EXHIBIT 99.2
EXECUTION COPY
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SALE AND SERVICING AGREEMENT
among
XXXXXX XXXXXXX AUTO LOAN TRUST 2004-HB1,
Issuer,
XXXXXX XXXXXXX ABS CAPITAL II INC.,
Depositor,
XXXXXX XXXXXXX ASSET FUNDING, INC.,
Seller,
THE HUNTINGTON NATIONAL BANK,
Servicer
and
XXXXX FARGO BANK, NATIONAL ASSOCIATION,
Indenture Trustee
Dated as of March 31, 2004
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.....................................................................................1
Section 1.02 Other Definitional Provisions..................................................................23
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01 Conveyance of Receivables......................................................................24
ARTICLE III
THE RECEIVABLES
Section 3.01 Certain Prior Representations and Warranties of HNB............................................26
Section 3.02 Representations and Warranties of the Depositor................................................27
Section 3.03 Repurchase Upon Breach.........................................................................27
Section 3.04 Custody of Receivable Files....................................................................28
Section 3.05 Duties of Servicer as Custodian................................................................28
Section 3.06 Instructions; Authority to Act.................................................................30
Section 3.07 [Intentionally Omitted]........................................................................30
Section 3.08 Effective Period and Termination...............................................................30
ARTICLE IV
SERVICING OF RECEIVABLES
Section 4.01 Duties of Servicer.............................................................................31
Section 4.02 Collection of Receivable Payments; Modifications of Receivables; Monthly Advances..............32
Section 4.03 Realization upon Receivables...................................................................33
Section 4.04 Satisfaction of Receivable.....................................................................33
Section 4.05 Maintenance of Security Interests in Financed Vehicles.........................................34
Section 4.06 Additional Servicing Covenants.................................................................34
Section 4.07 [Intentionally Omitted]........................................................................34
Section 4.08 Purchase of Receivables Upon Breach............................................................34
Section 4.09 Servicing Fee; Costs and Expenses..............................................................35
Section 4.10 Servicer's Certificate and Servicer Reports....................................................36
Section 4.11 Annual Statement as to Compliance..............................................................37
Section 4.12 Annual Report of Accountants...................................................................37
Section 4.13 Access to Certain Documentation and Information Regarding Receivables..........................38
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Section 4.14 Access to Information Regarding Trust and Basic Documents......................................38
Section 4.15 Maintenance of Errors and Omission Policy......................................................38
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
Section 5.01 Establishment of Accounts......................................................................38
Section 5.02 Collections; Deposits into Collection Account..................................................40
Section 5.03 Application of Collections.....................................................................41
Section 5.04 Repurchase Amounts.............................................................................41
Section 5.05 Permitted Withdrawals from Collection Account..................................................41
Section 5.06 Distributions..................................................................................42
Section 5.07 Statements to Securityholders..................................................................45
Section 5.08 Subcertifications of Indenture Trustee in Connection with Xxxxxxxx-Xxxxx Certifications........47
ARTICLE VI
THE DEPOSITOR
Section 6.01 Representations of Depositor...................................................................48
Section 6.02 Corporate Existence............................................................................50
Section 6.03 Liability of Depositor; Indemnities............................................................50
Section 6.04 Merger or Consolidation of, or Assumption of the Obligations of, Depositor.....................50
Section 6.05 Limitation on Liability of Depositor and Others................................................51
Section 6.06 Depositor May Own Securities...................................................................51
Section 6.07 Depositor to Provide Copies of Relevant Securities Filings.....................................51
Section 6.08 Amendment of Depositor's Organizational Documents..............................................51
Section 6.09 Xxxxxxxx-Xxxxx Certifications..................................................................51
ARTICLE VII
THE SERVICER
Section 7.01 Representations of Servicer....................................................................51
Section 7.02 Indemnities of Servicer........................................................................53
Section 7.03 Merger or Consolidation of, or Assumption of the Obligations of, Servicer......................55
Section 7.04 Limitation on Liability of Servicer and Others.................................................56
Section 7.05 Servicer Not to Resign.........................................................................56
ARTICLE VIII
DEFAULT
Section 8.01 Event of Servicing Terminations and Additional Event of Servicing Terminations.................57
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Section 8.02 Consequences of an Event of Servicing Termination or an Additional Event of Servicing
Termination....................................................................................58
Section 8.03 Appointment of Successor Servicer..............................................................59
Section 8.04 Notification to Securityholders................................................................60
Section 8.05 Waiver of Past Defaults........................................................................60
ARTICLE IX
TERMINATION
Section 9.01 Optional Purchase of All Receivables...........................................................61
ARTICLE X
MISCELLANEOUS
Section 10.01 Amendment......................................................................................62
Section 10.02 Protection of Title to Trust...................................................................63
Section 10.03 Notices........................................................................................65
Section 10.04 Assignment by the Depositor or the Servicer....................................................65
Section 10.05 Limitations on Rights of Others................................................................65
Section 10.06 Severability...................................................................................65
Section 10.07 Counterparts...................................................................................65
Section 10.08 Headings.......................................................................................66
Section 10.09 Governing Law..................................................................................66
Section 10.10 Assignment by Issuer...........................................................................66
Section 10.11 Nonpetition Covenants..........................................................................66
Section 10.12 Limitation of Liability of Owner Trustee and Indenture Trustee.................................66
SCHEDULE A Schedule of Receivables (On file with the Indenture Trustee)
SCHEDULE B Location of Receivable Files SCHEDULE C Cumulative Net Loss Ratio
SCHEDULE C Cumalative New Loss Ratio
EXHIBIT A Form of Distribution Date Statement to Noteholders
EXHIBIT B Form of Servicer's Certificate
EXHIBIT C Form of Servicer Annual Certification
EXHIBIT D Form of Depositor's Annual Xxxxxxxx-Xxxxx Certification
EXHIBIT E Form of Certification to be Provided to the Depositor by the Indenture Trustee
EXHIBIT F Loss Note Affidavit
EXHIBIT G Servicing Standards
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This SALE AND SERVICING AGREEMENT, dated as of March 31, 2004, among
XXXXXX XXXXXXX AUTO LOAN TRUST 2004-HB1, a Delaware statutory trust (the
"Issuer"), XXXXXX XXXXXXX ABS CAPITAL II INC., a Delaware corporation, as
depositor (the "Depositor"), THE HUNTINGTON NATIONAL BANK, as servicer ("HNB,"
and in such capacity, the "Servicer"), XXXXXX XXXXXXX ASSET FUNDING, INC., a
Delaware corporation, as seller (the "Seller"), and XXXXX FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, as indenture trustee (the
"Indenture Trustee").
WHEREAS, the Issuer desires to acquire from the Depositor a portfolio of
Receivables arising in connection with various retail automobile and
light-duty truck loan and installment sale contracts purchased by the Seller
in the ordinary course of its business and sold by the Seller to the Depositor
pursuant to the Assignment, Assumption and Recognition Agreement (as defined
herein);
WHEREAS, the Depositor is willing to transfer such Receivables to the
Issuer; and
WHEREAS, HNB is willing to service such Receivables.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"1934 Act Documents" shall have the meaning assigned to such term in
Section 5.08.
"Affiliate" means, when used with reference to a specified Person, any
Person that (a) directly or indirectly controls or is controlled by or is
under common control with the specified Person, (b) is an officer of, partner
in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner or
trustee, or with respect to which the specified Person serves in a similar
capacity or (c) directly or indirectly is the beneficial owner of 10% or more
of any class of equity securities of the specified Person or of which the
specified Person is directly or indirectly the owner of 10% or more of any
class of equity securities; provided, however, that when used with reference
to the Servicer in Section 7.01, "Affiliate" shall mean any Person that
directly or indirectly controls or is controlled by or is under common control
with the Servicer.
"Additional Event of Servicing Termination" shall have the meaning
assigned to such term in Section 8.01(b).
"Agreement" means this Sale and Servicing Agreement, including all
schedules and exhibits hereto, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"Amount Financed" means with respect to a Receivable, the amount advanced
under the Receivable toward the purchase price of a Financed Vehicle and any
related costs, including but not limited to, service warranties.
"Applicable Law" means, with respect to any Person, all statutes, rules
and regulations and orders of any Governmental Authority applicable to such
Person.
"Assignment, Assumption and Recognition Agreement" means the Assignment,
Assumption and Recognition Agreement dated as of March 31, 2004, between
Xxxxxx Xxxxxxx Asset Funding, Inc., as assignor, Xxxxxx Xxxxxxx ABS Capital II
Inc., as assignee, and HNB, as seller and servicer, as the same may be
amended, supplemented or otherwise modified from time to time.
"Basic Documents" means the Indenture, this Agreement, the Trust
Agreement, the Assignment, Assumption and Recognition Agreement and other
documents (including any Letter of Representations with the Depository Trust
Company) and certificates delivered in connection therewith.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in the States of New York or Delaware, the
jurisdiction of the principal place of business of the Servicer or the cities
in which the Corporate Trust Offices of the Indenture Trustee are located, are
authorized or required by law or executive order to be closed. Notwithstanding
the foregoing, with respect to payments to the Noteholders or
Certificateholders, Business Day shall mean any day other than (i) a Saturday
or Sunday or (ii) a day on which banking institutions in the State of New York
or the cities in which the Corporate Trust Offices of the Indenture Trustee
are located are authorized or required by law or executive order to be closed.
"Certificate" means a certificate evidencing the beneficial interest of a
Certificateholder in the Trust.
"Class" means any one of the classes of Notes.
"Class A Note" means any Class A-1 Note, Class A-2 Note , Class A-3 Note
or Class A-4 Note.
"Class A Noteholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Class A-1 Interest Distributable
Amount for such Distribution Date, the Class A-2 Interest Distributable Amount
for such Distribution Date, the Class A-3 Interest Distributable Amount for
such Distribution Date and the Class A-4 Interest Distributable Amount for
such Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (i) the Outstanding Amount of the Class
A Notes immediately prior to such Distribution Date minus (ii) the lesser of
(A) 88.00% of the Pool Balance for such Distribution Date and (B) an amount
equal to (1) the Pool Balance for such Distribution Date minus (2) the
Overcollateralization Target Amount for such Distribution Date; provided,
however, that, unless the Class A Notes have been paid in full, for (I) any
Distribution Date as of which the Three-
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Month Annualized Net Loss Ratio is greater than or equal to the Sequential
Principal Payment Trigger Percentage in effect on that Distribution Date and
(II) each subsequent Distribution Date as of which the Six-Month Annualized
Net Loss Ratio is greater than or equal to the Sequential Principal Payment
Trigger Percentage in effect on that Distribution Date, the Class A Principal
Distributable Amount shall be 100% of the Regular Principal Allocation for
such Distribution Date; provided further, that on the Final Scheduled
Distribution Date of any Class of Class A Notes, the Class A Principal
Distributable Amount shall not be less than the amount that is necessary to
pay that Class of Class A Notes in full; and provided further, that the Class
A Principal Distributable Amount on any Distribution Date shall not exceed the
Outstanding Amount of the Class A Notes on that Distribution Date.
"Class A-1 Final Scheduled Distribution Date" means the Distribution Date
in May 2006.
"Class A-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-1
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-1 Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class A-1
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class A-1 Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class A-1 Rate.
"Class A-1 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover
Shortfall for such Distribution Date.
"Class A-1 Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class A-1 Notes at the Class A-1 Rate on the Outstanding Amount
of the Class A-1 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, the Closing Date), after giving
effect to all distributions of principal to the Class A-1 Noteholders on or
prior to such preceding Distribution Date. For all purposes of this Agreement
and the other Basic Documents, interest with respect to the Class A-1 Notes
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note is
registered in the Note Register.
"Class A-1 Notes" means the 1.33% Asset Backed Notes, Class A-1,
substantially in the form of Exhibit A-1 to the Indenture.
"Class A-1 Rate" means 1.33% per annum.
"Class A-2 Final Scheduled Distribution Date" means the Distribution Date
in October 2006.
"Class A-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-2
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-2 Interest Carryover Shortfall on such
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preceding Distribution Date exceeds the amount in respect of interest for the
Class A-2 Notes actually deposited in the Note Interest Distribution Account
on such preceding Distribution Date, plus interest on the amount of interest
due but not paid to the Class A-2 Noteholders on such preceding Distribution
Date, to the extent permitted by law, at the Class A-2 Rate.
"Class A-2 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover
Shortfall for such Distribution Date.
"Class A-2 Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class A-2 Notes at the Class A-2 Rate on the Outstanding Amount
of the Class A-2 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, the Closing Date), after giving
effect to all distributions of principal to the Class A-2 Noteholders on or
prior to such preceding Distribution Date. For all purposes of this Agreement
and the other Basic Documents, interest with respect to the Class A-2 Notes
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months.
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note is
registered in the Note Register.
"Class A-2 Notes" means the 1.92% Asset Backed Notes, Class A-2,
substantially in the form of Exhibit A-2 to the Indenture.
"Class A-2 Rate" means 1.92% per annum.
"Class A-3 Final Scheduled Distribution Date" means the Distribution Date
in November 2007.
"Class A-3 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-3
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-3 Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class A-3
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class A-3 Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class A-3 Rate.
"Class A-3 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-3 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-3 Interest Carryover
Shortfall for such Distribution Date.
"Class A-3 Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class A-3 Notes at the Class A-3 Rate on the Outstanding Amount
of the Class A-3 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, the Closing Date), after giving
effect to all distributions of principal to the Class A-3 Noteholders on or
prior to such preceding Distribution Date. For all purposes of this Agreement
and the other
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Basic Documents, interest with respect to the Class A-3 Notes shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
"Class A-3 Noteholder" means the Person in whose name a Class A-3 Note is
registered in the Note Register.
"Class A-3 Notes" means the 2.64% Asset Backed Notes, Class A-3,
substantially in the form of Exhibit A-3 to the Indenture.
"Class A-3 Rate" means 2.64% per annum.
"Class A-4 Final Scheduled Distribution Date" means the Distribution Date
in October 2011.
"Class A-4 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-4
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-4 Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class A-4
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class A-4 Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class A-4 Rate.
"Class A-4 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-4 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-4 Interest Carryover
Shortfall for such Distribution Date.
"Class A-4 Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class A-4 Notes at the Class A-4 Rate on the Outstanding Amount
of the Class A-4 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, the Closing Date), after giving
effect to all distributions of principal to the Class A-4 Noteholders on or
prior to such preceding Distribution Date. For all purposes of this Agreement
and the other Basic Documents, interest with respect to the Class A-4 Notes
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months.
"Class A-4 Noteholder" means the Person in whose name a Class A-4 Note is
registered in the Note Register.
"Class A-4 Notes" means the 3.33% Asset Backed Notes, Class A-4,
substantially in the form of Exhibit A-4 to the Indenture.
"Class A-4 Rate" means 3.33% per annum.
"Class B Final Scheduled Distribution Date" means the Distribution Date
in October 2011.
"Class B Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class B Monthly
Interest Distributable Amount for the
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preceding Distribution Date and any outstanding Class B Interest Carryover
Shortfall on such preceding Distribution Date exceeds the amount in respect of
interest for the Class B Notes actually deposited in the Note Interest
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to the Class B Noteholders on such
preceding Distribution Date, to the extent permitted by law, at the Class B
Rate.
"Class B Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class B Notes at the Class B Rate on the Outstanding Amount of
the Class B Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, the Closing Date), after giving effect to
all distributions of principal to the Class B Noteholders on or prior to such
preceding Distribution Date. For all purposes of this Agreement and the other
Basic Documents, interest with respect to the Class B Notes shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.
"Class B Noteholder" means the Person in whose name a Class B Note is
registered in the Note Register.
"Class B Noteholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Class B Monthly Interest
Distributable Amount for such Distribution Date and the Class B Interest
Carryover Shortfall for such Distribution Date.
"Class B Notes" means the 3.05% Asset Backed Notes, Class B,
substantially in the form of Exhibit B to the Indenture.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) the sum of (i) the Outstanding
Amount of the Class A Notes (after taking into account distribution of the
Class A Principal Distributable Amount on such Distribution Date) and (ii) the
Outstanding Amount of the Class B Notes immediately prior to such Distribution
Date minus (b) the lesser of (i) 92.50% of the Pool Balance for such
Distribution Date and (ii) an amount equal to (A) the Pool Balance for such
Distribution Date minus (B) the Overcollateralization Target Amount for such
Distribution Date; provided, however, that, for (I) any Distribution Date as
of which the Three-Month Annualized Net Loss Ratio is greater than or equal to
the Sequential Principal Payment Trigger Percentage in effect on that
Distribution Date and (II) each subsequent Distribution Date as of which the
Six-Month Annualized Net Loss Ratio is greater than or equal to the Sequential
Principal Payment Trigger Percentage in effect on that Distribution Date, the
Class B Principal Distributable Amount shall be an amount equal to (x) 100% of
the Regular Principal Allocation for such Distribution Date minus (y) the
Class A Principal Distributable Amount for such Distribution Date; provided
further that, on the Class B Final Scheduled Distribution Date, the Class B
Principal Distributable Amount shall not be less than the amount that is
necessary to pay the Class B Notes in full; and provided further that the
Class B Principal Distributable Amount on any Distribution Date shall not
exceed the Outstanding Amount of the Class B Notes on that Distribution Date.
"Class B Rate" means 3.05% per annum.
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"Class C Final Scheduled Distribution Date" means the Distribution Date
in October 2011.
"Class C Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class C Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class C Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class C
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class C Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class C Rate.
"Class C Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class C Notes at the Class C Rate on the Outstanding Amount of
the Class C Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, the Closing Date), after giving effect to
all distributions of principal to the Class C Noteholders on or prior to such
preceding Distribution Date. For all purposes of this Agreement and the other
Basic Documents, interest with respect to the Class C Notes shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.
"Class C Noteholder" means the Person in whose name a Class C Note is
registered in the Note Register.
"Class C Noteholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Class C Monthly Interest
Distributable Amount for such Distribution Date and the Class C Interest
Carryover Shortfall for such Distribution Date.
"Class C Notes" means the 2.88% Asset Backed Notes, Class C,
substantially in the form of Exhibit C to the Indenture.
"Class C Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) the sum of (i) the Outstanding
Amount of the Class A Notes (after taking into account distribution of the
Class A Principal Distributable Amount on such Distribution Date), (ii) the
Outstanding Amount of the Class B Notes (after taking into account
distribution of the Class B Principal Distributable Amount on such
Distribution Date) and (iii) the Outstanding Amount of the Class C Notes
immediately prior to such Distribution Date minus (b) the lesser of (i) 94.50%
of the Pool Balance for such Distribution Date and (ii) an amount equal to (A)
the Pool Balance for such Distribution Date minus (B) the
Overcollateralization Target Amount for such Distribution Date; provided,
however, that, for (I) any Distribution Date as of which the Three-Month
Annualized Net Loss Ratio is greater than or equal to the Sequential Principal
Payment Trigger Percentage in effect on that Distribution Date and (II) each
subsequent Distribution Date as of which the Six-Month Annualized Net Loss
Ratio is greater than or equal to the Sequential Principal Payment Trigger
Percentage in effect on that Distribution Date, the Class C Principal
Distributable Amount shall be an amount equal to (x) 100% of the Regular
Principal Allocation for such Distribution Date minus (y) an amount equal to
the sum of (1) the Class A Principal Distributable Amount for such
Distribution Date plus (2) the Class B Principal Distribution Amount for such
Distribution Date; provided further that, on the Class C Final
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Scheduled Distribution Date, the Class C Principal Distributable Amount shall
not be less than the amount that is necessary to pay the Class C Notes in
full; and provided further that the Class C Principal Distributable Amount on
any Distribution Date shall not exceed the Outstanding Amount of the Class C
Notes on that Distribution Date.
"Class C Rate" means 2.88% per annum.
"Class D Final Scheduled Distribution Date" means the Distribution Date
in October 2011.
"Class D Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class D Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class D Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest for the Class D
Notes actually deposited in the Note Interest Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due but
not paid to the Class D Noteholders on such preceding Distribution Date, to
the extent permitted by law, at the Class D Rate.
"Class D Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued during the applicable Interest Accrual
Period on the Class D Notes at the Class D Rate on the Outstanding Amount of
the Class D Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, the Closing Date), after giving effect to
all distributions of principal to the Class D Noteholders on or prior to such
preceding Distribution Date. For all purposes of this Agreement and the other
Basic Documents, interest with respect to the Class D Notes shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.
"Class D Noteholder" means the Person in whose name a Class D Note is
registered in the Note Register.
"Class D Noteholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Class D Monthly Interest
Distributable Amount for such Distribution Date and the Class D Interest
Carryover Shortfall for such Distribution Date.
"Class D Notes" means the 5.50% Asset Backed Notes, Class D,
substantially in the form of Exhibit D to the Indenture.
"Class D Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to (a) 100% of the Regular Principal
Allocation for such Distribution Date minus (b) an amount equal to the sum of
(i) the Class A Principal Distributable Amount for such Distribution Date,
(ii) the Class B Principal Distributable Amount for such Distribution Date and
(iii) the Class C Principal Distributable Amount for such Distribution Date;
provided, however, that, on the Class D Final Scheduled Distribution Date, the
Class D Principal Distributable Amount shall not be less than the amount that
is necessary to pay the Class D Notes in full; and provided further that the
Class D Principal Distributable Amount on any Distribution Date shall not
exceed the Outstanding Amount of the Class D Notes on that Distribution Date.
"Class D Rate" means 5.50% per annum.
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"Closing Date" means May 14, 2004.
"Collateral" has the meaning specified in the Granting Clause of the
Indenture.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.01(a).
"Collection Period" means, with respect to each Distribution Date, the
calendar month preceding the calendar month in which that Distribution Date
occurs; provided, however, that in the case of the first Distribution Date,
the related Collection Period is the period commencing on April 1, 2004 and
ending on May 31, 2004.
"Collector" has the meaning assigned to such term in Section 4.03(b).
"Contract" means a retail automobile and light-duty truck loan and
installment sale contract.
"Contract Rate" means, with respect to each Receivable, the annual rate
of interest applicable to such Receivable stated in the applicable loan
contract or installment sale contract.
"Controlling Class" means (i) if the Class A Notes have not been paid in
full, the Class A Notes, (ii) if the Class A Notes have been paid in full and
Class B Notes remain Outstanding, the Class B Notes, (iii) if the Class A
Notes and the Class B Notes have been paid in full and Class C Notes remain
Outstanding, the Class C Notes, and (iv) if the Class A Notes, the Class B
Notes and the Class C Notes have been paid in full and Class D Notes remain
Outstanding, the Class D Notes.
"Conveyed Assets" has the meaning assigned to such term in Section
2.01(a).
"Cram Down Loss" means, with respect to a Receivable, any loss resulting
from an order issued by a court of appropriate jurisdiction in an insolvency
proceeding that reduces the amount owed on a Receivable or otherwise modifies
or restructures the scheduled payments to be made thereon. The amount of any
such Cram Down Loss will equal the excess of (i) the Principal Balance of the
Receivable immediately prior to such order over (ii) the Principal Balance of
such Receivable as so reduced, modified or restructured. A Cram Down Loss will
be deemed to have occurred at the end of the Collection Period in which the
Servicer enters the Cram Down Loss into its computer system (and the Servicer
shall make such entry within two Business Days after it has received actual
notice of such order).
