including any individual,
------
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, limited liability partnership, trust,
unincorporated organization, or government or any agency or political
subdivision thereof, or any other entity of whatever nature.
"Policy Claim Amount" shall have the meaning specified in Section
-------------------
4.6(b)(ii).
"Pool Balance" shall mean, as of the last day of any Collection
------------
Period, the aggregate Principal Balance of the Receivables as of such last day;
provided, however, that if the Receivables are purchased by the Servicer
-------- -------
pursuant to Section 9.1(a) or are sold or otherwise liquidated by the Indenture
Trustee following an Event of Default pursuant to Section 5.4(a) of the
Indenture, the Pool Balance shall be deemed to be zero as of the last day of the
Collection Period during which such purchase, sale or other liquidation occurs.
"Principal Balance" shall mean, with respect to any Receivable as
-----------------
of any date, the Amount Financed under such Receivable minus the sum of (i) that
-----
portion of all Scheduled Payments actually received on or prior to such date
allocable to principal using the Simple Interest Method (to the extent
collected) plus (ii) any rebates of extended warranty contract costs or physical
----
damage, theft, credit life or credit disability insurance premiums included in
the Amount Financed plus (iii) any full or partial prepayment applied to reduce
----
the unpaid principal balance of such Receivable; provided, however, that (i) the
-------- -------
Principal Balance of a Defaulted Receivable shall be zero as of the last day of
the Collection Period during which it became a Defaulted Receivable and (ii) the
Principal Balance of a Purchased Receivable shall be zero as of the last day of
the Collection Period during which it became a Purchased Receivable.
"Purchase Amount" shall mean, with respect to any Distribution
---------------
Date and any Receivable to be repurchased by the Seller or purchased by the
Servicer on such Distribution Date, an amount equal to the sum of (i) the
Principal Balance of such Receivable plus (ii) the amount of accrued but unpaid
----
interest on such Principal Balance at the related APR to but excluding such
Distribution Date.
"Purchased Receivable" shall mean a Receivable as to which payment
--------------------
of the Purchase Amount has been made by the Seller pursuant to Section 2.4 or
the Servicer pursuant to Section 3.7 or 9.1.
12
"Rating Agencies" shall mean Moody's and Standard & Poor's and
---------------
their respective successors; provided, however, that if no such organization or
-------- -------
successor is any longer in existence, Rating Agency shall mean a nationally
recognized statistical rating organization or other comparable Person designated
by the Trust, notice of which designation shall have been given to the Indenture
Trustee, the Owner Trustee and the Servicer.
"Rating Agency Condition" shall mean, with respect to any
-----------------------
action, that each Rating Agency shall have been given prior notice of such
action and shall have notified the Depositor, the Seller, the Servicer, the
Owner Trustee and the Insurer in writing that such action will not result in a
reduction or withdrawal of the then current rating assigned by such Rating
Agency to any class of Notes or the Certificates.
"Receivable" shall mean a motor vehicle retail installment
----------
sale contract identified on the Receivable Schedule (as such contract may be
amended, supplemented or otherwise modified and in effect from time to time).
"Receivable File" shall mean, with respect to any Receivable,
---------------
the electronic entries, documents, instruments and writings with respect to such
Receivable specified in Section 2.5.
"Receivable Schedule" shall mean the list identifying the
-------------------
Receivables attached as Schedule 1 to this Agreement (which list may be in the
form of microfiche or compact disk).
"Receivables Purchase Agreement" shall mean the Receivables
------------------------------
Purchase Agreement, dated as of November 1, 2001, between the Seller and the
Depositor, as amended, supplemented or otherwise modified and in effect from
time to time.
"Record Date" shall mean, with respect to any Distribution
-----------
Date, the close of business on the Business Day preceding such Distribution
Date; provided, however, that (i) if Definitive Notes have been issued with
-------- -------
respect to any class of Notes, Record Date shall mean, with respect to any
Distribution Date for such class, the last Business Day of the calendar month
preceding such Distribution Date and (ii) if Definitive Certificates have been
issued, Record Date shall mean, with respect to any Distribution Date for the
Certificates, the last Business Day of the calendar month preceding such
Distribution Date.
"Relevant UCC" shall mean the Uniform Commercial Code as in
------------
effect from time to time in any relevant jurisdiction.
"Required Payment Amount" shall have, for any Distribution
-----------------------
Date, the meaning specified for such Distribution Date in Section 4.6(a).
"Required Rating" shall mean a short-term unsecured debt
---------------
rating of Prime-1 by Moody's and A-1+ by Standard & Poor's.
"Required Reserve Account Amount" shall mean, for any
-------------------------------
Distribution Date, the greater of (i) $6,417,250 and (ii) 2.25% of the Pool
Balance as of the last day of the preceding Collection Period; provided,
--------
however, that the Required Reserve Account Amount for any Distribution Date on
-------
which a Required Reserve Account Increase Event (as defined in the
13
Insurance Agreement) has occurred and is continuing shall equal the Required
Reserve Account Increase Amount (as defined in the Insurance Agreement) and the
Required Reserve Account Amount for any Distribution Date on which a Trigger
Event (as defined in the Insurance Agreement) has occurred and is continuing
shall equal the Policy Amount; and, provided further, that the Required Reserve
-------- -------
Account Amount for any Distribution Date shall not exceed the sum of the Note
Balance plus the Certificate Balance as of such Distribution Date (after giving
----
effect to all payments of principal made to the Noteholders and the
Certificateholders on such Distribution Date).
"Reserve Account" shall mean the account established and
---------------
maintained as such pursuant to Section 4.7(a).
"Reserve Account Amount" shall mean, for any Distribution
----------------------
Date, the amount on deposit in and available for withdrawal from the Reserve
Account on such Distribution Date (after giving effect to all deposits to and
withdrawals from the Reserve Account on the preceding Distribution Date, or, in
the case of the initial Distribution Date, the Closing Date), including all
interest and other income (net of losses and investment expenses) earned on such
amount during the preceding Collection Period.
"Reserve Account Deficiency" shall have, for any Distribution
--------------------------
Date, the meaning specified for such Distribution Date in Section 4.6(b).
"Reserve Account Draw Amount" shall have the meaning specified
---------------------------
in Section 4.6(b).
"Reserve Account Property" shall have the meaning specified in
------------------------
Section 4.7(a).
"Residual Interest" shall have the meaning specified in the
-----------------
Trust Agreement.
"Responsible Officer" shall mean (i) in the case of the
-------------------
Indenture Trustee, any managing director, principal, vice president, assistant
vice president, assistant secretary, assistant treasurer or trust officer of the
Indenture Trustee or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and, with respect to a particular corporate trust matter, any other
officer of the Indenture Trustee to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject and (ii) in
the case of the Owner Trustee, any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or financial services
officer of the Owner Trustee or any other officer of the Owner Trustee
customarily performing functions similar to those performed by any of the above
designated officers and, with respect to a particular corporate trust matter,
any other officer of the Owner Trustee to whom such matter is referred because
of such officer's knowledge of and familiarity with the particular subject.
"Scheduled Payment" shall mean, for any Receivable, each
-----------------
payment required to be made by the related Obligor in accordance with the terms
of such Receivable (after giving effect to any deferral of payments pursuant to
Section 3.2 or any rescheduling of payments as a result of any Insolvency Event
with respect to such Obligor).
"Securities" shall have the meaning specified in Section
----------
6.7(a).
14
"Securitization Trust" shall have the meaning specified in
--------------------
Section 6.7(a).
"Seller" shall mean CarMax, in its capacity as seller of the
------
Receivables under the Receivables Purchase Agreement, and its successors in such
capacity.
"Servicer" shall mean CarMax, in its capacity as servicer of
--------
the Receivables under this Agreement, and its successors in such capacity.
"Servicer's Certificate" shall have the meaning specified in
----------------------
Section 3.9.
"Servicing Officer" shall mean any officer of the Servicer
-----------------
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing officers attached to an
Officer's Certificate furnished on the Closing Date to the Owner Trustee and the
Indenture Trustee by the Servicer, as such list may be amended from time to time
by the Servicer in writing.
"Servicing Rate" shall mean 1.00% per annum.
--------------
"Simple Interest Method" shall mean the method of allocating a
----------------------
fixed level payment between principal and interest, pursuant to which a portion
of such payment is allocated to interest in an amount equal to the product of
the APR of the related Receivable multiplied by the unpaid Principal Balance of
such Receivable multiplied by the period of time (expressed as a fraction of a
year, based on the actual number of days in the applicable calendar month and a
365-day year) elapsed since the preceding payment was made and the remainder of
such payment is allocated to principal.
"Simple Interest Receivable" shall mean any Receivable under
--------------------------
which each payment is allocated between principal and interest in accordance
with the Simple Interest Method.
"Standard & Poor's" shall mean Standard & Poor's, a division
-----------------
of The XxXxxx-Xxxx Companies, Inc., and its successors.
"Total Certificate Interest" shall mean, for any Distribution
--------------------------
Date, the sum of (i) the Monthly Certificate Interest for such Distribution Date
plus (ii) the Additional Certificate Interest for such Distribution Date.
----
"Total Note Interest" shall mean, for any Distribution Date
-------------------
and any class of Notes, the sum of (i) the Monthly Note Interest for such
Distribution Date for such class plus (ii) the Additional Note Interest for such
Distribution Date for such class.
"Total Servicing Fee" shall mean, for any Collection Period,
-------------------
the sum of (i) the Monthly Servicing Fee for such Collection Period plus (ii)
----
all accrued but unpaid Monthly Servicing Fees for previous Collection Periods.
"Transition Costs" shall have the meaning specified in Section
----------------
8.1(a) .
15
"Trust" shall mean the CarMax Auto Owner Trust 2001-2, a Delaware
-----
statutory business trust.
"Trust Agreement" shall mean the Amended and Restated Trust
---------------
Agreement, dated as of November 1, 2001, between the Depositor and the Owner
Trustee, as amended, supplemented or otherwise modified and in effect from time
to time.
"Trust Property" shall mean the Receivables and the other related
--------------
property sold, transferred, assigned and otherwise conveyed by the Depositor to
the Trust pursuant to Section 2.1(a).
SECTION 1.2 Other Definitional Provisions.
-----------------------------
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
assigned to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified. The term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
16
ARTICLE II
TRUST PROPERTY
SECTION 2.1 Conveyance of Trust Property.
----------------------------
(a) In consideration of the Trust's delivery to, or upon the written
order of, the Depositor of authenticated Notes and Certificates, in authorized
denominations in aggregate principal amounts equal to the Initial Note Balance
and the Initial Certificate Balance, respectively, the Depositor hereby
irrevocably sells, transfers, assigns and otherwise conveys to the Trust,
without recourse (subject to the obligations herein), all right, title and
interest of the Depositor, whether now owned or hereafter acquired, in, to and
under the following:
(i) the Receivables;
(ii) all amounts received on or in respect of the Receivables
after the Cutoff Date;
(iii) the security interests in the Financed Vehicles granted by
the Obligors pursuant to the Receivables;
(iv) all proceeds from claims on or refunds of premiums with
respect to physical damage, theft, credit life or credit disability
insurance policies relating to the Financed Vehicles or the Obligors;
(v) the Receivable Files;
(vi) the Collection Account, the Note Payment Account, the
Certificate Payment Account, and the Reserve Account and all amounts,
securities, financial assets, investments and other property deposited in
or credited to any of the foregoing and all proceeds thereof;
(vii) all rights of the Depositor under the Receivables Purchase
Agreement, including the right to require the Seller to repurchase
Receivables from the Depositor; and
(viii) all present and future claims, demands, causes of action
and choses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever
in respect of any or all of the foregoing, including all proceeds of the
conversion thereof, voluntary or involuntary, into cash or other liquid
property, all accounts, general intangibles, chattel paper, instruments,
documents, money, investment property, deposit accounts, letters of credit,
letter-of-credit rights, insurance proceeds, condemnation awards, rights to
payment of any and every kind and other forms of obligations and all other
property which at any time constitutes all or part of or is included in the
proceeds of any of the foregoing.
(b) The Depositor and the Trust intend that the transfer of the Trust
Property contemplated by Section 2.1(a) constitute a sale of the Trust Property,
conveying good title to the Trust Property, from the Depositor to the Trust. If
such transfer is deemed to be a pledge to
17
secure the payment of the Notes and the Certificates, however, the Depositor
hereby grants to the Trust a first priority security interest in all of the
Depositor's right, title and interest in, to and under the Trust Property, and
all proceeds thereof, to secure the payment of the Notes and the Certificates,
and in such event, this Agreement shall constitute a security agreement under
applicable law.
(c) The sale, transfer, assignment and conveyance of the Trust
Property made under Section 2.1(a) shall not constitute and is not intended to
result in an assumption by the Trust of any obligation of the Depositor or the
Seller to the Obligors or any other Person in connection with the Receivables
and the other Trust Property or any obligation of the Depositor or the Seller
under any agreement, document or instrument related thereto.
SECTION 2.2 Representations and Warranties of the Seller as to
--------------------------------------------------
the Receivables.
---------------
(a) The Seller has made, under the Receivables Purchase
Agreement, each of the representations and warranties as to the Receivables set
forth in Exhibit A to this Agreement. The Trust shall be deemed to have relied
on such representations and warranties in accepting the Receivables. The
representations and warranties set forth in Exhibit A to this Agreement speak as
of the execution and delivery of this Agreement, except to the extent otherwise
provided, but shall survive the sale, transfer, assignment and conveyance of the
Receivables to the Trust pursuant to this Agreement and the pledge of the
Receivables to the Indenture Trustee pursuant to the Indenture. Pursuant to
Section 2.1(a) of this Agreement, the Depositor has sold, transferred, assigned
and otherwise conveyed to the Trust, as part of the Trust Property, its rights
under the Receivables Purchase Agreement, including its right to require the
Seller to repurchase Receivables in accordance with the Receivables Purchase
Agreement upon a breach of the representations and warranties set forth in
Exhibit A to this Agreement.
(b) The Seller hereby agrees that the Trust shall have the right
to enforce any and all rights under the Receivables Purchase Agreement assigned
to the Trust under this Agreement, including the right to require the Seller to
repurchase Receivables in accordance with the Receivables Purchase Agreement
upon a breach of the representations and warranties set forth in Exhibit A to
this Agreement, directly against the Seller as though the Trust were a party to
the Receivables Purchase Agreement and that the Trust shall not be obligated to
enforce any such right indirectly through the Depositor.
SECTION 2.3 Representations and Warranties of the Depositor as
--------------------------------------------------
to the Receivables. The Depositor makes the following representations and
------------------
warranties as to the Receivables on which the Trust shall be deemed to have
relied in accepting the Receivables. The representations and warranties speak as
of the execution and delivery of this Agreement, except to the extent otherwise
provided, but shall survive the sale, transfer, assignment and conveyance of the
Receivables to the Trust pursuant to this Agreement and the pledge of the
Receivables to the Indenture Trustee pursuant to the Indenture.
(a) Title. The Depositor has purchased the Receivables from the
-----
Seller. The Depositor intends that the transfer of the Receivables contemplated
by Section 2.1(a) constitute a sale of the Receivables from the Depositor to the
Trust and that the beneficial
18
interest in, and title to, the Receivables not be part of the Depositor's estate
in the event of the filing of a bankruptcy petition by or against the Depositor
under any bankruptcy law. The Depositor has not sold, transferred, assigned or
pledged any Receivable to any Person other than the Trust. The Depositor has not
created, incurred or suffered to exist any Lien, encumbrance or security
interest on any Receivable except for the Lien of the Indenture.
