SALE AND SERVICING AGREEMENT
Dated as of December 1, 1997
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1997-D
Issuer
ARCADIA RECEIVABLES FINANCE CORP.
Seller
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
and
THE CHASE MANHATTAN BANK
Backup Servicer
TABLE OF CONTENTS
Page
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ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.4. Section References . . . . . . . . . . . . . . . . . . 25
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.6. Material Adverse Effect . . . . . . . . . . . . . . . . 25
ARTICLE II - CONVEYANCE OF RECEIVABLES . . . . . . . . . . . . . . . . . 26
SECTION 2.1. Conveyance of Initial Receivables . . . . . . . . . . . 26
SECTION 2.2. Custody of Receivable Files . . . . . . . . . . . . . . 26
SECTION 2.3. Conditions to Acceptance by Owner Trustee . . . . . . . 28
SECTION 2.4. Conveyance of Subsequent Receivables . . . . . . . . . 28
SECTION 2.5. Representations and Warranties of Seller . . . . . . . 32
SECTION 2.6. Repurchase of Receivables Upon Breach of Warranty . . . 34
SECTION 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . . . 35
SECTION 2.8. Collecting Lien Certificates Not Delivered on the
Closing Date or Subsequent Transfer Date . . . . . . . 35
SECTION 2.9. Trust's Assignment of Administrative Receivables and
Warranty Receivables . . . . . . . . . . . . . . . . . 35
ARTICLE III - ADMINISTRATION AND SERVICING OF RECEIVABLES . . . . . . . . 36
SECTION 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . 36
SECTION 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements . . . . . . . . . . . . 37
SECTION 3.3. Realization Upon Receivables . . . . . . . . . . . . . 40
SECTION 3.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.5. Maintenance of Security Interests in Vehicles . . . . . 43
SECTION 3.6. Covenants, Representations, and Warranties of Servicer. 44
SECTION 3.7. Purchase of Receivables Upon Breach of Covenant . . . . 46
SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . 47
SECTION 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event . . . . . . . . . . . . . . . . . . . 48
SECTION 3.11. Annual Independent Accountants' Report . . . . . . . . 49
SECTION 3.12. Access to Certain Documentation and Information
Regarding Receivables . . . . . . . . . . . . . . . . . 49
SECTION 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.14. Retention and Termination of Servicer . . . . . . . . . 51
SECTION 3.15. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . 51
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SECTION 3.16. Duties of the Servicer under the Indenture . . . . . . 51
SECTION 3.17. Duties of the Servicer under the Insurance Agreement. . 53
SECTION 3.18. Certain Duties of the Servicer under Trust Agreement. . 54
ARTICLE IV - DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS . . . . . . . . . . 54
SECTION 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.2. Collections . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.3. Application of Collections . . . . . . . . . . . . . . 57
SECTION 4.4. Monthly Advances . . . . . . . . . . . . . . . . . . . 58
SECTION 4.5. Additional Deposits . . . . . . . . . . . . . . . . . . 58
SECTION 4.6. Distributions . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.7. Pre-Funding Account . . . . . . . . . . . . . . . . . . 60
SECTION 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . . . 61
SECTION 4.9. Statements to Noteholders . . . . . . . . . . . . . . . 62
SECTION 4.10. Indenture Trustee as Agent . . . . . . . . . . . . . . 63
SECTION 4.11. Eligible Accounts . . . . . . . . . . . . . . . . . . . 63
ARTICLE V - THE RESERVE ACCOUNT; THE SPREAD ACCOUNT . . . . . . . . . . . 63
SECTION 5.1. Withdrawals from the Reserve Account . . . . . . . . . 63
SECTION 5.2. Withdrawals from Spread Account . . . . . . . . . . . . 64
ARTICLE VI - THE SELLER . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.1. Liability of Seller . . . . . . . . . . . . . . . . . . 65
SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Amendment of Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.3. Limitation on Liability of Seller and Others . . . . . 66
SECTION 6.4. Seller May Own Notes . . . . . . . . . . . . . . . . . 66
ARTICLE VII - THE SERVICER. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.1. Liability of Servicer; Indemnities . . . . . . . . . . 67
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer . . . . 68
SECTION 7.3. Limitation on Liability of Servicer, Backup Servicer
and Others . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . 70
SECTION 7.5. Servicer and Backup Servicer Not to Resign . . . . . . 70
ARTICLE VIII - SERVICER TERMINATION EVENTS. . . . . . . . . . . . . . . . 71
SECTION 8.1. Servicer Termination Event . . . . . . . . . . . . . . 71
SECTION 8.2. Consequences of a Servicer Termination Event . . . . . 73
SECTION 8.3. Appointment of Successor . . . . . . . . . . . . . . . 74
SECTION 8.4. Notification to Noteholders . . . . . . . . . . . . . . 75
SECTION 8.5. Waiver of Past Defaults . . . . . . . . . . . . . . . . 75
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ARTICLE IX - TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.1. Optional Purchase of All Receivables; Liquidation
of Trust Estate . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 77
SECTION 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.2. Protection of Title to Trust Property . . . . . . . . . 79
SECTION 10.3. Governing Law . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.4. Severability of Provisions . . . . . . . . . . . . . . 81
SECTION 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . 81
SECTION 10.7. Disclaimer by Security Insurer . . . . . . . . . . . . 81
SECTION 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.9. Intention of Parties . . . . . . . . . . . . . . . . . 82
SECTION 10.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.11. Limitation of Liability . . . . . . . . . . . . . . . . 83
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SCHEDULES
Schedule A -- Representations and Warranties of Seller and AFL
Schedule B -- Servicing Policies and Procedures
EXHIBITS
Exhibit A -- Schedule of Initial Receivables
Exhibit B -- Form of Custodian Agreement (AFL)
Exhibit C -- Form of Spread Account Agreement
Exhibit D -- Form of Receivables Purchase Agreement
Exhibit E -- Form of Servicer's Certificate
Exhibit F -- Form of Subsequent Transfer Agreement
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THIS SALE AND SERVICING AGREEMENT, dated as of December 1, 1997, is
made among Arcadia Automobile Receivables Trust, 1997-D (the "Issuer"),
Arcadia Receivables Finance Corp., a Delaware corporation, as Seller (the
"Seller"), Arcadia Financial Ltd., a Minnesota corporation, in its individual
capacity and as Servicer (in its individual capacity, "AFL"; in its capacity
as Servicer, the "Servicer") and The Chase Manhattan Bank, a New York banking
corporation, as Backup Servicer (the "Backup Servicer").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All terms defined in the Spread Account
Agreement, the Indenture or the Trust Agreement (each as defined below) shall
have the same meaning in this Agreement. Whenever capitalized and used in
this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally recognized
independent accountants described in Section 3.11.
ACCOUNTING DATE: With respect to a Distribution Date, the last day
of the Monthly Period immediately preceding such Distribution Date.
ACTUAL FUNDS: With respect to a Distribution Date, the sum of (i)
Available Funds for such Distribution Date, plus (ii) the portion of the
Reserve Amount, if any, deposited pursuant to Section 5.1(a) into the
Collection Account with respect to such Distribution Date.
ADDITION NOTICE: With respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.4, a notice, which shall be
given not later than 15 days prior to the related Subsequent Transfer Date,
of the Seller's designation of Subsequent Receivables to be transferred to
the Issuer and the aggregate Principal Balance of such Subsequent Receivables.
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a
Receivable which the Servicer is required to purchase pursuant to Section 3.7
or which the Servicer has elected to purchase pursuant to Section 3.4(c).
AFFILIATE: With respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
AFL: Arcadia Financial Ltd., a Minnesota corporation.