"Cumulative Net Loss Ratio" means, with respect to any Determination
Date, a fraction (expressed as a percentage), the numerator of which is equal
to (x) the sum of the Net Liquidation Losses for all Collection Periods from
the Cut-Off Date through and including the Collection Period immediately
preceding such Determination Date plus (y) the Cram Down Losses that occurred
during such period, and the denominator of which is equal to the aggregate
Principal Balance of the Receivables as of the Cut-Off Date.
"Cut-Off Date" means the close of business on March 31, 2004.
9
"Dealer" means each dealer that sold a Financed Vehicle and that
originated and/or assigned a related Receivable to HNB under an existing
Dealer Agreement.
"Dealer Agreement" means the agreement between a Dealer and HNB relating
to the origination of, or assignment of, the related Receivables to HNB and
all documents and instruments relating thereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"Defaulted Receivable" means, with respect to any Collection Period, a
Receivable (a) which, at the end of such Collection Period, is deemed
uncollectible by the Servicer in accordance with the Servicing Standard, (b)
in respect of which the Servicer has repossessed the related Financed Vehicle
and such Financed Vehicle has been liquidated during such Collection Period,
(c) in respect of which the Servicer has repossessed the related Financed
Vehicle and has held such Financed Vehicle in its repossession inventory for
60 (sixty) days or more as of the last day of such Collection Period, (d)
which becomes 120 days past due during such Collection Period and in respect
of which the related Financed Vehicle is not in repossession inventory or (e)
which becomes 180 days past due during such Collection Period.
"Deficiency Balance" means the outstanding Principal Balance of a
Defaulted Receivable remaining unpaid after the application of all Liquidation
Proceeds (including proceeds of sale or other disposition of the related
Financed Vehicle) and Insurance Proceeds received with respect to such
Defaulted Receivable have been applied in reduction of such Principal Balance.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and
are susceptible of physical delivery, transfer thereof to the Indenture
Trustee by physical delivery to the Indenture Trustee endorsed to, or
registered in the name of, the Indenture Trustee or endorsed in blank,
and, with respect to a certificated security (as defined in Section 8-102
of the UCC) transfer thereof (i) by delivery of such certificated
security endorsed to, or registered in the name of, the Indenture Trustee
or (ii) by delivery thereof to a "clearing corporation" (as defined in
Section 8-102 of the UCC) and the making by such clearing corporation of
appropriate entries on its books reducing the appropriate securities
account of the transferor and increasing the appropriate securities
account of the Indenture Trustee by the amount of such certificated
security and the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the
Indenture Trustee (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a
10
book-entry security held through the Federal Reserve System pursuant to
federal book-entry regulations, the following procedures, all in
accordance with applicable law, including applicable federal regulations
and Articles 8 and 9 of the UCC: book-entry registration of such Trust
Account Property to an appropriate book-entry account maintained with a
Federal Reserve Bank by a securities intermediary that is also a
"depository" pursuant to applicable federal regulations; the making by
such securities intermediary of entries in its books and records
crediting such Trust Account Property to the Indenture Trustee's security
account at the securities intermediary and identifying such book-entry
security held through the Federal Reserve System pursuant to federal
book-entry regulations as belonging to the Indenture Trustee; and such
additional or alternative procedures as may hereafter become appropriate
to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee, consistent with changes in applicable
law or regulations or the interpretation thereof;
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the Indenture Trustee or its nominee or
custodian who either (i) becomes the registered owner on behalf of the
Indenture Trustee or (ii) having previously become the registered owner,
acknowledges that it holds for the Indenture Trustee; and
(d) with respect to any item of Trust Account Property that is a
security entitlement causing the securities intermediary to indicate on
its books and records that such security entitlement has been credited to
a securities account of the Indenture Trustee.
"Depositor" means Xxxxxx Xxxxxxx ABS Capital II Inc. and its successors
in interest.
"Depositor's Annual Xxxxxxxx-Xxxxx Certification" has the meaning
assigned to such term in Section 6.09.
"Determination Date" means the fourth Business Day preceding a Remittance
Date, or if such day is not a Business Day, the immediately preceding Business
Day.
"Distribution Date" means, with respect to each Collection Period, the
fifteenth day of the following month or, if such day is not a Business Day,
the immediately following Business Day, commencing on June 15, 2004.
"Distribution Date Statement" means the monthly report to Securityholders
specified in Section 5.07, the form of which is set forth in Exhibit A.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any State, having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies
investment grade.
11
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or the Owner Trustee or (b) a depository institution
organized under the laws of the United States of America or any State, that
(i) has either (A) a long-term unsecured debt rating of at least "AA-" by
Standard & Poor's and "A2" by Moody's or (B) a short-term unsecured debt
rating or certificate of deposit rating of at least "A-1+" by Standard &
Poor's and "Prime-1" by Moody's and (ii) the deposits of which are insured by
the FDIC.
"Eligible Investments" means securities, negotiable instruments or
security entitlements, excluding any security with an "r" attached to the
rating thereof, that evidence:
(a) direct obligations of, and obligations fully guaranteed as
to the full and timely payment by, the United States of America or
any agency or instrumentality thereof;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under
the laws of the United States of America or any State (or any
domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depository institution
authorities; provided, however, that at the time of the investment
or contractual commitment to invest therein, the commercial paper or
other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person
other than such depository institution or trust company) thereof
shall have a credit rating from each Rating Agency in the highest
investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each Rating
Agency in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each
Rating Agency in the highest investment category granted thereby
(including funds for which the Indenture Trustee or the Owner
Trustee or any of their respective Affiliates is investment manager
or advisor);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is
a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States
of America, in either case entered into with a depository
institution or trust company (acting as principal) described in
clause (b) above; and
(g) any other investment with respect to which the Rating
Agency Condition is met and the Issuer, the Indenture Trustee or the
Servicer has received written notification from Standard & Poor's
that the acquisition of such
12
investment will not result in a reduction, withdrawal or downgrade of
the then-current rating of any Class of Notes.
"Eligible Servicer" means (a) HNB or (b) any other Person that at the
time of its appointment as Servicer is either (i) a person that (A) is
servicing a portfolio of retail automobile and light truck loan and
installment sale contracts, (B) is legally qualified and has the capacity to
service the Receivables, (C) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sale
contracts or motor vehicle installment loans similar to the Receivables with
reasonable skill and care and (D) has a minimum net worth of $50,000,000 or
(ii) otherwise acceptable to each Rating Agency.
"Event of Servicing Termination" has the meaning assigned to such term in
Section 8.01(a).
"FDIC" means the Federal Deposit Insurance Corporation or any successor
organization.
"Final Scheduled Distribution Date" means the Class A-1 Final Scheduled
Distribution Date, the Class A-2 Final Scheduled Distribution Date, the Class
A-3 Final Scheduled Distribution Date, the Class A-4 Final Scheduled
Distribution Date, the Class B Final Scheduled Distribution Date, the Class C
Final Scheduled Distribution Date or the Class D Final Scheduled Distribution
Date, as applicable.
"Financed Vehicle" means a new or used automobile or light-duty truck
that secures a Receivable.
"First Allocation of Principal" means, with respect to any Distribution
Date, the excess, if any, of (x) the aggregate Outstanding Amount of the Class
A Notes as of the day immediately preceding such Distribution Date over (y)
the Pool Balance with respect to such Distribution Date.
"Fitch" means Fitch Ratings, a wholly-owned subsidiary of Fimalac S.A.,
together with its successors.
"GAP Amount" means, with respect to any Receivable, the amount of the
outstanding Principal Balance of such Receivable which HNB determines is
required to be cancelled pursuant to HNB GAP in accordance with the terms of
the related loan contract or installment sale contract, if the Obligor on such
Receivable has purchased HNB GAP.
"Governmental Authority" means the government of the United States of
America, or any political subdivision thereof, whether state, federal,
provincial or local, and any agency, authority, instrumentality, regulatory
body, court, administrative court or judge, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"HNB" means The Huntington National Bank, a national banking association
organized under the laws of the United States of America.
13
"HNB GAP" means, with respect to any Receivable, HNB's debt cancellation
plan pursuant to which some or all of the outstanding Principal Balance of a
Receivable is required to be cancelled as and if provided under the terms of
the contract or related documents for such Receivable.
"Indemnified Claim" shall have the meaning assigned to such term in
Section 7.02(b).
"Indemnified Parties" or "Indemnified Party" shall have the meaning
assigned to such terms in Section 7.02(a).
"Indenture" means the Indenture, dated as of March 31, 2004, between the
Issuer and the Indenture Trustee, as the same may be amended, supplemented or
otherwise modified from time to time.
"Indenture Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Indenture Trustee Fee" means one twelfth of the sum of the fees payable
annually to the Indenture Trustee, as set forth in the fee letter from the
Indenture Trustee to the Depositor dated May 12, 2004.
"Initial Class A-1 Note Balance" means $225,300,000.
"Initial Class A-2 Note Balance" means $165,450,000.
"Initial Class A-3 Note Balance" means $174,400,000.
"Initial Class A-4 Note Balance" means $187,285,000.
"Initial Class B Note Balance" means $25,000,000.
"Initial Class C Note Balance" means $28,710,000.
"Initial Class D Note Balance" means $13,940,000.
"Initial Pool Balance" means an amount equal to the aggregate Principal
Balance, as of the Cut-Off Date, of the Receivables listed on Schedule A
hereto, which shall be $820,087,864.99.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or all or substantially all of its property
in an involuntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by
14
such Person to the entry of an order for relief in an involuntary case under
any such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for all or substantially
all of its property, or the making by such Person of any general assignment
for the benefit of creditors, or such Person admits in writing its inability
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insurance Proceeds" means, with respect to any Receivable, proceeds of
any insurance policy or service warranty related to such Receivable or the
related Collateral, to the extent such proceeds are to be used to reduce the
Principal Balance of such Receivable and are not to be applied to the
restoration of the related Financed Vehicle or released to the Obligor in
accordance with Applicable Law or the procedures that the Servicer would
follow in servicing retail automobile and light duty truck loan and
installment sale contracts or repossessed collateral held for its own account.
For the sake of clarity it is understood that HNB GAP is not an insurance
policy and that payments under HNB GAP with respect to a Receivable are not
Insurance Proceeds.
"Interest Accrual Period" means, with respect to the Notes, the period
from and including the 15th day of the preceding calendar month (or, in the
case of the first Distribution Date, the Closing Date) to and including the
14th day of the calendar month in which such Distribution Date occurs.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in a Trust Account to be applied on such Distribution Date pursuant to
Section 5.01(e).
"Issuer" means Xxxxxx Xxxxxxx Auto Loan Trust 2004-HB1.
"Late Fees" means, with respect to any Receivable, any late fees,
prepayment charges, extension fees, pass-a-payment fees or other
administrative fees or similar charges allowed by Applicable Law with respect
to such Receivable.
"Lien" means a security interest, lien, charge, claim, pledge, equity or
encumbrance of any kind other than tax liens, mechanics' liens and any liens
that attach to any Receivable by operation of Applicable Law.
"Liquidation Proceeds" means, with respect to any Defaulted Receivable,
cash (other than Insurance Proceeds) in excess of the costs of liquidation
received in connection with the liquidation of a Defaulted Receivable, whether
through the sale or assignment of such Receivable, trustee's sale or
otherwise, including the sale or other disposition of the related Financed
Vehicle.
"Lost Note Affidavit" means an affidavit substantially in the form of
Exhibit F hereto.
"Minimum Required Rating" means, with respect to HNB, a short-term senior
unsecured debt rating equal to or greater than "Prime-1" by Moody's and "A-1"
by Standard & Poor's.
"Monthly Advance" has the meaning assigned to such term in Section
4.02(c).
15
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Receivable that is payable by an Obligor under the related loan
contract or installment sale contract.
"Moody's" means Xxxxx'x Investors Service, Inc., and its successors.
"Net Investment Losses" means, with respect to a Trust Account and any
Collection Period, the amount, if any, by which the aggregate of all losses
and expenses incurred during such period in connection with the investment of
funds in Eligible Investments in accordance with Section 5.01(e) exceeds the
aggregate of all interest and other income realized during such period on such
funds.
"Net Liquidation Losses" means, with respect to any Collection Period,
the amount, if any, by which (a) the aggregate Principal Balance of all
Receivables that became Defaulted Receivables during that Collection Period
exceeds (b) the Liquidation Proceeds, Insurance Proceeds and any Deficiency
Balance recoveries received during that Collection Period.
"Note Balance" means, as of any date of determination, an amount equal to
the sum of (i) the Initial Class A-1 Note Balance, (ii) the Initial Class A-2
Note Balance, (iii) the Initial Class A-3 Note Balance, (iv) the Initial Class
A-4 Note Balance, (v) the Initial Class B Note Balance, (vi) the Initial Class
C Note Balance and (vii) the Initial Class D Note Balance, less all amounts
distributed to Noteholders on or prior to such date and allocable to
principal.
"Note Interest Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.01(b).
"Note Pool Factor" means, with respect to each Class of Notes as of the
close of business on the last day of a Collection Period, a seven-digit
decimal figure equal to the Outstanding Amount of such Class of Notes (after
giving effect to any reductions thereof to be made on the immediately
following Distribution Date) divided by the original Outstanding Amount of
such Class of Notes. The Note Pool Factor will be 1.0000000 as of the Closing
Date; thereafter, the Note Pool Factor will decline to reflect reductions in
the Outstanding Amount of each Class of Notes.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes and the Class
D Notes.
"Noteholders" means the Class A-1 Noteholders, the Class A-2 Noteholders,
the Class A-3 Noteholders, the Class A-4 Noteholders, the Class B Noteholders,
the Class C Noteholders or the Class D Noteholders.
"Obligor" means the obligor or obligors on a Receivable.
"Officer's Certificate" means a certificate signed by (a) the chairman of
the board, the vice chairman of the board, the president, an executive vice
president, a senior vice president, a vice president, an assistant vice
president, the treasurer, the secretary or (b) two of the assistant treasurers
and/or assistant secretaries of the Depositor or the Servicer, as required by
this Agreement.
16
"Opinion of Counsel" means one or more written opinions of counsel, who
may be an employee of or counsel to the Depositor, the Servicer or the Trust,
which counsel shall be acceptable to the Indenture Trustee, the Owner Trustee
or the Rating Agencies, as applicable, and which shall be addressed to the
Owner Trustee and the Indenture Trustee and which shall be at the expense of
the person required to provide such an Opinion of Counsel, except as otherwise
provided in the other Basic Documents or in the Purchase Agreement.
"Overcollateralization Target Amount" means, as of any Distribution Date,
the greater of (x) 2.00% of the outstanding Pool Balance for such Distribution
Date and (y) 1.00% of the Initial Pool Balance.
"Owner Trustee" means Wilmington Trust Company, acting not in its
individual capacity but solely as owner trustee under the Trust Agreement and
any successor Owner Trustee pursuant to the terms of the Trust Agreement.
"Owner Trustee Fee" means the fee payable to the Owner Trustee, as set
forth in a separate fee agreement between the Owner Trustee and the Depositor.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, joint venture, association, joint-stock company,
trust, national banking association, unincorporated organization or
Governmental Authority or any agency or political subdivision thereof or any
other entity.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means, with respect to any Distribution Date, an amount
equal to the aggregate Principal Balance of the Receivables at the end of the
related Collection Period, after giving effect to all payments of principal
received from Obligors and Repurchase Amounts to be remitted by the Servicer
for the related Collection Period, and after adjustment for Cram Down Losses
and reduction to zero of the aggregate outstanding Principal Balance of all
Receivables that became Defaulted Receivables during such Collection Period.
"Pool Delinquency Percentage" means, with respect to any Determination
Date, the average for the three (3) preceding Collection Periods (or if prior
to three (3) months from the Cut-Off Date, the number of whole Collection
Periods since the Cut-Off Date) of a fraction (expressed as a percentage), the
numerator of which is the aggregate Principal Balance of all Receivables that
as of the end of the immediately preceding Collection Period are thirty (30)
or more days delinquent (excluding Defaulted Receivables from such numerator),
and the denominator of which is the aggregate Principal Balance of the
Receivables as of the end of the immediately preceding Collection Period.
"Principal Balance" means, with respect to any Receivable, as of the
related date of determination, the Amount Financed minus an amount equal to
the sum, as of the close of business on the last day of the related Collection
Period, of (i) that portion of all amounts received by the Servicer (which
amounts shall include any amounts received by (x) HNB or (y) the Servicer
under the Purchase Agreement prior to the Closing Date) from or on behalf of
the
17
related Obligor on or prior to such date and allocable to principal using the
Simple Interest Method plus (ii) Cram Down Losses in respect of such
Receivable.
"Principal Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01(c).
"Purchase Agreement" means the Purchase and Servicing Agreement, dated as
of February 29, 2004, between HNB, as seller and servicer, and Xxxxxx Xxxxxxx
Asset Funding, Inc., as purchaser, as the same may be amended, restated or
modified from time to time.
"Purchase Agreement Collection Period" means a Collection Period as
defined in the Purchase Agreement.
"Rating Agency" means each of Xxxxx'x, Standard & Poor's or Fitch, as the
context may require. If none of Xxxxx'x, Standard & Poor's, Fitch or a
successor thereto remains in existence, "Rating Agency" shall mean any
nationally recognized statistical rating organization or other comparable
Person designated by the Depositor.
"Rating Agency Condition" means, with respect to any specified action or
determination, that each Rating Agency shall have been given 10 days' (or such
shorter period as shall be acceptable to each Rating Agency) prior notice
thereof and that each Rating Agency shall have notified the Issuer or the
Indenture Trustee in writing that such action will not result in a reduction,
withdrawal or downgrade of the then-current rating of any Class of Notes.
"Realized Losses" means, as to any Distribution Date, the amount, if any,
by which the aggregate outstanding Principal Balance of all Receivables that
became Defaulted Receivables during the related Collection Period exceeds that
portion allocable to principal of all Liquidation Proceeds, Insurance Proceeds
and Deficiency Balance recoveries received with respect to such Defaulted
Receivables for such Collection Period.
"Receivable File" means, with respect to each Receivable:
(i) the original loan contract or installment sale contract for such
Receivable or a copy of the original loan contract or installment sale
contract for such Receivable together with an affidavit of HNB as to the
original loan contract or installment sale contract for such Receivable;
(ii) the original credit application fully executed by the Obligor
or a photocopy thereof or a record thereof on a computer file or diskette or
on microfiche;
(iii) the original certificate of title, or if the original
certificate of title is required to be held by the agency, department or
office that issued such original certificate of title, a receipt thereof
(which for Michigan and Arizona shall be in the form of RD-108 and for
Kentucky shall be in the form of a "Lien Statement"), or such documents that
the Servicer shall keep on file, in accordance with its customary standards,
policies and procedures, evidencing the security interest of the Issuer in the
related Financed Vehicle;
18
(iv) if the odometer reading of the Financed Vehicle at the time of
sale to the Obligor is not listed on the certificate of title or the original
credit application, the odometer statement; and
(v) any and all other documents that the Servicer, in its capacity
as servicer under the Purchase Agreement prior to the date hereof, or in its
capacity as Servicer under this Agreement effective as of the date hereof, as
applicable, shall maintain on file in accordance with its customary procedures
relating to a Receivable, an Obligor or a Financed Vehicle.
"Receivables" means all of the retail automobile and light-duty truck
loan and installment sale contracts listed on Schedule A (which Schedule may
be in electronic form).
"Record Date" means, as to any Distribution Date, the day immediately
preceding such Distribution Date unless Definitive Notes are issued, in which
case the Record Date with respect to such Definitive Notes as to any
Distribution Date shall be the last day of the immediately preceding calendar
month.
"Regular Principal Allocation" means, with respect to any Distribution
Date, the excess, if any, of the aggregate Outstanding Amount of the Notes as
of the day immediately preceding such Distribution Date over the result of (a)
the Pool Balance with respect to such Distribution Date minus (b) the
Overcollateralization Target Amount with respect to such Distribution Date;
provided, however, that the Regular Principal Allocation on any Distribution
Date shall not exceed the Outstanding Amount of the Notes; and provided
further that the Regular Principal Allocation on or after the Final Scheduled
Distribution Date of any Class of Notes shall not be less than the amount that
is necessary to reduce the Outstanding Amount of such Class of Notes to zero.
"Remittance Date" means, with respect to each Collection Period, the 11th
day of the month following the end of that Collection Period, or if such day
is not a Business Day, the first Business Day immediately preceding such date.
"Repurchase Amount" means, with respect to each Repurchased Receivable,
an amount equal to (a) the remaining Principal Balance of the Receivable as of
the last day of the Collection Period related to the Distribution Date on
which the purchase or repurchase occurs, plus (b) accrued interest on such
outstanding Principal Balance at the Contract Rate from the date the Obligor
on such Receivable last made a payment of interest through the last day of the
Collection Period related to the Distribution Date on which the purchase or
repurchase occurs, less (c) Monthly Advances in respect of such Receivable
which have not been reimbursed in accordance with this Agreement.
"Repurchased Receivable" means a Receivable purchased by or on behalf of
HNB as described in Section 3.03 or by or on behalf of the Servicer pursuant
to Section 4.08.
"Responsible Officer" means the chairman of the board, the president, any
executive vice president, senior vice president, vice president, assistant
vice president, the treasurer, any assistant treasurer, the secretary, the
assistant secretary or any other officer or assistant officer of such Person
customarily performing (or supervising the performance of) functions similar
to those performed by any of the above designated officers and also, with
respect to a particular
19
matter, any other officer to whom such matter is required because of such
officer's knowledge and familiarity with the particular subject. Responsible
Officer of the Indenture Trustee or the Owner Trustee shall be as defined in
the Indenture.
"Review Period" shall have the meaning assigned to such term in Section
4.11(a).
"Xxxxxxxx-Xxxxx Act" means the Xxxxxxxx-Xxxxx Act of 2002 and the rules
and regulations promulgated thereunder by the Commission with respect thereto.
"Xxxxxxxx-Xxxxx Certification" means as and to the extent required by the
Xxxxxxxx-Xxxxx Act, the certification or certifications as comply in form and
substance with the Xxxxxxxx-Xxxxx Act required to be filed in all Annual
Reports on Form 10-K filed with the Commission with respect to the Trust.
"Schedule of Receivables" means the list of Receivables set forth in
Schedule A.
"Second Allocation of Principal" means, with respect to any Distribution
Date, the excess, if any, of (x) the aggregate Outstanding Amount of the Class
A Notes and the Class B Notes as of the day immediately preceding such
Distribution Date over (y) the Pool Balance with respect to such Distribution
Date.
"Securities" means the Notes and the Certificates.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securityholders" means the Noteholders and/or the Certificateholders, as
the context may require.
"Seller" means Xxxxxx Xxxxxxx Asset Funding, Inc. and its successors in
interest, as assignor of the Receivables to the Depositor pursuant to the
Assignment, Assumption and Recognition Agreement.
"Sequential Principal Payment Trigger Percentage" means, with respect to
each Determination Date occurring in the time periods set forth below, the
percentage corresponding thereto:
Determination
Date Percentage
---- ----------
June 2004 through and including April 2005 1.50%
May 2005 through and including June 2006 2.25%
July 2006 and thereafter 2.50%
"Servicer" means HNB, as the servicer of the Receivables, and each
successor to HNB (in the same capacity) pursuant to Section 7.03 or 8.03.