(b) Security Interest Matters. This Agreement creates a valid
-------------------------
and continuing "security interest" (as defined in the Relevant UCC) in the
Receivables in favor of the Trust, which security interest is prior to all other
Liens and is enforceable as such as against creditors of and purchasers from the
Depositor. The Receivables constitute "tangible chattel paper" (as defined in
the Relevant UCC). The Depositor owns and has good and marketable title to the
Receivables free and clear of any Lien, claim or encumbrance of any Person. The
Depositor has caused or will cause prior to the Closing Date the filing of all
appropriate financing statements in the proper filing offices in the appropriate
jurisdictions under applicable law necessary to perfect the security interest in
the Receivables granted to the Trust under this Agreement. Other than the
security interest granted to the Trust under this Agreement, the Depositor has
not pledged, assigned, sold, granted a security interest in or otherwise
conveyed any of the Receivables. The Depositor has not authorized the filing of
and is not aware of any financing statements against the Depositor that include
a description of collateral covering the Receivables other than any financing
statement relating to the security interest granted to the Trust under this
Agreement or that has been terminated. The Depositor is not aware of any
judgment or tax lien filings against the Depositor. The security interest of the
Seller in each Financed Vehicle has been validly assigned by the Depositor to
the Trust.
(c) Financing Statements. All financing statements filed or to
--------------------
be filed against the Depositor in favor of the Indenture Trustee (as assignee of
the Trust) contain a statement substantially to the following effect: "A
purchase of or security interest in any collateral described in this financing
statement will violate the rights of the Indenture Trustee."
(d) No Transfer Restrictions. The Depositor has not created,
------------------------
incurred or suffered to exist any restriction on transferability of the
Receivables except for the restrictions on transferability imposed by this
Agreement. The transfer of the Receivables and the Receivable Files by the
Depositor to the Trust pursuant to this Agreement is not subject to the bulk
transfer laws or any similar statutory provisions in effect in any applicable
jurisdiction.
SECTION 2.4 Repurchase by Seller upon Breach. The Depositor, the
--------------------------------
Seller, the Servicer or the Owner Trustee, as the case may be, shall inform the
other parties to this Agreement, the Indenture Trustee and the Insurer promptly,
in writing, upon the discovery of any breach or failure to be true of the
representations and warranties set forth in Exhibit A to this Agreement. If such
breach or failure shall not have been cured by the close of business on the last
day of the Collection Period which includes the thirtieth (30th) day after the
date on which the Seller becomes aware of, or receives written notice from the
Depositor, the Servicer, the Owner Trustee or the Insurer of, such breach or
failure, and such breach or failure materially and adversely affects the
interest of the Trust in a Receivable, the Seller shall repurchase such
Receivable from the Trust on the Distribution Date immediately following such
Collection Period. In consideration of the repurchase of a Receivable hereunder,
the Seller shall remit the Purchase Amount of such Receivable in the manner
specified in Section 4.5. The sole remedy of
19
the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Insurer with respect to a breach or failure to be
true of the representations and warranties set forth in Exhibit A to this
Agreement shall be to require the Seller to repurchase Receivables pursuant to
this Section 2.4 or Section 3.02(g) of the Receivables Purchase Agreement.
Neither the Owner Trustee nor the Indenture Trustee shall have any duty to
conduct an affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Receivable pursuant to this Section 2.4 or the
eligibility of any Receivable for purposes of this Agreement.
SECTION 2.5 Custody of Receivable Files. To assure uniform
---------------------------
quality in servicing the Receivables and to reduce administrative costs, the
Trust, upon the execution and delivery of this Agreement, hereby revocably
appoints the Servicer as its agent, and the Servicer hereby accepts such
appointment, to act as custodian on behalf of the Trust and the Indenture
Trustee of the following documents or instruments, which are hereby
constructively delivered to the Indenture Trustee, as pledgee of the Trust
pursuant to the Indenture with respect to each Receivable (collectively, a
"Receivable File"):
---------------
(i) the original, executed copy of such Receivable;
(ii) the original credit application with respect to such
Receivable fully executed by the related Obligor or a photocopy
thereof or a record thereof on a computer file or disc or on
microfiche;
(iii) the original certificate of title for the related
Financed Vehicle or such other documents that the Seller or the
Servicer shall keep on file, in accordance with its customary
practices and procedures, evidencing the security interest of the
Seller in such Financed Vehicle;
(iv) documents evidencing the commitment of the related
Obligor to maintain physical damage insurance covering the related
Financed Vehicle; and
(v) any and all other documents (including any computer file
or disc or microfiche) that the Seller or the Servicer shall keep on
file, in accordance with its customary practices and procedures,
relating to such Receivable, the related Obligor or the related
Financed Vehicle.
On the Closing Date, the Servicer shall deliver to the Trust and
the Indenture Trustee an Officer's Certificate confirming that the Servicer has
received, on behalf of the Trust and the Indenture Trustee, all the documents
and instruments necessary for the Servicer to act as the agent of the Trust and
the Indenture Trustee for the purposes set forth in this Section 2.5, including
the documents referred to herein, and the Trust, the Owner Trustee and the
Indenture Trustee are hereby authorized to rely on such Officer's Certificate.
In addition, within 180 days after the Closing Date, the Servicer shall deliver
to the Trust, the Indenture Trustee and the Insurer an Officer's Certificate
identifying each outstanding Receivable secured by a Financed Vehicle for which
the Servicer has not received the original certificate of title (and indicating
whether such Financed Vehicle is subject to a certificate of title statute or
motor vehicle registration law that requires that the original certificate of
title for such Financed Vehicle be delivered to the Seller).
20
SECTION 2.6 Duties of Servicer as Custodian.
-------------------------------
(a) Safekeeping. The Servicer, in its capacity as custodian,
-----------
shall hold the Receivable Files for the benefit of the Trust and the Indenture
Trustee and maintain such accurate and complete accounts, records and computer
systems pertaining to each Receivable File as shall enable the Servicer and the
Trust to comply with the terms and provisions of this Agreement and the
Indenture Trustee to comply with the terms and conditions of the Indenture. In
performing its duties as custodian, the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the files relating to comparable motor vehicle retail installment
sale contracts that the Servicer services for itself or others. The Servicer
shall conduct, or cause to be conducted, in accordance with its customary
practices and procedures, periodic audits of the Receivable Files held by it
under this Agreement, and of the related accounts, records and computer systems,
in such a manner as shall enable the Trust or the Indenture Trustee to verify
the accuracy of the Servicer's record keeping. The Servicer shall promptly
report to the Owner Trustee, the Indenture Trustee and the Insurer any failure
on its part to hold the Receivable Files and maintain its accounts, records and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Trust, the Owner Trustee or the Indenture
Trustee of the Receivable Files, and none of the Trust, the Owner Trustee or the
Indenture Trustee shall be liable or responsible for any action or failure to
act by the Servicer in its capacity as custodian hereunder.
(b) Maintenance of and Access to Records. The Servicer shall
------------------------------------
maintain each Receivable File at the location listed in Schedule 2 to this
Agreement or at such other location as shall be specified to the Trust, the
Insurer and the Indenture Trustee by written notice not later than ninety (90)
days after any change in location. The Servicer shall make available to the
Trust and the Indenture Trustee, or its duly authorized representatives,
attorneys or auditors, a list of locations of the Receivable Files, the
Receivable Files, and the related accounts, records, and computer systems
maintained by the Servicer, at such times as the Trust or the Indenture Trustee
shall instruct.
(c) Release of Documents. As soon as practicable after receiving
--------------------
written instructions from the Indenture Trustee, the Servicer shall release any
document in the Receivable Files to the Indenture Trustee, the Indenture
Trustee's agent or the Indenture Trustee's designee, as the case may be, at such
place as the Indenture Trustee may reasonably designate.
(d) Title to Receivables. The Servicer shall not at any time have
--------------------
or in any way attempt to assert any interest in any Receivable held by it as
custodian hereunder or in the related Receivable File other than for collecting
or enforcing such Receivable for the benefit of the Trust. The entire equitable
interest in such Receivable and the related Receivable File shall at all times
be vested in the Trust.
SECTION 2.7 Instructions; Authority to Act. The Servicer shall
------------------------------
be deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by an Authorized Officer.
A certified copy of excerpts of authorizing resolutions of the Board of
Directors of the Indenture Trustee shall constitute conclusive evidence of the
authority of any such Authorized Officer to act and shall be considered in full
21
force and effect until receipt by the Servicer of written notice to the contrary
given by the Indenture Trustee.
SECTION 2.8 Indemnification of the Custodian. The Servicer, in its
--------------------------------
capacity as custodian, shall indemnify and hold harmless the Trust, the Owner
Trustee and the Indenture Trustee and each of their respective officers,
directors, employees and agents from and against any and all liabilities,
obligations, losses, compensatory damages, payments, costs or expenses
(including legal fees if any) of any kind whatsoever that may be imposed on,
incurred or asserted against the Trust, the Owner Trustee or the Indenture
Trustee or any of their respective officers, directors, employees and agents as
the result of any act or omission by the Servicer relating to the maintenance
and custody of the Receivable Files; provided, however, that the Servicer shall
-------- -------
not be liable hereunder to the Owner Trustee to the extent that such
liabilities, obligations, losses, compensatory damages, payments, costs or
expenses result from the willful misfeasance, bad faith or negligence of the
Owner Trustee and shall not be liable hereunder to the Indenture Trustee to the
extent that such liabilities, obligations, losses, compensatory damages,
payments, costs or expenses result from the willful misfeasance, bad faith or
negligence of the Indenture Trustee.
SECTION 2.9 Effective Period and Termination. The Servicer's
--------------------------------
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section 2.9.
If the Servicer shall resign as Servicer under Section 7.6, or if all of the
rights and obligations of the Servicer shall have been terminated under Section
8.1, the appointment of the Servicer as custodian hereunder may be terminated
(i) by the Trust, with the consent of the Indenture Trustee and the Insurer,
(ii) by the Holders of Notes evidencing not less than 25% of the Note Balance
or, if the Notes have been paid in full, by the Holders of Certificates
evidencing not less than 25% of the Certificate Balance, (iii) by the Owner
Trustee, with the consent of the Holders of Notes evidencing not less than 25%
of the Note Balance or (iv) by the Insurer, in each case by notice then given in
writing to the Depositor, the Servicer and the Insurer (with a copy to the
Indenture Trustee and the Owner Trustee if given by the Noteholders or the
Certificateholders). As soon as practicable after any termination of such
appointment, the Servicer shall deliver, or cause to be delivered, the
Receivable Files and the related accounts and records maintained by the Servicer
to the Indenture Trustee, the Indenture Trustee's agent or the Indenture
Trustee's designee, as the case may be, at such place as the Indenture Trustee
may reasonably designate or, if the Notes have been paid in full, at such place
as the Owner Trustee may reasonably designate.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES AND
OTHER TRUST PROPERTY
SECTION 3.1 Duties of Servicer. The Servicer shall administer the
------------------
Receivables with reasonable care. The Servicer's duties shall include, but not
be limited to, the collection and posting of all payments, responding to
inquiries by Obligors on the Receivables, or by federal, state or local
governmental authorities, investigating delinquencies, reporting tax information
to Obligors, furnishing monthly and annual statements to the Owner Trustee and
the Indenture Trustee with respect to distributions and providing collection and
repossession services in the event of Obligor default. In performing its duties
as Servicer hereunder, the Servicer shall
22
use reasonable care and exercise that degree of skill and attention that the
Servicer exercises with respect to all comparable motor vehicle retail
installment sale contracts that it services for itself or others. Subject to the
foregoing and to Section 3.2, the Servicer shall follow its customary standards,
policies, practices and procedures in performing its duties hereunder as
Servicer. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered to execute and deliver, on behalf of itself, the
Depositor, the Trust, the Owner Trustee, the Indenture Trustee, the
Certificateholders, the Noteholders or any one or more of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Receivables
or the Financed Vehicles, all in accordance with this Agreement; provided,
--------
however, that, notwithstanding the foregoing, the Servicer shall not, except
-------
pursuant to an order from a court of competent jurisdiction, release an Obligor
from payment of any unpaid amount under any Receivable or waive the right to
collect the unpaid balance (including accrued interest) of any Receivable from
the related Obligor, except in connection with a de minimis deficiency which the
Servicer would not attempt to collect in accordance with its customary
procedures, in which event the Servicer shall indemnify the Trust for such
deficiency. If the Servicer shall commence a legal proceeding to enforce a
Receivable, the Owner Trustee shall thereupon be deemed to have automatically
assigned such Receivable to the Servicer, which assignment shall be solely for
purposes of collection. If in any enforcement suit or legal proceeding it shall
be held that the Servicer may not enforce a Receivable on the ground that it
shall not be a real party in interest or a holder entitled to enforce such
Receivable, the Owner Trustee shall, at the Servicer's expense and written
direction, take steps to enforce such Receivable, including bringing suit in its
name or the names of the Indenture Trustee, the Certificateholders, the
Noteholders or any of them. The Owner Trustee shall execute and deliver to the
Servicer any powers of attorney and other documents as shall be prepared by the
Servicer and reasonably necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties hereunder. The Servicer, at its
expense, shall obtain on behalf of the Trust or the Owner Trustee all licenses,
if any, required by the laws of any jurisdiction to be held by the Trust or the
Owner Trustee in connection with ownership of the Receivables and shall make all
filings and pay all fees as may be required in connection therewith during the
term hereof.
SECTION 3.2 Collection and Allocation of Receivable Payments. The
------------------------------------------------
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and otherwise act with respect to the Receivables and the other Trust
Property in such manner as will, in the reasonable judgment of the Servicer,
maximize the amount to be received by the Trust with respect thereto and in
accordance with the standard of care required by Section 3.1. The Servicer shall
allocate collections on or in respect of the Receivables between principal and
interest in accordance with the customary servicing practices and procedures it
follows with respect to all comparable motor vehicle retail installment sale
contracts that it services for itself or others. The Servicer shall not increase
or decrease the number or amount of any Scheduled Payment, the Amount Financed
under any Receivable or the APR of any Receivable, or extend, rewrite or
otherwise modify the payment terms of any Receivable; provided, however, that
-------- -------
the Servicer may extend the due date for one or more payments due on any
Receivable for credit-related reasons that would be acceptable to the Servicer
with respect to comparable motor vehicle retail installment sale contracts that
it services for itself or others and in accordance with its customary standards,
policies, practices and procedures if the cumulative extensions with respect to
any Receivable
23
shall not cause the term of such Receivable to extend beyond the Final Scheduled
Maturity Date. If the Servicer fails to comply with the provisions of the
preceding sentence, the Servicer shall be required to purchase each Receivable
affected thereby for the related Purchase Amount, in the manner specified in
Section 3.7, as of the close of the Collection Period during which such failure
occurs. The Servicer may, in its discretion (but only in accordance with its
customary standards, policies, practices and procedures), waive any late payment
charge or any other fee that may be collected in the ordinary course of
servicing a Receivable.
SECTION 3.3 Realization upon Receivables. The Servicer shall use
----------------------------
reasonable efforts on behalf of the Trust, in accordance with the standard of
care required under Section 3.1, to repossess or otherwise convert the ownership
of each Financed Vehicle securing a Defaulted Receivable. In taking such action,
the Servicer shall follow such customary practices and procedures as it shall
deem necessary or advisable in its servicing of comparable motor vehicle retail
installment sale contracts and as are otherwise consistent with the standard of
care required under Section 3.1. The Servicer shall be entitled to recover all
reasonable expenses incurred by it in the course of repossessing and liquidating
a Financed Vehicle into cash proceeds, but only out of the cash proceeds of such
Financed Vehicle and any deficiency obtained from the related Obligor. If a
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
will increase the Liquidation Proceeds received with respect to the related
Receivable.
SECTION 3.4 Physical Damage Insurance. The Servicer shall follow its
-------------------------
customary practices and procedures to determine whether or not each Obligor
shall have maintained physical damage insurance covering the related Financed
Vehicle.
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles.
------------------------------------------------------
The Servicer shall take such steps, in accordance with the standard of care
required under Section 3.1, as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle.
The Trust hereby authorizes the Servicer, and the Servicer hereby agrees, to
take such steps as are necessary to re-perfect such security interest on behalf
of the Trust and the Indenture Trustee in the event the Servicer receives notice
of, or otherwise has actual knowledge of, the fact that such security interest
is not perfected as a result of the relocation of a Financed Vehicle or for any
other reason. The Servicer shall not release, in whole or in part, any security
interest in a Financed Vehicle created by the related Receivable except as
permitted herein or in accordance with its customary standards, policies,
practices and procedures.