AGGREGATE PRINCIPAL BALANCE: With respect to any Determination
Date, the sum of the Principal Balances (computed as of the related
Accounting Date) for all Receivables (other than (i) any Receivable that
became a Liquidated Receivable during the related Monthly Period and (ii) any
Receivable that became a Purchased Receivable as of the immediately preceding
Accounting Date).
AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing Agreement,
all amendments and supplements thereto and all exhibits and schedules to any
of the foregoing.
AMOUNT FINANCED: With respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the
Financed Vehicle and related costs, including amounts advanced in respect of
accessories, insurance premiums, service and warranty contracts, other items
customarily financed as part of retail automobile installment sale contracts
or promissory notes, and related costs. The term "Amount Financed" shall not
include any Insurance Add-On Amounts.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the
rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act).
If after the Closing Date, the rate per annum with respect to a Receivable as
of the Closing Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.
ARCC PURCHASE AGREEMENT: The Receivables Purchase Agreement and
Assignment, dated as of December 3, 1996, between AFL and the Seller.
ASSUMED REINVESTMENT RATE: 2.5% per annum.
AVAILABLE FUNDS: With respect to any Determination Date, the sum
of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account as of the related Deposit Date,
(iii) all Monthly Advances made by the Servicer as of the related Deposit
Date, and (iv) all net income from investments of funds in the Trust Accounts
during the related Monthly Period.
BACKUP SERVICER: The Chase Manhattan Bank, or its successor in
interest pursuant to Section 8.2, or such Person as shall have been appointed
as Backup Servicer or successor Servicer pursuant to Section 8.3.
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BASIC SERVICING FEE: With respect to any Monthly Period, the fee
payable to the Servicer for services rendered during such Monthly Period,
which shall be equal to one-twelfth of the Basic Servicing Fee Rate
multiplied by the Aggregate Principal Balance as of the Determination Date
falling in such Monthly Period.
BASIC SERVICING FEE RATE: 1.25% per annum.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday
or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of
any successor Servicer, successor Owner Trustee, successor Indenture Trustee
or successor Collateral Agent are authorized or obligated by law, executive
order or governmental decree to be closed.
CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE: January 15, 1999 (or,
if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-1 HOLDBACK AMOUNT: As of any Subsequent Transfer Date, an
amount equal to 2.5% of the amount, if any, by which the applicable "Target
Original Pool Balance" specified below is greater than the Original Pool
Balance after giving effect to the transfer of Subsequent Receivables on such
Subsequent Transfer Date:
SUBSEQUENT TRANSFER DATE TARGET ORIGINAL POOL BALANCE
December 16 - January 14 $497,233,682.53
January 15 - February 14 $600,000,000.00
CLASS A-1 HOLDBACK SUBACCOUNT: The subaccount of the Reserve
Account, the funds in which shall consist of all Class A-1 Holdback Amounts
deposited therein during the Funding Period, other than investment earnings
thereon. Any funds in the Class A-1 Holdback Subaccount shall be withdrawn
on the Class A-1 Final Scheduled Distribution Date and distributed as
specified in Section 5.1(b).
CLASS A-1 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-1 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-1 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-1 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-1 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
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CLASS A-1 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-1 INTEREST RATE: 5.8875% per annum.
CLASS A-1 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the product of (i) the product of (x) the Class A-1
Interest Rate and (y) a fraction, the numerator of which is the number of
days elapsed from and including the most recent date to which interest has
been paid (or, in the case of the first Distribution Date, interest accrued
for 29 days, which is the number of days elapsed from and including the
Closing Date to but excluding January 15, 1998, based on the assumption that
the last day of each month is the 30th) to but excluding such Distribution
Date and the denominator of which is 360 and (ii) the outstanding principal
balance of the Class A-1 Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Closing Date), after
giving effect to all payments of principal to Class A-1 Noteholders on or
prior to such immediately preceding Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date).
CLASS A-1 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect
to any transfer of Subsequent Receivables on such date, an amount equal to
the Class A-1 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded
Amount as of such Distribution Date.
CLASS A-1 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on the Class A-1 Prepayment Amount at the Class
A-1 Interest Rate during the period commencing on and including the
Distribution Date on which the Class A-1 Prepayment Amount is required to be
deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding February 28, 1998 over (ii) the amount of interest that would have
accrued on the Class A-1 Prepayment Amount over the same period at a per
annum rate of interest equal to the bond equivalent yield to maturity on the
Determination Date preceding such Distribution Date on the 5.125% United
States Treasury Note due February 28, 1998. Such excess shall be discounted
to present value to such Distribution Date at the yield described in clause
(ii) above.
CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE: March 15, 2001, (or,
if such day is not a Business Day, the next succeeding Business Day
thereafter).
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CLASS A-2 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-2 Interest Distributable Amount
for the preceding Distribution Date, over the amount in respect of interest
on the Class A-2 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-2 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-2 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-2 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-2 INTEREST RATE: 6.125% per annum.
CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 29 days, which is the number of days
elapsed from and including the Closing Date to but excluding January 15,
1998) at the Class A-2 Interest Rate on the outstanding principal balance of
the Class A-2 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-2 Noteholders on such or prior
to immediately preceding Distribution Date.
CLASS A-2 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect
to any transfer of Subsequent Receivables on such date, an amount equal to
the Class A-2 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded
Amount as of such Distribution Date.
CLASS A-2 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on the Class A-2 Prepayment Amount at the Class
A-2 Interest Rate during the period commencing on and including the
Distribution Date on which the Class A-2 Prepayment Amount is required to be
deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding December 31, 1998, over (ii) the amount of interest that would have
accrued on the Class A-2 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 5.750% U.S. Treasury Note due
December 31, 1998. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
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CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: May 15, 2003 (or, if
such day is not a Business Day, the next succeeding Business Day thereafter).
CLASS A-3 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-3 Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class A-3 Notes that was actually deposited in the Note Distribution Account on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to Class A-3 Noteholders on the preceding Distribution Date, to the
extent permitted by law, at the Class A-3 Interest Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
CLASS A-3 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-3 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-3 Interest Carryover Shortfall
for such Distribution Date.
CLASS A-3 INTEREST RATE: 6.20% per annum.
CLASS A-3 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 29 days, which isn the number of days
elapsed from and including the Closing Date to but excluding January 15, 1998)
at the Class A-3 Interest Rate on the outstanding principal balance of the Class
A-3 Notes on the immediately preceding Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date), after giving effect to all
payments of principal to Class A-3 Noteholders on or prior to such immediately
preceding Distribution Date.
CLASS A-3 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-3 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.
CLASS A-3 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on the Class A-3 Prepayment Amount at the Class
A-3 Interest Rate during the period commencing on and including the Distribution
Date on which the Class A-3 Prepayment Amount is required to be deposited in the
Note Distribution Account pursuant to Section 4.7 to but excluding May 15,
2000, over (ii) the amount of interest that would have accrued on the Class A-3
Prepayment Amount over the same period at a per annum rate of interest equal to
the yield to maturity on the Determination Date preceding such Distribution Date
on the 6.375% U.S. Treasury Note due May 15, 2000. Such excess shall be
discounted to present value to such Distribution Date at the yield described in
clause (ii) above.
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CLASS A-4 FINAL SCHEDULED DISTRIBUTION DATE: November 15, 2005 (or,
if such day is not a Business Day, the next succeeding Business Day thereafter).
CLASS A-4 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-4 Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class A-4 Notes that was actually deposited in the Note Distribution Account on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to Class A-4 Noteholders on the preceding Distribution Date, to the
extent permitted by law, at the Class A-4 Interest Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
CLASS A-4 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-4 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-4 Interest Carryover Shortfall
for such Distribution Date.
CLASS A-4 INTEREST RATE: 6.35% per annum.