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"Servicer Annual Certification" means an Officer's Certificate of the
Servicer delivered pursuant to Section 4.11(a), substantially in the form of
Exhibit C.
"Servicer Employees" has the meaning assigned to such term in Section
4.15.
"Servicer's Certificate" means a Certificate of the Servicer delivered
pursuant to Section 4.10(a), substantially in the form of Exhibit B.
"Servicing Advances" means all customary, reasonable and necessary
"out-of-pocket" costs and expenses other than Monthly Advances (including
reasonable attorney's fees and disbursements) incurred in the performance by
the Servicer of its servicing obligations, including, but not limited to, the
cost of (a) repossessing a Financed Vehicle, (b) restoring and reconditioning
a Financed Vehicle in preparation of such Financed Vehicle for auction, (c)
any enforcement or judicial proceedings or (d) the sale or other disposition
of repossessed Financed Vehicles.
"Servicing Fee" has the meaning assigned to such term in Section 4.09(a).
"Servicing Fee Rate" means 1.00% per annum.
"Servicing Reimbursement Amount" has the meaning assigned to such term in
Section 4.09(c).
"Servicing Rights" means all rights relating to the servicing of the
Receivables.
"Servicing Standard" has the meaning assigned to such term in Section
4.01(a).
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which (a) an amount equal
to the product of the Contract Rate multiplied by the unpaid Principal Balance
multiplied by the period of time (expressed as a fraction of a year, based on
the actual number of days in the month and a 365-day year or, in the event of
a leap year, a 366-day year) elapsed since the preceding payment was made is
allocated to interest and (b) the remainder of such payment is allocable to
late fees and other fees and charges, if any and then to principal.
"Six-Month Annualized Net Loss Ratio" means, with respect to any
Determination Date, the average for the six (6) preceding Collection Periods
(or if prior to six (6) months from the Cut-Off Date, the number of whole
Collection Periods since the Cut-Off Date), of the product of 12 times a
fraction (expressed as a percentage), the numerator of which is equal to the
Net Liquidation Losses during the Collection Period plus the Cram Down Losses
that occurred during the Collection Period, and the denominator of which is
equal to the aggregate Principal Balance of the Receivables as of the first
day of the Collection Period; provided, that, the first Collection Period
shall be treated as two such periods each having one-half of the numerator
calculated for the entire period.
"Standard & Poor's" means Standard & Poor's, a division of The
XxXxxx-Xxxx Companies, Inc., and its successors.
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"Termination Trigger Event" means, with respect to any Determination
Date, any of the following conditions shall exist: (a) the Pool Delinquency
Percentage as of the last day of the related Collection Period is greater than
2.50%, (b) the Six-Month Annualized Net Loss Ratio as of such Determination
Date exceeds the percentages set forth for the period in which the
Determination Date occurs in the definition of "Sequential Principal Payment
Trigger Percentage" and (c) for any Determination Date, the Cumulative Net
Loss Ratio exceeds the percentage set forth opposite such Determination Date
on Schedule C hereto.
"Third Allocation of Principal" means, with respect to any Distribution
Date, the excess, if any, of (x) the aggregate Outstanding Amount of the Class
A Notes, the Class B Notes and the Class C Notes as of the day immediately
preceding such Distribution Date over (y) the Pool Balance with respect to
such Distribution Date.
"Three-Month Annualized Net Loss Ratio" means, with respect to any
Determination Date, the average for the three preceding Collection Periods (or
if prior to three months from the Cut-Off Date, the number of whole Collection
Periods since the Cut-Off Date), of the product of 12 times a fraction
(expressed as a percentage), the numerator of which is equal to the Net
Liquidation Losses during the Collection Period plus the Cram Down Losses that
occurred during the Collection Period, and the denominator of which is equal
to the aggregate Principal Balance of the Receivables as of the first day of
the Collection Period; provided, that, the first Collection Period shall be
treated as two such periods each having one-half of the numerator calculated
for the entire period.
"Total Distribution Amount" means, with respect to any Distribution Date,
the sum of the following amounts, without duplication, with respect to the
related Collection Period: (i) all collections on the Receivables during such
Collection Period allocable to interest in accordance with the Simple Interest
Method and all collections on the Receivables during such Collection Period
allocable to principal in accordance with the Simple Interest Method, (ii)
Liquidation Proceeds for such Collection Period, (iii) Insurance Proceeds for
such Collection Period, (iv) GAP Amounts for such Collection Period, (v)
Monthly Advances for such Collection Period, (vi) the Repurchase Amount of
each Receivable that became a Repurchased Receivable during or in respect of
such Collection Period, (vii) Deficiency Balance recoveries for such
Collection Period, (viii) any rebate of an unearned insurance premium, service
warranty or other amount received by the Servicer with respect to such
Collection Period which was financed in the contract for a Financed Vehicle;
(ix) Investment Earnings; and (x) any other amounts received by the Servicer
in respect of a Receivable; provided, however, that the Total Distribution
Amount shall not include: (A) all payments and proceeds (including Liquidation
Proceeds and Insurance Proceeds) of any Repurchased Receivables the Repurchase
Amount of which has been included in the Total Distribution Amount in a prior
Collection Period, (B) any Late Fees collected by and paid to the Servicer
during the related Collection Period and (C) costs and expenses incurred by
the Servicer for or on behalf of an Obligor (such as retitling costs) that
such Obligor repays to the Servicer.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical
22
Property, book-entry securities, uncertificated securities or otherwise) and
all proceeds of the foregoing.
"Trust Accounts" shall mean the Collection Account, the Note Interest
Distribution Account and the Principal Distribution Account.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
as of March 31, 2004, between the Depositor and the Owner Trustee, as the same
may be amended, supplemented or modified from time to time.
"Trust Officer" means, with respect to the Indenture Trustee, any officer
within the Corporate Trust Office of the Indenture Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary
or any other officer of the Indenture Trustee customarily performing functions
with respect to corporate trust matters and having direct responsibility for
the administration of the Indenture and the other Basic Documents and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, in each case having direct responsibility for the
administration of the Basic Documents.
"UCC" means the Uniform Commercial Code, as in effect in the State of New
York or, if so provided herein, in any relevant jurisdiction.
"VSI Policy" means that certain "Ultimate Loss Insurance Blanket Single
Interest Policy" issued by Ohio Indemnity Company to HNB and currently in
force, together with all endorsements thereto.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein that are not otherwise defined
shall have the meanings ascribed thereto in the Indenture or, if not defined
therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement and in any instrument governed hereby
and in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as
applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such instrument, certificate or other document are
inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such instrument, certificate or other document shall control.
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(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; the term "including" shall mean "including without
limitation"; and the term "or" shall include "and/or".
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01 Conveyance of Receivables.
(a) In consideration of the Issuer's delivery to or upon the order
of the Depositor of the Notes and the Certificates, the Depositor does hereby
sell, transfer, assign, set over and otherwise convey to the Issuer on the
Closing Date, without recourse (subject to the obligations of the Depositor
set forth herein), and the Issuer hereby purchases, all right, title and
interest of the Depositor in, to and under each of the Receivables, including:
(i) all interest, principal, and any other amounts received on
or with respect to each of the Receivables after the Cut-Off Date;
(ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of the
Depositor in such Financed Vehicles;
(iii) all other security interests or other property interests
created by or constituting each Receivable and on any property that shall
have secured the Receivable and that shall have been acquired by or on
behalf of the Depositor;
(iv) all of the Depositor's rights with respect to each
Receivable and the documentation relating to the Receivables, including,
without limitation, all rights under the VSI Policy with respect to such
Receivable and the contents of each Receivable File, including, without
limitation, all of the Depositor's enforcement and other rights under the
UCC and other Applicable Law;
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(v) rebates of premiums on insurance policies and all other
items financed as part of the Receivables in effect as of the Cut-Off
Date, including but not limited to, service warranties;
(vi) all Servicing Rights with respect to, and all proceeds of
and rights to enforce, any of the foregoing, including, without
limitation, any Insurance Proceeds and Liquidation Proceeds;
(vii) all of the Depositor's rights (but not its obligations)
under the Assignment, Assumption and Recognition Agreement and the
Purchase Agreement;
(viii) all funds on deposit from time to time in the Trust
Accounts and the Certificate Distribution Account and in all investments
therein and proceeds thereof (including all Investment Earnings thereon);
(ix) all accounts, money, chattel paper, securities,
instruments, documents, deposit accounts, certificates of deposit,
letters of credit, advices of credit, banker's acceptances,
uncertificated securities, general intangibles, contract rights, goods
and other property consisting of, arising from or relating to any and all
of the foregoing; and
(x) the proceeds of any and all of the foregoing (collectively,
with the assets listed in clauses (i) through (ix) above, the "Conveyed
Assets").
(b) Upon the sale of the Receivables, the ownership of each
Receivable (for non-tax purposes), including the contents of the related
Receivable File, and all rights, benefits, payments, proceeds and obligations
arising from or in connection with any of the foregoing (but excluding all
rights and obligations under any Dealer Agreement), shall be vested in the
Trust, and the ownership of all records and documents with respect to the
related Receivable prepared by or which come into the possession of the
Depositor shall immediately vest in the Trust and shall be retained and
maintained, in trust, by the Servicer for the benefit of the Trust, as the
owner thereof, in a custodial capacity only. The Depositor shall deliver a
computer file, microfiche list or printed list of the Schedule of Receivables
which shall be incorporated by reference herein in this Agreement.
(c) It is the intention of the parties hereto that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the
Receivables and other related property from the Depositor to the Trust (for
non-tax purposes) and the beneficial interest in and title to the Receivables
and that such Conveyed Assets shall not be treated as property of the
Depositor as debtor-in-possession or by a bankruptcy trustee in any
insolvency, bankruptcy or other similar proceeding in respect of the Depositor
under any Applicable Law. Further, it is not the intent of the parties hereto
that any such transfer and conveyance be deemed a grant by the Depositor to
the Trust of a mere security interest (for non-tax purposes) in any of the
Conveyed Assets in order to secure a debt or other obligation of the
Depositor. However, in the event and to the extent that, notwithstanding the
intent of the parties hereto, the transfer and assignment contemplated hereby
is held not to be a true or absolute sale (for non-tax purposes), this
Agreement shall constitute a security agreement under Applicable Law, and, in
such event, the
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Depositor shall be deemed to have granted, and the Depositor hereby grants, to
the Issuer a first priority security interest in all accounts, money, chattel
paper, securities, instruments, documents, deposit accounts, certificates of
deposit, letters of credit, advices of credit, banker's acceptances,
uncertificated securities, general intangibles, contract rights, goods and
other property consisting of, arising from or relating to such Conveyed
Assets, for the benefit of the Trust and its assignees as security for the
Depositor's obligations hereunder and the Depositor consents to the pledge of
the foregoing Conveyed Assets under the Indenture to the Indenture Trustee.
The Depositor shall file and deliver, prior to the Closing Date, financing
statements on form UCC-1 in respect of such security interest, and the
Depositor hereby authorizes, on or after the Closing Date, the filing of any
financing statements or continuation statements, and amendments to financing
statements, or any similar document in any jurisdictions and with any filing
offices as the Issuer or the Indenture Trustee may determine, in its sole
discretion, are necessary or advisable to perfect the security interest
granted to the Trust herein and assigned to the Indenture Trustee under the
Indenture. Such financing statements shall contain a statement to the
following effect: "A purchase of or security interest in any collateral
described in this financing statement other than by the Issuer or the
Indenture Trustee on behalf of the Noteholders will violate the rights of the
Issuer and the Indenture Trustee on behalf of the Noteholders" and may
describe the Conveyed Assets in the same manner as described herein or may
contain an indication or description of collateral that describes such
property as necessary, advisable or prudent to ensure the perfection of the
security interest in the Conveyed Assets granted to the Trust herein and
pledged to the Indenture Trustee under the Indenture.
(d) The Depositor has determined that the Depositor's disposition of
the Receivables pursuant to this Agreement will be afforded sale treatment for
accounting purposes and shall treat the disposition of the Receivables
pursuant to this Agreement in such manner. The sale of each Receivable (for
non-tax purposes) shall be reflected on the Depositor's balance sheet and
other financial statements as a sale of assets by the parties hereto and the
Depositor shall treat the disposition of the Receivables hereunder as a sale
for accounting and tax purposes.
ARTICLE III
THE RECEIVABLES
Section 3.01 Certain Prior Representations and Warranties of HNB.
Pursuant to Section 1 of the Assignment, Assumption and Recognition
Agreement, the Seller, as assignor, has assigned to the Depositor, as
assignee, all of its right, title and interest in and to the Receivables and
the Purchase Agreement, to the extent relating to the Receivables (other than
certain rights of the Seller to indemnification thereunder), and the Depositor
has thereby assumed all of the Seller's obligations under the Purchase
Agreement. Pursuant to Section 2.01 of this Agreement, the Depositor has sold,
assigned, transferred and conveyed to the Issuer, as part of the assets of the
Issuer, its rights under the Purchase Agreement, including the representations
and warranties of HNB made pursuant to Section 3.01 of the Purchase Agreement
with regard to the Receivables, upon which representations and warranties the
Issuer relies in accepting the Receivables and delivering the Securities,
together with all rights with respect to any breach thereof, including the
right to require HNB to repurchase Receivables in accordance with the Purchase
Agreement. It is understood and agreed
26
that the representations and warranties of HNB made pursuant to Section 3.01
of the Purchase and Sale Agreement speak as of the Cut-Off Date and/or the
Closing Date (each as defined in the Purchase Agreement) under the Purchase
Agreement but shall survive the sale, assignment and delivery of the
Receivables to the Depositor and the Issuer and the pledge of such Receivables
to the Indenture Trustee.
Section 3.02 Representations and Warranties of the Depositor.
The Depositor makes the following representations and warranties, on
which the Issuer relies in accepting the Receivables and delivering the
Securities. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date, but shall survive the
sale, transfer and assignment of the Receivables by the Depositor to the
Issuer and the pledge thereof to the Indenture Trustee in accordance with the
terms of the Indenture:
(a) Title. The Depositor shall convey to the Issuer all right, title
and interest of the Depositor in and to the Receivables, including all right,
title and interest of the Depositor in and to the security interests in the
related Financed Vehicles.
(b) All Filings Made. The Depositor has caused all filings
(including UCC filings) to be made in Delaware with respect to the sale of the
Receivables to the Issuer and the pledge contemplated in the Basic Documents
to the Indenture Trustee.
(c) Liens. The Depositor has not taken any actions to create, incur
or suffer to exist any Lien on or restriction on transferability of any
Receivable except for the Lien of the Indenture and the restrictions on
transferability imposed by this Agreement.
Section 3.03 Repurchase Upon Breach.
(a) Each of the Depositor, the Owner Trustee, the Indenture Trustee,
the Seller and the Servicer shall inform the other parties to this Agreement
promptly, in writing, upon the discovery by it that any of HNB's
representations and warranties made pursuant to the Purchase Agreement were
incorrect when made. Upon its receipt of notice as described in the previous
sentence, the Indenture Trustee shall notify (or shall cause notice to be
delivered to) HNB of its breach of any such representation and warranty.
Unless the breach shall have been cured within the cure period specified in
the Purchase Agreement, the Indenture Trustee shall enforce the obligations of
HNB with respect to each affected Receivable pursuant to the Purchase
Agreement. Pursuant to the Assignment, Assumption and Recognition Agreement,
the Seller has irrevocably appointed the Indenture Trustee as its
attorney-in-fact to exercise the remedies of the Seller against HNB in the
event it is discovered that any of HNB's representations and warranties made
in Section 3.01(b) of the Purchase Agreement were incorrect when made, and the
Indenture Trustee hereby acknowledges and accepts such appointment, further
acknowledging that, pursuant to the conveyance and assignment under Section
2.01 of this Agreement, all of the Depositor's rights with respect to that
appointment established pursuant to the Assignment, Assumption and Recognition
Agreement have been conveyed and assigned to the Issuer and that such rights
have been collaterally assigned to the Indenture Trustee pursuant to the
Indenture.
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(b) The Indenture Trustee shall not have any duty to conduct any
affirmative investigation as to the occurrence of any conditions requiring the
repurchase of any Receivable pursuant to this Section 3.03 and will not be
deemed to have discovered any breach hereunder or under Section 4.08 hereof
unless and until a Trust Officer shall have actual knowledge thereof.
Section 3.04 Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer
hereby appoints the Servicer, and the Servicer hereby accepts such
appointment, to act for the benefit of the Issuer and the Indenture Trustee as
custodian of the Receivable Files, which are hereby constructively delivered
by the Issuer to the Indenture Trustee. To the extent that original documents
are not required for purposes of realization of Liquidation Proceeds or
Insurance Proceeds, as certified in an Officer's Certificate to the Issuer or
the Indenture Trustee, documents maintained by the Servicer may be in the form
of microfilm or microfiche or such other reliable means of recreating original
documents, including but not limited to, optical imagery techniques so long as
the Servicer complies with the requirements of all Applicable Laws.
Section 3.05 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Receivable Files, in
trust, as custodian for the benefit of the Issuer and the Indenture Trustee,
and shall maintain such accurate and complete accounts, records and computer
systems pertaining to each Receivable File as shall enable the Issuer to
comply with this Agreement. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to the Receivable Files
relating to all comparable motor vehicle receivables that the Servicer
services for itself or others. The Servicer shall conduct, or cause to be
conducted, periodic internal audits of the Receivable Files held by it under
this Agreement and of the related accounts, records and computer systems, in
such a manner as shall enable the Issuer and the Indenture Trustee to verify
the accuracy of the Servicer's record keeping. The Servicer shall promptly
report to the Issuer and the Indenture Trustee any failure on its part to hold
the Receivable Files and maintain its accounts, records and computer systems
as herein provided and shall promptly take appropriate action to remedy any
such failure. Nothing herein shall be deemed to require an initial review or
any periodic review by the Issuer or the Indenture Trustee of the Receivable
Files. In acting as custodian of the Receivable Files, the Servicer further
agrees not to assert any beneficial ownership interests in the Receivables or
the Receivable Files.
(b) Maintenance of and Access to Receivable Files. (i) Each
Receivable File shall be maintained by the Servicer at one of the locations
specified in Schedule B to this Agreement or at such other location in the
United States as shall be specified by the Servicer by written notice to the
Issuer and the Indenture Trustee not later than ninety (90) days prior to any
change in location. The Servicer shall make available to the Issuer and the
Indenture Trustee or their designees a current list of locations of the
Receivable Files upon written request and shall make the Receivable Files and
the related accounts, records and computer systems maintained by the Servicer
available for inspection by the Issuer and the Indenture Trustee or their
designees without charge during normal business hours at the offices of the
Servicer and shall permit the Issuer and the Indenture Trustee or their
designees to make copies of and obtain abstracts from
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the Receivable Files, in each case during the time the Issuer retains
ownership of a Receivable and thereafter in accordance with Applicable Law.
(i) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of each such Receivable, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on or with respect to each
such Receivable and the amounts from time to time held by the Servicer or
deposited in the Collection Account in respect of each such Receivable.
(c) Release of Documents. Upon written instruction from the
Indenture Trustee or, if the Notes have been paid in full, from the Owner
Trustee, the Servicer shall release to the Indenture Trustee or the Owner
Trustee, as the case may be, or to the agent or designee of the Indenture
Trustee or the Owner Trustee, as the case may be, any Receivable File relating
to a Receivable that has not been repurchased by HNB in accordance with the
terms of this Agreement or repurchased by HNB in accordance with the terms of
the Purchase and Sale Agreement at such place or places as the Indenture
Trustee or the Owner Trustee, as applicable, may designate, as soon as
practicable (but in no event more than five (5) days after the date of such
instruction) and the Issuer shall reimburse the Servicer for its reasonable
out-of-pocket expenses incurred in connection with any such delivery. Upon the
delivery of any such document in accordance with the instructions of the
Indenture Trustee or the Owner Trustee, as the case may be, the Servicer shall
be released from any further liability and responsibility with respect to such
documents and any other provision of this Agreement if the fulfillment of the
Servicer's responsibilities is dependent upon possession of such documents,
unless and until such time as such documents shall be returned to the
Servicer. In no event shall the Servicer be responsible for any loss
occasioned by the Indenture Trustee's or the Owner Trustee's failure to return
any Receivable File or any portion thereof in a timely manner. Any costs
associated with the transfer of the Receivable Files in connection with this
clause (c) and all fees and expenses incurred by the successor custodian as
custodian pursuant to this clause (c) shall be paid by the Issuer; provided,
however, that in the event such transfer occurs after the occurrence of an
event which, with the giving of notice or lapse of time or both, would become
an Event of Servicing Termination under Section 8.01(a) or an Additional Event
of Servicing Termination under Section 8.01(b), such costs shall be paid by
the Servicer.
(d) Reimbursement for Reasonable Out-of-Pocket Expenses. Pursuant to
Section 4.09(c), the Servicer shall be entitled to reimbursement for all
reasonable out-of-pocket expenses incurred in connection with the performance
of its obligations as custodian of the Receivable Files under this Section
3.05.
(e) Destruction of Receivable Files. In the event the Receivable
Files held by the Servicer are destroyed due to fire or other casualty, the
Servicer will bear the responsibility for (i) having new titles issued for
each Financed Vehicle and providing printed copies of the destroyed title from
the Servicer's imaging system, which shall remain in the Receivable File until
such new titles are received, (ii) replacing each Receivable (by printing a
copy thereof held on the Servicer's imaging system), and (iii) creating a Lost
Note Affidavit to accompany each replaced Receivable, certifying that the
original Receivable was destroyed; provided, however, that in the event any
additional document is needed in order to service the Receivable, the
29
Servicer shall print a copy thereof from its imaging system. All costs
incurred in connection with this clause (e) shall be paid by the Servicer and
the Servicer shall indemnify the Issuer and the Indenture Trustee for any
losses suffered by the Issuer as a result of the loss or destruction of the
original Receivable Files.
Section 3.06 Instructions; Authority to Act. The Servicer shall be deemed
to have received proper instructions with respect to the Receivable Files upon
its receipt of written instructions signed by a Trust Officer of the Indenture
Trustee or, if the Notes have been paid in full, of the Owner Trustee. A
certified copy of a by-law or of a resolution of the Board of Directors of the
Indenture Trustee or Owner Trustee, as applicable, shall constitute conclusive
evidence of the authority of any such Trust Officer to act and shall be
considered in full force and effect until receipt by the Servicer of written
notice to the contrary given by the Indenture Trustee or Owner Trustee, as
applicable.