SECTION 3.6 Amendment of Receivable Terms. The Servicer shall not
-----------------------------
impair in any material respect the rights of the Depositor, the Trust, the Owner
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders or the
Insurer in the Receivables or, except as permitted under Section 3.2, otherwise
amend or alter the terms of the Receivables if, as a result of such amendment or
alteration, the interests of the Depositor, the Trust, the Owner Trustee, the
Indenture Trustee, the Certificateholders, the Noteholders or the Insurer
hereunder would be materially adversely affected.
24
SECTION 3.7 Purchase by Servicer upon Breach. The Depositor, the
--------------------------------
Seller, the Servicer or the Owner Trustee, as the case may be, shall inform the
other parties to this Agreement, the Indenture Trustee and the Insurer promptly,
in writing, upon the discovery of any breach of Section 3.2, 3.5 or 3.6. If such
breach shall not have been cured by the close of business on the last day of the
Collection Period which includes the thirtieth (30th) day after the date on
which the Servicer becomes aware of, or receives written notice from the
Depositor, the Seller, the Owner Trustee or the Insurer of, such breach, and
such breach materially and adversely affects the interest of the Trust in a
Receivable, the Servicer shall purchase such Receivable from the Trust on the
Distribution Date following such Collection Period; provided, however, that,
-------- -------
with respect to a breach of Section 3.2, the Servicer shall purchase the
affected Receivable from the Trust at the end of the Collection Period in which
such breach occurs. In consideration of the purchase of a Receivable hereunder,
the Servicer shall remit the Purchase Amount of such Receivable in the manner
specified in Section 4.5. The sole remedy of the Trust, the Owner Trustee, the
Indenture Trustee, the Noteholders and the Certificateholders with respect to a
breach of Section 3.2, 3.5 or 3.6 shall be to require the Servicer to purchase
Receivables pursuant to this Section 3.7. Neither the Owner Trustee nor the
Indenture Trustee shall have any duty to conduct an affirmative investigation as
to the occurrence of any condition requiring the purchase of any Receivable
pursuant to this Section 3.7.
SECTION 3.8 Servicing Compensation. The Servicer shall receive the
----------------------
Monthly Servicing Fee for servicing the Receivables. The Monthly Servicing Fee
for any Collection Period shall equal the product of one-twelfth (1/12) of the
Servicing Rate and the Pool Balance as of the first day of such Collection
Period (or, in the case of the initial Collection Period, as of the Closing
Date). The Servicer shall pay all expenses incurred by it in connection with its
activities hereunder (including the fees and expenses of the Owner Trustee and
the Indenture Trustee, including the reasonable fees and expenses of their
attorneys, and any custodian appointed by the Owner Trustee and the Indenture
Trustee, the fees and expenses of independent accountants, taxes imposed on the
Servicer and expenses incurred in connection with distributions and reports to
the Certificateholders and the Noteholders), except expenses incurred in
connection with realizing upon Receivables under Section 3.3.
SECTION 3.9 Servicer's Certificate. On or before the Determination
----------------------
Date immediately preceding each Distribution Date, the Servicer shall deliver to
the Depositor, the Seller, the Owner Trustee, the Indenture Trustee, the Insurer
and each Paying Agent, with a copy to the Rating Agencies, a certificate of a
Servicing Officer substantially in the form of Exhibit B to this Agreement (a
"Servicer's Certificate") and attached to a Servicer's report containing all
----------------------
information necessary to make the transfers and distributions pursuant to
Sections 4.5, 4.6 and 4.7, together with the written statements to be furnished
by the Owner Trustee to the Certificateholders pursuant to Section 4.9 and by
the Indenture Trustee to the Noteholders pursuant to Section 4.9 and pursuant to
Section 6.6 of the Indenture. The Servicer shall separately identify (by account
number) in a written notice to the Depositor, the Owner Trustee, the Indenture
Trustee and the Insurer the Receivables to be repurchased by the Seller or to be
purchased by the Servicer, as the case may be, on the Business Day preceding
such Distribution Date, and, upon request of one of the foregoing parties, each
Receivable which became a Defaulted Receivable during the related Collection
Period. The Servicer shall deliver to the Rating Agencies any information, to
the extent it is available to the Servicer, that the Rating Agencies reasonably
request in order to monitor the Trust.
25
SECTION 3.10 Annual Statement as to Compliance; Notice of Event of
-----------------------------------------------------
Servicing Termination.
---------------------
(a) On or before May 31 of each year (commencing with the year 2002),
the Servicer shall deliver to the Depositor, the Owner Trustee, the Indenture
Trustee and the Insurer an Officer's Certificate stating, as to the officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Servicer during the
preceding Fiscal Year (or, in the case of the Officer's Certificate to be
delivered in the year 2002, during the period beginning on the Closing Date
and ending on February 28, 2002) and of its performance under this
Agreement has been made under such officer's supervision; and
(ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such Fiscal Year (or, in the case of the Officer's Certificate
to be delivered in the year 2002, such period) or, if there has been a
default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof.
A copy of such certificate may be obtained by any Certificateholder
by a request in writing to the Owner Trustee, or by any Noteholder or Person
certifying that it is a Note Owner by a request in writing to the Indenture
Trustee, in either case addressed to the applicable Corporate Trust Office. Upon
the written request of the Owner Trustee, the Indenture Trustee shall promptly
furnish the Owner Trustee a list of Noteholders as of the date specified by the
Owner Trustee.
(b) The Servicer shall deliver to the Depositor, the Owner Trustee,
the Indenture Trustee, the Insurer and the Rating Agencies, promptly after
having obtained knowledge thereof, but in no event later than five (5) Business
Days thereafter, an Officer's Certificate specifying any event which constitutes
or, with the giving of notice or lapse of time or both, would become an Event of
Servicing Termination.
SECTION 3.11 Annual Independent Certified Public Accountants'
-----------------------------------------------
Reports. On or before May 31 of each year (commencing with the year 2002), the
-------
Servicer shall cause a firm of independent certified public accountants (who may
also render other services to the Servicer or its Affiliates) to deliver to the
Depositor, the Owner Trustee, the Indenture Trustee and the Insurer a report
addressed to the Board of Directors of the Servicer with respect to the
preceding Fiscal Year (or, in the case of the report to be delivered in the year
2002, with respect to the period beginning on the Closing Date and ending on
February 28, 2002) to the effect that (i) such firm has audited the financial
statements of the Servicer and issued its report thereon, (ii) such firm has
audited the reports delivered by the Servicer pursuant to Section 3.9 and the
records relating to the servicing of the Receivables and the distributions on
the Notes and the Certificates under this Agreement, (iii) such audit was made
in accordance with generally accepted auditing standards and (iv) except as
described in the report, such audit disclosed no exceptions or errors in the
records relating to motor vehicle loans serviced for others. Such report shall
also indicate that the firm is independent with respect to the Depositor, the
Seller and the Servicer within the meaning of the Code of Professional Ethics of
the American Institute of
26
Certified Public Accountants. A copy of such report may be obtained by any
Certificateholder by a request in writing to the Owner Trustee, or by any
Noteholder or Person certifying that it is a Note Owner by a request in writing
to the Indenture Trustee, in either case addressed to the applicable Corporate
Trust Office. In the event such firm requires the Indenture Trustee to agree to
the procedures performed by such firm, the Servicer shall direct the Indenture
Trustee in writing to so agree, it being understood and agreed that the
Indenture Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and the Indenture Trustee makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
SECTION 3.12 Access to Certain Documentation and Information
-----------------------------------------------
Regarding Receivables. The Servicer shall provide the Depositor, the Owner
---------------------
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders and the
Insurer with access to the Receivable Files in the cases where the Depositor,
the Owner Trustee, the Indenture Trustee, the Certificateholders, the
Noteholders or the Insurer shall be required by applicable statutes or
regulations to have access to such documentation. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the Servicer. Nothing in this Section 3.12 shall affect
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section 3.12. Each Certificateholder or
Noteholder, by its acceptance of a Certificate or Note, as the case may be, and
the Insurer shall be deemed to have agreed to keep any information obtained by
it pursuant to this Section 3.12 confidential, except as may be required by
applicable law.
SECTION 3.13 Reports to the Commission. The Servicer shall, on behalf
-------------------------
of the Trust, cause to be filed with the Commission any periodic reports
required to be filed under the provisions of the Exchange Act, and the rules and
regulations of the Commission thereunder. The Depositor shall, at its expense,
cooperate in any reasonable request made by the Servicer in connection with such
filings. The Servicer shall provide or cause to be provided to the Depositor
copies of all documents filed by the Servicer after the Closing Date with the
Commission pursuant to the Securities Act of 1933, as amended, or the Securities
Act of 1934, as amended, that relate specifically to the Trust, the Notes or the
Certificates.
SECTION 3.14 Reports to Rating Agencies. The Servicer shall deliver
--------------------------
to each Rating Agency, at such address as such Rating Agency may request, a copy
of all reports or notices furnished or delivered pursuant to this Article III
and a copy of any amendments, supplements or modifications to this Agreement and
any other information reasonably requested by such Rating Agency to monitor this
transaction.
27
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO
NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1 Accounts.
--------
(a) The Servicer shall establish, on or before the Closing Date, and
maintain in the name of the Indenture Trustee at an Eligible Institution (which
shall initially be the Indenture Trustee) a segregated trust account designated
as the Collection Account (the "Collection Account"). The Collection Account
------------------
shall be held in trust for the benefit of the Insurer, the Noteholders and the
Certificateholders. The Collection Account shall be under the sole dominion and
control of the Indenture Trustee; provided, however, that the Servicer may make
-------- -------
deposits to and direct the Indenture Trustee in writing to make withdrawals from
the Collection Account in accordance with this Agreement, the Indenture and the
Trust Agreement. All monies deposited from time to time in the Collection
Account pursuant to this Agreement shall be held by the Indenture Trustee as
part of the Trust Property and shall be applied as provided in this Agreement.
All deposits to and withdrawals from the Collection Account shall be made only
upon the terms and conditions of the Transaction Documents.
If the Servicer is required to remit collections on a daily basis
pursuant to the first sentence of Section 4.2, all amounts held in the
Collection Account shall, to the extent permitted by applicable law, rules and
regulations, be invested, as directed in writing by the Servicer, by the bank or
trust company then maintaining the Collection Account in Permitted Investments
that mature not later than the Business Day preceding the Distribution Date
following the Collection Period to which such amounts relate. All such Permitted
Investments shall be held to maturity. If the Collection Account is no longer to
be maintained at the Indenture Trustee, the Servicer shall, with the Indenture
Trustee's assistance as necessary, promptly (and in any case within ten (10)
calendar days or such longer period not to exceed thirty (30) calendar days as
to which each Rating Agency may consent) cause the Collection Account to be
moved to an Eligible Institution. The Servicer shall promptly notify the
Indenture Trustee and the Owner Trustee of any change in the account number or
location of the Collection Account.
(b) The Servicer shall establish, on or before the Closing Date, and
maintain in the name of the Indenture Trustee at an Eligible Institution (which
shall initially be the Indenture Trustee) a segregated trust account designated
as the Note Payment Account (the "Note Payment Account"). The Note Payment
--------------------
Account shall be held in trust for the benefit of the Noteholders. The Note
Payment Account shall be under the sole dominion and control of the Indenture
Trustee; provided, however, that the Servicer may make deposits to and direct
-------- -------
the Indenture Trustee in writing to make withdrawals from the Note Payment
Account in accordance with this Agreement and the Indenture. All monies
deposited from time to time in the Note Payment Account pursuant to this
Agreement and the Indenture shall be held by the Indenture Trustee as part of
the Trust Property and shall be applied as provided in this Agreement and the
Indenture. The amounts on deposit in the Note Payment Account shall not be
invested. If the Note Payment Account is no longer to be maintained at the
Indenture Trustee, the Servicer shall, with the Indenture Trustee's assistance
as necessary, promptly (and in any case within ten (10) calendar days or such
longer period not to exceed thirty (30) calendar days as to which each Rating
Agency may consent) cause the Note Payment Account to be moved to an Eligible
28
Institution. The Servicer shall promptly notify the Indenture Trustee and the
Owner Trustee of any change in the account number or location of the Note
Payment Account.
(c) The Servicer shall establish, on or before the Closing Date, and
maintain in the name of the Owner Trustee at an Eligible Institution (which
shall initially be the Owner Trustee) a segregated trust account designated as
the Certificate Payment Account (the "Certificate Payment Account"). The
---------------------------
Certificate Payment Account shall be held in trust for the benefit of the
Certificateholders. The Certificate Payment Account shall be under the sole
dominion and control of the Owner Trustee; provided, however, that the Servicer
-------- -------
may direct the Indenture Trustee in writing to make deposits to the Certificate
Payment Account in accordance with this Agreement and the Indenture and may
direct the Owner Trustee to make withdrawals from the Certificate Payment
Account in accordance with this Agreement and the Trust Agreement. All monies
deposited from time to time in the Certificate Payment Account pursuant to this
Agreement and the Indenture shall be held by the Owner Trustee as part of the
Trust Property and shall be applied as provided in this Agreement and the Trust
Agreement. The amounts on deposit in the Certificate Payment Account shall not
be invested. If the Certificate Payment Account is no longer to be maintained at
the Owner Trustee, the Servicer shall, with the Owner Trustee's assistance as
necessary, promptly (and in any case within ten (10) calendar days or such
longer period not to exceed thirty (30) calendar days as to which each Rating
Agency may consent) cause the Certificate Payment Account to be moved to an
Eligible Institution. The Servicer shall promptly notify the Indenture Trustee
and the Owner Trustee in writing of any change in the account number or location
of the Certificate Payment Account.
SECTION 4.2 Collections. The Servicer shall remit to the Collection
-----------
Account all amounts received by the Servicer on or in respect of the Receivables
(including Liquidation Proceeds and all amounts received by the Servicer in
connection with the repossession and sale of a Financed Vehicle (whether or not
the related Receivable has been classified as a Defaulted Receivable) but
excluding payments with respect to Purchased Receivables) as soon as practicable
and in no event after the close of business on the second Business day after
such receipt; provided, however, that for so long as (i) CarMax is the Servicer,
-------- -------
(ii) no Event of Servicing Termination shall have occurred and be continuing and
(iii) the Rating Agency Condition shall have been satisfied and, unless an
Insurer Default shall have occurred and be continuing, the written consent of
the Insurer shall have been obtained (each, a "Monthly Remittance Condition"),
----------------------------
the Servicer may remit any such amounts received during any Collection Period to
the Collection Account in immediately available funds on the Business Day
preceding the Distribution Date following such Collection Period (it being
understood that the Monthly Remittance Condition has not been satisfied as of
the Closing Date). The Owner Trustee and the Indenture Trustee shall not be
deemed to have knowledge of any event or circumstance under clause (ii) or (iii)
of the definition of Monthly Remittance Condition that would require daily
remittance by the Servicer to the Collection Account unless the Owner Trustee or
the Indenture Trustee, as applicable, has received notice of such event or
circumstance from the Depositor or the Servicer in an Officer's Certificate or
written notice from the Insurer (if no Insurer Default shall have occurred and
be continuing), the Holders of Notes evidencing not less than 25% of the Note
Balance or from the Holders of Certificates evidencing not less than 25% of the
Certificate Balance or a Responsible Officer of the Owner Trustee or the
Indenture Trustee, as applicable, has actual knowledge of such event or
circumstance. The Servicer shall remit to the Collection Account on the Closing
Date all amounts received by the Servicer on or
29
in respect of the Receivables (including Liquidation Proceeds and all amounts
received by the Servicer in connection with the repossession and sale of a
Financed Vehicle (whether or not the related Receivable has been classified as a
Defaulted Receivable)) during the period from but excluding the Cutoff Date to
and including the second Business Day preceding the Closing Date.