CLASS A-4 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 29 days, which isn the number of days
elapsed from and including the Closing Date to but excluding January 15, 1998)
at the Class A-4 Interest Rate on the outstanding principal balance of the Class
A-4 Notes on the immediately preceding Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date), after giving effect to all
payments of principal to Class A-4 Noteholders on or prior to such immediately
preceding Distribution Date.
CLASS A-4 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-4 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.
CLASS A-4 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on the Class A-4 Prepayment Amount at the Class
A-4 Interest Rate during the period commencing on and including the Distribution
Date on which the Class A-4 Prepayment Amount is required to be deposited in the
Note Distribution Account pursuant to Section 4.7 to but excluding October 31,
2001, over (ii) the amount of interest that would have accrued on the Class A-4
Prepayment Amount over the same period at a per annum rate of interest equal to
the yield to maturity on the Determination Date preceding such Distribution Date
on the
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6.250% U.S. Treasury Note due October 31, 2001. Such excess shall be
discounted to present value to such Distribution Date at the yield described
in clause (ii) above.
CLOSING DATE: December 16, 1997.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase Agreement
and Assignment, dated as of December 1, 1997, between AFL and the Seller.
COLLATERAL AGENT: The Collateral Agent named in the Spread Account
Agreement, and any successor thereto pursuant to the terms of the Spread Account
Agreement.
COLLATERAL INSURANCE: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy, pursuant to Section 3.4(e).
COLLECTED FUNDS: With respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds collected
during the related Monthly Period (but excluding any Monthly Advances and any
Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 4.1(a).
COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
COMPUTER TAPE: The computer tape generated on behalf of the Seller
which provides information relating to the Receivables and which was used by the
Seller and AFL in selecting the Receivables conveyed to the Trust hereunder.
CORPORATE TRUST OFFICE: With respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing Date
is located at Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000; the telecopy number for the Corporate Trust Administration of
the Owner Trustee on the date of the execution of this Agreement is (302)
651-8882; with respect to the Indenture Trustee, the principal office of the
Indenture Trustee at which at any particular time its corporate trust business
shall be administered, which office is located at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, XX 00000-0000, Attention: Global Trust, Structured Finance Services
Group; the telecopy number for the Global Trust, Structured Finance Services
Group of the Indenture Trustee on the date of execution of this Agreement is
(000) 000-0000.
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CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the Scheduled Payments to be made on a Receivable, an amount equal to the excess
of the Principal Balance of such Receivable immediately prior to such order over
the Principal Balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the contract rate or the rate of
interest, if any, specified by the court in such order) of the Scheduled
Payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
CREDIT ENHANCEMENT FEE: With respect to any Distribution Date, the
amount to be paid to the Security Insurer pursuant to Section 4.6(vi) and the
amount to which the Seller is entitled pursuant to Section 4.6(vii).
CUSTODIAN: AFL and any other Person named from time to time as
custodian in any Custodian Agreement acting as agent for the Trust, which Person
must be (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in
effect between the Custodian named therein and the Trust, substantially in the
form of Exhibit B hereto, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof, which Custodian
Agreement and any amendments, supplements or modifications thereto shall (so
long as an Insurer Default shall not have occurred and be continuing) be
acceptable to the Security Insurer.
DEALER: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to AFL under an existing agreement between such seller
and AFL.
DEALER AGREEMENT: An agreement between AFL and a Dealer relating to
the sale of retail installment sale contracts and installment notes to AFL and
all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to AFL.
DEFICIENCY CLAIM AMOUNT: As defined in Section 5.2(a).
DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date.
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DEFICIENCY NOTICE: As defined in Section 5.2(a).
DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Determination Date.
DETERMINATION DATE: With respect to any Monthly Period, the sixth
Business Day immediately preceding the related Distribution Date.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of
(i) the Actual Funds for such Distribution Date, and (ii) the Deficiency Claim
Amount, if any, received by the Indenture Trustee with respect to such
Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or if such
15th day is not a Business Day, the next succeeding Business Day, commencing
January 15, 1998 to and including the Final Scheduled Distribution Date.
DRAW DATE: With respect to any Distribution Date, the third Business
Day immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with the corporate trust department of a depository institution acceptable to
the Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing), or (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the States thereof, or the District of Columbia,
having a certificate of deposit, short term deposit or commercial paper rating
of at least "A-1+" by Standard & Poor's and
"P-1" by Moody's and (so long as an Insurer Default shall not have occurred and
be continuing) acceptable to the Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(a) (i) direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality of the United States, the
obligations of which are backed by the full faith and credit of the United
States; and (ii) direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by, the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation, but only if, at the time of investment, such obligations are
assigned a rating in the highest credit rating category by each Rating Agency;
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(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Indenture Trustee, the Owner Trustee or any agent
of either of them acting in their respective commercial capacities); provided
that the short-term unsecured debt obligations of such depository institution or
trust company at the time of such investment, or contractual commitment
providing for such investment, are assigned a rating in the highest credit
rating category by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement (i) with
respect to any obligation described in clause (a) above, where the Indenture
Trustee has taken actual or constructive delivery of such obligation in
accordance with Section 4.1, and (ii) entered into with the corporate trust
department of a depository institution or trust company organized under the laws
of the United States or any State thereof, the deposits of which are insured by
the Federal Deposit Insurance Corporation and the short-term unsecured debt
obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's
(including, if applicable, the Indenture Trustee, the Owner Trustee or any agent
of either of them acting in their respective commercial capacities);
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any State whose
long-term unsecured debt obligations are assigned a rating in the highest credit
rating category by each Rating Agency at the time of such investment or
contractual commitment providing for such investment; PROVIDED, HOWEVER, that
securities issued by any particular corporation will not be Eligible Investments
to the extent that an investment therein will cause the then outstanding
principal amount of securities issued by such corporation and held in the Trust
Accounts to exceed 10% of the Eligible Investments held in the Trust Accounts
(with Eligible Investments held in the Trust Accounts valued at par);
(e) commercial paper that (i) is payable in United States dollars
and (ii) is rated in the highest credit rating category by each Rating Agency;
(f) units of money market funds rated in the highest credit rating
category by each Rating Agency; provided that all Eligible Investments shall be
held in the name of the Indenture Trustee; or
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Rating Agencies and the Security
Insurer, as evidenced by the prior written consent of the Security Insurer,
as may from time to time be confirmed in writing to the Indenture Trustee by
the Security Insurer; PROVIDED, HOWEVER, that securities issued by any entity
(except as provided in paragraph (a)) will not be Eligible Investments to the
extent that an investment therein will cause the then outstanding principal
amount of securities issued by
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such entity and held in the Pre-Funding Account to exceed $25 million (with
Eligible Investments held in the Pre-Funding Account valued at par), unless
and for so long as such securities are acceptable to the Rating Agencies and
the Security Insurer, as evidenced by the prior written consent of the
Security Insurer, as may from time to time be confirmed in writing to the
Indenture Trustee by the Security Insurer.
Eligible Investments may be purchased by or through the Indenture Trustee or any
of its Affiliates.
ELIGIBLE SERVICER: AFL, the Backup Servicer or another Person
which at the time of its appointment as Servicer (i) is servicing a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service
the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, and (iv) is qualified and entitled to use, pursuant
to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement.
FINAL SCHEDULED DISTRIBUTION DATE: With respect to each class of
Notes, the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final
Scheduled Distribution Date, the Class A-3 Final Scheduled Distribution Date and
the Class A-4 Final Scheduled Distribution Date, respectively.
FINANCED VEHICLE: A new or used automobile or light truck, together
with all accessories thereto, securing or purporting to secure an Obligor's
indebtedness under a Receivable.
FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b).