Section 3.07 [Intentionally Omitted]
Section 3.08 Effective Period and Termination. The Servicer shall act as
custodian of the Receivables and shall continue to act in such capacity unless
and until terminated pursuant to this Section 3.08. If the Servicer or any
successor Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of the Servicer or
any successor Servicer shall have been terminated under Section 8.02, (i) such
Servicer shall also resign as custodian of the Receivables and (ii) the
appointment of such Servicer as custodian may be terminated by the Issuer or
by the Holders of Notes evidencing not less than 25% of the Outstanding Amount
of the Notes, or, if no Notes are outstanding, by Holders of Certificates
evidencing not less than 25% of the percentage interests in the Certificates,
in the same manner as the Indenture Trustee or such Securityholders may
terminate the rights and obligations of the Servicer under Section 8.02. The
Indenture Trustee or, with the consent of the Indenture Trustee, the Owner
Trustee may terminate the Servicer's appointment as custodian, with cause, at
any time upon written notification to the Servicer and without cause, only by
written notification to the Servicer pursuant to Section 8.02. As soon as
practicable after any termination of such appointment (but in no event more
than ten Business Days after any such termination of appointment), the
Servicer shall deliver the Receivable Files to the Indenture Trustee or the
Indenture Trustee's agent, at such place or places as the Indenture Trustee
may reasonably designate; provided, however, that, if the Servicer shall have
been terminated as custodian without cause pursuant to this Section 3.08, the
Servicer shall be entitled to reimbursement by the Issuer for all reasonable
out-of-pocket expenses incurred in connection with such delivery of the
Receivable Files. Notwithstanding the termination of the Servicer as
custodian, the Indenture Trustee and the Owner Trustee agree that, upon any
such termination and for so long as the Servicer remains the Servicer
hereunder, the Indenture Trustee or the Owner Trustee, as the case may be,
shall provide, or cause its agent to provide, access to the Receivable Files
to the Servicer for the purpose of enabling the Servicer to perform its
obligations under this Agreement with respect to the servicing of the
Receivables.
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ARTICLE IV
SERVICING OF RECEIVABLES
Section 4.01 Duties of Servicer.
(a) From and after the Closing Date, the Servicer, as an independent
contract servicer, for the benefit of the Issuer and the Indenture Trustee,
shall manage, service, administer and make collections on the Receivables and
perform the other actions required by the Servicer under this Agreement. The
Servicer will service the Receivables in accordance with the servicing
standard set forth in Exhibit G, or in the event that Exhibit G does not
specify a standard with respect to a particular servicing function, in
accordance with its usual and customary procedures, consistent with the
procedures employed by institutions that service motor vehicle installment
sale contracts or motor vehicle installment loan notes for their own account
or for the account of third parties (the foregoing, the "Servicing Standard").
(b) The Servicer's duties shall include, but not be limited to, the
collection and posting of all payments, responding to inquiries of Obligors on
the Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting tax information to Obligors, monitoring the Receivables,
accounting for collections, preparing tax forms required by any federal, state
or local tax authority, if any, furnishing Servicer Reports, including the
Servicer's Certificate, and annual statements as required herein, making
Monthly Advances and performing the other duties specified herein. The
Servicer is hereby authorized and empowered to execute and deliver, on behalf
of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders, or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments with respect to the
Receivables and with respect to the Financed Vehicles; provided, however,
that, notwithstanding the foregoing, the Servicer shall not, except as
permitted by the Servicing Standard or pursuant to an order from a court of
competent jurisdiction or as otherwise required by Applicable Law, (i) release
the Financed Vehicle securing a Receivable from the security interest granted
by such Receivable in whole or in part except in the event of payment in full
by or on behalf of the Obligor thereunder or repossession, (ii) impair the
rights of the Trust or the Indenture Trustee in the Receivables, (iii) change
the Contract Rate with respect to any Receivable, (iv) waive the right to
collect the unpaid balance of any Receivable from an Obligor or (v) modify the
Principal Balance or the total number of originally scheduled due dates of any
Receivable.
(c) The Servicer is hereby authorized to commence, in its own name
or in the name of the Indenture Trustee or the Owner Trustee, a legal
proceeding to enforce a Receivable pursuant to Section 4.03 or to commence or
participate in any other legal proceeding (including a bankruptcy proceeding)
relating to or involving a Receivable, an Obligor or a Financed Vehicle. If
the Servicer commences or participates in any such legal proceeding in its own
name, the Indenture Trustee or the Issuer shall thereupon be deemed to have
automatically assigned the applicable Receivable to the Servicer solely for
purposes of commencing or participating in such proceeding as a party or
claimant. The Servicer is authorized and empowered by the Indenture Trustee to
execute and deliver in the Indenture Trustee's name any notices, demands,
claims, complaints, responses, affidavits or other documents or instruments in
connection with any such
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proceeding and to bring suit in the name of the Indenture Trustee. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may
not enforce a Receivable on the ground that it is not a real party in interest
or a holder entitled to enforce such Receivable, the Owner Trustee shall, at
the Servicer's direction, take steps to enforce such Receivable, including
bringing suit in its name or in the name of the Indenture Trustee or, with the
prior written permission of the Depositor, the Issuer. The Owner Trustee and
the Indenture Trustee shall upon the written request of the Servicer furnish
the Servicer with any powers of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder, and the Owner Trustee and the Indenture
Trustee shall not be held responsible for any acts by the Servicer in its uses
of any such powers of attorney or other document other than as authorized or
permitted by this Agreement.
Section 4.02 Collection of Receivable Payments; Modifications of
Receivables; Monthly Advances.
(a) Consistent with the Servicing Standard, the Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables. The Servicer may, in its discretion and, in
accordance with the Servicing Standard, waive any Late Fees that may be
collected in the ordinary course of servicing Receivable.
(b) The Servicer may, in accordance with the Servicing Standard,
grant extensions on a Receivable for which the related Obligor is delinquent
for failure of payment. The Servicer shall not grant more than one (1)
extension on such Receivable in any calendar year and not more than three (3)
extensions on any such Receivable; provided, however, that if the Servicer
extends the date for the final payment by any Obligor of any Receivable beyond
March 22, 2011, the Servicer shall promptly purchase such Receivable at the
Repurchase Amount. The use of a pass-a-payment coupon shall not be considered
an extension on a Receivable pursuant to this Section 4.02(b).
(c) On each Remittance Date, subject to a determination of
recoverability, the Servicer shall remit to the Collection Account from its
own funds or from amounts held for future distribution an amount (the "Monthly
Advance") equal to the interest portion of all Monthly Payments that were (i)
due on the Receivables during the applicable Collection Period and that were
delinquent at the close of business on the last day of such Collection Period
immediately preceding the related Distribution Date or (ii) not due during the
applicable Collection Period because payment in the Collection Period was
deferred by the Servicer (including, for this purpose, any extension made in
connection with the use of a pass-a-payment coupon). Any amounts held for
future distribution used for purposes of making the remittances provided in
the preceding sentence shall be reimbursed by the Servicer on or before any
future Remittance Date, if funds available on such Remittance Date shall be
less than amounts required to be deposited into the Collection Account on such
Remittance Date subject to a determination of recoverability, and amounts so
reimbursed by the Servicer shall be treated as a Monthly Advance, reimbursable
to the Servicer pursuant to Section 4.09(c). Notwithstanding the foregoing,
the Servicer shall not be permitted to make any Monthly Advances pursuant to
this Section 4.02 from amounts held for future distribution, and instead shall
be required to make all Monthly Advances from its own funds, unless the
Servicer has a long-term credit rating of at least "A" by Standard & Poor's
and "A2" by Xxxxx'x. The Servicer's obligation to make such
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Monthly Advances as to any Receivable shall continue through the earlier to
occur of (i) the last Monthly Payment due prior to the payment in full of the
Receivable or (ii) the last Remittance Date prior to the Remittance Date for
the remittance of all Liquidation Proceeds and other payments or recoveries
(including Insurance Proceeds) with respect to the Receivable; provided,
however, that the obligation to pay Monthly Advances shall cease if the
Servicer determines, in its sole reasonable opinion, that advances with
respect to such Receivable are non-recoverable by the Servicer from
Liquidation Proceeds or otherwise from amounts allocable to interest with
respect to a particular Receivable.
Section 4.03 Realization upon Receivables.
(a) In the event that any payment due under any Receivable is not
paid when the same becomes due and payable, or in the event the related
Obligor fails to perform any other covenant or obligation under the Receivable
and such failure continues beyond any applicable grace period, the Servicer
shall take such actions as (i) it would take under similar circumstances with
respect to a similar motor vehicle retail installment contract or motor
vehicle installment loan note held for its own account for investment, (ii)
shall be consistent with Servicing Standard, and (iii) it shall determine
prudently to be in the best interest of the Trust. In connection herewith, the
Servicer shall from its own funds make all necessary and proper Servicing
Advances, subject to reimbursement pursuant to Section 4.09; provided,
however, that the foregoing shall not be construed to require the Servicer to
undertake repossession, restoration or preservation of any Financed Vehicle,
unless the Servicer shall determine (x) that such preservation, restoration
and/or repossession will increase the proceeds of liquidation of the
Receivable after reimbursement to itself for such expenses and (y) that
expenses in connection with such repossession, restoration or repossession
will be recoverable either through Liquidation Proceeds or through Insurance
Proceeds. The recovery of expenses incurred by the Servicer shall be limited
to Liquidation Proceeds, Insurance Proceeds and Deficiency Balance recoveries
with respect to such Receivable.
(b) In connection with any Deficiency Balance, the Servicer in
accordance with the Servicing Standard will (A)(i) pursue collection of the
deficiency for a period of no more than 120 days, which may be extended an
additional 60 days if, in the Servicer's reasonable judgment such extension
will maximize recovery of the Deficiency Balance and then (ii) refer the
related account to (x) its routinely preferred third party collector or (y)
such other third party collector as approved by the Issuer (the entity hired
pursuant to clause (x) or (y), the "Collector"), which will pursue collection
of such Deficiency Balance; or (B) refer the related account directly to the
Collector as provided in (A)(ii) above, if, in the Servicer's reasonable
judgment referral of such account to the Collector will maximize recovery of
the Deficiency Balance. In the event the Servicer refers the related account
to the Collector, the Servicer shall no longer remain obligated or be liable
to any other party for the collection of such Receivable. The Servicer shall,
in accordance with Section 5.02(a), remit any amounts collected by it or
remitted to it by the Collector (from which the Collector may net a portion of
the Collector's costs, expenses and other charges not to exceed an amount
equal to 40% of the recovery amount prior to deducting such costs, expenses
and charges) in regards to such Deficiency Balance.
Section 4.04 Satisfaction of Receivable. Upon payment in full on any
Receivable, or otherwise in accordance with the Servicer's customary policies
and procedures consistent with
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the Servicing Standard, the Servicer is authorized to execute an instrument in
satisfaction of such Receivable and to do such other acts and execute such
other documents as the Servicer deems necessary to discharge the Obligor
thereunder and eliminate the security interest in the Financed Vehicle related
thereto. To the extent that insufficient payments are received on a Receivable
credited by the Servicer as prepaid or paid in full and satisfied, the
shortfall shall be paid by the Servicer out of its own funds if the shortfall
is in excess of $25.
Section 4.05 Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, consistent with the Servicing Standard, take such steps as are
necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle in favor of the Issuer and the
Indenture Trustee. The Servicer is hereby authorized to take such steps as are
necessary to re-perfect such security interest on behalf of the Issuer and the
Indenture Trustee in the event of the relocation of a Financed Vehicle, or for
any other reason. Notwithstanding the foregoing, (i) the Servicer shall have
no obligation to audit the perfection or re-perfection of security interests
in the Financed Vehicles and (ii) the Servicer shall have no obligation to
perfect or re-perfect any security interest in any Financed Vehicle unless it
is aware that perfection or re-perfection is necessary. Pursuant to Section
4.09(c), the Servicer shall be reimbursed for all reasonable out-of-pocket
expenses incurred in connection with the performance of its obligations under
this Section 4.05.
Section 4.06 Additional Servicing Covenants.
The Servicer further agrees:
(a) Except as permitted by the Servicing Standard, the Servicer
shall not (i) release the Financed Vehicle securing each Receivable from the
security interest granted by such Receivable, in whole or in part, except (x)
in the event of payment in full (or within $25.00 of payment in full) by or on
behalf of the Obligor thereunder or (y) upon repossession and liquidation of
such Financed Vehicle, (ii) impair the rights of the Issuer in the Receivables
or (iii) extend or otherwise amend the terms of any Contract (including any
change to the Contract Rate applicable to any Receivable, the Principal
Balance or the total number of originally scheduled due dates of any
Receivable), except as provided in Sections 4.01 and 4.02; and
(b) The Servicer shall not (1) create or incur, or agree to create
or incur or consent to or permit in the future (upon the occurrence of a
contingency or otherwise) the creation, incurrence or existence of any Lien on
or restriction on transferability of any Receivable except for the Lien of the
Indenture and the restrictions on transferability imposed by this Agreement or
(2) other than as contemplated herein, sign or file any UCC financing
statements in any jurisdiction that names HNB, the Seller, the Depositor as a
debtor, and any Person other than the Seller, the Depositor, the Indenture
Trustee or the Issuer as a secured party, or sign any security agreement
authorizing any secured party thereunder to file any such financing statement,
in each case with respect to the Receivables or any other Conveyed Assets.
Section 4.07 [Intentionally Omitted].
Section 4.08 Purchase of Receivables Upon Breach. Upon discovery by any
of the Servicer, the Seller, the Depositor, the Owner Trustee or the Indenture
Trustee of a breach of any
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of the covenants set forth in Sections 4.02(b), 4.05 or 4.06, the party
discovering such breach shall give prompt written notice to the others;
provided, however, that the failure to give any such notice shall not affect
any obligation of the Servicer under this Section 4.08. Within sixty days of
the earlier of either discovery by, or notice to, the Servicer of a breach of
any covenant set forth in Sections 4.02(b), 4.05 or 4.06, (i) the Servicer
shall use its best efforts promptly to cure such breach in all material
respects and (ii) if such breach cannot be cured, the Servicer shall be
required to purchase the affected Receivable. If such breach of a covenant set
forth in Sections 4.02(b), 4.05 or 4.06 is curable and the Servicer shall have
timely commenced such cure or remedy but notwithstanding its due and diligent
efforts, the remedy or cure shall not be capable of cure within such sixty day
period, the Servicer shall, upon receipt of written consent by the Issuer, the
Indenture Trustee or the Owner Trustee, have up to two additional thirty day
period to effectuate the cure (up to an aggregate total of 120 days) so long
as it is acting in good faith to effectuate such cure. In the event that such
breach cannot be cured within a maximum of 120 days of the earlier of either
discovery by, or notice to, the Servicer of such breach (or within sixty or
ninety days, if the applicable extension was not granted), the affected
Receivable shall, at the option of the Issuer, the Indenture Trustee or the
Owner Trustee, be purchased by the Servicer in an amount equal to the
Repurchase Amount. The Servicer shall remit such amount to the Collection
Account in the manner specified in Section 5.04 and shall notify in writing
the Indenture Trustee of such deposit. Subject to Section 7.02, it is
understood and agreed that the obligation of the Servicer to purchase any
Receivable with respect to which such breach has occurred and is continuing
shall, if such obligation is fulfilled, be the sole remedy against the
Servicer for such breach available to the Issuer, the Indenture Trustee, the
Noteholders, or the Certificateholders. Notwithstanding anything to the
contrary, the Servicer shall not intentionally breach any of the covenants set
forth in Sections 4.02(b), 4.05 or 4.06 for the purpose of acquiring any
Receivable.
Section 4.09 Servicing Fee; Costs and Expenses.
(a) In compensation for performing the servicing obligations
described in this Agreement during each Collection Period, the Servicer shall
be paid a monthly fee, for all Receivables that are not Defaulted Receivables
serviced pursuant to this Agreement, equal to one-twelfth of the product of
(i) the Servicing Fee Rate and (ii) the Principal Balance of the Receivables
as of the beginning of the first day of such Collection Period (such monthly
fee, the "Servicing Fee"); provided, that, for the first Distribution Date,
the fee payable to the Servicer is equal to one-twelfth of the product of the
Servicing Fee Rate and the Principal Balance as of May 1, 2004, it being
understood that pursuant to the Purchase Agreement the Servicer received a fee
from the Seller in an amount equal to one-twelfth of the product of the
Servicing Fee Rate and the Principal Balance as of April 1, 2004. As
additional servicing compensation, the Servicer shall be entitled to receive
all Late Fees with respect to the Receivables serviced pursuant to this
Agreement and all interest accrued on any funds held by the Servicer
constituting collections of any of the Receivables.
(b) In addition to the Servicing Fee set forth above, the Servicer
shall also be entitled to receive on each Distribution Date reimbursement for
amounts set forth below for the related Collection Period. The Servicer shall
be paid the Servicing Fee and the Servicing Reimbursement Amount payable for
each Collection Period on the Distribution Date related to such Collection
Period in accordance with Sections 5.06(b)(i) and (xi).
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(c) The Servicer shall pay all expenses incurred by it in connection
with its servicing activities hereunder and shall not be entitled to
reimbursement thereof except to the extent as follows:
(i) The Servicer shall be entitled to reimbursement for Monthly
Advances and for amounts treated as Monthly Advances pursuant to Section
4.02(c); provided, that reimbursement for Monthly Advances shall be
limited to that portion of collections that are allocated or allocable to
payment of interest in accordance with the Simple Interest Method and the
terms of each Receivable;
(ii) To the extent set forth under Section 4.03, the Servicer
shall be entitled to reimbursement for unreimbursed Servicing Advances in
connection with the realization upon a Receivable; provided that, in
accordance with Section 4.03, such right of reimbursement shall be
limited to the amount of Liquidation Proceeds, Insurance Proceeds and
Deficiency Balance recoveries with respect to such Receivable; and
(iii) The Servicer shall be entitled to the reimbursement of
certain reasonable out-of-pocket expenses to the extent permitted under
Sections 3.05(d), 4.05 and 10.02(g).
The aggregate amount of all amounts set forth in clauses (i) through (iii) of
this Section 4.09(c) that the Servicer shall incur during any Collection
Period shall be referred to herein as the "Servicing Reimbursement Amount" for
such Collection Period.
(d) For so long as (i) HNB is the Servicer, (ii) the Servicer has
the Minimum Required Rating and (iii) no Event of Servicing Termination shall
have occurred and be continuing, the Servicer may net the Servicing Fee and
the Servicing Reimbursement Amount payable to the Servicer on the related
Distribution Date from any remittance it makes pursuant to Section 5.02(a).
The Servicing Fee shall be retained from the interest portion of Monthly
Payments collected or the interest portion of Liquidation Proceeds received on
the Receivables. To the extent the interest portions are insufficient to pay
the full amount of the Servicing Fee in a particular month, the Servicer shall
be entitled to retain the interest portions of Monthly Payments collected and
Liquidation Proceeds received in subsequent months to recover the unpaid
portion.
Section 4.10 Servicer's Certificate and Servicer Reports.
(a) Servicer's Certificate. Not later than 10:00 a.m. (New York City
time) on each Determination Date, the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee and the Depositor, with a copy to each Rating
Agency, a Servicer's certificate (a "Servicer's Certificate") substantially in
the form of Exhibit B which shall be delivered in electronic format or through
any other means mutually acceptable to the Indenture Trustee and the Servicer
and which shall contain the amount of collections received on the Receivables
during the related Collection Period. Such Servicer's Certificate shall be
certified by a Responsible Officer of the Servicer that the information
provided is accurate and complete and no defaults have occurred. With respect
to each Collection Period, Receivables to be repurchased by the Seller and
each Receivable that became a Defaulted Receivable, in each case, during such
Collection Period
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shall be identified by the Servicer by account number with respect to such
Receivable (as specified in the applicable Schedule of Receivables).
(b) Servicer Reports. Not later than 10:00 a.m. (New York City time)
on each Determination Date, the Servicer shall deliver to the Owner Trustee
(for delivery to the Certificateholders pursuant to the Trust Agreement) each
of the Servicer Reports listed as an exhibit to the Purchase Agreement and
each Servicer Report shall be substantially in the form set forth in the
Purchase Agreement (it being understood that for purposes of the first
Determination Date, the Depositor shall deliver such reports for the first
Purchase Agreement Collection Period and the Servicer shall deliver such
reports for the second Purchase Agreement Collection Period (which together
cover the first Collection Period)). Each Servicer Report shall be certified
by a Responsible Officer of the Servicer that the information provided is
accurate and complete and no defaults have occurred. In addition, the Servicer
shall at all times maintain a complete system backup file with respect to the
Receivables and shall, by no later than each Determination Date, deliver to
the Owner Trustee a copy of (i) the loan file tape and (ii) the extracts from
other applicable servicing systems of the Servicer.
Section 4.11 Annual Statement as to Compliance.
(a) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Depositor and each Rating Agency, on or before March 15 each
year, beginning March 15, 2005, an Officer's Certificate (the "Servicer Annual
Certification") substantially in the form of Exhibit C, signed by a
Responsible Officer of the Servicer.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than three Business Days thereafter, written
notice in an Officer's Certificate of any event that is, or with the giving of
notice or lapse of time or both would become, an Event of Servicing
Termination under Section 8.01(a) or an Additional Event of Servicing
Termination under Section 8.01(b).
Section 4.12 Annual Report of Accountants. On or before March 15 of each
year, beginning March 15, 2005, the Servicer, at its expense, shall cause a
firm of independent certified public accountants that is a member of the
American Institute of Certified Public Accountants to furnish a report
addressed to the Owner Trustee, the Indenture Trustee and each Rating Agency
to the effect that such firm of independent certified public accountants has
examined the documents or records of the Servicer relating to the Receivables
that such examination (a) was conducted in accordance with generally accepted
auditing standards, and (b) included tests relating to retail motor vehicle
loan and installment sale contracts serviced for others and that such firm is
of the opinion that the provisions of this Agreement have been complied with
during the preceding calendar year (or, with respect to the first report, the
period from the Closing Date through December 31 of such year), and that, on
the basis of such examination, nothing has come to their attention that would
indicate that such servicing has not been conducted therewith during such
calendar year or other applicable period, except for (x) such exceptions as
such firm shall believe to be immaterial and (y) such other exceptions as
shall be set forth in such statement.
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Section 4.13 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Owner
Trustee, the Indenture Trustee and the Certificateholders reasonable access to
the documentation regarding the Receivables and the related Trust property.
Access shall be afforded without charge, but only upon reasonable request,
which does not unreasonably interfere with the Servicer's normal business
operations or employee or customer relations, and during the normal business
hours at the offices of the Servicer. Nothing in this Section shall affect the
obligation of the Servicer to observe any Applicable Law prohibiting
disclosure of information regarding the Obligors and the failure of the
Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section.
Section 4.14 Access to Information Regarding Trust and Basic Documents.
The Servicer shall furnish to the Owner Trustee from time to time such
information regarding the Trust or the Basic Documents as the Owner Trustee
shall reasonably request. Upon written request, the Indenture Trustee shall
furnish to the Owner Trustee annually a copy of the Note Register; provided,
however, the Indenture Trustee shall not be obligated to furnish a copy of the
Note Register more than once each calendar year. The Servicer shall furnish to
the Owner Trustee copies of all documents and reports required to be provided
by the Servicer pursuant to Sections 4.10, 4.11 and 4.12 of this Agreement.
Section 4.15 Maintenance of Errors and Omission Policy. The Servicer
shall maintain, at its own expense, an errors and omissions insurance policy
on all officers, employees or other persons acting in any capacity with regard
to the Receivables to handle funds, money, documents or papers relating to the
Receivables ("Servicer Employees"), which policy shall protect and insure the
Servicer against losses, including forgery, theft, embezzlement, fraud, errors
and omissions, and negligent acts of such Servicer Employees. Such errors and
omissions insurance policy shall also protect and insure the Servicer, against
losses in connection with the release or satisfaction of a Receivable without
having obtained payment in full of the indebtedness secured thereby.