SECTION 4.3 Application of Collections. For purposes of this
--------------------------
Agreement, all amounts received on or in respect of a Receivable during any
Collection Period (including Liquidation Proceeds and all amounts received by
the Servicer in connection with the repossession and sale of a Financed Vehicle
(whether or not the related Receivable has been classified as a Defaulted
Receivable) but excluding payments with respect to Purchased Receivables) shall
be applied by the Servicer, as of the last day of such Collection Period, to
interest and principal on such Receivable in accordance with the Simple Interest
Method.
SECTION 4.4 [RESERVED].
----------
SECTION 4.5 Additional Deposits. The Seller and the Servicer shall
-------------------
deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Receivables pursuant to Section 2.4,
3.7 or 9.1. All such deposits with respect to a Collection Period shall be made
in immediately available funds no later than 5:00 p.m., New York City time, on
the Business Day preceding the Distribution Date following such Collection
Period.
SECTION 4.6 Determination Date Calculations; Application of
-----------------------------------------------
Available Funds.
---------------
(a) On each Determination Date, the Servicer shall calculate the
following amounts:
(i) the Available Collections for the following Distribution
Date;
(ii) the Total Servicing Fee for the preceding Collection
Period;
(iii) the Total Note Interest for each class of Notes for the
following Distribution Date;
(iv) the Total Certificate Interest for the following
Distribution Date;
(v) the Monthly Note Principal for the following
Distribution Date;
(vi) the Monthly Certificate Principal for the following
Distribution Date;
(vii) the Insurance Premium for the following Distribution
Date plus any overdue Insurance Premiums for previous Distribution Dates;
(viii) the aggregate amount of any unreimbursed payments under
the Policy, including any amount deposited by the Insurer pursuant to
Section 5.2(d) or (e) of the Indenture, to the extent payable to the
Insurer under the Insurance Agreement plus
----
30
accrued interest on any unreimbursed payments under the Policy, including
any amount deposited by the Insurer pursuant to Section 5.2(d) or (e) of
the Indenture, at the rate provided in the Insurance Agreement plus any
----
other amounts due the Insurer under the Insurance Agreement plus any
----
unreimbursed Insurer Defense Costs;
(ix) the sum of the amounts described in clauses (ii) through
(vi) above (the "Required Payment Amount"); and
-----------------------
(x) the sum of the amounts described in clauses (vii) and (viii)
above (the "Insurance Payment Amount").
------------------------
(b) On each Determination Date, the Servicer shall calculate the
following amounts:
(i) the lesser of (A) the amount, if any, by which the sum of
the Required Payment Amount for the following Distribution Date plus the
----
Insurance Payment Amount for such Distribution Date exceeds the Available
Collections for such Distribution Date and (B) the Reserve Account Amount
for such Distribution Date (before giving effect to any deposits to or
withdrawals from the Reserve Account on such Distribution Date) (such
lesser amount, the "Reserve Account Draw Amount");
---------------------------
(ii) the amount, if any, by which the Required Payment Amount for
the following Distribution Date exceeds the sum of the Available
Collections for such Distribution Date plus the Reserve Account Draw Amount
----
for such Distribution Date (such amount, the "Policy Claim Amount");
-------------------
(iii) the Reserve Account Amount for the following Distribution
Date (after giving effect to the withdrawal of the Reserve Account Draw
Amount for such Distribution Date); and
(iv) the amount, if any, by which the Required Reserve Account
Amount for the following Distribution Date exceeds the Reserve Account
Amount for such Distribution Date (after giving effect to the withdrawal of
the Reserve Account Draw Amount for such Distribution Date) (such excess,
the "Reserve Account Deficiency").
--------------------------
On each Distribution Date, the Servicer shall instruct the Indenture
Trustee to transfer the Reserve Account Draw Amount, if any, for such
Distribution Date from the Reserve Account to the Collection Account; provided,
--------
however, that, if the Notes have been declared immediately due and payable
-------
following an Event of Default (as defined in the Indenture), the Servicer shall
instruct the Indenture Trustee to transfer directly to the Insurer the portion,
if any, of such Reserve Account Draw Amount payable in respect of the Insurance
Payment Amount.
(c) If the Servicer determines on any Determination Date that the
Available Collections for the following Distribution Date and the Reserve
Account Draw Amount for such Distribution Date will be insufficient to pay in
full the Required Payment Amount for such Distribution Date, the Servicer shall
deliver to the Indenture Trustee, with a copy to the Insurer, the Owner Trustee
and the Fiscal Agent, no later than 2:00 p.m., New York City time, on such
31
Determination Date, a written notice specifying the Policy Claim Amount for
such Distribution Date. The Indenture Trustee shall, no later than 12:00 p.m.,
New York City time, on the second Business Day prior to such Distribution Date,
make a claim under the Policy for such Policy Claim Amount by delivering to the
Insurer and the Fiscal Agent, with a copy to the Depositor and the Servicer, a
Notice for Payment (as defined in and attached as Exhibit A to the Policy) for
such Policy Claim Amount. In making any such claim, the Indenture Trustee shall
act on behalf of the Noteholders and the Certificateholders and shall comply
with all the terms and conditions of the Policy. The Indenture Trustee shall,
upon receipt, deposit such Policy Claim Amount in the Collection Account.
(d) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee in writing to apply the Available Funds for such Distribution
Date to make the following payments and deposits in the following order of
priority:
(i) to the Servicer, the Total Servicing Fee for the
preceding Collection Period;
(ii) to the Note Payment Account, the Total Note Interest for
such Distribution Date;
(iii) if the Notes have not been declared immediately due and
payable following an Event of Default (as defined in the Indenture), to the
Certificate Payment Account, the Total Certificate Interest for such
Distribution Date;
(iv) to the Note Payment Account, the Monthly Note Principal
for such Distribution Date;
(v) if the Notes have been declared immediately due and
payable following an Event of Default (as defined in the Indenture), to the
Certificate Payment Account, the Total Certificate Interest for such
Distribution Date;
(vi) to the Certificate Payment Account, the Monthly
Certificate Principal for such Distribution Date;
(vii) to the Insurer, the Insurance Premium for such
Distribution Date plus any overdue Insurance Premiums for previous
Distribution Dates;
(viii) to the Insurer, the aggregate amount of any unreimbursed
payments under the Policy, including any amount deposited by the Insurer
pursuant to Section 5.2(d) or (e) of the Indenture, to the extent payable
to the Insurer under the Insurance Agreement plus accrued interest on any
----
unreimbursed payments under the Policy, including any amount deposited by
the Insurer pursuant to Section 5.2(d) or (e) of the Indenture, at the rate
provided in the Insurance Agreement plus any other amounts due the Insurer
----
under the Insurance Agreement plus any unreimbursed Insurer Defense Costs;
----
(ix) if the Notes have been declared immediately due and
payable following an Event of Default (as defined in the Indenture), to the
Note Payment
32
Account, an amount equal to the outstanding principal balance of the Notes
as of such Distribution Date (before giving effect to the application of
Available Funds on such Distribution Date) minus the Monthly Note Principal
-----
for such Distribution Date;
(x) if a successor Servicer has been appointed pursuant to
Section 8.2, to such successor Servicer, any unpaid Transition Costs due in
connection with such transfer of servicing plus the Additional Servicing
----
Fee, if any, for the preceding Collection Period;
(xi) to the Reserve Account, the Reserve Account Deficiency,
if any, for such Distribution Date; and
(xii) to the Seller, as holder of the Residual Interest, any
remaining Available Funds (the "Excess Collections").
------------------
(e) The Indenture Trustee shall provide prompt written notice to the
Insurer of any action or proceeding known to the Indenture Trustee seeking to
recover all or any portion of any payment made to the Noteholders or the
Certificateholders as a voidable preference under the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time. If the Indenture Trustee has
received a Final Order with respect to a preference payment, it shall promptly
notify the Insurer of such Final Order and shall comply with the provisions of
the Policy to obtain payment by the Insurer of such preference payment. The
Indenture Trustee shall furnish to the Insurer such information as the Insurer
shall reasonably request with respect to such preference payment.
SECTION 4.7 Reserve Account.
---------------
(a) The Servicer shall establish, on or before the Closing Date, and
maintain in the name of the Indenture Trustee at an Eligible Institution (which
shall initially be the Indenture Trustee) a segregated trust account designated
as the Reserve Account (the "Reserve Account"). The Reserve Account shall be
---------------
held in trust for the benefit of the Noteholders, the Certificateholders and the
Insurer. The Reserve Account shall be under the sole dominion and control of the
Indenture Trustee; provided, however, that the Servicer may make deposits to and
-------- -------
direct the Indenture Trustee in writing to make withdrawals from the Reserve
Account in accordance with this Agreement and the Indenture. On the Closing
Date, the Depositor shall deposit the Initial Reserve Account Deposit into the
Reserve Account from the net proceeds of the sale of the Notes. The Reserve
Account and all amounts, securities, investments, financial assets and other
property deposited in or credited to the Reserve Account (the "Reserve Account
---------------
Property") has been conveyed by the Depositor to the Trust pursuant to Section
--------
2.1(a). Pursuant to the Indenture, the Trust will pledge all of its right, title
and interest in, to and under the Reserve Account and the Reserve Account
Property to the Insurer and to the Indenture Trustee on behalf of the
Noteholders and the Certificateholders to secure its obligations under the Notes
and the Indenture.
(b) The Reserve Account Property shall, to the extent permitted by
applicable law, rules and regulations, be invested, as directed in writing by
the Servicer, by the bank or trust company then maintaining the Reserve Account
in Permitted Investments that mature not later
33
than the Business Day preceding the next Distribution Date. All such
Permitted Investments shall be held to maturity. All interest and other income
(net of losses and investment expenses) on funds on deposit in the Reserve
Account shall, at the written direction of the Servicer, be paid to the Seller,
as holder of the Residual Interest, on any Distribution Date to the extent that
funds on deposit therein, as certified by the Servicer, exceed the Required
Reserve Account Amount. If the Reserve Account is no longer to be maintained at
the Indenture Trustee, the Servicer shall, with the Indenture Trustee's
assistance as necessary, promptly (and in any case within ten (10) calendar days
or such longer period not to exceed thirty (30) calendar days as to which each
Rating Agency may consent) cause the Reserve Account to be moved to an Eligible
Institution. The Servicer shall promptly notify the Insurer, the Indenture
Trustee and the Owner Trustee in writing of any change in the account number or
location of the Reserve Account.
(c) With respect to any Reserve Account Property:
(i) any Reserve Account Property that is a "financial asset" (as
defined in Section 8-102(a)(9) of the Relevant UCC) shall be physically
delivered to, or credited to an account in the name of, the Eligible
Institution maintaining the Reserve Account, in accordance with such
institution's customary procedures such that such institution establishes a
"securities entitlement" in favor of the Indenture Trustee with respect
thereto;
(ii) any Reserve Account Property that is held in deposit
accounts shall be held solely in the name of the Indenture Trustee at one
or more depository institutions having the Required Rating and each such
deposit account shall be subject to the exclusive custody and control of
the Indenture Trustee and the Indenture Trustee shall have sole signature
authority with respect thereto; and
(iii) except for any deposit accounts specified in clause (ii)
above, the Reserve Account shall only be invested in securities or in other
assets which the Eligible Institution maintaining the Reserve Account
agrees to treat as "financial assets" (as defined in Section 8-102(a)(9) of
the Relevant UCC).
(d) If the Reserve Account Amount for any Distribution Date (after
giving effect to the withdrawal of the Reserve Account Draw Amount for such
Distribution Date) exceeds the Required Reserve Account Amount for such
Distribution Date, the Servicer shall instruct the Indenture Trustee in writing
to distribute the amount of such excess to the Seller, as holder of the Residual
Interest. The Indenture Trustee and the Owner Trustee hereby release, on each
Distribution Date, their security interest in, to and under Reserve Account
Property distributed to the Seller, as holder of the Residual Interest.
(e) If the Note Balance and the Certificate Balance, and all other
amounts owing or to be distributed hereunder or under the Indenture or the Trust
Agreement to the Noteholders, the Certificateholders or the Insurer, have been
paid in full and the Trust has been terminated, any remaining Reserve Account
Property shall be distributed to the Seller, as holder of the Residual Interest.
34
Section 4.8 Net Deposits. As an administrative convenience, unless the
------------
Servicer is required to remit collections on a daily basis pursuant to the first
sentence of Section 4.2, the Depositor and the Servicer may make any remittance
pursuant to this Article IV with respect to a Collection Period net of
distributions to be made to the Depositor or the Servicer with respect to such
Collection Period; provided, however, that such obligations shall remain
-------- -------
separate obligations, no party shall have a right of offset and each such party
shall account for all of the above described remittances and distributions as if
the amounts were deposited and/or transferred separately.
Section 4.9 Statements to Noteholders and Certificateholders. On or prior
------------------------------------------------
to each Distribution Date, the Servicer shall provide to the Indenture Trustee
(with copies to the Depositor, the Insurer, the Rating Agencies and each Paying
Agent), for the Indenture Trustee to forward to each Noteholder of record as of
the most recent Record Date and to the Owner Trustee (with copies to the
Depositor, the Insurer, the Rating Agencies and each Paying Agent) for the Owner
Trustee to forward to each Certificateholder of record as of the most recent
Record Date, a statement in substantially the form of Exhibit C to this
Agreement or Exhibit D to this Agreement, as applicable. Each such statement
shall set forth at least the following information as to the Notes and the
Certificates (to the extent applicable) with respect to the distribution to be
made on such Distribution Date:
(i) the amount of such distribution allocable to principal for each
class of Notes and for the Certificates;
(ii) the amount of such distribution allocable to current and
overdue interest (including any interest on overdue interest) for each class of
Notes and for the Certificates;
(iii) the Total Servicing Fee for the preceding Collection Period;
(iv) the aggregate outstanding principal balance of each class of
Notes, the Note Pool Factor with respect to each class of Notes, the Certificate
Balance and the Certificate Pool Factor (in each case after giving effect to
payments allocated to principal reported under clause (i) above);
(v) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(vi) the Reserve Account Amount on such Distribution Date (after
giving effect to all deposits to or withdrawals from the Reserve Account on such
Distribution Date);
(vii) the aggregate Purchase Amount of Receivables repurchased by the
Seller or purchased by the Servicer, if any, with respect to the preceding
Collection Period;
(viii) the number and aggregate Principal Balance of Receivables that
were 31-60 days, 61-90 days or 91 days or more delinquent as of the last day of
the preceding Collection Period; and
35
(ix) the Net Losses with respect to the preceding Collection Period.
Section 4.10 Control of Securities Accounts. Notwithstanding anything to
------------------------------
the contrary contained herein, the Trust agrees that each of the Collection
Account, the Note Payment Account, the Certificate Payment Account and the
Reserve Account will only be established at an Eligible Institution that agrees
substantially as follows: (i) it will comply with "entitlement orders" (as
defined in Section 8-102(a)(8) of the Relevant UCC) relating to such accounts
issued by the Indenture Trustee without further consent by the Trust; (ii) until
the termination of the Indenture, it will not enter into any other agreement
relating to any such account pursuant to which it agrees to comply with
entitlement orders of any Person other than the Indenture Trustee; and (iii) all
assets delivered or credited to it in connection with such accounts and all
investments thereof will be promptly credited to such accounts.
Section 4.11 Policy Matters.
--------------
(a) The Indenture Trustee hereby agrees on behalf of the Noteholders (and
each Noteholder, by its acceptance of its Notes, hereby agrees) for the benefit
of the Insurer that the Indenture Trustee shall recognize that to the extent the
Insurer makes a payment under the Policy, either directly or indirectly (as by
paying through the Indenture Trustee), to the Noteholders, the Insurer will be
entitled to be subrogated to the rights of the Noteholders to the extent of such
payment made under the Policy. Any rights of subrogation acquired by the Insurer
as a result of any payment made under the Policy shall, in all respects, be
subordinate and junior in right of payment to the prior indefeasible payment in
full of all amounts due under the Notes.