FUNDING PERIOD: The period beginning on the Closing Date and ending
on the first to occur of (a) the Distribution Date on which the Pre-Funded
Amount (after giving effect to any reduction in the Pre-Funded Amount in
connection with the transfer of Subsequent Receivables to the Trust on such
Distribution Date) is less than $100,000, (b) the date on which an Event of
Default or a Servicer Termination Event occurs, (c) the date on which an
Insolvency Event occurs with respect to AFL and (d) the close of business on
the Distribution Date occurring in February 1998.
INDENTURE: The Indenture, dated as of December 1, 1997, among the
Trust, the Indenture Trustee and the Indenture Collateral Agent, as the same may
be amended and supplemented from time to time.
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INDENTURE COLLATERAL AGENT: The Person acting as Indenture
Collateral Agent under the Indenture, its successors in interest and any
successor Indenture Collateral Agent under the Indenture.
INDENTURE TRUSTEE: The Person acting as Trustee under the Indenture,
its successors in interest and any successor Trustee under the Indenture.
INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).
INITIAL CUTOFF DATE: December 11, 1997.
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $394,467,365.06.
INITIAL RECEIVABLES: The Receivables listed on the Schedule of
Initial Receivables on the Closing Date.
INSOLVENCY EVENT: With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law, and such case is not
dismissed within 60 days; or (b) the filing of a decree or entry of an order
for relief by a court having jurisdiction in the premises in respect of such
Person or any substantial part of its property in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs; or (c) the commencement by such Person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case under any such law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the
event that the Servicer obtains Force-Placed Insurance pursuant to Section 3.4.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as
of December 16, 1997, among the Security Insurer, the Trust, the Seller and AFL.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the Insurance Agreement.
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INSURANCE POLICY: With respect to a Receivable, any insurance policy
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
INSURER DEFAULT: The occurrence and continuance of any of the
following:
(a) the Security Insurer shall have failed to make a payment required
under the Note Policy;
(b) The Security Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law, or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) made a general assignment for the benefit
of its creditors, or (iii) had an order for relief entered against it under the
United States Bankruptcy Code, the New York State Insurance Law, or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a final and
nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Security Insurer or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Security Insurer (or the taking of possession
of all or any material portion of the property of the Security Insurer).
LIEN: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer repossessed
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the related Financed Vehicle, (ii) the Servicer has determined in good faith
that all amounts it expects to recover have been received, or (iii) all or any
portion of a Scheduled Payment shall have become more than 180 days past due.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
from the Spread Account or the Reserve Account and drawings under the Note
Policy) net of (i) reasonable expenses incurred by the Servicer in connection
with the collection of such Receivable and the repossession and disposition of
the Financed Vehicle and (ii) amounts that are required to be refunded to the
Obligor on such Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero.
LOCKBOX ACCOUNT: The segregated account maintained on behalf of the
Trust by the Lockbox Bank in accordance with Section 3.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13,
1992 by and among Xxxxxx Trust and Savings Bank, AFL, Shawmut Bank, N.A., as
Trustee, Saturn Financial Services, Inc. and the Program Parties (as defined
therein), taken together with the Retail Lockbox Agreement, dated as of
November 13, 1992, among such parties, and the Counterpart to Agency Agreement
and Retail Lockbox Agreement, dated as of December 16, 1997, among Xxxxxx Trust
and Savings Bank, AFL, the Trust, the Indenture Trustee and the Security
Insurer, as such agreements may be amended from time to time, unless the
Indenture Trustee hereunder shall cease to be a Program Party thereunder, or
such agreement shall be terminated in accordance with its terms, in which event
"Lockbox Agreement" shall mean such other agreement, in form and substance
acceptable to the Security Insurer, or if an Insurer Default shall have occurred
and be continuing, to a Note Majority, among the Servicer, the Trust, the
Indenture Trustee and the Lockbox Bank.
LOCKBOX BANK: A depository institution named by the Servicer and, so
long as an Insurer Default shall not have occurred and be continuing, acceptable
to the Security Insurer, or, if an Insurer Default shall have occurred and be
continuing, to a Note Majority.
MONTHLY ADVANCE: The amount that the Servicer is required to advance
on any Receivable pursuant to Section 4.4(a).
MONTHLY PERIOD: With respect to a Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs (such calendar
month being referred to as the "related" Monthly Period with respect to such
Distribution Date). With respect to an Accounting Date, the calendar month in
which such Accounting Date occurs is referred to herein as the "related" Monthly
Period to such Accounting Date.
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MONTHLY RECORDS: All records and data maintained by the Servicer
with respect to the Receivables, including the following with respect to each
Receivable: the account number; the identity of the originating Dealer;
Obligor name; Obligor address; Obligor home phone number; Obligor business
phone number; original Principal Balance; original term; Annual Percentage
Rate; current Principal Balance; current remaining term; origination date;
first payment date; final scheduled payment date; next payment due date; date
of most recent payment; new/used classification; collateral description; days
currently delinquent; number of contract extensions (months) to date; amount,
if any, of Force-Placed Insurance payable monthly; amount of the Scheduled
Payment; current Insurance Policy expiration date; and past due late charges,
if any.
MOODY'S: Xxxxx'x Investors Service, Inc., or any successor thereto.
NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.1(c).
NOTE MAJORITY: As to each class of Notes, Holders of Notes
representing a majority of the outstanding principal balance of such class of
Notes.
NOTE POLICY: The financial guaranty insurance policy issued by the
Security Insurer to the Indenture Trustee on behalf of the Noteholders.
NOTE POOL FACTOR: With respect to any Distribution Date and each
class of Notes, an eight-digit decimal figure equal to the outstanding
principal balance of such class of Notes as of such Distribution Date (after
giving effect to all distributions on such date) divided by the original
outstanding principal balance of such class of Notes as of the Closing Date.
NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-1 Interest Distributable Amount,
the Class A-2 Interest Distributable Amount, the Class A-3 Interest
Distributable Amount and the Class A-4 Interest Distributable Amount.
NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 100% of the Principal Distribution Amount. With
respect to the Distribution Date on which the outstanding principal balance
of the Class A-1 Notes is reduced to zero, the "Noteholders' Monthly
Principal Distributable Amount" shall equal the sum of (i) the outstanding
principal balance of the Class A-1 Notes plus (ii) 100% (after giving effect
to the retirement of the Class A-1 Notes) of the Principal Distribution
Amount less the outstanding principal balance of the Class A-1 Notes
immediately prior to such Distribution Date.
NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the sum of the Noteholders'
Monthly Principal Distributable Amount and any outstanding Noteholders'
Principal
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Carryover Shortfall from the immediately preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on such immediately preceding Distribution Date.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date (other than the Final Scheduled Distribution Date with
respect to any class of Notes), the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and any Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. The Noteholders' Principal Distributable Amount on the Final Scheduled
Distribution Date for any class of Notes will equal the sum of (i) the
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date, (ii) the Noteholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date, and (iii) the excess of the outstanding
principal balance of such class of Notes, if any, over the amounts in clauses
(i) and (ii). In no event may the Noteholders' Principal Distributable
Amount for any Distribution Date exceed the outstanding principal balance of
the Notes immediately prior to such Distribution Date.
NOTES: The Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes.
OBLIGOR: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.
OPINION OF COUNSEL: A written opinion of counsel acceptable in
form and substance and from counsel acceptable to the Owner Trustee and, if
such opinion or a copy thereof is required to be delivered to the Indenture
Trustee or the Security Insurer, to the Indenture Trustee or the Security
Insurer, as applicable.
ORIGINAL POOL BALANCE: As of any date, the sum of the Initial
Cutoff Date Principal Balance plus the aggregate Principal Balance (as of the
related Subsequent Cutoff Date) of all Subsequent Receivables sold to the
Trust on any Subsequent Transfer Date.
OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable and a
Determination Date, the sum of all Monthly Advances made on any Determination
Date prior to such Determination Date relating to that Receivable which have
not been reimbursed pursuant to Section 4.6(i) or Section 4.8.
OWNER TRUSTEE: Wilmington Trust Company, acting not individually
but solely as trustee, or its successor in interest, and any successor Owner
Trustee appointed as provided in the Trust Agreement.
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
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unincorporated organization or government or any agency or political
subdivision thereof, or any other entity.
PRE-FUNDED AMOUNT: As of any date, $205,532,634.94 minus the
aggregate Principal Balance (as of the related Subsequent Cutoff Date) of all
Subsequent Receivables sold to the Trust on or prior to such date.
PRE-FUNDING ACCOUNT: The account designated as the Pre-Funding
Account in, and which is established and maintained pursuant to, Section
4.1(b).
PREFERENCE CLAIM: The meaning specified in Section 5.4(b).
PRINCIPAL BALANCE: With respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the terms of
the Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the amount equal to the sum of the following amounts with respect to
the related Monthly Period, in each case computed with respect to each
Receivable in accordance with the method specified in the related retail
installment sale contract or promissory note: (i) that portion of all
collections on Receivables (other than Liquidated Receivables and Purchased
Receivables) allocable to principal, including all full and partial principal
prepayments, (ii) the Principal Balance (as of the related Accounting Date)
of all Receivables that became Liquidated Receivables during the related
Monthly Period (other than Purchased Receivables), (iii) the Principal
Balance of all Receivables that became Purchased Receivables as of the
related Accounting Date, and, in the sole discretion of the Security Insurer,
provided no Insurer Default shall have occurred and be continuing, the
Principal Balance as of the related Accounting Date of all Receivables that
were required to be purchased as of the related Accounting Date but were not
so purchased, and (iv) the aggregate amount of Cram Down Losses that shall
have occurred during the related Monthly Period.
PURCHASE AGREEMENTS: (i) The Closing Date Purchase Agreement and
(ii) one or more Assignment Agreements pursuant to the ARCC Purchase
Agreement, pursuant to which, together, AFL transferred the Initial
Receivables to the Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable (without regard
to any Monthly Advances that may have been made with respect to the
Receivable) as of the Accounting Date on which the obligation to purchase
such Receivable arises.
PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable
(including any Liquidated Receivable) that became a Warranty Receivable or
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Administrative Receivable as of such Accounting Date (or which AFL or the
Servicer has elected to purchase as of an earlier Accounting Date, as
permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has
been deposited in the Collection Account by the Seller, AFL or the Servicer,
as applicable, on or before the related Deposit Date.
RATING AGENCY: Each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller
and (so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.
RATING AGENCY CONDITION: With respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof and that
each of the Rating Agencies shall have notified the Seller, the Servicer, the
Security Insurer, the Owner Trustee and the Indenture Trustee in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
RECEIVABLE: A retail installment sale contract or promissory note
(and related security agreement) for a new or used automobile or light truck
(and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of
calculating Noteholders' Distributable Amounts hereunder and for the purpose
of determining the obligations pursuant to Section 2.6 and 3.7 to purchase
Receivables), or (ii) any Purchased Receivable on or after the Accounting
Date immediately preceding the Deposit Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 4.5.
RECEIVABLE FILE: The documents, electronic entries, instruments
and writings listed in Section 2.2 pertaining to a particular Receivable.
REFERENCE BANKS: Three major banks in the London interbank market
selected by the Servicer.
REGISTRAR OF TITLES: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
RELATED DOCUMENTS: The Trust Agreement, the Indenture, the Notes,
the Purchase Agreements, each Subsequent Purchase Agreement, each Subsequent
Transfer Agreement, the Custodian Agreement, the Note Policy, the Spread
Account Agreement, the Insurance Agreement, the Lockbox Agreement, the
Depository Agreement, the Stock Pledge Agreement and the Underwriting
Agreement among the Seller, AFL and the underwriters of the Notes. The
Related
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Documents executed by any party are referred to herein as "such party's
Related Documents," "its Related Documents" or by a similar expression.
REPURCHASE EVENTS: The occurrence of a breach of any of AFL's, the
Seller's or the Servicer's representations and warranties in this Agreement
or in the Purchase Agreement or in any Subsequent Purchase Agreement which
requires the repurchase of a Receivable by AFL or the Seller pursuant to
Section 2.6 or by the Servicer pursuant to Section 3.7.
REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies and, so long as
an Insurer Default shall not have occurred and be continuing, the Security
Insurer) so as to not affect the rating on the Notes.
REQUISITE RESERVE AMOUNT: As of the Closing Date, $1,275,680.98
and as of any Distribution Date or Subsequent Transfer Date thereafter during
the Funding Period an amount equal to the difference between
(a) the product of (x) the weighted average of the Class A-1
Interest Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate,
the Class A-4 Interest Rate and the Class A-5 Interest Rate (based on
the outstanding principal balance of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes on such date),
divided by 360, (y) the Pre-Funded Amount on such date and (z) the
number of days until the Distribution Date in February 1998, and
(b) the product of (x) the Assumed Reinvestment Rate, divided
by 360, (y) the Pre-Funded Amount on such date and (z) the number of
days until the Distribution Date in February 1998.
The Requisite Reserve Amount for any Subsequent Transfer Date (i) shall be
calculated after taking into account the transfer of Subsequent Receivables
to the Trust on such Subsequent Transfer Date (unless such Subsequent
Transfer Date does not coincide with a Distribution Date and does not occur
between a Distribution Date and the related Determination Date) and (ii) (A)
if such Subsequent Transfer Date does not coincide with a Distribution Date
but occurs between a Distribution Date and the related Determination Date,
shall be calculated as of the Distribution Date immediately following such
Subsequent Transfer Date as if such Subsequent Transfer Date occurred on such
Distribution Date, (B) if such Subsequent Transfer Date coincides with a
Distribution Date, shall be calculated as of such Distribution Date or (C) if
such Subsequent Transfer Date does not coincide with a Distribution Date and
does not occur between a Distribution Date and the related Determination
Date, shall be calculated as of the immediately preceding Distribution Date
(or as of the Closing Date, if such Subsequent Transfer Date occurs before
the Determination
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Date in February 1998) as if such Subsequent Transfer Date occurred on such
immediately preceding Distribution Date (or the Closing Date).
RESERVE ACCOUNT: The account designated as the Reserve Account in,
and which is established and maintained pursuant to, Section 4.1(d),
including the Class A-1 Holdback Subaccount.
RESERVE AMOUNT: As of any date of determination, the amount on
deposit in the Reserve Account (other than the amount on deposit in the Class
A-1 Holdback Subaccount) on such date.
RESPONSIBLE OFFICER: When used with respect to the Owner Trustee,
any officer of the Owner Trustee assigned by the Owner Trustee to administer
its corporate trust affairs relating to the Trust. When used with respect to
the Indenture Trustee, any officer assigned to the Corporate Trust Division
(or any successor thereto), including any Vice President, Assistant Vice
President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of the Trust. When used with
respect to any other Person that is not an individual, the President, any
Vice-President or Assistant Vice-President or the Controller of such Person,
or any other officer or employee having similar functions.
SCHEDULE OF INITIAL RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to this Agreement which is attached hereto as Schedule A.
SCHEDULE OF RECEIVABLES: The Schedule of Initial Receivables
attached hereto as Schedule A as supplemented by each Schedule of Subsequent
Receivables attached as Schedule A to each Subsequent Transfer Agreement.
SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties attached hereto as Schedule B.
SCHEDULE OF SUBSEQUENT RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to a Subsequent Transfer Agreement which is attached as
Schedule A to such Subsequent Transfer Agreement, which Schedule of
Subsequent Receivables shall supplement the Schedule of Initial Receivables.
SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Monthly Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the
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Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) modifications or
extensions of the Receivable permitted by Section 3.2(b), the Scheduled
Payment with respect to such Monthly Period shall refer to the Obligor's
payment obligation with respect to such Monthly Period as so modified.
SECURITY INSURER: Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or
any successor thereto, as issuer of the Note Policy.
SELLER: Arcadia Receivables Finance Corp., a Delaware corporation,
or its successor in interest pursuant to Section 6.2.
SERVICER: Arcadia Financial Ltd., its successor in interest
pursuant to Section 8.2 or, after any termination of the Servicer upon a
Servicer Termination Event, the Backup Servicer or any other successor
Servicer.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to
Section 3.14.
SERVICER TERMINATION EVENT: An event described in Section 8.1.
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached hereto as
Exhibit E.
SPREAD ACCOUNT: The Spread Account established and maintained
pursuant to the Spread Account Agreement.
SPREAD ACCOUNT ADDITIONAL DEPOSIT: With respect to any transfer of
Subsequent Receivables to the Trust pursuant to Section 2.4, the amount
required to be deposited in the Spread Account pursuant to the terms of the
Spread Account Agreement.
SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement, dated as
of March 25, 1993, as amended and restated as of December 16, 1997, among the
Seller, AFL, the Security Insurer, the Collateral Agent and the trustees
specified therein, as the same may be amended, supplemented or otherwise
modified in accordance with the terms thereof.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division
of The XxXxxx-Xxxx Companies, Inc., or any successor thereto.
STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of
March 25, 1993, as amended and restated as of December 3, 1996, as amended,
among the Security Insurer, AFL and the Collateral Agent, as the same may be
amended from time to time.
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SUBCOLLECTION ACCOUNT: The account designated as the Subcollection
Account in, and which is established and maintained pursuant to Section
4.2(a).
SUBSEQUENT CUTOFF DATE: With respect to any Subsequent
Receivables, the date specified in the related Subsequent Transfer Agreement,
which may in no event be later than the Subsequent Transfer Date.
SUBSEQUENT PURCHASE AGREEMENT: With respect to any Subsequent
Receivables, either (i) the agreement between AFL and the Seller pursuant to
which AFL transferred the Subsequent Receivables to the Seller, the form of
which is attached to the Purchase Agreement as Exhibit A, or (ii) one or more
Assignment Agreements pursuant to the ARCC Purchase Agreement, pursuant to
which AFL transferred the Subsequent Receivables to the Seller.
SUBSEQUENT RECEIVABLES: All Receivables sold and transferred to the
Trust pursuant to Section 2.4.
SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent
Receivables, the related agreement described in Section 2.4.
SUBSEQUENT TRANSFER DATE: Any date during the Funding Period on
which Subsequent Receivables are transferred to the Trust pursuant to Section
2.4.
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period,
all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, collected on the Receivables during such
Monthly Period.
TELERATE PAGE 3750: The display page currently so designated on
the Dow Xxxxx Telerate Service (or such other page as may replace that page
on that service for the purpose of displaying comparable rates or prices).
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRUST: Arcadia Automobile Receivables Trust, 1997-D.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of December 1, 1997,
among the Seller, the Security Insurer and the Owner Trustee, as the same may
be amended and supplemented from time to time.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
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WARRANTY RECEIVABLE: With respect to any Monthly Period, a
Receivable which AFL has become obligated to repurchase pursuant to Section
2.6.
SECTION 1.2. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
terms "include" or "including" mean "include without limitation" or
"including without limitation."
SECTION 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months, except that calculations of interest accrued on the
Class A-1 Notes shall be made on the basis of actual days elapsed in a
360-day year. All references to the Principal Balance of a Receivable as of
an Accounting Date shall refer to the close of business on such day.
SECTION 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
SECTION 1.5. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
officer, or director, as such, of the Seller, AFL, the Servicer, the
Indenture Trustee, the Backup Servicer or the Owner Trustee or of any
predecessor or successor of the Seller, AFL, the Servicer, the Indenture
Trustee, the Backup Servicer or the Owner Trustee.
SECTION 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is
to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account
the insurance provided by the Note Policy.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES. Subject to the
terms and conditions of this Agreement, the Seller, pursuant to the mutually
agreed upon terms contained herein, hereby sells, transfers, assigns, and
otherwise conveys to the
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Trust, without recourse (but without limitation of its obligations in this
Agreement), all of the right, title and interest of the Seller in and to the
Initial Receivables, all monies at any time paid or payable thereon or in
respect thereof after the Initial Cutoff Date (including amounts due on or
before the Initial Cutoff Date but received by AFL or the Seller after the
Initial Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Initial Receivables, the Obligors or the
related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Initial Receivables,
an assignment of the rights of AFL or the Seller against Dealers with respect
to the Initial Receivables under the Dealer Agreements and the Dealer
Assignments, all items contained in the related Receivable Files, any and all
other documents that AFL keeps on file in accordance with its customary
procedures relating to the Initial Receivables, the Obligors or the related
Financed Vehicles, an assignment of the rights of the Seller under the
Purchase Agreements, property (including the right to receive future
Liquidation Proceeds) that secures an Initial Receivable and that has been
acquired by or on behalf of the Trust pursuant to liquidation of such
Receivable, all funds on deposit from time to time in the Trust Accounts and
all investments therein and proceeds thereof, and all proceeds of the
foregoing. It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement and each Subsequent Transfer
Agreement shall constitute a sale of the Receivables and other Trust Property
from the Seller to the Trust and the beneficial interest in and title to the
Receivables and the other Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that, notwithstanding the
intent of the Seller, the transfer and assignment contemplated hereby and
each Subsequent Transfer Agreement is held not to be a sale, this Agreement
and each Subsequent Transfer Agreement shall constitute a grant of a security
interest to the Trust in the property referred to in this Section 2.1 or
transferred to the Trust pursuant to the related Subsequent Transfer
Agreement.
SECTION 2.2. CUSTODY OF RECEIVABLE FILES.
(a) In connection with the sale, transfer and assignment of the
Receivables and the other Trust Property to the Trust pursuant to this
Agreement and each Subsequent Transfer Agreement, and simultaneously with the
execution and delivery of this Agreement, the Trust shall enter into the
Custodian Agreement with the Custodian, dated as of the Closing Date,
pursuant to which the Owner Trustee, on behalf of the Trust, shall revocably
appoint the Custodian, and the Custodian shall accept such appointment, to
act as the agent of the Trust as Custodian of the following documents or
instruments in its possession which shall be delivered to the Custodian as
agent of the Trust on or before the Closing Date (with respect to each
Initial Receivable) or the applicable Subsequent Transfer Date (with respect
to each Subsequent Receivable):
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(i) The fully executed original of the Receivable (together
with any agreements modifying the Receivable, including without limitation
any extension agreements) or a microfiche copy thereof;
(ii) Documents evidencing or related to any Insurance Policy, or
copies (including but not limited to microfiche copies) thereof;
(iii) The original credit application, or a copy thereof, of each
Obligor, fully executed by each such Obligor on AFL's customary form, or
on a form approved by AFL, for such application; and
(iv) The original certificate of title (when received) and
otherwise such documents, if any, that AFL keeps on file in accordance
with its customary procedures indicating that the Financed Vehicle is owned
by the Obligor and subject to the interest of AFL as first lienholder or
secured party (including any Lien Certificate received by AFL), or, if
such original certificate of title has not yet been received, a copy of
the application therefor, showing AFL as secured party.
In connection with the grant of the security interest in the Trust
Estate to the Issuer Secured Parties pursuant to the Indenture, the Trust
agrees that from and after the Closing Date through the date of release of
such security interest pursuant to the terms of the Indenture, the Custodian
shall not be acting as agent of the Trust, but rather shall be acting as
agent of the Issuer Secured Parties.