Notwithstanding the foregoing, such errors and omission policy may have a
deductible consistent with prudent corporate practice. No provision of this
Section 4.15 requiring such errors and omissions insurance shall diminish or
relieve the Servicer from its duties and obligations as set forth in this
Agreement. Nothing in the preceding sentence shall limit any of the Servicer's
indemnification obligations under this Agreement. Upon the request of the
Issuer or the Indenture Trustee, the Servicer shall cause to be delivered to
the Issuer or the Indenture Trustee a certified true copy of such fidelity
bond and insurance policy.
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
Section 5.01 Establishment of Accounts.
(a) The Indenture Trustee shall establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders and the Certificateholders. The Collection Account shall be
established initially at the Indenture Trustee.
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(b) The Indenture Trustee shall establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Note Interest Distribution Account"), bearing a
designation clearly indicating that the funds deposited therein are held for
the benefit of the Noteholders. The Note Interest Distribution Account shall
be established initially at the Indenture Trustee.
(c) The Indenture Trustee shall establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders, an Eligible
Deposit Account (the "Principal Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit
of the Noteholders. The Principal Distribution Account shall be established
initially at the Indenture Trustee.
(d) Funds on deposit in the Collection Account shall be invested by
the Indenture Trustee, in Eligible Investments selected in writing by the
Seller (it being understood that the Seller may select a particular Eligible
Investment pursuant to an instruction letter which shall be executed by the
Seller as of the Closing Date); provided, however, that if the Seller fails to
select any Eligible Investment, the Indenture Trustee shall invest such funds
in an Eligible Investment described in clause (d) of the definition of
"Eligible Investment" herein. The Indenture Trustee shall have no duty or
obligation to confirm or verify whether any Eligible Investment selected by
the Seller is in fact an Eligible Investment. All such Eligible Investments
shall be held by the Indenture Trustee for the benefit of the Noteholders
and/or the Certificateholders, as applicable. Other than as permitted in
writing by the Rating Agencies, funds on deposit in the Trust Accounts shall
be invested in Eligible Investments that will mature not later than the
Business Day immediately preceding the next Distribution Date. Funds deposited
in a Trust Account on a day that immediately precedes a Distribution Date upon
the maturity of any Eligible Investments are not required to be invested
overnight.
(e) The Indenture Trustee shall possess all right, title and
interest in all funds and investment property on deposit from time to time in
or credited to the Trust Accounts and in all proceeds thereof (including
Investment Earnings thereon) and all such funds, investment property, proceeds
and income shall be part of the Trust Estate, except as otherwise set forth
herein. The Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the
Certificateholders, as applicable. If, at any time, any Trust Account ceases
to be an Eligible Deposit Account, the Indenture Trustee, shall within ten
(10) Business Days (or such longer period, not to exceed thirty (30) calendar
days, as to which each Rating Agency shall have consented) establish a new
Trust Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments from the account that is no longer an Eligible Deposit
Account to the new Trust Account.
(i) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts, subject
to the last sentence of Section 5.01(e)(i); and each such Eligible
Deposit Account shall be subject to the exclusive custody and control of
the Indenture Trustee, and the Indenture Trustee, shall have sole
signature authority with respect thereto;
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(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee, in accordance with
paragraph (a) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Indenture Trustee, or a securities
intermediary (as such term is defined in Section 8-102 of the UCC) acting
solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to federal
book-entry regulations shall be delivered in accordance with paragraph
(b) of the definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in
such paragraph;
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause
(C) above shall be delivered to the Indenture Trustee, in accordance with
paragraph (c) of the definition of "Delivery" and shall be maintained by
the Indenture Trustee, pending maturity or disposition, through continued
registration of the Indenture Trustee's (or its nominee's) ownership of
such security; and
(E) any Trust Account Property that is a security
entitlement shall be delivered in accordance with paragraph (d) of the
definition herein of "Delivery" and shall be held pending maturity or
disposition by the Indenture Trustee or a securities intermediary acting
solely for the Indenture Trustee.
(ii) The Servicer shall have the power, revocable by the
Indenture Trustee, or by the Owner Trustee with the consent of the
Indenture Trustee, following an Event of Servicing Termination to
instruct the Indenture Trustee in writing, to make withdrawals and
payments from the Trust Accounts and the Certificate Distribution Account
for the purpose of withdrawing any amounts deposited in error into such
accounts.
Section 5.02 Collections; Deposits into Collection Account.
(a) The Servicer shall remit to the Collection Account the Total
Distribution Amount on each Remittance Date for so long as (i) HNB is the
Servicer, (ii) the Servicer has the Minimum Required Rating and (iii) no Event
of Servicing Termination shall have occurred and be continuing.
Notwithstanding anything herein to the contrary, so long as the conditions set
forth in clauses (i) through (iii) above are satisfied, the Servicer may make
any remittance pursuant to the preceding sentence net of the Servicing Fee and
any Servicing Reimbursement Amount payable to the Servicer on the related
Distribution Date. If (i) HNB is no longer the Servicer, (ii) HNB no longer
has the Minimum Required Rating or (iii) an Event of Servicing Termination
shall have occurred and be continuing, the Servicer shall remit to the
Collection Account within two Business Days of receipt thereof any amounts
received by it that are to be included in the Total Distribution Amount for
such Collection Period. Notwithstanding anything to the contrary contained
herein, for purposes of the first Collection Period, the Servicer shall remit
to the Collection Account on the first Remittance Date, the Total Distribution
Amount with respect to the second Purchase Agreement Collection Period and the
Depositor shall remit the
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amounts pursuant to Section 5.02(b), together comprising the Total
Distribution Amount for the first Collection Period.
(b) The Issuer hereby directs the Depositor (in accordance with
Section 2.01(a)(i) hereof) to cause the Seller, and the Depositor hereby
directs the Seller (in accordance with the Assignment, Assumption and
Recognition Agreement) to deliver to the Indenture Trustee on the Closing Date
for deposit into the Collection Account all moneys received by the Seller in
respect of the Receivables from (but excluding) the Cut-Off Date to (and
including) the Closing Date, and the Indenture Trustee shall deposit all such
moneys so delivered to it into the Collection Account on the Closing Date.
Section 5.03 Application of Collections. All payments received from or on
behalf of an Obligor during each Collection Period with respect to each
Receivable (other than a Receivable that is a Repurchased Receivable) shall be
applied to interest and principal in accordance with the Simple Interest
Method and the Servicer's customary procedures. Generally, subject to the
foregoing sentence, the Servicer applies obligor payments, first to interest,
second to Late Fees and third, to unpaid principal; provided, that with
respect to Defaulted Receivables for which the Servicer disposes of or sells a
Financed Vehicle, and the Liquidation Proceeds from the disposition of the
Financed Vehicle do not equal the Principal Balance of such Receivable, the
Servicer applies such Liquidation Proceeds, first to unpaid principal, second
to interest and third to unpaid Late Fees.
Section 5.04 Repurchase Amounts. For so long as (i) HNB is the Servicer,
(ii) HNB has the Minimum Required Rating, and (iii) no Event of Servicing
Termination shall have occurred and be continuing, the Servicer shall be
entitled, pursuant to the first sentence of Section 5.02, to deposit or cause
to be deposited in the Collection Account on the related Remittance Date, (x)
the aggregate Repurchase Amounts owed by the Servicer with respect to the
related Collection Period pursuant to Section 4.08 and (y) any amounts
remitted to the Servicer in respect of the Repurchase Price (as defined in the
Purchase Agreement) during the related Collection Period. If, however, (i) HNB
no longer is the Servicer, (ii) HNB no longer has the Minimum Required Rating,
or (iii) an Event of Servicing Termination shall have occurred and be
continuing, the Servicer shall deposit or cause to be deposited in the
Collection Account (x) the aggregate Repurchase Amount pursuant to Section
4.08 within two Business Days' of the purchase of the Repurchased Receivable
by the Servicer pursuant to Section 4.08 and (y) any amounts remitted to the
Servicer in respect of the Repurchase Price (as defined in the Purchase
Agreement) within two Business Days' of its receipt of such amounts.
Section 5.05 Permitted Withdrawals from Collection Account.
(a) On each Distribution Date, the Indenture Trustee, at the written
direction of the Servicer, shall, in addition to, and prior to, the
withdrawals from the Collection Account on such Distribution Date pursuant to
Section 5.06(b), make withdrawals from the Collection Account to withdraw any
amount not required to be deposited in the Collection Account or deposited
therein in error.
(b) The Indenture Trustee shall make withdrawals from the Collection
Account to clear and terminate the Collection Account in connection with the
termination of this
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Agreement; provided that all conditions to the termination of this Agreement
set forth herein and in the other Basic Documents shall have been met.
Section 5.06 Distributions.
(a) On each Distribution Date, the Indenture Trustee shall determine
all amounts required to be deposited pursuant to this Section.
(b) On each Distribution Date, the Indenture Trustee (based in
relevant part on the information provided by the Servicer in the Servicer's
Certificate delivered on the related Determination Date pursuant to Section
4.10(a)) shall make the following payments, deposits and distributions from
amounts on deposit in the Collection Account, to the extent of the Total
Distribution Amount for such Distribution Date, to make required payments and
distributions on such date pursuant to clauses (i) through (xii) below, in the
following order and priority:
(i) to the Servicer, the Servicing Fee and Servicing
Reimbursement Amount for the related Collection Period (and any accrued
and unpaid Servicing Fees and Servicing Reimbursement Amounts from prior
Collection Periods);
(ii) (x) to the Indenture Trustee and the Owner Trustee pro
rata, the Indenture Trustee Fee for the related Collection Period (and
any accrued and unpaid Indenture Trustee Fees from prior Collection
Periods) and the Owner Trustee Fee for the related Collection Period (and
any accrued and unpaid Owner Trustee Fees from prior Collection Periods)
and then (y) to the Indenture Trustee and the Owner Trustee pro rata, any
other accrued and unpaid amounts (including reasonable legal fees and
expenses) owed to the Indenture Trustee and the Owner Trustee not to
exceed $100,000 in the aggregate in any consecutive twelve month period;
(iii) to the Note Interest Distribution Account for payment to
the Class A Noteholders pursuant to Section 5.06(c)(i), from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Class A Noteholders' Interest Distributable Amount;
(iv) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount remaining
after the application of clauses (i) through (iii), the First Allocation
of Principal, if any;
(v) to the Note Interest Distribution Account for payment to
the Class B Noteholders pursuant to Section 5.06(c)(ii), from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv), the Class B Noteholders' Interest Distributable Amount;
(vi) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount remaining
after the application of clauses (i) through (v), the Second Allocation
of Principal, if any, reduced by any First Allocation of Principal paid
pursuant to clause (iv) above;
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(vii) to the Note Interest Distribution Account for payment to
the Class C Noteholders pursuant to Section 5.06(c)(iii), from the Total
Distribution Amount remaining after the application of clauses (i)
through (vi), the Class C Noteholders' Interest Distributable Amount;
(viii) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount remaining
after the application of clauses (i) through (vii), the Third Allocation
of Principal, if any, reduced by any First Allocation of Principal paid
pursuant to clause (iv) above and any Second Allocation of Principal paid
pursuant to clause (vi) above;
(ix) to the Note Interest Distribution Account for payment to
the Class D Noteholders pursuant to Section 5.06(c)(iv), from the Total
Distribution Amount remaining after the application of clauses (i)
through (viii), the Class D Noteholders' Interest Distributable Amount;
(x) to the Principal Distribution Account, for distribution
pursuant to Section 5.06(d), from the Total Distribution Amount remaining
after the application of clauses (i) through (ix), the Regular Principal
Allocation, if any, reduced by any First Allocation of Principal paid
pursuant to clause (iv) above, any Second Allocation of Principal paid
pursuant to clause (vi) above and any Third Allocation of Principal paid
pursuant to clause (viii) above;
(xi) to the applicable party, from the Total Distribution
Amount remaining after the application of clauses (i) through (x), any
accrued and unpaid fees or expenses (including reasonable legal fees and
expenses) or any other amounts owed to such party under any of the Basic
Documents, to the extent not paid pursuant to clauses (i) through (x);
and
(xii) the remainder, if any, of the Total Distribution Amount,
to the Certificate Distribution Account for distribution to the
Certificateholders.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee, shall continue to maintain the Collection Account hereunder until all
amounts distributable on the Certificates have been distributed to the
Certificateholders.
(c) On each Distribution Date, the Indenture Trustee (based in
relevant part on the information provided to it by the Servicer in the
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 4.10(a)) shall withdraw the funds on deposit in the Note Interest
Distribution Account with respect to the Collection Period preceding such
Distribution Date and make payments on such date pursuant to clauses (i)
through (iv) below, in the following order and priority:
(i) first, to the Class A Noteholders, ratably, the Class A
Noteholders' Interest Distributable Amount for such Distribution Date;
(ii) second, to the Class B Noteholders, the Class B
Noteholders' Interest Distributable Amount for such Distribution Date;
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(iii) third, to the Class C Noteholders, the Class C
Noteholders' Interest Distributable Amount for such Distribution Date;
and
(iv) fourth, to the Class D Noteholders, the Class D
Noteholders' Interest Distributable Amount for such Distribution Date.
(d) On each Distribution Date, the Indenture Trustee (based in
relevant part on the information provided to it by the Servicer in the
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 4.10(a)) shall withdraw the funds on deposit in the Principal
Distribution Account with respect to the Collection Period preceding such
Distribution Date and make payments on such date pursuant to clauses (i)
through (iv) below, in the following order and priority:
(i) to the Class A Noteholders, in the following order and
priority, the Class A Principal Distributable Amount for such Payment
Date:
(A) first, to the Class A-1 Noteholders on account of
principal until the Outstanding Amount of the Class A-1 Notes is reduced
to zero;
(B) second, to the Class A-2 Noteholders on account of
principal until the Outstanding Amount of the Class A-2 Notes is reduced
to zero; and
(C) third, to the Class A-3 Noteholders on account of
principal until the Outstanding Amount of the Class A-3 Notes is reduced
to zero;
(D) fourth, to the Class A-4 Noteholders on account of
principal until the Outstanding Amount of the Class A-4 Notes is reduced
to zero;
(ii) to the Class B Noteholders, the Class B Principal
Distributable Amount for such Payment Date;
(iii) to the Class C Noteholders, the Class C Principal
Distributable Amount for such Payment Date; and
(iv) to the Class D Noteholders, the Class D Principal
Distributable Amount for such Payment Date.
(e) Notwithstanding the foregoing, subject to the provisions of
Section 5.04(b) of the Indenture:
(i) If the Notes have been accelerated following the occurrence
and during the continuation of an Event of Default specified in Section
5.01(i), 5.01(ii), 5.01(iv) or 5.01(v) of the Indenture but prior to any
liquidation of the Trust Estate, the Indenture Trustee shall (w) transfer
the funds on deposit in the Collection Account remaining after the
application of clauses 5.06(b)(i) through (iii) above to the Principal
Distribution Account to the extent necessary to reduce the Outstanding
Amount of all the Class A Notes to zero, or, (x) if the Class A Notes
shall have been paid in full, transfer the funds on deposit in the
Collection Account remaining after the application of clauses
44
5.06(b)(i) through (v) above to the Principal Distribution Account to the
extent necessary to reduce the Outstanding Amount of all the Class B
Notes to zero, or, (y) if the Class A Notes and Class B Notes shall have
been paid in full, transfer the funds on deposit in the Collection
Account remaining after the application of clauses 5.06(b) (i) through
(vii) above to the Principal Distribution Account to the extent necessary
to reduce the Outstanding Amount of all the Class C Notes to zero, or,
(z) if the Class A Notes, Class B Notes and Class C Notes shall have been
paid in full, to transfer the funds on deposit in the Collection Account
remaining after the application of clauses 5.06(b)(i) through (ix) above
to the Principal Distribution Account to the extent necessary to reduce
the Outstanding Amount of all the Class D Notes to zero. Any amounts
transferred to the Principal Distribution Account pursuant to clause (w)
shall be applied to the repayment of principal of the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes pro rata
based on the respective Outstanding Amounts of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes.
(ii) If the Notes have been accelerated following the
occurrence and during the continuation of an Event of Default specified
in Section 5.01(iii) of the Indenture, the Indenture Trustee shall
transfer the funds on deposit in the Collection Account remaining after
the application of clauses 5.06(b)(i) through (x) to the Principal
Distribution Account to the extent necessary to reduce the principal
amount of all the Notes to zero in the order and priority set forth in
Section 5.06(d).
Section 5.07 Statements to Securityholders. On each Distribution Date,
the Indenture Trustee shall prepare and make available via its website at
xxx.xxxxxxx.xxx to each Noteholder of record as of the most recent Record
Date, and shall provide to each Rating Agency, the Seller and to the Owner
Trustee (with a copy to each Paying Agent (if any)) for the Owner Trustee to
forward to each Certificateholder of record as of the most recent Record Date,
a statement substantially in the form of Exhibit A setting forth at least the
following information as to the Securities to the extent applicable:
(a) the amount of collections received with respect to the
Receivables during the related Collection Period and allocable to principal
allocable to each Class of Notes on such Distribution Date;
(b) the amount of collections received with respect to the
Receivables during the related Collection Period and allocable to interest
allocable to each Class of Notes on such Distribution Date;
(c) the amount of the Regular Principal Allocation for such
Distribution Date;
(d) the amount of the First Allocation of Principal, if any, for
such Distribution Date;
(e) the amount of the Second Allocation of Principal, if any, for
such Distribution Date;
(f) the amount of the Third Allocation of Principal, if any, for
such Distribution Date;
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(g) the Pool Balance with respect to such Distribution Date, after
giving effect to payments allocated to principal reported under clause (a)
above;
(h) the Outstanding Amount of each Class of Notes, the Note Pool
Factor for each such Class, and the Note Balance for each such Class as of the
close of business on the preceding Distribution Date, after giving effect to
payments allocated to principal reported under clause (a) above;
(i) the amount of the Servicing Fee and Servicing Reimbursement
Amount paid to the Servicer with respect to the related Collection Period;
(j) the respective amounts of the Owner Trustee Fee paid to the
Owner Trustee and the Indenture Trustee Fee paid to the Indenture Trustee in
each case with respect to the related Collection Period;
(k) the aggregate amounts of Realized Losses, if any, and Cram Down
Losses, if any, separately identified, with respect to the related Collection
Period;
(l) the aggregate Principal Balance of all Receivables that became
Defaulted Receivables or Repurchased Receivables during the related Collection
Period;
(m) the aggregate Principal Balance and number of Receivables that
are 30 to 59 days, 60 to 89 days or 90 days or more delinquent as of the last
day of the related Collection Period;
(n) the Class A-1 Interest Carryover Shortfall, the Class A-2
Interest Carryover Shortfall, the Class A-3 Interest Carryover Shortfall, the
Class A-4 Interest Carryover Shortfall, the Class B Interest Carryover
Shortfall, the Class C Interest Carryover Shortfall and the Class D Interest
Carryover Shortfall, in each case after giving effect to payments on such
Distribution Date, and any change in such amounts from the preceding
statement;
(o) the aggregate Repurchase Amounts for Repurchased Receivables, if
any, that were or are to be purchased during or with respect to such
Collection Period;
(p) the aggregate Principal Balance and number of all Receivables
with respect to which the related Financed Vehicle was repossessed;
(q) the aggregate Principal Balance and number of Receivables with
respect to which the Servicer granted an extension;
(r) the Overcollateralization Target Amount for the next
Distribution Date;
(s) the Cumulative Net Loss Ratio as of such Determination Date;
(t) the Six-Month Annualized Net Loss Ratio as of such Determination
Date;
(u) the Three-Month Annualized Net Loss Ratio as of such
Determination Date; and
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(v) the Pool Delinquency Percentage as of such Determination Date.
Each amount set forth on the Distribution Date Statement under clauses
(a), (b), (c), (d), (e), (f), (i) or (j) above shall be expressed as a dollar
amount per $1,000 of original principal balance of a Note.
Section 5.08 Subcertifications of Indenture Trustee in Connection with
Xxxxxxxx-Xxxxx Certifications.
(a) The Indenture Trustee and the Servicer shall reasonably
cooperate with the Depositor in connection with the Trust satisfying the
reporting requirements under the Exchange Act. The Indenture Trustee shall
prepare on behalf of the Trust any Forms 8-K and 10-K customary for similar
securities as required by the Exchange Act and the rules and regulations of
the Commission thereunder, and the Indenture Trustee shall file (via the
Commission's Electronic Data Gathering and Retrieval System) such Forms with
the Commission on behalf of the Depositor. The Depositor hereby grants to the
Indenture Trustee a limited power of attorney to execute and file each such
Form 8-K but only to the extent no accompanying certification is required to
be filed on behalf of the Depositor. Such power of attorney shall continue
until either the earlier of (i) receipt by the Indenture Trustee from the
Depositor of written termination of such power of attorney and (ii) the
termination of the Trust. The Depositor shall execute the Form 10-Ks. The
Indenture Trustee shall have no liability with respect to any failure to
properly prepare or file such periodic reports resulting from or relating to
the Indenture Trustee's inability or failure to obtain any information not
resulting from its own negligence or willful misconduct.
(b) Each Form 8-K shall be filed by the Indenture Trustee with the
Commission within 15 days after each Distribution Date, including a Form 8-K
with a copy of the statement to the Noteholders for such Distribution Date as
an exhibit thereto. Prior to March 30th of each year (or such earlier date as
may be required by the Exchange Act and the Rules and Regulations of the SEC),
the Indenture Trustee shall file a Form 10-K, in substance as required by
applicable law or the Commission's staff interpretations. Such Form 10-K shall
include as exhibits the Servicer's annual statement of compliance described
under Section 4.11 (upon which the Indenture Trustee may rely) and the
accountant's report described under Section 4.12, in each case to the extent
they have been timely delivered to the Indenture Trustee. If they are not so
timely delivered, the Indenture Trustee shall file an amended Form 10-K
including such documents as exhibits reasonably promptly after they are
delivered to the Indenture Trustee. The Form 10-K shall also include the
Depositor's Annual Xxxxxxxx-Xxxxx Certification provided for in Section 6.09.
The Indenture Trustee shall prepare and deliver each Form 10-K to the
Depositor for execution no later than March 20th (or if such day is not a
Business Day, the immediately preceding Business Day) of each year. The
Depositor shall return the executed Form 10-K to the Indenture Trustee for
filing no later than March 25th (or if such day is not a Business Day, the
immediately preceding Business Day) of each year.