(b) The Owner Trustee hereby agrees on behalf of the Certificateholders
(and each Certificateholder, by its acceptance of its Certificates, hereby
agrees) for the benefit of the Insurer that the Indenture Trustee shall
recognize that to the extent the Insurer makes a payment under the Policy,
either directly or indirectly (as by paying through the Indenture Trustee), to
the Certificateholders, the Insurer will be entitled to be subrogated to the
rights of the Certificateholders to the extent of such payment made under the
Policy. Any rights of subrogation acquired by the Insurer as a result of any
payment made under the Policy shall, in all respects, be subordinate and junior
in right of payment to the prior indefeasible payment in full of all amounts due
under the Certificates.
(c) The Indenture Trustee, for itself and on behalf of the Noteholders,
hereby agrees that the Insurer may at any time during the continuation of any
proceeding relating to a Final Order direct all matters relating to such Final
Order, including the direction of any appeal of any order relating to such Final
Order and the posting of any surety, supersedeas or performance bond pending any
such appeal. In addition and without limitation of the foregoing, the Insurer
shall be subrogated, to the extent of any payments made under the Policy, to the
rights of the Depositor, the Seller, the Servicer, the Trust, the Indenture
Trustee and the Noteholders in the conduct of any preference claim, including
all rights of any party to any adversarial proceeding or action with respect to
any court order issued in connection with any such preference claim.
36
(d) The Owner Trustee, for itself and on behalf of the
Certificateholders, hereby agrees that the Insurer may at any time during the
continuation of any proceeding relating to a Final Order direct all matters
relating to such Final Order, including the direction of any appeal of any order
relating to such Final Order and the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition and without limitation of
the foregoing, the Insurer shall be subrogated, to the extent of any payments
made under the Policy, to the rights of the Depositor, the Seller, the Servicer,
the Trust, the Owner Trustee and the Certificateholders in the conduct of any
preference claim, including all rights of any party to any adversarial
proceeding or action with respect to any court order issued in connection with
any such preference claim.
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR
Section 6.1 Representations and Warranties of Depositor. The Depositor
-------------------------------------------
makes the following representations and warranties on which the Trust shall be
deemed to have relied in accepting the Trust Property. The representations and
warranties speak as of the execution and delivery of this Agreement and shall
survive the sale, transfer, assignment and conveyance of the Trust Property to
the Trust pursuant to this Agreement and the pledge of the Trust Property to the
Indenture Trustee pursuant to the Indenture:
(a) Organization and Good Standing. The Depositor has been duly
------------------------------
organized and is validly existing as a limited liability company in good
standing under the laws of the State of Delaware, has the power, authority and
legal right to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and has the power,
authority and legal right to acquire, own and sell the Receivables.
(b) Due Qualification. The Depositor is duly qualified to do business
-----------------
as a foreign limited liability company in good standing and has obtained all
necessary licenses and approvals in each jurisdiction in which the failure to so
qualify or to obtain such licenses and approvals would, in the reasonable
judgment of the Depositor, materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or enforceability of,
this Agreement, any of the other Transaction Documents to which the Depositor is
a party, the Receivables, the Notes or the Certificates.
(c) Power and Authority. The Depositor has the power and authority to
-------------------
execute, deliver and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party. The Depositor has the power and
authority to sell, assign, transfer and convey the property to be transferred to
and deposited with the Trust and has duly authorized such transfer and deposit
by all necessary limited liability company action, and the execution, delivery
and performance of this Agreement and the other Transaction Documents to which
the Depositor is a party have been duly authorized by the Depositor by all
necessary limited liability company action.
37
(d) Valid Transfer; Binding Obligation. This Agreement effects a
----------------------------------
valid sale, transfer, assignment and conveyance to the Trust of the Receivables
and the other Trust Property enforceable against all creditors of and purchasers
from the Depositor. This Agreement and the other Transaction Documents to which
the Depositor is a party constitute legal, valid and binding obligations of the
Depositor, enforceable against the Depositor in accordance with their terms,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, liquidation and other similar
laws and to general equitable principles.
(e) No Violation. The execution, delivery and performance by the
------------
Depositor of this Agreement and the other Transaction Documents to which the
Depositor is a party, the consummation of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof will not
conflict with, result in a breach of any of the terms and provisions of or
constitute (with or without notice or lapse of time or both) a default under the
certificate of formation or limited liability company agreement of the Depositor
or any material indenture, agreement, mortgage, deed of trust or other
instrument to which the Depositor is a party or by which the Depositor is bound
or to which any of its properties are subject, or result in the creation or
imposition of any lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument (other
than pursuant to this Agreement), or violate any law, order, rule or regulation
applicable to the Depositor or its properties of any federal or state regulatory
body, court, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the knowledge of the Depositor, threatened against the Depositor
before any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties (i)
asserting the invalidity of this Agreement, the Indenture, the Trust Agreement,
any of the other Transaction Documents, the Notes or the Certificates, (ii)
seeking to prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions contemplated by this Agreement, the
Indenture, the Trust Agreement or any of the other Transaction Documents, (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Depositor, would materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of, this
Agreement, the Indenture, the Trust Agreement, any of the other Transaction
Documents, the Receivables, the Notes or the Certificates, or (iv) that, in the
reasonable judgment of the Depositor, would adversely affect the federal or
Applicable Tax State income, excise, franchise or similar tax attributes of the
Trust or of the Notes or the Certificates.
SECTION 6.2 Liability of Depositor; Indemnities.
-----------------------------------
(a) The Depositor shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Depositor under this
Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the
Trust, the Owner Trustee and the Indenture Trustee from and against any taxes
that may at any time be asserted against any such Person with respect to, and as
of the date of, the transfer of the Receivables to the Trust or the issuance and
original sale of the Notes or the Certificates,
38
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Trust, not
including any taxes asserted with respect to ownership of the Receivables or
federal or other Applicable Tax State income taxes arising out of the
transactions contemplated by this Agreement and the other Transaction
Documents), and all costs and expenses in defending against such taxes.
(c) The Depositor shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders from and against any loss, liability or expense incurred by
reason of (i) the Depositor's willful misfeasance, bad faith or gross negligence
in the performance of its duties under this Agreement or any other Transaction
Document to which it is a party or by reason of a reckless disregard of its
obligations and duties under this Agreement or any other Transaction Document to
which it is a party and (ii) the Depositor's violation of federal or state
securities laws in connection with the registration or the sale of the Notes or
the Certificates.
(d) The Depositor shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained herein and in the
Trust Agreement, in the case of the Owner Trustee, and in the Indenture, in the
case of the Indenture Trustee, except to the extent that such cost, expense,
loss, claim, damage or liability (i) shall be due to the willful misfeasance,
bad faith or gross negligence (except for errors in judgment) of the Owner
Trustee or the Indenture Trustee, as applicable, (ii) in the case of the Owner
Trustee, shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in the Trust Agreement, (iii) in the
case of the Indenture Trustee, shall arise from the breach by the Indenture
Trustee of any of its representations and warranties set forth in the Indenture
or (iv) relates to any tax other than the taxes with respect to which either the
Depositor or the Servicer shall be required to indemnify the Owner Trustee or
the Indenture Trustee, as applicable.
(e) The Depositor shall pay any and all taxes levied or assessed upon
all or any part of the Owner Trust Estate.
Indemnification under this Section 6.2 shall survive the resignation
or removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor shall have made any indemnity payments
pursuant to this Section 6.2 and the Person to or on behalf of whom such
payments are made thereafter shall collect any of such amounts from others, such
Person shall promptly repay such amounts to the Depositor, without interest.
SECTION 6.3 Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Depositor. Any Person (i) into which the Depositor shall be
-------------------------
merged or consolidated, (ii) resulting from any merger, conversion or
consolidation to which the Depositor shall be a party or (iii) that shall
succeed by purchase and assumption to all or substantially all of the business
of the Depositor, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Depositor under this
Agreement, shall be the successor to the Depositor under this Agreement without
the execution or filing of any other document or any
39
further act on the part of any of the parties to this Agreement; provided,
--------
however, that (x) the Depositor shall have delivered to the Owner Trustee and
-------
the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such merger, conversion, consolidation or succession and such
agreement of assumption comply with this Section 6.3, (y) the Depositor shall
have delivered to the Owner Trustee and the Indenture Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been
authorized and filed that are necessary to fully preserve and protect the
interest of the Trust and the Indenture Trustee, respectively, in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to fully preserve and
protect such interest and (z) the Rating Agency Condition shall have been
satisfied and, unless an Insurer Default shall have occurred and be continuing,
the written consent of the Insurer shall have been obtained. The Depositor shall
provide prior written notice of any merger, conversion, consolidation or
succession pursuant to this Section 6.3 to the Insurer. Notwithstanding anything
to the contrary contained herein, the execution of the foregoing agreement of
assumption and compliance with clauses (x), (y) and (z) above shall be
conditions to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above.
SECTION 6.4 Limitation on Liability of Depositor and Others.
-----------------------------------------------
(a) Neither the Depositor nor any of the directors, officer,
employees or agents of the Depositor shall be under any liability to the Trust,
the Noteholders or the Certificateholders for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Depositor
-------- -------
or any such Person against any liability that would otherwise be imposed by
reason of willful misfeasance or bad faith in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement, or
by reason of gross negligence in the performance of duties under this Agreement
(except for errors in judgment). The Depositor, and its directors, officers,
employees and agents, may rely in good faith on the advice of counsel or on any
document of any kind prima facie properly executed and submitted by any Person
----- -----
in respect of any matters arising under this Agreement.
(b) The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 6.5 Depositor May Own Notes or Certificates. The Depositor,
---------------------------------------
and any Affiliate of the Depositor, may, in its individual or any other
capacity, become the owner or pledgee of Notes or Certificates with the same
rights as it would have if it were not the Depositor or an Affiliate of the
Depositor, except as otherwise expressly provided herein (including in the
definitions of "Note Balance" and "Certificate Balance") or in the other
Transaction Documents. Except as otherwise expressly provided herein (including
the definition of "Certificate Balance" and "Note Balance") or in the other
Transaction Documents, Notes and Certificates so owned by or pledged to the
Depositor or such Affiliate shall have an equal and proportionate benefit under
the provisions of this Agreement and the other Transaction Documents, without
preference, priority or distinction as among the Notes and the Certificates.
40
SECTION 6.6 RESERVED.
--------
SECTION 6.7 Certain Limitations.
-------------------
(a) The purpose of the Depositor shall be limited to the conduct or
promotion of the following activities: (i) to acquire retail installment sales
contracts, purchase money notes or other notes between motor vehicle dealers or
lenders and purchasers of new and used automobiles, minivans, sport utility
vehicles, light-duty trucks, motorcycles or commercial vehicles (the "Motor
-----
Vehicle Receivables"); (ii) to act as settlor or grantor of one or more trusts
-------------------
or special purpose entities (each, a "Securitization Trust") formed pursuant to
--------------------
a trust agreement or other agreement for the purpose of issuing one or more
series or classes of certificates, bonds, notes or other evidences of interest
or indebtedness (collectively, the "Securities") secured by or representing
----------
beneficial interests in the Motor Vehicle Receivables; (iii) to acquire, lease,
own, hold, sell, transfer, convey, dispose of, pledge, assign, borrow money
against, finance, refinance or otherwise deal with, publicly or privately held
and whether with unrelated third parties or with affiliated entities, retail
installment sales contracts, purchase money notes or other notes between motor
vehicle dealers or lenders and purchasers of Motor Vehicle Receivables; (iv) to
acquire Securities or other property of a Securitization Trust (including
remainder interests in collateral or reserve accounts) or any interest in any of
the foregoing; (v) to issue, authorize, sell and deliver Securities or other
instruments secured or collateralized by the Securities; (vi) to own equity
interests in other limited liability companies or partnerships whose purposes
are substantially restricted to those described in clauses (i) through (v)
above; (vii) to borrow money other than pursuant to clause (iii) above, but only
to the extent that such borrowing is permitted by the terms of the transactions
contemplated by clauses (i) through (vi) above; and (viii) to (A) negotiate,
authorize, execute, deliver or assume or perform the obligations under any
agreement, instrument or document relating to the activities set forth in
clauses (i) through (vii) above, including the Basic Documents (as defined in
the limited liability company agreement of the Depositor) and (B) engage in any
lawful act or activity and to exercise any powers permitted to limited liability
companies organized under the laws of the State of Delaware that are incidental
to and necessary, convenient or advisable for the accomplishment of the
above-mentioned purposes, including the entering into of interest rate or basis
swap, cap, floor or collar agreements, currency exchange agreements or similar
hedging transactions and referral, management, servicing and administration
agreements. So long as any outstanding debt of the Depositor or Securities are
rated by any nationally recognized statistical rating organization, the
Depositor shall not issue notes or otherwise borrow money unless (1) the
Depositor has made a written request to the related nationally recognized
statistical rating organization to issue notes or incur borrowings, which notes
or borrowings are rated by the related nationally recognized statistical rating
organization the same as or higher than the rating afforded any outstanding
rated debt or Securities, or (2) such notes or borrowings (x) are fully
subordinated (and which shall provide for payment only after payment in respect
of all outstanding rated debt and/or Securities) or are nonrecourse against any
assets of the Depositor other than the assets pledged to secure such notes or
borrowings, (y) do not constitute a claim against the Depositor in the event
such assets are insufficient to pay such notes or borrowings and (z) where such
notes or borrowings are secured by the rated debt or Securities, are fully
subordinated (and which shall provide for payment only after payment in respect
of all outstanding rated debt and/or Securities) to such rated debt or
Securities.
41
(b) Notwithstanding any other provision of this Section and any
provision of law, the Depositor shall not do any of the following:
(i) engage in any business or activity other than as set forth
in clause (a) above; or
(ii) without the unanimous written consent of the members of the
Depositor and the members of the Board of Directors of the Depositor
(including all independent directors of the Depositor), (A) consolidate or
merge the Depositor with or into any Person or sell all or substantially
all of the assets of the Depositor, (B) institute proceedings to have the
Depositor be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against Depositor, (C)
file a petition seeking, or consent to, reorganization or relief with
respect to the Depositor under any applicable federal or state law relating
to bankruptcy, (D) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Depositor
or a substantial part of its property, (E) make any assignment for the
benefit of creditors of the Depositor, (F) admit in writing the Depositor's
inability to pay its debts generally as they become due, (G) take any
action in furtherance of any action set forth in clauses (A) through (F)
above or (H) to the fullest extent permitted by law, dissolve or liquidate
the Depositor.
(c) The Depositor shall not amend its organizational documents except
in accordance with the provisions thereof.
ARTICLE VII
THE SERVICER
SECTION 7.1 Representations and Warranties of Servicer. The Servicer
------------------------------------------
makes the following representations and warranties on which the Trust shall be
deemed to have relied in accepting the Trust Property. The representations and
warranties speak as of the execution and delivery of this Agreement and shall
survive the sale, transfer, assignment and conveyance of the Trust Property to
the Trust pursuant to this Agreement and the pledge of the Trust Property to the
Indenture Trustee pursuant to the Indenture:
(a) Organization and Good Standing. The Servicer has been duly
------------------------------
organized and is validly existing as a corporation in good standing under the
laws of the state of its incorporation, has the power, authority and legal right
to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted and has the power,
authority and legal right to acquire, own, sell and service the Receivables and
to hold the Receivable Files as custodian on behalf of the Trust.
(b) Due Qualification. The Servicer is duly qualified to do business
-----------------
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals in each jurisdiction in which the failure to so qualify
or to obtain such licenses and approvals would, in the reasonable judgment of
the Depositor, materially and adversely affect the performance by the Depositor
of its obligations under, or the validity or enforceability of, this
42
Agreement, the Indenture, the Trust Agreement, any of the other Transaction
Documents, the Receivables, the Notes or the Certificates.
(c) Power and Authority. The Servicer has the power and authority to
-------------------
execute, deliver and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party, and the execution, delivery and
performance of this Agreement and the other Transaction Documents to which the
Servicer is a party have been duly authorized by the Servicer by all necessary
corporate action.