The Indenture Trustee may act as the Custodian, in which case the
Indenture Trustee shall be deemed to have assumed the obligations of the
Custodian specified in the Custodian Agreement.
(b) Upon payment in full on any Receivable, the Servicer will
notify the Custodian by certification of an officer of the Servicer (which
certification shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited
in the Collection Account pursuant to Section 3.1 have been so deposited) and
shall request delivery of the Receivable and Receivable File to the Servicer.
From time to time as appropriate for servicing and enforcing any Receivable,
the Custodian shall, upon written request of an officer of the Servicer and
delivery to the Custodian of a receipt signed by such officer, cause the
original Receivable and the related Receivable File to be released to the
Servicer. The Servicer's receipt of a Receivable and/or Receivable File
shall obligate the Servicer to return the original Receivable and the related
Receivable File to the Custodian when its need by the Servicer has ceased
unless the Receivable shall be repurchased as described in Section 2.6 or 3.7.
SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As
conditions to Owner Trustee's execution and delivery of the Notes on behalf
of the
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Trust on the Closing Date, the Owner Trustee shall have received the
following on or before the Closing Date:
(a) The Schedule of Initial Receivables certified by the
President, Controller or Treasurer of the Seller;
(b) The acknowledgement of the Custodian that it holds the
Receivable File relating to each Initial Receivable;
(c) Copies of resolutions of the Board of Directors of the
Seller approving the execution, delivery and performance of this
Agreement, the Related Documents and the transactions contemplated hereby
and thereby, certified by a Secretary or an Assistant Secretary of the
Seller;
(d) Copies of resolutions of the Board of Directors of AFL
approving the execution, delivery and performance of this Agreement, the
Related Documents and the transactions contemplated hereby and thereby,
certified by a Secretary or an Assistant Secretary of AFL;
(e) Evidence that all filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to
be taken or performed by any Person in any jurisdiction (other than those
actions to be taken with respect to Subsequent Receivables pursuant to
Section 2.4) to give the Owner Trustee a first priority perfected lien on,
or ownership interest in, the Receivables and the other Trust Property
have been made, taken or performed; and
(f) An executed copy of the Spread Account Agreement and
evidence of the deposit of $1,275,680.98 in the Reserve Account.
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b) below,
the Seller, pursuant to the mutually agreed upon terms contained herein and
pursuant to one or more Subsequent Transfer Agreements, shall sell, transfer,
assign, and otherwise convey to the Trust, without recourse (but without
limitation of its obligations in this Agreement), all of the right, title and
interest of the Seller in and to the Subsequent Receivables, all monies at
any time paid or payable thereon or in respect thereof after the related
Subsequent Cutoff Date (including amounts due on or before the related
Subsequent Cutoff Date but received by AFL or the Seller after the related
Subsequent Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Subsequent Receivables, the Obligors or
the related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Subsequent
Receivables, rights of AFL or the Seller against Dealers with respect to the
Subsequent Receivables under the Dealer
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Agreements and the Dealer Assignments, all items contained in the Receivable
Files relating to the Subsequent Receivables, any and all other documents
that AFL keeps on file in accordance with its customary procedures relating
to the Subsequent Receivables, the Obligors or the related Financed Vehicles,
the rights of the Seller under the related Subsequent Purchase Agreement,
property (including the right to receive future Liquidation Proceeds) that
secures a Subsequent Receivable and that has been acquired by or on behalf of
the Trust pursuant to liquidation of such Subsequent Receivable, and all
proceeds of the foregoing.
(b) The Seller shall transfer to the Trust the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) The Seller shall have provided the Owner Trustee, the
Indenture Trustee, the Security Insurer and the Rating Agencies with a
timely Addition Notice and shall have provided any information reasonably
requested by any of the foregoing with respect to the Subsequent
Receivables;
(ii) the Funding Period shall not have terminated;
(iii) the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) shall in its sole and absolute
discretion have given its prior written approval of the transfer of such
Subsequent Receivables to the Trust;
(iv) the Seller shall have delivered to the Owner Trustee and
the Indenture Trustee a duly executed written assignment (including an
acceptance by the Indenture Trustee and the Owner Trustee) in substantially
the form of Exhibit G (the "Subsequent Transfer Agreement"), which shall
include a Schedule of Subsequent Receivables listing the Subsequent
Receivables and shall specify the Spread Account Additional Deposit, if
any, the Requisite Reserve Amount, and the Class A-1 Holdback Amount, if
any, as of or for such Subsequent Transfer Date;
(v) the Seller shall have delivered to the Custodian the
Receivable Files relating to the Subsequent Receivables, and the Custodian
shall have delivered to the Seller, the Owner Trustee, the Security
Insurer and the Indenture Collateral Agent an acknowledgement of receipt
of such Receivable Files;
(vi) the Seller shall, to the extent required by Section 4.1,
have deposited in the Collection Account collections in respect of the
Subsequent Receivables;
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(vii) as of each Subsequent Transfer Date, neither AFL nor the
Seller shall be insolvent nor shall either of them have been made
insolvent by such transfer nor shall either of them be aware of any pending
insolvency;
(viii) the applicable Spread Account Additional Deposit for such
Subsequent Transfer Date shall have been made pursuant to the Spread
Account Agreement.
(ix) the Reserve Amount on such Subsequent Transfer Date, after
taking into account any transfers of funds from the Reserve Account to the
Depositor in respect of the sale of the Subsequent Receivables to the
Trust, shall be no less than the Requisite Reserve Amount for such
Subsequent Transfer Date;
(x) each Rating Agency shall have notified the Security
Insurer that following such transfer the Notes will be rated in the highest
short-term or long-term rating category, as applicable, by such Rating
Agency;
(xi) such addition will not result in a material adverse tax
consequence to the Trust or the Noteholders as evidenced by an Opinion of
Counsel to be delivered by the Seller;
(xii) the Seller shall have delivered to the Owner Trustee and
the Indenture Trustee an Officer's Certificate confirming the satisfaction
of each condition precedent specified in this paragraph (b);
(xiii) the Seller shall have delivered to the Rating Agencies and
to the Security Insurer one or more Opinions of Counsel with respect to the
transfer of the Subsequent Receivables substantially in the form of the
Opinions of Counsel delivered to such Persons on the Closing Date;
(xiv) (A) the Receivables in the Trust, including the Subsequent
Receivables to be conveyed to the Trust on the Subsequent Transfer Date,
shall meet the following criteria (based on the characteristics of the
Initial Receivables on the Initial Cutoff Date and the Subsequent
Receivables on each related Subsequent Cutoff Date): (1) the weighted
average APR of such Receivables will not be less than 15.53%, (2) the
weighted average remaining term of such Receivables will not be greater
than 67 months nor less than 63 months, (3) not more than 87% of the
Aggregate Principal Balances of such Receivables will represent loans
secured by used Financed Vehicles, (4) not more than 63% of the Aggregate
Principal Balance of such Receivables will represent Receivables originated
under AFL's "Classic" program, (5) not more than 3% of the Aggregate
Principal Balance of such Receivables will have an APR in excess of 21%,
(6) not more than 0.25% of the Aggregate Principal Balance of such
Receivables will represent loans in excess of $50,000.00, (7) not more
than 3.0% of the Aggregate Principal Balance of such Receivables will
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represent loans with original terms greater than 72 months and (8) not
more than 5.0% of the Aggregate Principal Balance of such Receivables will
represent loans secured by Financed Vehicles that previously secured a
loan originated by AFL with an obligor other than the current Obligor, and
(B) the Trust, the Owner Trustee, the Indenture Trustee and the Security
Insurer shall have received written confirmation from a firm of certified
independent public accountants as to the satisfaction of such criteria;
(xv) the Seller shall have taken any action necessary or, if
requested by the Security Insurer, advisable to maintain the first
perfected ownership interest of the Trust in the Trust Property and the
first perfected security interest of the Indenture Collateral Agent in
the Indenture Collateral; and
(xvi) no selection procedures adverse to the interests of the
Noteholders shall have been utilized in selecting the Subsequent
Receivables.