(c) Notwithstanding that the Depositor's Annual Xxxxxxxx-Xxxxx
Certification is to be signed by an officer of the Depositor, a Responsible
Officer of the Indenture Trustee shall sign a certification, in the form
attached hereto as Exhibit E for the benefit of the Depositor and its
officers, directors and Affiliates (provided, however, that the Indenture
Trustee shall not undertake an analysis of the accountant's report attached as
an exhibit to the Form 10-K). The
47
forms of certification attached as Exhibit D and Exhibit E hereto are subject
to revision so as to conform to any amendments made to the Xxxxxxxx-Xxxxx Act
of 2002 or to any rules and regulations promulgated thereto. Such
certification shall be delivered to the Depositor, no later than March 15th of
each year (or if such day is not a Business Day, the immediately preceding
Business Day) and the Depositor shall deliver the Depositor's Annual
Xxxxxxxx-Xxxxx Certification to be filed to the Indenture Trustee no later
than March 20th of each year (or if such day is not a Business Day, the
immediately preceding Business Day). In the event that prior to the filing
date of the Form 10-K in March of each year, the Indenture Trustee has actual
knowledge of information material to the Depositor's Annual Xxxxxxxx-Xxxxx
Certification, the Indenture Trustee shall promptly notify the Depositor. In
addition, the Indenture Trustee shall indemnify and hold harmless the
Depositor and its officers, directors and Affiliates from and against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments and other costs and expenses arising out of
or based upon any breach of the Indenture Trustee's obligations under this
Section 5.08 or the Indenture Trustee's negligence, bad faith or willful
misconduct in connection therewith.
(d) Upon any filing with the Commission, the Indenture Trustee shall
promptly deliver to the Depositor a copy of any such executed report,
statement or information.
(e) Prior to January 30 of the first year in which the Indenture
Trustee is able to do so under applicable law, the Indenture Trustee shall, in
accordance with applicable law, file a Form 15D Suspension Notification with
respect to the Issuer in a timely manner.
ARTICLE VI
THE DEPOSITOR
Section 6.01 Representations of Depositor. The Depositor makes the
following representations to the Issuer, the Servicer, the Indenture Trustee
and the Seller. The Issuer relies on such representations in accepting the
Receivables and delivering the Securities. Such representations and warranties
speak as of the execution and delivery of this Agreement and as of the Closing
Date, and shall survive the sale, transfer and assignment of the Receivables
by the Depositor to the Issuer and the pledge thereof to the Indenture Trustee
in accordance with the terms of the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized
and validly existing as a corporation in good standing under the laws of the
State of Delaware, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted.
(b) Due Qualification. The Depositor is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions where the failure to do
so would materially and adversely affect the Depositor's ability to transfer
the Receivables to the Issuer pursuant to this Agreement or the validity or
enforceability of the Receivables.
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(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and the other Basic Documents
to which it is a party and to carry out their respective terms; the Depositor
has full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Issuer, and the Depositor shall have duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement and the
other Basic Documents to which the Depositor is a party have been, duly
authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement and the other Basic Documents
to which the Depositor is a party, when duly executed and delivered by the
other parties hereto and thereto, shall constitute legal, valid and binding
obligations of the Depositor, enforceable against the Depositor in accordance
with their respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
to general principles of equity (whether applied in a proceeding at law or in
equity).
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents and the fulfillment of the
terms of this Agreement and the other Basic Documents shall not conflict with,
result in any breach of any of the terms or provisions of or constitute (with
or without notice or lapse of time, or both) a default under, the certificate
of incorporation or bylaws of the Depositor, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Depositor is a party
or by which it is bound; or result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than this
Agreement and the other Basic Documents; or violate any law, order, rule or
regulation applicable to the Depositor of any court or federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor.
(f) No Proceedings. No legal or governmental proceedings are pending
to which the Depositor is a party or of which any property of the Depositor is
subject and no such proceedings are, to the Depositor's knowledge, threatened
or contemplated, against the Depositor before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the
invalidity of this Agreement or any other Basic Document; (ii) seeking to
prevent the issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or any other Basic Document; (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement or any other Basic Document; or (iv) seeking
to adversely affect the federal income tax attributes of the Trust, the Notes
or the Certificates.
(g) No Litigation Pending. There is no action, suit, regulatory or
other proceeding of any kind pending or, to the Depositor's knowledge,
threatened against or materially affecting the Depositor or the properties of
the Depositor before any Governmental Authority which, if determined adversely
to the Depositor, would adversely affect the Depositor ability to execute,
deliver and perform its obligations under this Agreement.
49
(h) No Consents. The Depositor is not required to obtain the consent
of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Basic Document to which it is a
party that has not already been obtained.
(i) No Untrue Information. Neither this Agreement nor any statement,
report or other document furnished or to be furnished by the Depositor in
writing pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary to make such
statement, document or report not misleading.
Section 6.02 Corporate Existence. During the term of this Agreement, the
Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. In
addition, all transactions and dealings between the Depositor and its
Affiliates will be conducted on an arm's-length basis.
Section 6.03 Liability of Depositor; Indemnities. The Depositor shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement (which shall not
include distributions on account of the Notes or the Certificates).
Section 6.04 Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person with which the Depositor shall merge or consolidate
or which the Depositor shall permit to become the successor to the Depositor's
business shall execute an agreement of assumption of every obligation of the
Depositor under this Agreement and the other Basic Documents. Whether or not
such assumption agreement is executed, such successor Person shall be the
successor to the Depositor under this Agreement without the execution or
filing of any document or any further act on the part of any of the parties to
this Agreement. The Depositor shall provide prompt notice of any merger,
consolidation or succession pursuant to this Section 6.04 to the Owner
Trustee, the Indenture Trustee, the Servicer, the Securityholders and the
Rating Agencies. Notwithstanding the foregoing, the Depositor shall not merge
or consolidate with any other Person or permit any other Person to become a
successor to the Depositor's business unless (w) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.02 or 6.01 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction), (x) the Depositor shall have delivered to the Owner
Trustee, the Indenture Trustee and the Servicer an Officer's Certificate and
an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 6.04 and
that all conditions precedent provided for in this Agreement relating to such
transaction have been complied with, (y) the Rating Agency Condition shall
have been satisfied and (z) the Depositor shall have delivered to the Owner
Trustee, the Indenture Trustee and the Servicer an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all
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financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Receivables and reciting the details of such
filings or (B) no such action is necessary to preserve and protect such
interest.
Section 6.05 Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Depositor shall be under no obligation to
appear in, prosecute or defend any legal action that shall not be incidental
to its obligations under this Agreement and that in its opinion may involve it
in any expense or liability.
Section 6.06 Depositor May Own Securities. The Depositor and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Securities with the same rights as it would have if it were not
the Depositor or an Affiliate thereof, except as expressly provided herein or
in any Basic Document.
Section 6.07 Depositor to Provide Copies of Relevant Securities Filings.
The Depositor shall provide or cause to be provided to the Indenture Trustee a
copy of any document filed by the Depositor subsequent to the date hereof with
the Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934 that relate specifically to the Trust, the Notes or the
Certificates.
Section 6.08 Amendment of Depositor's Organizational Documents. The
Depositor shall not amend its organizational documents except in accordance
with the provisions thereof.
Section 6.09 Xxxxxxxx-Xxxxx Certifications. The Depositor shall provide
on a timely basis for filing with the 1934 Act Documents, the certification
(the "Depositor's Annual Xxxxxxxx-Xxxxx Certification"), substantially in the
form of Exhibit D, required by Section 302 of the Xxxxxxxx-Xxxxx Act to be
included in those reports.
ARTICLE VII
THE SERVICER
Section 7.01 Representations of Servicer.
(a) The Servicer makes the following representations and warranties
to the Issuer, the Depositor, the Indenture Trustee, the Owner Trustee and the
Seller and upon which the Issuer is deemed to have relied in acquiring the
Receivables. Such representations speak as of the execution and delivery of
this Agreement and as of the Closing Date (and in the case of subsections (i),
(v) and (ix) as of any point during the term of the Agreement), and shall
survive the sale of the Receivables to the Issuer and the pledge thereof to
the Indenture Trustee in accordance with the terms of the Indenture.
(i) Due Organization and Qualification. The Servicer (A) is
duly organized and validly existing as a national banking association
under the laws of the United States of America, (B) is in good standing
under such laws and (C) is duly
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qualified to transact business under such laws. The Servicer is an
insured depository institution under the provisions of the Federal
Deposit Insurance Act, 12 U.S.C. Sections 1811-1831 and the Servicer's
status as an insured depository institution has not been terminated under
the provisions of Section 8 of the Federal Deposit Insurance Act, 12
U.S.C. Section 1818. The Servicer has, and at all relevant times had, the
power, authority and legal right to service the Receivables.
(ii) Power and Authority; Due Authorization; Enforceability.
The Servicer has full power and authority to perform its obligations
under this Agreement and has duly authorized the performance of its
obligations under this Agreement by all necessary action. The Agreement
has been duly authorized, executed and delivered by the Servicer and
constitutes the legal, valid, binding and enforceable obligation of the
Servicer except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting the enforcement of
creditors' rights or by general equity principles.
(iii) No Violation. The Servicer is not in default under any
indenture, mortgage, deed of trust, loan agreement, guarantee, lease
financing agreement or similar agreement or instrument to which the
Servicer is a party, as borrower or guarantor, and the consummation of
the transactions contemplated by this Agreement and the other Basic
Documents to which it is a party, and the fulfillment of the respective
terms thereof, will not conflict with or result in a breach of any of the
terms or provisions of, or constitute (with or without notice or lapse of
time or both) a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the property or assets of the
Servicer pursuant to the terms of, any such indenture, mortgage, deed of
trust, loan agreement, guarantee, lease financing agreement or similar
agreement or instrument to which the Servicer is a party or by which it
is bound, in each case where such a default, conflict or breach would
materially and adversely affect the performance by the Servicer of its
obligations under this Agreement and the consummation of the transactions
contemplated by this Agreement; and the fulfillment of the terms hereof
will not result in any violation of the provisions of the organizational
documents of the Servicer.
(iv) No Proceedings. No legal or governmental proceedings or
investigations are pending to which the Servicer is a party or of which
any property of the Servicer is the subject, and no such proceedings are
threatened or contemplated by Governmental Authorities or threatened by
others against the Servicer before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Servicer or its properties, other than such
proceedings which will not have a material adverse effect upon the
general affairs, financial position, net worth or operations of the
Servicer and its subsidiaries considered as a whole: (x) asserting the
invalidity of this Agreement or any of the other Basic Documents; (y)
seeking to prevent the issuance of the Securities or the consummation of
any of the transactions contemplated by this Agreement or any of the
other Basic Documents; or (z) seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer of
its obligations under, or the validity and enforceability of, this
Agreement or any of the other Basic Documents to which it is a party.
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(v) Licenses and Approvals. The Servicer has obtained all the
licenses and approvals necessary for the conduct of Servicer's business
in the jurisdictions where the failure to do so would materially and
adversely affect its performance of its obligations under this Agreement
or render any of the Receivables unenforceable.
(vi) Ability to Perform. The Servicer has the facilities,
procedures and experienced personnel necessary for the servicing of
retail motor vehicle loan and installment sale contracts of the same type
as the Receivables in accordance with the Servicing Standard. The
Servicer does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every one of its obligations
under this Agreement.
(vii) No Consent Required. The Servicer is not required to
obtain the consent of any other Person, or any consent, license, approval
or authorization or registration or declaration with, any Governmental
Authority in connection with the execution, delivery or performance of
this Agreement or any other Basic Document to which it is a party, except
for such as have been obtained, effected or made or will be obtained on
or prior to the Closing Date.
(viii) No Litigation Pending. There is no action, suit,
proceeding or investigation pending or, to the Servicer's knowledge,
threatened against the Servicer or any of its Affiliates which, if
determined adversely against the Servicer, would materially adversely
affect the execution, delivery or enforceability of this Agreement, the
other Basic Documents to which the Servicer is a party, as applicable, or
draw into question the validity of this Agreement, the other Basic
Documents to which the Servicer is a party, as applicable, or any of the
Receivables or have a material adverse effect on the financial condition
of the Servicer or the Servicer's ability to perform its obligations
under the terms of this Agreement or the other Basic Documents to which
the Servicer is a party, as applicable.
(ix) No Untrue Information. None of this Agreement, the other
Basic Documents to which the Servicer is a party or any statement, report
or other document furnished or to be furnished in writing by the Servicer
pursuant to this Agreement, the other Basic Documents to which the
Servicer is a party, as applicable, or in connection with the
transactions contemplated hereby or thereby contains or will contain any
untrue statement of material fact or omits or will omit to state any
material fact necessary to make such statement, document or report not
misleading.
(x) No Fraud. To the best of the Servicer's knowledge, no
material misrepresentation, negligence or fraud in respect of such
Receivable has taken place on the part of any employee or agent of the
Servicer in connection with the servicing of the Receivables.
Section 7.02 Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer and the representations made by the Servicer under
this Agreement and:
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(a) The Servicer shall indemnify, defend and hold harmless the
Seller, the Issuer, the Owner Trustee, the Indenture Trustee, the
Securityholders and the Depositor and any of the officers, directors, agents,
partners, members, shareholders and employees of the Seller, the Issuer, the
Owner Trustee, the Indenture Trustee (collectively, the "Indemnified Parties"
and each, an "Indemnified Party") from and against any and all claims, losses
and liabilities, reasonable and necessary legal fees and related costs,
judgments, and any other costs, fees or expenses that an Indemnified Party may
sustain in any way related to claims of third parties related to (i) the
failure of the Servicer to perform its duties as servicer and custodian and to
service the Receivables in compliance with the terms of this Agreement, (ii)
the breach of any representation or warranty, covenant or other agreement of
the Servicer set forth in this Agreement or the other Basic Documents
applicable to it, (iii) the use, ownership or operation by the Servicer or any
Affiliate thereof of a Financed Vehicle or (iv) any information delivered by
the Servicer to the Indenture Trustee and/or the Depositor pursuant to this
Agreement that is false, incorrect, incomplete or misleading in any material
respect when delivered.
(b) The Servicer or the Indemnified Party, as applicable, shall
promptly notify the other upon becoming aware that a claim subject to
indemnification under Section 7.02(a) (an "Indemnified Claim") has been made
by a third party with respect to this Agreement or the Receivables; provided,
however, that the failure of the Indemnified Party to notify the Servicer of
an Indemnified Claim shall not relieve the Servicer from any liability that it
may have to any Indemnified Party, but only to the extent such failure to
notify does not prejudice the Servicer's ability to defend. The Servicer shall
assume the defense of any such Indemnified Claim and be responsible for all
fees and expenses of counsel incurred therewith as well as any other
litigation expenses; provided, that counsel chosen by the Servicer shall be
reasonably acceptable to the Issuer; and provided, however, that at any time
the Indemnified Party shall be entitled to participate therein and, to the
extent that it shall wish, hire counsel (who shall not, except with the
consent of the Servicer, be counsel to the Servicer) and, jointly with the
Servicer, assume the defense thereof. The Servicer shall not be liable to the
Indemnified Party for the cost of the Indemnified Party's counsel. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party unless: (i) the
employment thereof has been specifically authorized by the Servicer in
writing; (ii) the actual or potential defendants in, or targets of, any such
action include both the Servicer and the Indemnified Party and counsel
retained by the Servicer cannot adequately represent both the Servicer and the
Indemnified Party in light of the claims and defenses that each intends to
raise; or (iii) the Servicer has failed to assume the defense of such action
and employ counsel reasonably satisfactory to the Indemnified Party within a
reasonable time after the commencement of the action. In the case of (ii) or
(iii) above, if the Indemnified Party notifies the Servicer in writing that it
elects to employ separate counsel at the expense of the Servicer, the Servicer
shall not have the right to select separate counsel to participate in the
defense of such action on behalf of the Indemnified Party. Notwithstanding the
foregoing sentence, the Servicer shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (together with no more than one local counsel, if necessary) at any
time for the Indemnified Party, which firm shall be designated in writing by
the Servicer. The Servicer shall not, without the written consent of the
Indemnified Party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any
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pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnified Party is
an actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the
Indemnified Party from all liability arising out of such action or claim and
(ii) does not include a statement as to, or an admission of, fault,
culpability or failure to act, by or on behalf of the Indemnified Party.
For purposes of this Section, in the event of the termination of the
rights and obligations of HNB (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.02, or the resignation by such
Servicer pursuant to this Agreement, such Servicer shall have the rights and
obligations of "Servicer" pursuant to Section 7.02(b) with respect to any
Indemnified Claim arising from its capacity as Servicer under this Agreement.
The Servicer shall have no obligation to indemnify any of the Indemnified
Parties in connection with (x) a Receivable being deemed to be unenforceable
in a jurisdiction or (y) any impairment of receipt of collections on a
Receivable if either of the foregoing occurs as a result of the Issuer's, the
Indenture Trustee's or the Owner Trustee's failure to obtain any license or
consent necessary in connection with the ownership or enforcement of the
Receivables or the inability of the Servicer to pursue litigation as a result
of the restrictions set forth in Section 4.01(c).
Indemnification under this Section shall survive the resignation or
removal of the Servicer or the termination of this Agreement with respect to
acts of the Servicer prior thereto, and shall include reasonable fees and
expenses of counsel and reasonable expenses of litigation. If the Servicer
shall have made any indemnity payments pursuant to this Section 7.02 and the
Person to or on behalf of whom such payments are made thereafter collects any
of such amounts from others, such Person shall promptly repay such amounts to
the Servicer, without interest.
Section 7.03 Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. The Servicer shall preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement or any of the
Receivables and to perform its duties under this Agreement.
Any Person (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, (iii) that acquires by conveyance, transfer or
lease substantially all of the assets of the Servicer, or (iv) succeeding to
the business of the Servicer, which Person shall execute an agreement of
assumption to perform every obligation of the Servicer under this Agreement,
shall be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement anything herein to the contrary notwithstanding;
provided, that, the Servicer shall provide prompt notice of any merger,
consolidation or succession pursuant to this Section 7.03 to the Owner
Trustee, the Indenture Trustee, the Depositor and the Rating Agencies and
immediately after giving effect to such transaction, (i) no representation or
warranty made pursuant to Section 7.01 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction), (ii) no event that, after notice or lapse
of time or both, would become an Event of Servicing Termination or an
Additional Event of Servicing Termination shall have occurred
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and be continuing, (iii) the Servicer shall have delivered to the Indenture
Trustee and the Owner Trustee an Officer's Certificate and Opinion of Counsel
each stating that such consolidation, merger or succession and any such
related agreements comply with this Section 7.03 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with and (iv) the Servicer shall have delivered to the
Indenture Trustee and the Owner Trustee an Opinion of Counsel stating that, in
the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed
that are necessary fully to preserve and protect the interest of the Trust and
the Indenture Trustee in the Receivables or (B) no such action shall be
necessary to preserve and protect such interest. Furthermore, in the event the
Servicer transfers or otherwise disposes of all or substantially all of its
assets to an Affiliate of the Servicer, such Affiliate shall satisfy the
condition described in the preceding sentence and shall also be fully liable
to for all of the Servicer's obligations and liabilities hereunder.
Section 7.04 Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of its shareholders, directors, officers, employees or agents
shall be under any liability to the Seller, the Issuer, the Depositor, the
Indenture Trustee, the Owner Trustee, the Noteholders or any other Person for
taking any action or for refraining from the taking of any action pursuant to
this Agreement, or for errors in judgment; provided, however, that this
Section 7.04 shall not protect the Servicer against any liability that would
otherwise be imposed by reason of a breach or warranties or representation
made in this Agreement or the failure to perform its obligations in compliance
with any standard of care set forth in this Agreement or any other liability
which would otherwise be imposed under this Agreement. The Servicer and any
director, officer, employee or agent of the Servicer may conclusively rely in
good faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement; provided further, however, that in no event shall
Servicer be liable to the Issuer or any other Person for any consequential,
exemplary or punitive damages, except to the extent awarded to a third party
with respect to any matters indemnified under Section 7.02.
Section 7.05 Servicer Not to Resign.
(a) Subject to the provisions of Section 7.03, the Servicer shall
not resign from the obligations and duties imposed on it by this Agreement as
Servicer except upon mutual consent of the Servicer, the Depositor, the
Indenture Trustee and the Owner Trustee or upon the determination that the
performance of its duties under this Agreement shall no longer be permissible
under Applicable Law and such incapacity cannot be cured by the Servicer.
(b) Notice of any determination that the performance by the Servicer
of its duties hereunder is no longer permitted under Applicable Law shall be
communicated to the Owner Trustee and the Indenture Trustee at the earliest
practicable time (and, if such communication is not in writing, shall be
confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered by the Servicer to the Owner Trustee and the Indenture Trustee. No
resignation of the Servicer shall become effective until a successor Servicer
(or if one is not appointed, the Indenture Trustee) shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
8.03, unless the Servicer is prohibited by Applicable Law from serving as
Servicer,
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in which instance the Indenture Trustee shall act as successor Servicer or
immediately appoint another Person to do so. If the Indenture Trustee is
legally unable to act as Servicer and if no successor Servicer shall have been
appointed within thirty days of resignation or removal of the resigning
Servicer, the Indenture Trustee, the Owner Trustee or the Certificateholders
evidencing not less than 25% of the percentage interests in the Certificates
may petition any court of competent jurisdiction for such appointment.
ARTICLE VIII
DEFAULT
Section 8.01 Event of Servicing Terminations and Additional Event of
Servicing Terminations.
(a) For purposes of this Agreement, the occurrence and continuance
of any of the following shall constitute a "Event of Servicing Termination":
(i) any failure by the Servicer to deposit into the Collection
Account (x) any proceeds or payment required to be so delivered on a
Remittance Date under the terms of this Agreement that continues
unremedied for a period of one Business Day after the date upon which
such payment was due or (y) any payment required to be made under the
terms of this Agreement (other than any payment to be made on a
Remittance Date) that continues unremedied for a period of three Business
Days after the date upon which such payment was due;
(ii) failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement, which failure continues unremedied
for a period of thirty days after discovery of such failure by a
Responsible Officer of the Servicer or after the date on which written
notice of such failure requiring the same to be remedied shall have been
given to the Servicer by Noteholders evidencing not less than 25% of the
Outstanding Amount of the Controlling Class;
(iii) failure by the Servicer to maintain its license to do
business in any jurisdiction where the Servicer is required to be
licensed in connection with the servicing of the Receivables or the
performance of its other obligations under this Agreement, where such
failure materially and adversely affects the ability of the Servicer to
perform its obligations under this Agreement;
(iv) the occurrence of an Insolvency Event with respect to the
Servicer;
(v) any assignment or delegation by the Servicer of its duties
or rights hereunder except as specifically permitted hereunder, or any
attempt to make such assignment or delegation;
(vi) the indictment of the Servicer, any director or employee
thereof, any Affiliate or any director or employee thereof for criminal
activity related to the origination or servicing activities of the
Servicer, in each case, where such indictment
57
materially and adversely affects the ability of the Servicer, as
applicable, to perform its obligations under this Agreement subject to
the condition that such indictment is not dismissed within ninety days;
or
(vii) any disqualification of the Servicer as an Eligible
Servicer.
(b) For purposes of this Agreement, the occurrence and continuance
of the following shall constitute an "Additional Event of Servicing
Termination":
(i) the occurrence of a Termination Trigger Event;
(ii) any change in the business, assets, operations, prospects
or condition, financial or otherwise, of the Servicer that has a material
adverse effect on the ability of the Servicer to perform any of its
obligations under this Agreement;
(iii) the long-term unsecured debt rating of the Servicer is
withdrawn or reduced to "Baa2" or below by Xxxxx'x, "BBB" or below by
Standard & Poor's or "BBB" or below by Fitch; or
(iv) the Servicer shall default in the payment of indebtedness
for any borrowed monies (after giving effect to all applicable cure
periods in any agreement governing such indebtedness) in an amount in
excess of $10,000,000.