(d) Binding Obligation. This Agreement and the other Transaction
------------------
Documents to which the Servicer is a party constitute legal, valid and binding
obligations of the Servicer, enforceable against the Servicer in accordance with
their terms, subject, as to enforceability, to applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership, liquidation and other
similar laws and to general equitable principles.
(e) No Violation. The execution, delivery and performance by the
------------
Servicer of this Agreement and the other Transaction Documents to which the
Servicer is a party, the consummation of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof will not
conflict with, result in a breach of any of the terms and provisions of or
constitute (with or without notice or lapse of time or both) a default under the
articles of incorporation or bylaws of the Servicer or any material indenture,
agreement, mortgage, deed of trust or other instrument to which the Servicer is
a party or by which the Servicer is bound or to which any of its properties are
subject, or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, or violate any law, order, rule or regulation
applicable to the Servicer or its properties of any federal or state regulatory
body, court, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending, or, to the knowledge of the Servicer, threatened, against the Servicer
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that, in the reasonable
judgment of the Servicer would materially and adversely affect the performance
by the Servicer of its obligations under, or the validity or enforceability of,
this Agreement or the Receivables.
(g) Security Interest Matters. The Servicer has in its possession all
-------------------------
original copies of the motor vehicle retail installment sale contracts that
constitute or evidence the Receivables. The motor vehicle retail installment
sale contracts that constitute or evidence the Receivables do not have any marks
or notations indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Depositor, the Trust or the Indenture
Trustee.
43
SECTION 7.2 Liability of Servicer; Indemnities.
----------------------------------
(a) The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Servicer under this
Agreement.
(b) The Servicer shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Depositor from and against all costs, expenses,
losses, claims, damages and liabilities arising out of or incurred in connection
with the use, ownership or operation by the Servicer or any Affiliate of the
Servicer of a Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the Trust,
the Owner Trustee and the Indenture Trustee from and against any taxes that may
at any time be asserted against any such Person with respect to the transactions
contemplated in this Agreement or the other Transaction Documents, including any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Trust, not including any
taxes asserted with respect to, and as of the date of, the transfer of the
Receivables to the Trust or the issuance and original sale of the Notes or the
Certificates or asserted with respect to ownership of the Receivables or federal
or other Applicable Tax State income taxes arising out of the transactions
contemplated by this Agreement and the other Transaction Documents), and all
costs and expenses in defending against such taxes.
(d) The Servicer shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Depositor from and against any loss, liability or
expense incurred by reason of the Servicer's willful misfeasance, bad faith or
gross negligence in the performance of its duties under this Agreement or any
other Transaction Document to which it is a party or by reason of a reckless
disregard of its obligations and duties under this Agreement or any other
Transaction Document to which it is a party.
(e) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained herein and in the
Trust Agreement, in the case of the Owner Trustee, and in the Indenture, in the
case of the Indenture Trustee, except to the extent that such cost, expense,
loss, claim, damage or liability (i) shall be due to the willful misfeasance,
bad faith or gross negligence (except for errors in judgment) of the Owner
Trustee or the Indenture Trustee, as applicable, (ii) in the case of the Owner
Trustee, shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in the Trust Agreement, (iii) in the
case of the Indenture Trustee, shall arise from the breach by the Indenture
Trustee of any of its representations and warranties set forth in the Indenture
or (iv) relates to any tax other than the taxes with respect to which either the
Depositor or the Servicer shall be required to indemnify the Owner Trustee or
the Indenture Trustee, as applicable.
(f) For purposes of this Section 7.2, in the event of a termination
of the rights and obligations of CarMax (or any successor Servicer) as Servicer
pursuant to Section 8.1 or a
44
resignation by CarMax (or any successor Servicer) as Servicer pursuant to
Section 7.6, CarMax (or any successor Servicer) shall be deemed to be the
Servicer pending appointment of a successor Servicer (other than the Indenture
Trustee) pursuant to Section 8.2. Indemnification under this Section 7.2 by
CarMax (or any successor Servicer) as Servicer, with respect to the period such
Person was (or was deemed to be) the Servicer, shall survive the termination of
such Person as Servicer or a resignation by such Person as Servicer as well as
the resignation or removal of the Owner Trustee or the Indenture Trustee and the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation and the fees and expenses of the Owner
Trustee and the Indenture Trustee. If the Servicer shall have made any indemnity
payments pursuant to this Section 7.2 and the Person to or on behalf of whom
such payments are made thereafter shall collect any of such amounts from others,
such Person shall promptly repay such amounts to the Servicer, without interest.
SECTION 7.3 Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. Any Person (i) into which the Servicer shall be merged
------------------------
or consolidated, (ii) resulting from any merger, conversion or consolidation to
which the Servicer shall be a party or (iii) that shall succeed by purchase and
assumption to all or substantially all of the business of the Servicer, which
Person in any of the foregoing cases is an Eligible Servicer and executes an
agreement of assumption to perform every obligation of the Servicer under this
Agreement, shall be the successor to the Servicer under this Agreement without
the execution or filing of any other document or any further act on the part of
any of the parties to this Agreement; provided, however, that (x) the Servicer
-------- -------
shall have delivered to the Depositor, the Owner Trustee and the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating that
such merger, conversion, consolidation or succession and such agreement of
assumption comply with this Section 7.3 and (y) the Servicer shall have
delivered to the Depositor, the Owner Trustee and the Indenture Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been authorized and filed that are necessary to fully preserve and protect the
interest of the Trust and the Indenture Trustee, respectively, in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to fully preserve and
protect such interest. The Servicer shall provide prior written notice of any
merger, conversion, consolidation or succession pursuant to this Section 7.3 to
the Insurer and the Rating Agencies. Notwithstanding anything to the contrary
contained herein, the execution of the foregoing agreement of assumption and
compliance with clauses (x) and (y) above shall be conditions to the
consummation of the transactions referred to in clauses (i), (ii) and (iii)
above.
SECTION 7.4 Limitation on Liability of Servicer and Others.
----------------------------------------------
(a) Neither the Servicer nor any of the directors, officers,
employees or agents of the Servicer shall be under any liability to the Trust,
the Noteholders or the Certificateholders for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
-------- -------
or any such Person against any liability that would otherwise be imposed by
reason of willful misfeasance or bad faith in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement, or
by reason of negligence in the performance of duties under this Agreement
(except for errors in judgment). The Servicer, and its directors,
45
officers, employees and agents, may rely in good faith on the advice of counsel
or on any document of any kind prima facie properly executed and submitted by
----- -----
any Person in respect of any matters arising under this Agreement.
(b) The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its duties
to service the Receivables in accordance with this Agreement and that in its
opinion may involve it in any expense or liability; provided, however, that the
-------- -------
Servicer may undertake any reasonable action that it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
to this Agreement and the interests of the Noteholders and the
Certificateholders under this Agreement. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Servicer.
SECTION 7.5 Delegation of Duties. The Servicer may at any time
--------------------
delegate its duties as servicer under this Agreement to third parties; provided,
--------
however, that no such delegation shall relieve the Servicer of its
-------
responsibilities with respect to such duties and the Servicer shall be solely
responsible for the fees of any such third party; and, provided further, that
-------- -------
the Servicer must obtain the prior written consent of the Insurer if such
delegation is not in the ordinary course of business.
SECTION 7.6 Servicer Not to Resign. Subject to the provisions of
----------------------
Section 7.3, the Servicer shall not resign from its obligations and duties under
this Agreement except upon a determination that the performance of its duties is
no longer permissible under applicable law. Any such determination permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered to the Depositor, the Owner Trustee and the Indenture
Trustee. No such resignation shall become effective until the Indenture Trustee
or a successor Servicer shall have (i) assumed the obligations and duties of the
Servicer in accordance with Section 8.2 and (ii) become the Administrator under
the Administration Agreement pursuant to Section 8 thereof.
SECTION 7.7 Servicer May Own Notes or Certificates. The Servicer, and
--------------------------------------
any Affiliate of the Servicer, may, in its individual or any other capacity,
become the owner or pledgee of Notes or Certificates with the same rights as it
would have if it were not the Servicer or an Affiliate of the Servicer, except
as otherwise expressly provided herein (including in the definitions of "Note
Balance" and "Certificate Balance") or in the other Transaction Documents.
Except as otherwise expressly provided herein (including in the definitions of
"Note Balance" and "Certificate Balance") or in the other Transaction Documents,
Notes and Certificates so owned by or pledged to the Servicer or such Affiliate
shall have an equal and proportionate benefit under the provisions of this
Agreement and the other Transaction Documents, without preference, priority or
distinction as among the Notes and the Certificates.
46
ARTICLE VIII
SERVICING TERMINATION
Section 8.1 Events of Servicing Termination.
-------------------------------
(a) The occurrence of any one of the following events shall
constitute an event of servicing termination hereunder (each, an "Event of
--------
Servicing Termination"):
---------------------
(i) any failure by the Servicer to deliver to the Owner
Trustee, the Indenture Trustee or the Insurer the Servicer's Certificate
for any Collection Period, which failure shall continue unremedied beyond
the earlier of three (3) Business Days following the date such Servicer's
Certificate was required to be delivered and the Business Day preceding the
related Distribution Date, or any failure by the Servicer to make any
required payment or deposit under this Agreement, which failure shall
continue unremedied beyond the earlier of five (5) Business Days following
the date such payment or deposit was due and, in the case of a payment or
deposit to be made no later than a Distribution Date or the Business Day
preceding a Distribution Date, such Distribution Date or preceding Business
Day, as applicable; or
(ii) any failure by the Servicer duly to observe or perform in
any material respect any other covenant or agreement in this Agreement,
which failure shall materially and adversely affect the rights of the
Depositor, the Certificateholders, the Noteholders or the Insurer and shall
continue unremedied for a period of sixty (60) days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Depositor, the Owner Trustee, the
Indenture Trustee or the Insurer or to the Depositor, the Seller, the
Servicer, the Owner Trustee and the Indenture Trustee by the Holders of
Notes evidencing not less than 25% of the Note Balance or, if the Notes
have been paid in full, by the Holders of Certificates evidencing not less
than 25% of the Certificate Balance; or
(iii) any representation or warranty of the Servicer made in this
Agreement or in any certificate delivered pursuant hereto or in connection
herewith, other than any representation and warranty relating to a
Receivable that has been purchased by the Servicer, proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and the circumstance or condition in respect of which such
representation or warranty was incorrect shall not have been eliminated or
otherwise cured for a period of thirty (30) days after the date on which
written notice of such circumstance or condition, requiring the same to be
eliminated or cured, shall have been given to the Servicer by the
Depositor, the Owner Trustee, Indenture Trustee or the Insurer or to the
Depositor, the Seller, the Servicer, the Owner Trustee and the Indenture
Trustee by the Holders of Notes evidencing not less than 25% of the Note
Balance or, if the Notes have been paid in full, by the Holders of
Certificates evidencing not less than 25% of the Certificate Balance; or
(iv) the entry of a decree or order by a court or agency or
supervisory authority of competent jurisdiction for the appointment of a
conservator, receiver, liquidator or trustee for the Servicer in any
bankruptcy, insolvency, readjustment of debt,
47
marshalling of assets and liabilities or similar proceeding, or for the
winding up or liquidation of its affairs, which decree or order continues
unstayed and in effect for a period of sixty (60) consecutive days; or
(v) the consent by the Servicer to the appointment of a
conservator, receiver, liquidator or trustee in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceeding of or relating to the Servicer or relating to substantially all
of its property, the admission in writing by the Servicer of its inability
to pay its debts generally as they become due, the filing by the Servicer
of a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, the making by the Servicer of an assignment for the
benefit of its creditors or the voluntary suspension by the Servicer of
payment of its obligations; or
(vi) the failure by the Servicer to be an Eligible Servicer.
If an Event of Servicing Termination or a Trigger Event (as defined in
the Insurance Agreement) shall have occurred and be continuing and no Insurer
Default shall have occurred and be continuing, the Indenture Trustee or, if the
Notes have been paid in full, the Owner Trustee, in each case if directed in
writing to do so by the Insurer, by notice then given in writing to the
Depositor and the Servicer, shall terminate all of the rights and obligations of
the Servicer under this Agreement. If an Event of Servicing Termination shall
have occurred and be continuing and an Insurer Default shall have occurred and
be continuing, the Indenture Trustee or the Holders of Notes evidencing not less
than 51% of the Note Balance or, if the Notes have been paid in full, the Owner
Trustee or the Holders of Certificates evidencing not less than 51% of the
Certificate Balance, in each case by notice then given in writing to the
Depositor, the Servicer and the Insurer (with a copy to the Indenture Trustee
and the Owner Trustee if given by the Noteholders or the Certificateholders),
may terminate all of the rights and obligations of the Servicer under this
Agreement; provided, however, that the indemnification obligations of the
-------- -------
Servicer under Section 7.2 shall survive such termination. On or after the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Notes, the
Certificates, the Trust Property or otherwise, shall pass to and be vested in
the Indenture Trustee or a successor Servicer appointed under Section 8.2 and,
without limitation, the Indenture Trustee and the Owner Trustee shall be
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivable Files or the certificates of title to the Financed
Vehicles or otherwise. The Servicer shall cooperate with the Indenture Trustee,
the Owner Trustee and such successor Servicer in effecting the termination of
its responsibilities and rights as Servicer under this Agreement, including the
transfer to the Indenture Trustee or such successor Servicer for administration
of all cash amounts that are at the time held by the Servicer for deposit or
thereafter shall be received with respect to a Receivable, all Receivable Files
and all information or documents that the Indenture Trustee or such successor
Servicer may require. In addition, the Servicer shall transfer its electronic
records relating to the Receivables to the successor Servicer in such electronic
form as the successor Servicer may reasonably request. All reasonable costs and
expenses (including reasonable attorneys' fees) incurred or payable by the
successor Servicer in connection with the transfer of servicing (whether due to
termination, resignation or
48
otherwise), including allowable compensation of employees and overhead costs
incurred or payable in connection with the transfer of the Receivable Files or
any amendment to this Agreement required in connection with the transfer of
servicing (which amendment must be approved in writing by the Insurer), (the
"Transition Costs") shall be paid by the outgoing Servicer (or by the initial
----------------
Servicer if the outgoing Servicer is the Indenture Trustee acting on an interim
basis) upon presentation of reasonable documentation of such costs and expenses.
(b) The Indenture Trustee and the Owner Trustee shall have no
obligation to notify the Noteholders, the Certificateholders or any other Person
of the occurrence of any event specified in Section 8.1(a) prior to the
continuance of such event through the end of any cure period specified in
Section 8.1(a).
SECTION 8.2 Indenture Trustee to Act; Appointment of Successor
--------------------------------------------------
Servicer. Upon the resignation of the Servicer pursuant to Section 7.6 or the
--------
termination of the Servicer pursuant to Section 8.1, the Indenture Trustee shall
be the successor in all respects to the Servicer in its capacity as Servicer
under this Agreement and shall be subject to all the obligations and duties
placed on the Servicer by the terms and provisions of this Agreement. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if no such resignation
or termination had occurred, except that all collections on or in respect of the
Receivables shall be deposited in the Collection Account within two (2) Business
Days of receipt and shall not be retained by the Servicer. Notwithstanding the
foregoing, the Indenture Trustee may, if it shall be unwilling so to act, or
shall, if it is legally unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, an Eligible Servicer as the successor to the
terminated Servicer under this Agreement, subject to the approval of the
Insurer, unless an Insurer Default shall have occurred and be continuing. In
connection with such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor Servicer out of collections
on or in respect of the Receivables as it and such successor shall agree;
provided, however, that such compensation shall not be greater than that payable
-------- -------
to CarMax as Servicer hereunder without the prior written consent of the
Insurer. The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Indenture Trustee shall not be relieved of its duties as
successor Servicer under this Section 8.2 until a newly appointed Servicer shall
have assumed the obligations and duties of the terminated Servicer under this
Agreement. Notwithstanding anything to the contrary contained herein, in no
event shall the Indenture Trustee be liable for any servicing fee or for any
differential in the amount of the servicing fee paid hereunder and the amount
necessary to induce any successor Servicer to act as successor Servicer
hereunder.