(c) The Servicer shall deliver to the Indenture Trustee and the
Owner Trustee, promptly after having obtained knowledge thereof, but in no
event later than three Business Days thereafter, written notice in an
Officer's Certificate of any event which with the giving of notice or lapse of
time, or both, would become an Event of Servicing Termination under Section
8.01(a) or an Additional Event of Servicing Termination under Section 8.01(b).
(d) Any delinquencies, repossessions or losses on the Receivables
caused by (i) the failure of the Issuer, the Indenture Trustee or the Owner
Trustee to have any licenses or consents necessary in connection with the
ownership or enforcement of the Receivables or (ii) the inability of the
Servicer to pursue litigation as a result of the restrictions set forth in
bringing suit at the direction of the Servicer as required by Section 4.01(c)
shall not be considered in determining the existence of an Additional Event of
Servicing Termination.
Section 8.02 Consequences of an Event of Servicing Termination or an
Additional Event of Servicing Termination.
(a) If an Event of Servicing Termination shall occur and be
continuing, the Indenture Trustee may, and at the written direction of
Noteholders evidencing not less than a majority of the Outstanding Amount of
the Controlling Class, or, if no Notes are Outstanding, Certificateholders
evidencing 25% of the percentage interests in the Certificates, shall
terminate all of the rights and obligations of the Servicer under this
Agreement by notice in writing to the Servicer. If an Additional Event of
Servicing Termination shall occur, the Indenture Trustee may, and at the
written direction of Certificateholders evidencing not less than 75% of the
percentage interests in the Certificates shall, terminate all of the rights
and obligations of the Servicer under this Agreement by notice in writing to
the Servicer. At the time a notice of
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termination is delivered to the Servicer or as soon thereafter as possible, a
successor Servicer shall be appointed pursuant to Section 8.03.
(b) The Indenture Trustee or such other successor Servicer is
authorized and empowered by this Agreement to execute and deliver, on behalf
of the terminated Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables and related documents to show the Indenture Trustee (or the Owner
Trustee if the Notes have been paid in full) as lienholder or secured party on
the related certificates of title of the Financed Vehicles or otherwise. In
the event of termination pursuant to Section 8.02(a), the terminated Servicer
agrees to cooperate with the Indenture Trustee or the successor Servicer, as
applicable, in effecting the termination of the responsibilities and rights of
the terminated Servicer under this Agreement, including the transfer to the
Indenture Trustee or such other successor Servicer for administration by it of
all money and property held by the Servicer with respect to the Receivables
and other records relating to the Receivables, including any portion of the
Receivables File held by the Servicer and a computer tape in readable form as
of the most recent Business Day containing all information necessary to enable
the successor Servicer or the Indenture Trustee to service the Receivables.
The terminated Servicer shall also provide the Indenture Trustee or such other
successor Servicer computer records in order to facilitate the orderly and
efficient transfer of servicing duties. Upon such termination, the terminated
Servicer, upon the request of the Indenture Trustee, shall give notice to each
Obligor of the sale of the related Receivable to the Issuer and that such
Obligor shall, effective as of the date of such notice, remit all Monthly
Payments to an account specified by the Indenture Trustee or such other
successor Servicer.
Section 8.03 Appointment of Successor Servicer.
(a) On and after the receipt by the Servicer of a notice of
termination pursuant to Section 8.02 or upon resignation of the Servicer
pursuant to Section 7.05, the Servicer shall continue to perform all servicing
functions under this Agreement until the earlier of the date specified in such
notice of termination or otherwise specified by the Indenture Trustee or until
a date mutually agreed upon by the Servicer and the Indenture Trustee. As
promptly as possible after a notice of termination has been received by the
Servicer, the Certificateholders evidencing not less than a majority of the
percentage interests in the Certificates shall appoint an Eligible Servicer
who satisfies the Rating Agency Condition as successor Servicer, and such
successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee. In the event that a successor
Servicer has not been appointed by the requisite percentage of
Certificateholders or has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Indenture Trustee without further
action shall automatically be appointed the successor Servicer.
Notwithstanding the above, if (x) a successor Servicer has not been selected
by the Certificateholders or has not accepted its appointment at the time when
the Servicer ceases to act as Servicer and (y) the Indenture Trustee is
legally unable to act as Servicer, the Indenture Trustee, the Owner Trustee or
Noteholders evidencing not less than 25% of the Outstanding Amount of the
Controlling Class or, if no Notes are outstanding, Certificateholders
evidencing not less than 25% of the percentage interests in the Certificates,
may petition a court of competent jurisdiction to appoint an Eligible Servicer
as the
59
successor to the Servicer. Except as provided in Section 7.05, pending
appointment pursuant to the preceding sentence, the outgoing Servicer shall
continue to act as Servicer until a successor has been appointed and accepted
such appointment. The Indenture Trustee shall be entitled to withdraw from the
Collection Account and remit to the successor Servicer (including the
Indenture Trustee as successor Servicer) or such other party entitled thereto
(but not including the terminated Servicer) all reasonably incurred Servicer
transition costs. The sole remedy for termination under Section 8.01(b)(i)
shall be the termination of the Servicer.
(b) The successor Servicer (including the Indenture Trustee in its
capacity as successor Servicer), shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and all rights,
including to the Servicing Fee, authority, power, obligations and
responsibilities of the Servicer under this Agreement automatically shall pass
to, be vested in and become obligations and responsibilities of such successor
Servicer and such successor Servicer shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating to the Servicer under this Agreement, except as otherwise stated
herein; provided, however, that such successor Servicer shall have no
liability with respect to any obligation that was required to be performed by
the terminated Servicer prior to the date that such successor Servicer becomes
the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer; and provided, further that the Indenture
Trustee as successor Servicer shall have no obligation to make Monthly
Advances (as provided in Section 4.02(c)). The Depositor, the Owner Trustee,
the Indenture Trustee and the successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicing Fee to which a successor Servicer is entitled may be
modified, with the prior written consent of Certificateholders evidencing not
less than 100% of the percentage interests in the Certificates and subject to
satisfaction of the Rating Agency Condition with respect to such modification
of the Servicing Fee.
Section 8.04 Notification to Securityholders. Upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article VIII, the
Owner Trustee shall give prompt written notice thereof to the
Certificateholders, and the Indenture Trustee shall give prompt written notice
thereof to the Noteholders and each Rating Agency.
Section 8.05 Waiver of Past Defaults. Noteholders evidencing not less
than a majority of the Outstanding Amount of the Controlling Class, or, if no
Notes are Outstanding, Certificateholders evidencing not less than a majority
of the percentage interests in the Certificates, may, on behalf of all
Securityholders, waive in writing any Event of Servicing Termination or
default by the Servicer in the performance of its obligations hereunder and
its consequences, except (i) a default in making any required deposits to or
payments from any of the Trust Accounts in accordance with this Agreement or
(ii) a default that is an Insolvency Event. Certificateholders evidencing not
less than 100% of the percentage interests in the Certificates, may, on behalf
of all Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences that is, or with
the giving of notice or lapse of time or both would become, an Additional
Event of Servicing Termination. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Servicing Termination or
Additional Event of Servicing Termination, as applicable, arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such
60
waiver shall extend to any subsequent or other default or impair any right
consequent thereto except to the extent so expressly waived.
ARTICLE IX
TERMINATION
Section 9.01 Optional Purchase of All Receivables.
(a) On each Determination Date as of which the Pool Balance with
respect to the related Distribution Date will be equal to or less than 10% of
the Initial Pool Balance, the Servicer shall have the option to purchase the
Receivables. If the Servicer shall elect not to exercise such option, a
Certificateholder evidencing 100% of the percentage interests in the
Certificates shall have the option to purchase the Receivables; provided that
such Certificateholder shall not be the Seller, the Depositor or any Affiliate
thereof. To exercise such option, the Servicer or the Certificateholder, shall
deposit to the Collection Account on the Business Day prior to the Redemption
Date, an amount equal to the lesser of (i) the fair market value of the
Receivables and (ii) aggregate Repurchase Amount for the Receivables
(including Receivables that became Defaulted Receivables during the related
Collection Period) and shall succeed to all interests in and to the
Receivables; provided, however, that in order for the Servicer or such
Certificateholder to exercise such option the amount deposited into the
Collection Account shall be sufficient to pay the full amount of principal and
interest then due and payable on any Outstanding Notes and to pay any amounts
due to the Indenture Trustee and the Owner Trustee; and provided further, that
the Certificateholder shall also be required to deposit into the Collection
Account on the date of such purchase, an amount sufficient reimburse the
Servicer for any Monthly Advances which have not been reimbursed in accordance
with this Agreement. The exercise of such option shall effect a retirement, in
whole but not in part, of all outstanding Notes.
(b) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee
and the Indenture Trustee as soon as practicable after the Servicer has
received notice thereof.
(c) If the Servicer shall exercise its option to purchase the
Receivables pursuant to Section 9.01(a), any Certificateholder (unless such
Certificateholder is the Seller, the Depositor or any Affiliate thereof) shall
have the option to purchase such Receivables from the Servicer at a price
equal to the price that the Servicer paid for such Receivables pursuant to
Section 9.01(a).
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee, on behalf of the Issuer, will succeed to the rights of the
Indenture Trustee pursuant to this Agreement.
61
ARTICLE X
MISCELLANEOUS
Section 10.01 Amendment.
(a) This Agreement may be amended by the Depositor, the Servicer,
the Indenture Trustee and the Issuer, without the consent of any of the
Noteholders or Certificateholders, to amend Section 5.08 in a manner
consistent with the rules and regulations of the Commission, to cure any
ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Owner Trustee and the Indenture Trustee, adversely affect in
any material respect the interests of any Noteholder or Certificateholder;
provided further, that such action shall be deemed not to adversely affect in
any material respect the interests of any Noteholder or Certificateholder and
no Opinion of Counsel to that effect shall be required if the person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the ratings
then assigned to the Notes.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Issuer, with the prior written consent of the
Indenture Trustee, Noteholders holding not less than a majority of the
Outstanding Amount of the Class A Notes, Noteholders holding not less than a
majority of the Outstanding Amount of the Class B Notes, Noteholders holding
not less than a majority of the Outstanding Amount of the Class C Notes,
Noteholders holding not less than a majority of the Outstanding Amount of the
Class D Notes and Certificateholders evidencing not less than a majority of
the percentage interests in the Certificates, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the
Securityholders; provided, however, that no such amendment shall (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Securityholders, (ii) reduce the aforesaid
percentage of the Outstanding Amount of the Class A Notes, the Class B Notes,
the Class C Notes or the Class D Notes, the Noteholders of which are required
to consent to any such amendment, without the consent of the Noteholders
holding all Outstanding Class A Notes, Class B Notes, Class C Notes and Class
D Notes or (iii) reduce the aforesaid percentage of the percentage interests
in the Certificates, the Certificateholders of which are required to consent
to any such amendment, without the consent of all of the Certificateholders.
(c) Promptly after the execution of any amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent to each Securityholder and each Rating Agency.
(d) It shall not be necessary for the consent of Noteholders or
Certificateholders pursuant to this Section to approve the particular form of
any proposed
62
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof.
(e) Prior to the execution of any amendment to this Agreement, the
Owner Trustee, on behalf of the Issuer and the Indenture Trustee, shall be
entitled to receive and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and,
if applicable, the Opinion of Counsel referred to in Section 10.01(a). The
Owner Trustee and the Indenture Trustee, may, but shall not be obligated to,
enter into any such amendment that affects the Owner Trustee's or the
Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise.
Section 10.02 Protection of Title to Trust.
(a) The Seller and the Depositor shall file such financing
statements and cause to be filed such continuation statements, all in such a
manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Issuer and the Indenture Trustee in
the Receivables and the proceeds thereof. The Seller and/or the Depositor, as
applicable, shall deliver or cause to be delivered to the Owner Trustee and
the Indenture Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above as soon as available following such filing.
In addition, the Seller and the Depositor hereby authorize the Issuer and the
Indenture Trustee at any time and from time to time to prepare and file, at
the Depositor's sole cost and expense, financing statements and amendments
thereto in any jurisdiction as may be necessary or desirable to preserve,
maintain and protect the interests of the Issuer and the Indenture Trustee in
the Receivables and the proceeds thereof.
(b) None of the Seller, the Depositor or the Servicer shall change
its name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-506(b) of the UCC, unless it shall have given the Owner Trustee and
the Indenture Trustee at least five (5) days' prior written notice thereof and
shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements. Each of the Seller and the
Depositor hereby authorizes the Issuer to file any continuation statements or
amendments to financing statements, or any similar document in any
jurisdictions and with any filing offices as the Issuer (or the Indenture
Trustee on behalf of the Issuer) may determine, in its sole discretion, are
necessary or advisable in connection with the protection of ownership interest
granted to the Issuer and the Indenture Trustee herein.
(c) Each of Seller, the Depositor and the Servicer shall have an
obligation to give the Owner Trustee and the Indenture Trustee at least sixty
days' prior written notice of (i) any relocation of its registered location or
(ii) any change in the jurisdiction of its organization (including, with
respect to the Servicer, the jurisdiction in which the Servicer maintains its
main office under its national banking association charter). In addition, the
Servicer shall at all times maintain each office from which it shall service
Receivables, and its principal executive office, within the United States of
America.
(d) [Reserved].
63
(e) The Servicer shall maintain its computer systems, in accordance
with customary standards, so that, from and after the time of sale under this
Agreement of the Receivables, the Servicer's master computer records
(including any backup archives) that refer to a Receivable shall be coded to
reflect that such Receivable is part of the portfolio of Receivables that is
the subject of this Agreement and is owned by Xxxxxx Xxxxxxx Auto Loan Trust
2004-HB1 and pledged to the Indenture Trustee. The unique identification code
which the Servicer shall use is "GL Type Code 306". The Servicer shall have
the right to change such code upon written notice to the Issuer, provided that
such new code is a unique identification code. Indication of such Receivables'
inclusion in the portfolio shall be deleted from or modified on the Servicer's
computer systems when, and only when, the lien on the related Financed Vehicle
has been released in accordance with the Basic Documents.
(f) If at any time the Depositor or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest in motor
vehicle receivables to any prospective purchaser, lender or other transferee,
all of the computer diskettes, records or printouts (including any restored
from backup archives) that are delivered to such prospective purchaser, lender
or transferee refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Issuer and has
been pledged to the Indenture Trustee.
(g) The Servicer shall, without charge, permit the Indenture Trustee
and its agents upon reasonable notice and at any time during normal business
hours, which does not unreasonably interfere with the Servicer's normal
operations or customer or employee relations to, at the expense of the
Indenture Trustee (which reasonable expenses shall be reimbursed by the Issuer
pursuant to Section 5.06(b)), inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Receivable.
(h) The Depositor shall deliver to the Owner Trustee and the
Indenture Trustee:
(i) promptly after the execution and delivery of this Agreement
and each amendment hereto, an Opinion of Counsel stating that, in the
opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary
to fully preserve and protect the interest of the Trust and the Indenture
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given,
or (ii) no such action shall be necessary to preserve and protect such
interest; and
(ii) within ninety days after the beginning of each calendar
year beginning with the first calendar year beginning more than three
months after the Cut-Off Date, an Opinion of Counsel, dated as of a date
during such 90-day period, stating that, in the opinion of such counsel,
either (i) all financing statements and continuation statements have been
executed and filed that are necessary to fully preserve and protect the
interest of the Trust and the Indenture Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (ii) no such action shall be
necessary to preserve and protect such interest.
64
Each Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in
the following year to preserve and protect such interest.
Section 10.03 Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Issuer, the Owner
Trustee, the Indenture Trustee or any Rating Agency under this Agreement shall
be in writing, personally delivered, faxed and followed by first class mail,
or mailed by certified mail, return receipt requested, and shall be deemed to
have been duly given upon receipt (a) in the case of the Depositor, to 0000
Xxxxxxxx, Xxx Xxxx, XX 00000 (fax no.: (000) 000-0000), Attention: Xxxx
Xxxxxx, with a copy to Xxxxxxxx Xxxxx at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000
(fax no.: (000) 000-0000), (b) in the case of the Servicer and the custodian,
to The Huntington National Bank, 00 Xxxxx Xxxx Xxxxxx - XX0000, Xxxxxxxx, Xxxx
00000 (fax no.: (000) 000-0000), Attention: Xxxxxxx X. Xxxxxx, (c) in the case
of the Issuer or the Owner Trustee, at the Corporate Trust Administration
Department (as defined in the Trust Agreement); (d) in the case of the
Indenture Trustee, to Xxxxx Fargo Bank, National Association, Sixth and
Marquette Avenue, MAC N9311-161, Xxxxxxxxxxx, XX 00000 (fax no.: (612)
000-0000), Attention: CTS/Asset Backed Securities Administration, Xxxxxx
Xxxxxxx Auto Loan Trust 2004-HB1, (e) in the case of Xxxxx'x, to 00 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (fax no.: (000) 000-0000), Attention: ABS
Monitoring Department, (f) in the case of Fitch, to Xxx Xxxxx Xxxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (fax no.: (000)-000-0000), Attention: Xxxxxx Xxxx and
(g) in the case of Standard & Poor's, to 00 Xxxxx Xxxxxx (00xx Xxxxx), Xxx
Xxxx, Xxx Xxxx 00000 (fax no.: (000) 000-0000), Attention: Asset Backed
Surveillance Department; or, as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 10.04 Assignment by the Depositor or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided
in Sections 6.04 and 7.03 herein and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not
be assigned by the Depositor or the Servicer.
Section 10.05 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the
Seller, the Issuer, the Owner Trustee, the Certificateholders, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 10.06 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 10.07 Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute but
one and the same instrument. Transmission by
65
facsimile of an executed counterpart hereof shall be deemed to constitute due
and sufficient delivery of such counterpart.
Section 10.08 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 10.09 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 10.10 Assignment by Issuer. The Depositor hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest
by the Issuer to the Indenture Trustee in accordance with the terms of the
Indenture for the benefit of the Noteholders of all right, title and interest
of the Issuer in, to and under the Receivables or the assignment of any or all
of the Issuer's rights and obligations hereunder to the Indenture Trustee.
Section 10.11 Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement, the parties hereto shall not, prior to the date
that is one year and one day after the termination of this Agreement with
respect to the Issuer or the Depositor, acquiesce, petition or otherwise
invoke or cause the Issuer or the Depositor to invoke the process of any court
or government authority for the purpose of commencing or sustaining a case
against the Issuer or the Depositor under any federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or
the Depositor or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer or the Depositor.
Section 10.12 Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee of the
Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer in accordance
with the priorities set forth herein. For all purposes of this Agreement, in
the performance of its duties or obligations hereunder or in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Xxxxx Fargo Bank, National Association, not in
its individual capacity but solely as Indenture Trustee, and in no event shall
Xxxxx Fargo Bank, National Association have any liability for the
representations, warranties, covenants, agreements or other
66
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer in accordance with the priorities set forth
herein.
67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
XXXXXX XXXXXXX AUTO LOAN
TRUST 2004-HB1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Financial Services Officer
XXXXXX XXXXXXX ABS CAPITAL II INC.,
as Depositor
By: /s/ Xxxx Xxxxxx
-----------------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
XXXXXX XXXXXXX ASSET FUNDING, INC.,
as Seller
By: /s/ J. Xxxxxxx Xxx Xxxx
------------------------------------------
Name: J. Xxxxxxx Xxx Xxxx
Title: Vice President
THE HUNTINGTON NATIONAL BANK,
as Servicer
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
68
XXXXX FARGO BANK, NATIONAL
ASSOCIATION, not in its individual capacity
but solely as Indenture Trustee
By: /s/ Xxxxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: Vice President
69
SCHEDULE A
Schedule of Receivables
(On file with the Indenture Trustee)
SCHEDULE B
Location of Receivable Files
----------------------------
1. The Huntington National Bank
0000 Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
SCHEDULE C
Cumulative Net Loss Ratio
Determination Cumulative Net
Date Loss Ratio
---- ----------
Apr-04 0.07%
May-04 0.07%
Jun-04 0.07%
Jul-04 0.28%
Aug-04 0.28%
Sep-04 0.28%
Oct-04 0.57%
Nov-04 0.57%
Dec-04 0.57%
Jan-05 0.83%
Feb-05 0.83%
Mar-05 0.83%
Apr-05 1.07%
May-05 1.07%
Jun-05 1.07%
Jul-05 1.27%
Aug-05 1.27%
Sep-05 1.27%
Oct-05 1.44%
Nov-05 1.44%
Dec-05 1.44%
Jan-06 1.60%
Feb-06 1.60%
Mar-06 1.60%
Apr-06 1.73%
May-06 1.73%
Jun-06 1.73%
Jul-06 1.84%
Aug-06 1.84%
Sep-06 1.84%
Oct-06 1.94%
Nov-06 1.94%
Dec-06 1.94%
Jan-07 2.01%
Feb-07 2.01%
Mar-07 2.01%
Apr-07 2.08%
May-07 2.08%
Jun-07 2.08%
Determination Cumulative Net
Date Loss Ratio
---- ----------
Jul-07 2.13%
Aug-07 2.13%
Sep-07 2.13%
Oct-07 2.17%
Nov-07 2.17%
Dec-07 2.17%
Jan-08 2.21%
Feb-08 2.21%
Mar-08 2.21%
Apr-08 2.23%
May-08 2.23%
Jun-08 2.23%
Jul-08 2.24%
Aug-08 2.24%
Sep-08 2.24%
Oct-08 2.26%
Nov-08 2.26%
Dec-08 2.26%
Jan-09 2.26%
Feb-09 2.26%
Mar-09 2.26%
2
EXHIBIT A
Form of Distribution Date Statement to Noteholders
Xxxxxx Xxxxxxx Auto Loan Trust 2004-HB1 Distribution Date Statement
to Securityholders
Principal Distribution Amount
Class A-1 Notes: ($ per $1,000 original Principal Balance)
Class A-2 Notes ($ per $1,000 original Principal Balance)
Class A-3 Notes ($ per $1,000 original Principal Balance)
Class A-4 Notes ($ per $1,000 original Principal Balance)
Class B Notes: ($ per $1,000 original Principal Balance)
Class C Notes: ($ per $1,000 original Principal Balance)
Class D Notes: ($ per $1,000 original Principal Balance)
Interest Distribution Amount
Class A-1 Notes: ($ per $1,000 original Principal Balance)
Class A-2 Notes ($ per $1,000 original Principal Balance)
Class A-3 Notes ($ per $1,000 original Principal Balance)
Class A-4 Notes ($ per $1,000 original Principal Balance)
Class B Notes: ($ per $1,000 original Principal Balance)
Class C Notes: ($ per $1,000 original Principal Balance)
Class D Notes: ($ per $1,000 original Principal Balance)
Regular Principal Allocation ($ per $1,000 original Principal Balance)
First Allocation of Principal ($ per $1,000 original Principal Balance)
Second Allocation of Principal ($ per $1,000 original Principal Balance)
Third Allocation of Principal ($ per $1,000 original Principal Balance)
Class A-1 Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
Class A-2 Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
Class A-3 Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
Class A-4 Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
Class B Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
Class C Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
Class D Interest Carryover Shortfall ($ per $1,000 original Principal Balance)
A-1
Note Balance
Class A-1 Notes:
Class A-2 Notes:
Class A-3 Notes:
Class A-4 Notes:
Class B Notes:
Class C Notes:
Class D Notes:
Note Pool Factor
Class A-1 Notes:
Class A-2 Notes:
Class A-3 Notes:
Class A-4 Notes:
Class B Notes:
Class C Notes:
Class D Notes:
Servicing Fee ($ per $1,000 original principal balance)
Servicing Reimbursement Amount ($ per $1,000 original principal balance)
Owner Trustee Fee ($ per $1,000 original principal balance)
Indenture Trustee Fee ($ per $1,000 original principal balance)
Pool Balance
Realized Losses
Cram Down Losses
Repossessed Receivables
Defaulted Receivables or Repurchased
Receivables
Receivables granted extensions
Repurchase Amounts
Principal Balance of Receivables that were
delinquent
A-2
30 to 59 days:
60 to 89 days:
90 days or more:
Overcollateralization Target Amount for next Distribution Date
Cumulative Net Loss Ratio as of related Determination Date
Six-Month Annualized Net Loss Ratio as of related Determination Date
Three-Month Annualized Net Loss Ratio as of related Determination Date
Pool Delinquency Percentage as of related Determination Date
A-3
EXHIBIT B
FORM OF SERVICER'S CERTIFICATE
------------------------------
(Available from Servicer)
B-1
EXHIBIT C
FORM OF SERVICER ANNUAL CERTIFICATION
-------------------------------------
I, [ ] certify that I am the duly authorized representative of The
Huntington National Bank ("Huntington"), as servicer (the "Servicer") pursuant
to the Sale and Servicing Agreement dated as of March 31, 2004, as amended
from time to time (the Sale and Servicing Agreement"), among Xxxxxx Xxxxxxx
Auto Loan Trust 2004-HB1, as issuer (the "Issuer"), Xxxxxx Xxxxxxx Asset
Funding, Inc. (the "Seller"), as seller, Xxxxxx Xxxxxxx ABS Capital II Inc.,
as depositor (the "Depositor"), Huntington and Xxxxx Fargo Bank, National
Association, as indenture trustee (the "Indenture Trustee"), and I do hereby
certify in the name of and on behalf of the Servicer that:
1. A review of the activities of the Servicer and of the performance
of its obligations under the Sale and Servicing Agreement during the period
from [ ], 200[ ] to and including December 31, 200[ ] (the "Review Period")
[or, with respect to the first Officer's Certificate, the period from the
Closing Date to December 31 of such year] was conducted under the supervision
of the undersigned.