SECTION 8.3 Effect of Servicing Transfer.
----------------------------
(a) After a transfer of servicing hereunder, the Indenture Trustee or
successor Servicer shall notify the Obligors to make directly to the successor
Servicer payments that are due under the Receivables after the effective date of
such transfer.
(b) Except as provided in Section 8.2, after a transfer of servicing
hereunder, the outgoing Servicer shall have no further obligations with respect
to the administration,
49
servicing, custody or collection of the Receivables and the successor Servicer
shall have all of such obligations, except that the outgoing Servicer will
transmit or cause to be transmitted directly to the successor Servicer for its
own account, promptly on receipt and in the same form in which received, any
amounts or items held by the outgoing Servicer (properly endorsed where required
for the successor Servicer to collect any such items) received as payments upon
or otherwise in connection with the Receivables.
(c) Any successor Servicer shall provide the Depositor and the
Insurer with access to the Receivable Files and to the successor Servicer's
records (whether written or automated) with respect to the Receivable Files.
Such access shall be afforded without charge, but only upon reasonable request
and during normal business hours at the offices of the successor Servicer.
Nothing in this Section 8.3 shall affect the obligation of the successor
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section 8.3.
SECTION 8.4 Notification to Insurer, Noteholders, Certificateholders
--------------------------------------------------------
and Rating Agencies. Upon any notice of an Event of Servicing Termination or
-------------------
upon any termination of, or any appointment of a successor to, the Servicer
pursuant to this Article VIII, the Indenture Trustee shall give prompt written
notice thereof to the Insurer and the Noteholders and the Owner Trustee shall
give prompt written notice thereof to the Certificateholders and to the Rating
Agencies.
SECTION 8.5 Waiver of Past Events of Servicing Termination. The
----------------------------------------------
Holders of Notes evidencing not less than 51% of the Note Balance or, if the
Notes have been paid in full, the Holders of Certificates evidencing not less
than 51% of the Certificate Balance may, on behalf of all Noteholders and
Certificateholders, as applicable, waive any Event of Servicing Termination and
its consequences, except an event resulting from the failure to make any
required deposits to or payments from the Collection Account, the Note Payment
Account, the Certificate Payment Account, or the Reserve Account in accordance
with this Agreement; provided, however, that no Event of Servicing Termination
-------- -------
shall be waived without the consent of the Insurer if such waiver would
reasonably be expected to have a material adverse effect upon the rights of the
Insurer; and, provided further, that the Insurer (if no Insurer Default shall
-------- -------
have occurred and be continuing), in its discretion, may waive any Event of
Servicing Termination. Upon any such waiver of an Event of Servicing
Termination, such event shall cease to exist, and shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other event or impair any right arising therefrom, except to the
extent expressly so waived.
ARTICLE IX
TERMINATION
SECTION 9.1 Optional Purchase of All Receivables.
------------------------------------
(a) If, as of the last day of any Collection Period, the Pool
Balance shall be less than or equal to 10% of the Initial Pool Balance, the
Servicer shall have the option to purchase on the following Distribution Date
the Owner Trust Estate, other than the Collection
50
Account, the Note Payment Account, the Certificate Payment Account or the
Reserve Account. To exercise such option, the Servicer shall notify the
Depositor, the Owner Trustee, the Indenture Trustee, the Insurer and the Rating
Agencies no later than twenty (20) days prior to the Distribution Date on which
such repurchase is to be effected and shall deposit into the Collection Account
on the Business Day preceding such Distribution Date an amount equal to the
aggregate Purchase Amount for the Receivables, plus the appraised value of any
----
other Trust Property, other than the Collection Account, the Note Payment
Account, the Certificate Payment Account or the Reserve Account, such value to
be determined by an appraiser mutually agreed upon by the Servicer, the Owner
Trustee, the Indenture Trustee and the Insurer; provided, however, that the
-------- -------
Servicer shall not be permitted to exercise such option unless the amount to be
deposited in the Collection Account pursuant to this Section 9.1(a) is at least
equal to the sum of all amounts due to the Servicer under this Agreement plus
----
the Note Balance plus all accrued but unpaid interest (including any overdue
----
interest) on the Notes plus the Certificate Balance plus all accrued but unpaid
---- ----
interest (including any overdue interest) on the Certificates plus all amounts
----
due to the Insurer under the Transaction Documents or the Policy. Upon such
payment, the Servicer shall succeed to and own all interests in and to the
Trust. The aggregate Purchase Amount for such Distribution Date, plus, to the
----
extent necessary, all amounts in the Reserve Account, shall be used to make
payments in full to the Noteholders, the Certificateholders and the Insurer in
the manner set forth in Article IV.
(b) If, at the time the Servicer exercises its purchase option
hereunder, the Servicer's long-term unsecured debt has a rating lower than
investment grade by the Rating Agencies, the Servicer shall deliver to the
Depositor, the Owner Trustee and the Indenture Trustee on such Distribution Date
(i) a letter from an Independent investment bank or an Independent public
accountant to the effect that the price paid by the Servicer for the Receivables
at the time of transfer pursuant to such purchase option represented a fair
market price for such Receivables or (ii) a letter from the Rating Agencies to
the effect that no such letter is required.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders shall succeed to the rights of the Noteholders hereunder and
the Indenture Trustee shall continue to carry out its obligations hereunder with
respect to the Certificateholders, including making distributions from the
Collection Account in accordance with Section 4.6(d), making withdrawals from
the Reserve Account in accordance with Sections 4.6(b) and 4.7 and submitting
claims for payment under the Insurance Policy in accordance with the terms
thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendment.
---------
(a) This Agreement may be amended from time to time by the Depositor,
the Seller, the Servicer and the Owner Trustee, on behalf of the Trust, with the
consent of the Indenture Trustee, but without the consent of any of the
Noteholders or the Certificateholders, to cure any ambiguity, to correct or
supplement any provision in this Agreement that may be inconsistent with any
other provisions in this Agreement or any offering document used in
51
connection with the initial offer and sale of the Notes or the Certificates
or to add, change or eliminate any other provisions with respect to matters or
questions arising under this Agreement that are not inconsistent with the
provisions of this Agreement; provided, however, that (i) no such amendment may
-------- -------
materially adversely affect the interests of any Noteholder or
Certificateholder, (ii) no such amendment will be permitted unless an Opinion of
Counsel is delivered to the Depositor, the Owner Trustee and the Indenture
Trustee to the effect that such amendment will not cause the Trust to be
characterized for federal income tax purposes as an association taxable as a
corporation or otherwise have any material adverse impact on the federal income
taxation of any Notes Outstanding or outstanding Certificates or any Noteholder
or Certificateholder and (iii) no such amendment will be permitted without the
consent of the Insurer if such amendment would reasonably be expected to
materially adversely affect the interests of the Insurer.
(b) This Agreement may also be amended from time to time by the
Depositor, the Seller, the Servicer and the Owner Trustee, on behalf of the
Trust, with the consent of the Indenture Trustee, the consent of the Holders of
Notes evidencing not less than 51% of the Note Balance or, if the Notes have
been paid in full, the consent of the Holders of Certificates evidencing not
less than 51% of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that (x) no such amendment will be
-------- -------
permitted unless an Opinion of Counsel is delivered to the Depositor, the Owner
Trustee and the Indenture Trustee to the effect that such amendment will not
cause the Trust to be characterized for federal income tax purposes as an
association taxable as a corporation or otherwise have any material adverse
impact on the federal income taxation of any Notes Outstanding or outstanding
Certificates or any Noteholder or Certificateholder and (y) no such amendment
will be permitted without the consent of the Insurer if such amendment would
reasonably be expected to materially adversely affect the interests of the
Insurer; and, provided further, that no such amendment may:
-------- -------
(i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, or change the allocation or
priority of, collections of payments on or in respect of the
Receivables or distributions that are required to be made for the
benefit of the Noteholders or the Certificateholders, or change any
Note Rate or the Certificate Rate, without the consent of all
Noteholders and Certificateholders adversely affected by such
amendment;
(ii) reduce the percentage of the Note Balance or the percentage
of the Certificate Balance the consent of the Holders of which is
required for any amendment to this Agreement without the consent of
all the Noteholders and Certificateholders adversely affected by the
amendment; or
(iii) adversely affect the rating assigned by either Rating
Agency to any Class of Notes or the Certificates without the consent
of the Holders of Notes evidencing not less than 66 2/3% of the
aggregate principal amount of the then outstanding Notes of such Class
or the consent of the Holders of Certificates evidencing not less than
66 2/3% of the Certificate Balance.
52
(c) An amendment to this Agreement shall be deemed not to materially
adversely affect the interests of any Noteholder or Certificateholder if (i) the
Person requesting such amendment obtains and delivers to the Owner Trustee an
Opinion of Counsel to that effect or (ii) the Rating Agency Condition is
satisfied.
(d) Prior to the execution of any amendment or consent pursuant to
Section 10.1, the Servicer shall provide written notification of the substance
of such amendment or consent to each Rating Agency and the Insurer.
(e) Promptly after the execution of any amendment or consent pursuant
to Section 10.1(b), the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to each Certificateholder. It shall not
be necessary for the consent of the Noteholders or the Certificateholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any other
consents of the Noteholders and the Certificateholders provided for in this
Agreement) and of evidencing the authorization of the execution thereof by the
Noteholders and the Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee and the Indenture Trustee may prescribe.
(f) Prior to the execution of any amendment pursuant to Section 10.1,
the Depositor, the Owner Trustee and the Indenture Trustee shall be entitled to
receive and rely upon (i) an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this Agreement and (ii) an
Officer's Certificate of the Servicer that all conditions precedent provided for
in this Agreement to the execution of such amendment have been complied with.
The Owner Trustee or the Indenture Trustee may, but shall not be obligated to,
enter into any such amendment which affects such Owner Trustee's or Indenture
Trustee's own rights, duties or immunities under this Agreement or otherwise.
(g) The representations and warranties set forth in Section 2.3(b)
and (c), Section 7.1(g) and paragraphs (l), (m) and (n) of Exhibit A to this
Agreement may not be amended or waived.
SECTION 10.2 Protection of Title to Trust.
----------------------------
(a) The Depositor or the Servicer, or both, shall authorize and file
such financing statements and cause to be authorized and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Trust and the
Indenture Trustee for the benefit of the Noteholders in the Receivables and the
proceeds thereof. The Depositor or the Servicer, or both, shall deliver (or
cause to be delivered) to the Owner Trustee and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above as soon as available following such filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or organizational structure in any manner that would make any financing
statement or continuation statement filed by the Depositor or the Servicer in
accordance with Section 10.2(a) seriously
53
misleading within the meaning of Section 9-506 of the Relevant UCC, unless it
shall have given the Owner Trustee and the Indenture Trustee at least sixty (60)
days' prior written notice thereof and shall have promptly filed such amendments
to previously filed financing statements or continuation statements or such new
financing statements as may be necessary to continue the perfection of the
interest of the Trust and the Indenture Trustee for the benefit of the
Noteholders in the Receivables and the proceeds thereof.
(c) Each of the Depositor and the Servicer shall give the Owner
Trustee and the Indenture Trustee at least sixty (60) days' prior written notice
of any change in its name, identity, organizational structure or jurisdiction of
organization or any relocation of its principal place of business or chief
executive office if, as a result of such change or relocation, the applicable
provisions of the Relevant UCC would require the filing of any amendment to any
previously filed financing statement or continuation statement or of any new
financing statement and shall promptly file any such amendment, continuation
statement or new financing statement. The Depositor shall at all times maintain
its jurisdiction of organization, its principal place of business and its chief
executive office within the United States of America. The Servicer shall at all
times maintain each office from which it shall service Receivables and each
office at which the Receivable Files are located within the United States of
America.
(d) The Servicer shall maintain accounts and records as to each
receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
and the Reserve Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of the transfer of the Receivables to the Trust pursuant
to this Agreement, the Servicer's master computer records (including any back-up
archives) that refer to a Receivable shall indicate clearly and unambiguously
the interest of the Trust and the Indenture Trustee in such Receivable and that
such Receivable is owned by the Trust and has been pledged to the Indenture
Trustee pursuant to the Indenture. Indication of the Trust's and the Indenture
Trustee's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, such Receivable shall have been
paid in full or repurchased by the Seller or purchased by the Servicer.
(f) If at any time the Depositor or the Servicer shall propose
to sell, grant a security interest in or otherwise transfer any interest in any
motor vehicle retail installment sale contract to any prospective purchaser,
lender or other transferee, the Servicer shall give to such prospective
purchaser, lender or other transferee computer tapes, compact disks, records or
print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Receivable, shall indicate clearly and
unambiguously that such Receivable has been sold and is owned by the Trust and
has been pledged to the Indenture Trustee (unless such Receivable has been paid
in full or repurchased by the Seller or purchased by the Servicer).
54
(g) The Servicer shall permit the Owner Trustee, the Indenture
Trustee and their respective agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivable.
(h) If the Seller has repurchased one or more Receivables from
the Trust pursuant to Section 2.4 or the Servicer has purchased one or more
Receivables from the Trust pursuant to Section 3.7, the Servicer shall, upon
request, furnish to the Owner Trustee and the Indenture Trustee, within ten (10)
Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a reconciliation of such
list to the Receivable Schedule and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Depositor and the
Depositor shall deliver to the Owner Trustee and the Indenture Trustee:
(1) promptly after the authorization and delivery of
each amendment to any financing statement, an Opinion of Counsel
either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been
authorized and filed that are necessary fully to preserve and
protect the interest of the Depositor (in the case of an opinion
delivered by the Servicer) or the Trust and the Indenture
Trustee (in the case of an opinion delivered by the Depositor)
in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are
given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such
interest; and
(2) within ninety (90) days after the beginning of
each calendar year (beginning with the year 2002), an Opinion of
Counsel, dated as of a date during such 90-day period, either
(A) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been authorized and
filed that are necessary fully to preserve and protect the
interest of the Depositor (in the case of an opinion delivered
by the Servicer) or the Trust and the Indenture Trustee (in the
case of an opinion delivered by the Depositor) in the
Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are
given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such
interest.
Each Opinion of Counsel referred to in clause (i)(1) or (i)(2)
above shall specify any action necessary (as of the date of such opinion) to be
taken on or before March 31 of the following year to preserve and protect such
interest.
(j) The Depositor shall, to the extent required by applicable
law, cause the Notes to be registered with the Commission pursuant to Section
12(b) or Section 12(g) of the Exchange Act within the time periods specified in
such sections.
SECTION 10.3 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
55
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF WHICH MAY REQUIRE THE APPLICATION OF THE
LAWS OF ANY OTHER JURISDICTION (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATION LAW).
SECTION 10.4 Notices. All demands, notices and other
-------
communications under this Agreement shall be in writing, personally delivered,
sent by telecopier, overnight courier or mailed by certified mail, return
receipt requested, and shall be deemed to have been duly given upon receipt (i)
in the case of the Depositor, at the following address: 000 Xxxxx Xxxxxxx
Xxxxxx, Xxx Xxxxx Xxxxx Xxxxxx, XX-0, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000,
Attention: General Counsel, (ii) in the case of the Seller or the Servicer, at
the following address: 0000 Xxx Xxxx, Xxxx Xxxxx, Xxxxxxxx 00000, Attention:
Treasury Department, (iii) in the case of the Owner Trustee, at the related
Corporate Trust Office, (iv) in the case of the Indenture Trustee, at the
related Corporate Trust Office, (v) in the case of Moody's, at the following
address: Xxxxx'x Investors Service, Inc., ABS Monitoring Department, 00 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and (vi) in the case of Standard & Poor's, at
the following address: Standard & Poor's, a division of The XxXxxx-Xxxx
Companies, Inc., 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Asset Backed Surveillance Department, and (vi) in the case of the
Insurer, at the following address: MBIA Insurance Corporation, 000 Xxxx Xxxxxx,
Xxxxxx, Xxx Xxxx 00000, Attention: Insured Portfolio Management, Structured
Finance.