2. Based on such review, except as otherwise disclosed pursuant to
paragraph 3 below, to undersigned's knowledge, the Servicer has fulfilled its
obligations under the Sale and Servicing Agreement during the applicable
Review Period and there is no default known the undersigned with respect to
the applicable Review Period which has not been disclosed herein.
3. Based on such review, to the undersigned's knowledge, the
following is a description of each default in the performance of the
Servicer's obligations under the provisions of the Sale and Servicing
Agreement made during the Review Period, which sets forth in detail (i) the
nature and status of each such default and (ii) the action taken by the
Servicer, if any, to remedy each such default: [List Out]
4. To the undersigned's knowledge, the servicing information
provided by the Servicer herein in respect of the Receivables, including
information relating to actions of the Servicer and/or payments and other
collections on and characteristics of the Receivables, taken as a whole, does
not contain any untrue statement of material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading as of the last day of
the applicable Review Period.
5. To the knowledge of the undersigned, the Servicer has provided
all of the reports and certificates required under Sections 4.10, 4.11 and
4.12 to the parties to which such reports and certificates are required to be
provided with respect to the applicable Review Period.
C-1
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate this [ ] day of [ ], 200[ ].
Responsible Officer of the Servicer
By:
---------------------------------
Name:
Title:
C-2
EXHIBIT D
FORM OF DEPOSITOR'S ANNUAL XXXXXXXX-XXXXX CERTIFICATION
-------------------------------------------------------
I, [identify the certifying individual], certify that:
1. I have reviewed this annual report on Form 10-K (the "Annual Report"),
and all reports on Form 8-K containing distribution reports (collectively
with this Annual Report, the "Report") filed in respect of periods
included in the year covered by this Annual Report, of the Trust;
2. Based on my knowledge, the information in the Reports, taken as a whole,
does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of
the last day of the period covered by this Annual Report;
3. Based on my knowledge, the distribution or servicing information required
to be provided to the Indenture Trustee by the Servicer under the Sale
and Servicing Agreement, for inclusion in the Reports is included in the
Reports;
4. Based on my knowledge and upon the annual compliance statement included
in this Annual Report and required to be delivered to the Indenture
Trustee in accordance with the terms of the Sale and Servicing Agreement,
and except as disclosed in the Reports, the Servicer has fulfilled its
obligations under the Sale and Servicing Agreement; and
5. The Reports disclose all significant deficiencies relating to the
Servicer's compliance with the minimum servicing standards based upon the
report provided by an independent public accountant, after conducting a
review in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or similar procedure, as set forth in the Sale and
Servicing Agreement, that is included in the Reports.
In giving the certifications above, I have reasonably relied on information
provided to me by the following unaffiliated parties: the Indenture Trustee
and the Servicer.
Date:_____________
_____________________
Name:
Title:
D-1
EXHIBIT E
Form of Certification to be Provided to the Depositor by the Indenture Trustee
------------------------------------------------------------------------------
Xxxxxx Xxxxxxx ABS Capital II Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Re: Xxxxxx Xxxxxxx Auto Loan Trust 2004-HB1
Reference is made to the Sale and Servicing Agreement (the "Sale and
Servicing Agreement"), dated as of March 31, 2004, among Xxxxxx Xxxxxxx Auto
Loan Trust 2004-HB1 (the "Issuer"), Xxxxxx Xxxxxxx ABS Capital II Inc. (the
"Depositor"), Xxxxxx Xxxxxxx Asset Funding, Inc. (the "Seller"), The
Huntington National Bank (the "Servicer") and Xxxxx Fargo Bank, National
Association (the "Indenture Trustee"). The Indenture Trustee hereby certifies
to the Depositor, and its officers, directors and affiliates, and with the
knowledge and intent that they will rely upon this certification, that:
(i) The Indenture Trustee has reviewed the [ ] reports on Form 8-K
containing distribution reports filed in respect of periods included in the
fiscal year ending in [ ], relating to the above-referenced trust
(collectively, the "Reports"); and
(ii) Based on my knowledge, the distribution information required to
be provided by the Indenture Trustee under the Sale and Servicing Agreement is
included in these Reports. Based on my knowledge, the information in the
Reports, taken as a whole, does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not
misleading.
In giving the certifications above, I have reasonably relied on
nformation provided to me by the following unaffiliated party: The Huntington
National Bank, as Servicer.
Date:
XXXXX FARGO BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
E-1
EXHIBIT F
LOST NOTE AFFIDAVIT
I, the undersigned, do hereby state that:
1. I, a duly authorized Officer of The Huntington National Bank,
(the "Bank"), am authorized to make this Affidavit on behalf of the Bank.
2. The Bank is the owner of the following installment note or loan
agreement (the "Contract"):
Loan No:
Obligor:
Automobile Make and Model:
Year Model:
Body Style:
Vehicle Identification Number:
Date:
Original Amount:
3. The Bank is the lawful owner of the Contract, and the Bank has
not assigned or hypothecated the Contract.
4. The original Contract could not be located after a thorough and
diligent search, which consisted of searching through such records of the Bank
as were reasonable and appropriate.
5. ( ) Attached is a true and correct copy of the original Contract.
6. This affidavit is intended to be relied on by the purchaser of
the Contract from the Bank and such purchaser's successors and assigns.
7. The Bank agrees immediately and without further consideration to
surrender the original Contract to the foregoing purchaser, its successor or
the assignee thereof if such original Contract ever comes into the Bank's
possession, custody or power.
8. The Bank further agrees to indemnify and hold harmless the
foregoing purchaser and its successors and assigns from any and all losses,
liabilities, costs, damages, reasonable attorney's fees and expenses in
connection with the inability of the Bank to locate the original Contract.
F-1
EXECUTED THIS _____day of _________, 200[ ]
On behalf of:
-----------------------------------------
Name:
Title:
STATE OF
COUNTY OF
Before me, a Notary Public in and for said County and State,
personally appeared __________________________________, a duly authorized
Officer of ___________________, who acknowledges the signing thereof to be
his/her free and voluntary act and deed and the free act and deed of said
board.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my official seal on the day and year last aforesaid.
--------------------------------------------------------
Notary Public
F-2
EXHIBIT G
SERVICING STANDARDS
The Servicer shall provide the loan accounting and servicing functions
described in this document for the Portfolio(s) attached hereto, and for any
other Portfolios that may become subject to this Agreement from time to time.
Servicing Fees shall cover all servicing costs (including various borrower
account maintenance updates and title cures). The Servicer shall provide
reconstitution support to the Purchaser if accounts in the Portfolio are sold
pursuant to a Pass Through Transfer or a Whole Loan Transfer.
Servicing Environment Setup:
Set up unique identification for the Portfolio in the Servicer loan accounting
and servicing system to provide servicing and process standards, reporting of
results, data, and reports as mutually agreed upon for this Portfolio.
Establish procedures for calculating and assigning Deficiency Balances to HNB
recovery units or through a third party vendor.
All customer statements, forms, letter, correspondence and default notices and
resulting actions will be identified in the name of the Servicer and the
Purchaser name shall not be conveyed in any written or verbal correspondence
unless required by law.
Report monthly to the 3 major credit bureaus in the name of the Servicer and
not the Purchaser.
Loan Account Servicing and Reporting:
Maintain appropriate customer and loan account records for all accounts on the
Servicer Accounting System. The system will accurately account for interest
accruals, payoff calculations, late charge processing, payment application
processing, delinquency processing and closed loan processing.
Process all loan payments in compliance with the Retail Installment Loan
Contracts.
Process on a daily basis all payments received from customers.
Perform all exception processing for non exact items, misapplied payments, or
other correspondence received from the customers.
Appropriately staff (including with Bilingual counselors) the toll free
customer service and collection line to respond to customer inquiries using
live operators (define and agree upon working hours and days).
Respond to and resolve written customer inquiries regarding their accounts.
Process account maintenance changes to the loan accounting system.
G-1
Generate and mail late notices to customers when their account becomes past
due.
Generate and maintain an interface to the Servicer Collection Management
System for all accounts that are past due to initiate collection efforts.
Investigate and process refunds on overpayment accounts.
Process and address any credit bureau disputes received from customers
directly or the credit bureaus.
Update the credit bureau risk score for each account within the portfolio on a
quarterly basis, and provide updates to Purchaser.
Periodically update the behavior score (as applicable) for each account in the
portfolio.
Generate and mail appropriate forms and letters to customers throughout the
life of the loan (i.e. payoff letters, final payment bills, paid letters,
etc.).
Send any notices provided by the Purchaser or its designee to maintain
compliance with the Privacy Act.
Maintain customer accounts in an automated loan accounting system ensuring the
information contained in the account records is accurate and authorized change
requests are processed.
Provide all payment processing for loan accounts including ACH, other
electronic payment processes currently available and supported, and Lock box
account for receipt of customer payments.
Provide 24/7 toll-free incoming call service to loan customers for inquiries
on their accounts.
Establish access to a VRU to provide automated balance and payoff information
for loan customers.
Perform paid loan processing functions including credit bureau updates.
Process lien satisfactions for paid out/closed installment loans.
Archive all loan documents on hard copy or film for the appropriate retention
period.
Loan Account Collection:
Establish and maintain collection records in the Servicer Collection
Management System for all past due accounts. Record all collection efforts
within the collection history for each account.
Process extensions in accordance with Purchaser or its designee's guidelines.
No Skip a Payment or other deferment programs (other than as provided in
Section 4.01(b)) allowed other than existing pass a payment in current coupon
books.
G-2
Early Stage Delinquency:
Utilize the Servicer's STRATA Decisioning System including any Behavior
Scoring System and updated FICO scores to assign collection strategies as
specified herein. Loans will have phone calls start as early as 1 day past due
depending on the account level strategy. First payment default loans must be
called between the fifth and tenth day. Minimum Right Party Contact Rates of
25% monthly, and call penetration rates to be actively managed to achieve
these results.
Customer contact inquiries will be made to determine and provide the reason(s)
for default including but not limited to status of employment and household
income, any insurance claims in process, status of insurance on and location
and condition of collateral if applicable.
Collection actions and contact attempts will be taken in accordance collection
strategies as often as necessary and at various times of the day, evening, and
weekend in compliance with applicable law.
Accounts with no contact after 10 days (or earlier, if there is no phone
number in service for the related Account) will be escalated to manual review
to determine on-going strategy. If account has still not been contacted
through the dialer, account will be assigned to an off-dialer collection
resource for the purpose of direct scheduled calling sequence which may
include a targeted call period (evenings, weekends, breaks, etc.). This
process will occur approximately 17-20 days after scheduled due date.
At any stage (either by on-dialer recognition or through off-dialer review)
the account can be forwarded to an off-dialer resource or to a supervisor. No
promise in excess of ten days will be allowed. An account is currently
considered a broken promise 3 days after the date made. Advanced collection
resources will become involved if the customer has broken an existing promise
to pay. These resources will work the account within two business days after
the broken promise. In special circumstances, the account can be issued
directly to supervisor for review for repossession, or to the skip department
for advance location review. Broken promises are sent to a specific queue and
will be prioritized in CACS to maximize the next day call rate.
Skip tracing will commence as soon as indicated (telephone disconnected, mail
returned), and no later than 10 days after no contact. Making borrower
contacts attempts based on information obtained through methods such as credit
reports, internet services, place of employment and co-signer information,
door knocks, etc. If all account information is still considered to be valid,
account will be placed back into the dialer for 2nd random call sequencing.
Mid-Stage and Off-Dialer Collections:
A supervisor reviews most accounts that progress to beyond 30-days delinquent,
or that have been referred to the supervisor by the collector due to an
adverse situation or unacceptable customer request. No accounts (other than,
potentially, accounts with a balance of less than $2,500) will remain on the
dialer for longer than 45 days.
For accounts 30 or more days past due, continued regular phone attempts to
contact the Borrower will be made.
Customers 30 or more days past due will be requested to send payments via
overnight mail or through an automatic payment service.
G-3
Exclusive of any on-line automated late notices, the collection resource will
have the ability to generate an on-line collection letter to the debtor. These
notices to range from a friendly reminder to a firm demand letter based upon
the severity of the delinquency and the history of the account.
Account will remain in the collection resource's queue with a follow-up code.
This code will only be changed if the customer makes a payment, or the
collection resource performs an action on the account. Accounts are typically
sorted based upon the oldest follow-up date and the outstanding balance of
delinquency. Account follow-up should not exceed two days without the account
being reviewed.
Between the 45th and 60th day of delinquency of accounts where no payment
arrangements have been made, Servicer will order a current credit bureau
report if appropriate, verify title lien if applicable, and value of
collateral if applicable and order a copy of the Contract as needed.
The supervisor can submit the account for repossession during the standard
review process, or during special request by the off-dialer collection
resource. This will occur when the account has progressed to approximately 55
days, but no more than 70 days contractually delinquent, but may occur at any
time based upon the supervisor's/portfolio manager's determination.
Advance Collections:
Late Stage Collectors will be dedicated to collect on accounts at or near 45
days contractually delinquent. No more than 200 accounts will be assigned to
any one Late Stage Collector at any one time.
Advance collections include:
o Accounts that are skip and cannot be located
Accounts that have broken multiple promises to pay without activity by
the customer
Accounts that are out for repossession or liquidation
Accounts with pending insurance activity
For most accounts that becomes 60 days past due, a supervisor shall review the
account and determine and execute a collection strategy. Strategies will be
based upon the borrowers ability to pay, delinquency status, payment history
and the asset's value/location. If it is not conceivable that arrangements can
be made to bring the customer current over a period of time through a
repayment plan or extension (in accordance with the agreed upon procedures),
the supervisor will submit the account to the collateral management group for
review for asset liquidation.
The account is placed into a special queue, where a mini-skip routine is
performed to secure the whereabouts of the asset prior to assigning the
account for repossession. This process is designed to expedite the recovery
and sale process, and minimizes acquisition and storage costs.
The collector will examine the collateral type and value, and make an
evaluation as to the time necessary to liquidate the asset, and estimate the
potential selling price prior to the final decision to liquidate.
G-4
Servicer will charge off accounts from the Servicer Loan Accounting System at
the earliest of:
i) when the account is deemed uncollectible, or
ii) when the asset has been sold and proceeds received, or
iii) 60 days after repossession, if the asset is still in inventory, or
iv) by the end of the month during which a loan becomes 120 days past due
and is not in repossession inventory, or
v) by the end of the month during which a loan becomes 180 days past due.
Unrecovered balances will be charged off promptly after collateral liquidation
and receipt of funds. Servicing functions supporting the collection,
repossession and remarketing, or securing of insurance or other proceeds due
on the account will continue regardless of the charge off designation.
Servicing and Accounting systems, reports and data files must contain an
identifier for Repossession, and/or Charge-off status.
In cases of loan default and charge offs only, Servicer will apply for and use
reasonable efforts to realize upon insurance proceeds, including GAP insurance
and rebates on insurance and warranty policies in order to mitigate the loss
incurred. In all other cases, customers will be directed to the originating
dealership for cancellations, refunds, and all other insurance and warranty
matters.
Accounts in repossession and bankruptcy status remain in special queues that
are not accessed by the general collection resources unless redemption,
reaffirmation, dismissal, or other action has occurred which would qualify the
account for general collection processing.
Repossession:
Servicer will provide a repossession and remarketing network and contract with
such third party service providers.
Contracts assigned for repossession shall be handled in accordance with the
following standards and procedures:
o Verify lien on title.
o Order copy of contract and original title, if appropriate.
o Complete assignment to repossessor with borrower and collateral information
within 48 hours of receipt in repossession department.
o Follow up with repossessor on progress weekly.
o Continue to attempt contact and payment arrangements with borrower.
o When contacted by repossessor that property has been repossessed, obtain
condition report, storage location and costs.
o Follow state requirements regarding borrower notification and redemption or
reinstatement periods.
o If appropriate, negotiate redemption, notify storage lot of redemption and
terms. Provide borrower with redemption release to claim property once
terms have been met.
o If no redemption, determine value of collateral, set floor price and
proceed with sale at auction.
G-5
o All auction expenses to be netted from proceeds of sale and net proceeds
applied to the loan balance. Repossession expenses are paid by invoice and
added to account balance.
o Calculate deficiency balance and send deficiency letter to borrower.
o Obtain any warranty or insurance proceeds due on account.
o Charge off deficiency, or if overage exists after full payment of account
and expenses, send overage to borrower with notice of sale.
Servicer remarketing specialist to attend auctions to inspect collateral,
validate the auction process, and/or evaluate the remarketing strategy.
Recovery:
Account collection activities will continue after charge-off by following
recovery procedures in accordance with this Agreement, including:
Option 1:
o Attempt to collect on the Deficiency Balance for an account for a period of
no more than 120 days, which may be extended an additional 60 days if, in
the Servicer's reasonable judgment such extension will maximize recovery of
the Deficiency Balance; and then
o Refer the related account to a Collector to collect on the Deficiency
Balance for an account; or
Option 2:
o Immediately refer the related account to a Collector to collect on the
Deficiency Balance, if, in the Servicer's reasonable judgment referral of
such account to the Collector will maximize recovery of the Deficiency
Balance.
In any event, remittances collected or received from servicer or Collector
shall be included in the Remittance Amounts.
Guideline Costs associated with repossession and remarketing process
(estimated):
Judicial Fees: $500
Repossessor charge: $285 per unit (includes keys) average of voluntary
and involuntary
Storage Fee: $10 average per unit repossessed and sold
Standard Auction Clean-Up Fee: $83 per vehicle
Auction or Sale fee: Average of $105 per unit sold
Title conversion or Duplicate Title (if applicable): $45 per unit sold
Move collateral to auction: $37 per vehicle
Impound fees if applicable: Average of $45 per account processed
G-6
All costs are to be recouped from the liquidation sale proceeds. Net
liquidation proceeds cannot be less than zero.
Bankruptcy:
In the event that a debtor declares bankruptcy, servicer enters the bankruptcy
transaction on the account the same or following business day that the
notification is received. The account is placed into the bankruptcy
department's worklist, where follow-up dates and codes are placed on the
account to ensure that the servicer is following state and federal law in the
handling of these accounts. Servicer will perform all necessary actions for
bankruptcy including, at a minimum, the following:
o Acknowledge receipt of bankruptcy notice
o Stop all collection activity to comply with Federal Stay Order, including
property sale
o Conduct initial review verifying payment status, collateral, account
balance and debtor's attorney
o Obtain knowledge and understanding of the customer's plan
o Lift stay on collateral, as needed
o Motion to discharge/dismiss, as needed
o Objection to confirmation, as needed
o File proof of claim on all BKs as necessary
o Monitor customer's compliance to the confirmed plan
o Aggressively pursue reaffirmation of debt
o Process Cram Down amount when received from the court
G-7
Performance Standards:
The following Performance Standards will be measured on a calendar month basis
during the term of this Agreement. Servicer and Purchaser will jointly develop
specific measurement process and documentation during the implementation.
------------------------------------------------------------ ---------------------------
Performance
Customer Service Standard
------------------------------------------------------------ ---------------------------
Timeliness: % of calls answered in under 30 seconds 70%
------------------------------------------------------------ ---------------------------
Timeliness: % incoming calls answered. Manage to 5% 95%
abandonment rate or better
------------------------------------------------------------ ---------------------------
For routine customer service inquiries (e.g. due date
changes, automatic deductions) fulfillment confirmation
letters will be sent within 2 business days. All written 90%
service inquiries will be processed within the standard
day guidelines detailed by Servicer.
------------------------------------------------------------ ---------------------------
% of payments posted same business day if received in lock 95%
box by 10:00 AM EST with payment coupon. Payments
received after 10:00 AM EST, will be posted the next
business day. All other exception payments will be posted
not more than 5 business days after receipt.
------------------------------------------------------------ ---------------------------
G-8
------------------------------------------------------------ ---------------------------
Performance
Collections Standard
------------------------------------------------------------ ---------------------------
Timeliness: Percent of incoming calls to the defined 800# 70%
answered within 30 seconds
------------------------------------------------------------ ---------------------------
Adherence to Collection Standards specified herein 90%
------------------------------------------------------------ ---------------------------
Right Party Contact Rate for Early Stage Delinquent
Accounts (1 to 29 Days Past Due) based on 200% file
penetration and complete and accurate borrower contact 25%
information.
------------------------------------------------------------ ---------------------------
Maximum Late Stage Accounts (60+ Days Past Due) assigned 200
per Collector
------------------------------------------------------------ ---------------------------
New bankruptcy filings assigned per Bankruptcy Specialist 120 - 150
------------------------------------------------------------ ---------------------------
Repossession Performance Standard
------------------------------------------------------------ ---------------------------
Maximum number of repossessed Financed Vehicles in 50%
inventory for more than 60 days
------------------------------------------------------------ ---------------------------
Mainframe Systems Performance Standard
------------------------------------------------------------ ---------------------------
Availability 98%
------------------------------------------------------------ ---------------------------
G-9