SECTION 10.5 Severability of Provisions. If any one or more of
--------------------------
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement, or of the Notes or the
Certificates, or the rights of the Holders thereof.
SECTION 10.6 Assignment. Notwithstanding anything to the
----------
contrary contained herein, except as provided in Sections 7.3 and 8.2 and as
provided in the provisions of this Agreement concerning the resignation of the
Servicer, this Agreement may not be assigned by the Depositor, the Seller or the
Servicer without the prior written consent of the Owner Trustee, the Indenture
Trustee, the Holders of Notes evidencing not less than 66-2/3% of the Note
Balance and the Holders of Certificates evidencing not less than 66-2/3% of the
Certificate Balance.
SECTION 10.7 Further Assurances. The Depositor, the Seller, the
------------------
Servicer and the Trust agree to do and perform, from time to time, any and all
acts and to authorize and/or execute any and all further instruments required or
reasonably requested by the Owner Trustee or the Indenture Trustee more fully to
effect the purposes of this Agreement, including the authorization of any
financing statements or continuation statements relating to the Receivables for
filing under the provisions of the Relevant UCC of any applicable jurisdiction.
SECTION 10.8 No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the Depositor, the Owner
Trustee, the Indenture
56
Trustee, the Noteholders or the Certificateholders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
SECTION 10.9 Third-Party Beneficiaries. This Agreement shall
-------------------------
inure to the benefit of and be binding upon the parties hereto, the Owner
Trustee, the Noteholders, the Certificateholders, the Insurer and their
respective successors and permitted assigns. Except as otherwise provided in
this Article X, no other Person shall have any right or obligation hereunder.
The parties hereto hereby acknowledge and consent to the pledge of this
Agreement by the Trust to the Indenture Trustee for the benefit of the
Noteholders pursuant to the Indenture.
SECTION 10.10 Actions by Noteholder or Certificateholders.
-------------------------------------------
(a) Wherever in this Agreement a provision is made that an
action may be taken or a notice, demand or instruction given by the Noteholders
or the Certificateholders, such action, notice or instruction may be taken or
given by any Noteholder or any Certificateholder, as applicable, unless such
provision requires a specific percentage of the Noteholders or the
Certificateholders.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Noteholder or a Certificateholder shall bind
such Noteholder or Certificateholder and every subsequent Holder of such Note or
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done by
the Owner Trustee, the Indenture Trustee or the Servicer in reliance thereon,
whether or not notation of such action is made upon such Note or Certificate.
SECTION 10.11 Counterparts. For the purpose of facilitating the
------------
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 10.12 No Bankruptcy Petition. The Owner Trustee, the
----------------------
Indenture Trustee, the Trust and the Servicer each covenants and agrees that it
will not at any time institute against, or join any other Person in instituting
against, the Depositor or the Trust any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other proceedings under any federal or
state bankruptcy or similar law. This Section 10.13 shall survive the
resignation or removal of the Owner Trustee under the Trust Agreement and the
Indenture Trustee under the Indenture and shall survive the termination of the
Trust Agreement and the Indenture.
SECTION 10.13 Limitation of Liability of Owner Trustee and
--------------------------------------------
Indenture Trustee.
-----------------
(a) Notwithstanding anything to the contrary contained herein,
this Agreement has been countersigned by the Owner Trustee not in its individual
capacity but solely in its capacity as Owner Trustee of the Trust, and in no
event shall the Owner Trustee in its individual capacity have any liability for
the representations, warranties, covenants, agreements
57
or other obligations of the Trust hereunder or in any of the certificates,
notices or agreements delivered pursuant hereto, as to all of which recourse
shall be had solely to the assets of the Trust. For all purposes of this
Agreement, in the performance of its duties or obligations hereunder or in the
performance of any duties or obligations of the Trust hereunder, the Owner
Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything to the contrary contained herein,
this Agreement has been accepted by the Indenture Trustee not in its individual
capacity but solely as Indenture Trustee, and in no event shall the Indenture
Trustee in its individual capacity have any liability for the representations,
warranties, covenants, agreements or other obligations of the Trust hereunder or
in any of the certificates, notices or agreements delivered pursuant hereto, as
to all of which recourse shall be had solely to the assets of the Trust.
SECTION 10.14 Insurer Defense Costs. Each of the Trust, the
---------------------
Depositor, the Seller and the Servicer acknowledges Section 4.6 of the Trust
Agreement and agrees that the Trust shall reimburse the Insurer for all Insurer
Defense Costs pursuant to Section 4.6(d) of this Agreement and Section 2.8(a) of
the Indenture.
[SIGNATURE PAGES FOLLOW]
58
IN WITNESS WHEREOF, the Trust, the Depositor, the Seller and
the Servicer have caused this Agreement to be duly executed by their respective
officers, thereunto duly authorized, all as of the day and year first above
written.
CARMAX AUTO OWNER TRUST 2001-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By:______________________________
Name:
Title:
POOLED AUTO SECURITIES SHELF LLC,
as Depositor
By:______________________________
Name:
Title:
CARMAX AUTO SUPERSTORES, INC.,
as Seller and Servicer
By:______________________________
Name:
Title:
Accepted and agreed:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:______________________________
Name:
Title:
59
Schedule 1
Receivable Schedule
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[ON FILE WITH THE SERVICER]
Schedule 2
Location of Receivable Files
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000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Exhibit A
Representations and Warranties
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CarMax Auto Superstores, Inc., a Virginia corporation (the
"Seller"), has made the following representations and warranties in the
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Receivables Purchase Agreement dated as of November 1, 2001 (the "Receivables
-----------
Purchase Agreement") between the Seller and Pooled Auto Securities Shelf LLC, a
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Delaware limited liability company (the "Depositor"). All capitalized terms used
---------
in such representations and warranties have the respective meanings assigned to
them in the Receivables Purchase Agreement.
(a) Characteristics of Receivables. Each Receivable (i) has
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been originated by the Seller in the ordinary course of business in connection
with the sale of a new or used motor vehicle and has been fully and properly
executed by the parties thereto, (ii) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof are adequate
for realization against the collateral of the benefits of the security, (iii)
provides for level monthly payments that fully amortize the Amount Financed by
maturity (except that the period between the date of such Receivable and the
date of the first Scheduled Payment may be less than or greater than one month
and the amount of the first and last Scheduled Payments may be less than or
greater than the level payments) and yield interest at the related APR, (iv)
provides for, in the event that such Receivable is prepaid, a prepayment that
fully pays the Principal Balance of such Receivable with interest at the related
APR through the date of payment, (v) is a retail installment sale contract
substantially in the form of Exhibit E to the Receivables Purchase Agreement,
(vi) is secured by a new or used motor vehicle that had not been repossessed as
of the Cutoff Date, (vii) is a Simple Interest Receivable, (viii) relates to an
Obligor who has made at least one (1) payment under such Receivable as of the
Cutoff Date and (ix) relates to an Obligor whose mailing address is located in
any State.
(b) Receivable Schedule. The information set forth in the
-------------------
Receivable Schedule was true and correct in all material respects as of the
opening of business on the Cutoff Date, and no selection procedures believed to
be adverse to the Depositor, the Noteholders and/or the Certificateholders were
utilized in selecting the Receivables from those retail installment sale
contracts which met the criteria contained in the Receivables Purchase
Agreement. The information set forth in the compact disk or other listing
regarding the Receivables made available to the Depositor and its assigns (which
compact disk or other listing is required to be delivered as specified herein)
is true and correct in all material respects.
(c) Compliance with Law. Each Receivable and the sale of the
-------------------
related Financed Vehicle complied, at the time such Receivable was originated
and complies, as of the Closing Date, in all material respects with all
requirements of applicable federal, state and local laws, and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Credit Billing
Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act,
the Xxxxxxxx-Xxxx Warranty Act, the Federal Reserve Board's Regulations B, M and
Z, the Soldiers' and Sailors' Civil Relief Act of 1940 and state adaptations of
the National Consumer Act and the Uniform Consumer Credit Code.
A-1
(d) Binding Obligation. Each Receivable represents the genuine, legal,
------------------
valid and binding payment obligation in writing of the related Obligor,
enforceable by the holder thereof in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
(e) No Government Obligor. No Receivable is due from the United States
---------------------
of America or any State or from any agency, department or instrumentality of the
United States of America or any State.
(f) Security Interest in Financed Vehicles. Immediately prior to the
--------------------------------------
transfer of the Receivables by the Seller to the Depositor, each Receivable was
secured by a valid, binding and enforceable first priority perfected security
interest in favor of the Seller in the related Financed Vehicle, which security
interest has been validly assigned by the Seller to the Depositor. The Servicer
has received, or will receive within 180 days after the Closing Date, the
original certificate of title for each Financed Vehicle (other than any Financed
Vehicle that is subject to a certificate of title statute or motor vehicle
registration law that does not require that the original certificate of title
for such Financed Vehicle be delivered to the Seller).
(g) Receivables in Force. No Receivable has been satisfied,
--------------------
subordinated or rescinded, nor has any Financed Vehicle been released in whole
or in part from the Lien granted by the related Receivable.
(h) No Waiver. No provision of any Receivable has been waived in such
---------
a manner that such Receivable fails to meet all of the representations and
warranties made by the Seller in this Exhibit A with respect thereto.
(i) No Defenses. No Receivable is subject to any right of rescission,
-----------
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of any Receivable, or the exercise of any right
thereunder, will not render such Receivable unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and the Seller has not received written notice of the
assertion with respect to any Receivable of any such right of rescission,
setoff, counterclaim or defense.
(j) No Liens. To the best of the Seller's knowledge, no liens or
--------
claims have been filed for work, labor or materials or for unpaid state or
federal taxes relating to any Financed Vehicle that are prior to, or equal or
coordinate with, the security interest in such Financed Vehicle created by the
related Receivable.
(k) No Default; Repossession. To the best of the Seller's knowledge,
------------------------
no default, breach, violation or event permitting acceleration under the terms
of any Receivable has occurred and no continuing condition that with notice or
the lapse of time or both would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable has arisen, and the
Seller has not waived any such event or condition.
(l) Title. The Seller intends that the transfer of the Receivables
-----
contemplated by Section 2.01(a) of the Receivables Purchase Agreement constitute
a sale of the
A-2
Receivables from the Seller to the Depositor and that the beneficial interest
in, and title to, the Receivables not be part of the Seller's estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. The Seller has not sold, transferred, assigned or pledged any
Receivable to any Person other than the Depositor. Immediately prior to the
transfer of the Receivables contemplated by Section 2.01(a) of the Receivables
Purchase Agreement, the Seller had good and marketable title to the Receivables
free and clear of any Lien, claim or encumbrance of any Person and, immediately
upon such transfer, the Depositor shall have good and marketable title to the
Receivables free and clear of any Lien, claim or encumbrance of any Person.
(m) Security Interest Matters. The Receivables Purchase Agreement
-------------------------
creates a valid and continuing "security interest" (as defined in the Relevant
UCC) in the Receivables in favor of the Depositor, which security interest is
prior to all other Liens and is enforceable as such as against creditors of and
purchasers from the Seller. The Receivables constitute "tangible chattel paper"
(as defined in the Relevant UCC). The Seller has caused or will cause prior to
the Closing Date the filing of all appropriate financing statements in the
proper filing offices in the appropriate jurisdictions under applicable law
necessary to perfect the security interest in the Receivables granted to the
Depositor under the Receivables Purchase Agreement. Other than the security
interest granted to the Depositor under the Receivables Purchase Agreement, the
Seller has not pledged, assigned, sold, granted a security interest in or
otherwise conveyed any of the Receivables. The Seller has not authorized the
filing of and is not aware of any financing statements against the Seller that
include a description of collateral covering the Receivables other than any
financing statement relating to the security interest granted to the Depositor
under the Sale and Servicing Agreement or that has been terminated. The motor
vehicle retail installment sale contracts that constitute or evidence the
Receivables do not have any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the Depositor,
the Trust or the Indenture Trustee. The Seller is not aware of any judgment or
tax lien filings against the Seller.
(n) Financing Statements. All financing statements filed or to be
--------------------
filed against the Seller in favor of the Trust (as assignee of the Depositor)
contain a statement substantially to the following effect: "A purchase of or
security interest in any collateral described in this financing statement will
violate the rights of the Trust." All financing statements filed or to be filed
against the Seller in favor of the Indenture Trustee (as assignee of the Trust)
contain a statement substantially to the following effect: "A purchase of or
security interest in any collateral described in this financing statement will
violate the rights of the Indenture Trustee."
(o) Valid Assignment. No Receivable has been originated in, or is
----------------
subject to the laws of, any jurisdiction under which the sale, transfer,
assignment and conveyance of such Receivable under the Receivables Purchase
Agreement or the Sale and Servicing Agreement or the pledge of such Receivable
under the Indenture is unlawful, void or voidable or under which such Receivable
would be rendered void or voidable as a result of any such sale, transfer,
assignment, conveyance or pledge. The Seller has not entered into any agreement
with any account debtor that prohibits, restricts or conditions the assignment
of the Receivables.
A-3
(p) One Original. There is only one original executed copy of each
------------
Receivable.
(q) Principal Balance. Each Receivable had an original Principal
-----------------
Balance of not more than $50,000 and a remaining Principal Balance as of the
Cutoff Date of not less than $500.
(r) No Bankrupt Obligors. As of the Cutoff Date, no Receivable was
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due from an Obligor that was the subject of a proceeding under the Bankruptcy
Code of the United States or was bankrupt.
(s) New and Used Vehicles. As of the Cutoff Date, approximately 4.00%
---------------------
of the Pool Balance related to Receivables secured by new Financed Vehicles and
approximately 96.00% of the Pool Balance related to Receivables secured by used
Financed Vehicles.
(t) Origination. Each Receivable was originated after March 15, 1996.
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(u) Term to Maturity. Each Receivable had an original term to
----------------
maturity of not more than 72 months and not less than 12 months and a remaining
term to maturity as of the Cutoff Date of not more than 71 months and not less
than three months.
(v) Weighted Average Remaining Term to Maturity. As of the Cutoff
-------------------------------------------
Date, the weighted average remaining term to maturity of the Receivables was
approximately 54 months.
(w) Annual Percentage Rate. Each Receivable has an APR of at least
----------------------
5.00% and not more than 25.00%.
(x) Location of Receivable Files. The Receivable Files are maintained
----------------------------
at the location listed in Schedule 2 to the Sale and Servicing Agreement.
(y) Simple Interest Method. All payments with respect to the
----------------------
Receivables have been allocated consistently in accordance with the Simple
Interest Method.
(z) No Delinquent Receivables. As of the Cutoff Date, no payment due
-------------------------
under any Receivable was more than 30 days past due.
(aa) Prospectus Data. The tabular and numerical data contained in the
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Prospectus relating to the characteristics of the Receivables is true and
correct in all material respects.
(bb) Insurance. Each Obligor has obtained or agreed to obtain physical
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damage insurance (which insurance shall not be force placed insurance) covering
the related Financed Vehicle in accordance with the Seller's normal
requirements.
(cc) Fair Market Value. The Receivables Purchase Price and the value
-----------------
of the Residual Interest represent the fair market value of the Receivables.
A-4
(dd) Custodial Agreements. Immediately prior to the transfer of the
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Receivables by the Seller to the Depositor, the Seller or an Affiliate of the
Seller had possession of the Receivable Files and there were no, and there will
not be, any custodial agreements in effect materially adversely affecting the
right or ability of the Seller to make, or cause to be made, any delivery
required under the Receivables Purchase Agreement.
(ee) Bulk Transfer Laws. The transfer of the Receivables and the
------------------
Receivable Files by the Seller to the Depositor pursuant to the Receivables
Purchase Agreement is not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
A-5
Exhibit B
Form of Servicer's Certificate
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[SEE ATTACHED]
B-1
Exhibit C
Form of Statement to Noteholders
--------------------------------
[SEE ATTACHED]
C-1
Exhibit D
Form of Statement to Certificateholders
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[SEE ATTACHED]
D-1