(c) On such Subsequent Transfer Date, if all the conditions
specified in paragraph (b) above have been satisfied, the Trust shall accept
the transfer of such Subsequent Receivables and shall pay to the Seller from
the Pre-Funding Account an amount equal to (i) the Principal Balance as of
the related Subsequent Cutoff Date of the Subsequent Receivables transferred
to the Trust as of such date, minus (ii) the Spread Account Additional
Deposit, if any, for such Subsequent Transfer Date, minus (iii) the amount,
if any, by which the Requisite Reserve Amount for such Subsequent Transfer
Date exceeds the Reserve Amount as of such Subsequent Transfer Date, and
minus (iv) the Class A-1 Holdback Amount, if any, for such Subsequent
Transfer Date.
(d) The Seller covenants to transfer to the Trust pursuant to
paragraph (a) above Subsequent Receivables with an aggregate Principal
Balance equal to $205,532,634.94; PROVIDED, HOWEVER, that the sole remedy of
the Trust, the Owner Trustee, the Indenture Trustee or the Noteholders with
respect to a failure of such covenant shall be to enforce the provisions of
Sections 2.3(c) and 6.2 of the Closing Date Purchase Agreement, Section
2.4(c) hereof (with respect to Class A-1 Holdback Amounts) and Section 4.7(c)
hereof, Section 10.01(b) of the Indenture and Section 5.2 of the Trust
Agreement with respect to payment of the Class A-1 Prepayment Premium, Class
A-2 Prepayment Premium, Class A-3 Prepayment Premium and Class A-4 Prepayment
Premium.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its
execution of this Agreement and each Subsequent Transfer Agreement, the
Seller makes the following representations and warranties on which the Trust
relies in accepting the Receivables and the other Trust Property in trust and
on which the Owner Trustee relies in issuing on behalf of the Trust, Notes
and upon which the Security Insurer relies in issuing the Note Policy.
Unless otherwise specified, such representations and warranties speak as of
the Closing Date or Subsequent Transfer
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Date, as appropriate, but shall survive the sale, transfer, and assignment of
the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations and
warranties set forth on the Schedule of Representations are true and
correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own and
sell the Receivables and the other property transferred to the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and its Related Documents
and to carry out its terms and their terms, respectively; the Seller has
full power and authority to sell and assign the Trust Property to be sold
and assigned to and deposited with the Trust by it and has duly authorized
such sale and assignment to the Trust by all necessary corporate action;
and the execution, delivery and performance of this Agreement and the
Seller's Related Documents have been duly authorized by the Seller by all
necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and the
related Subsequent Transfer Agreement, if any, effects a valid sale,
transfer and assignment of the Receivables and the other Trust Property,
enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement and the related Subsequent Transfer Agreement,
if any, and the Seller's Related Documents, when duly executed and
delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the related Subsequent Transfer
Agreement, if any, and the Related Documents and the fulfillment of
the
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terms of this Agreement and the related Subsequent Transfer Agreement,
if any, and the Related Documents shall not conflict with, result in any
breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the certificate
of incorporation or by-laws of the Seller, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a
party or by which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller or
AFL, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this Agreement
or any of the Related Documents, (B) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated by
this Agreement or any of the Related Documents, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents, or (D)
seeking to adversely affect the federal income tax or other federal, state
or local tax attributes of the Notes.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at 0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx, XX
00000-0000.
(i) REGISTRATION STATEMENT. No stop order suspending the
effectiveness of the Registration Statement relating to the Notes has been
issued, and no proceeding for that purpose has been instituted or is
threatened, by the Securities and Exchange Commission.
(j) FILINGS. Since the effective date of the Registration
Statement relating to the Notes, there has occurred no event required to
be set forth in an amendment or supplement to the Registration Statement
or Prospectus that has not been so set forth, and there has been no
document required to be filed under the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder that upon such filing would be deemed to be
incorporated by reference in the Prospectus that has not been so filed.
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SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement or the
applicable Subsequent Transfer Agreement, as appropriate, AFL and the Seller
have entered into the Purchase Agreements or Subsequent Purchase Agreement,
as applicable, the rights of the Seller under which have been assigned by the
Seller to the Trust. Under the Purchase Agreements and each Subsequent
Purchase Agreement, if applicable, AFL has made the same representations and
warranties to the Seller with respect to the Receivables as those made by
Seller pursuant to the Schedule of Representations, upon which the Owner
Trustee has relied in accepting the Trust Property in trust and executing the
Notes and upon which the Security Insurer has relied in issuing the Note
Policy and upon which the Indenture Trustee has relied in authenticating the
Notes. Upon discovery by any of AFL, the Seller, the Servicer, the Security
Insurer, the Indenture Trustee or the Owner Trustee of a breach of any of the
representations and warranties contained in Section 2.5 that materially and
adversely affects the interests of the Noteholders, the Security Insurer or
the Trust in any Receivable (including any Liquidated Receivable), the party
discovering such breach shall give prompt written notice to the others;
PROVIDED, HOWEVER, that the failure to give any such notice shall not affect
any obligation of AFL or the Seller. As of the second Accounting Date (or,
at AFL's election, the first Accounting Date) following its discovery or its
receipt of notice of any breach of the representations and warranties set
forth on the Schedule of Representations that materially and adversely
affects the interests of the Noteholders, the Security Insurer or the Trust
in any Receivable (including any Liquidated Receivable), AFL shall, unless
such breach shall have been cured in all material respects, purchase such
Receivable from the Trust and, on or before the related Deposit Date, AFL
shall pay the Purchase Amount to the Owner Trustee pursuant to Section 4.5.
The obligations of the Seller with respect to any such breach of
representations and warranties shall be limited to taking any and all actions
necessary to enable the Owner Trustee to enforce directly the obligations of
AFL under the Purchase Agreement or Subsequent Purchase Agreement, as
applicable. It is understood and agreed that, except as set forth in this
Section 2.6, the obligation of AFL to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against AFL or the Seller for such breach
available to the Security Insurer or the Indenture Trustee on behalf of the
Noteholders.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller or AFL, AFL shall
indemnify the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust and the Noteholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach.
SECTION 2.7. NONPETITION COVENANT. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), the Backup Servicer nor AFL shall petition or otherwise invoke the
process of any court or
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government authority for the purpose of commencing or sustaining a case
against the Trust under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Trust or any
substantial part of its property, or ordering the winding up or liquidation
of the affairs of the Trust.
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
CLOSING DATE OR SUBSEQUENT TRANSFER DATE. In the case of any Receivable in
respect of which written evidence from the Dealer selling the related
Financed Vehicle that the Lien Certificate for such Financed Vehicle showing
AFL as first lienholder has been applied for from the Registrar of Titles was
delivered to the Custodian on the Closing Date or Subsequent Transfer Date,
as appropriate, in lieu of a Lien Certificate, the Servicer shall use its
best efforts to collect such Lien Certificate from the Registrar of Titles as
promptly as practicable. If such Lien Certificate showing AFL as first
lienholder is not received by the Custodian within 180 days after the Closing
Date or Subsequent Transfer Date, as appropriate, then the representation and
warranty in Paragraph 18 of the Schedule of Representations in respect of
such Receivable shall be deemed to have been incorrect in a manner that
materially and adversely affects the Noteholders, the Security Insurer and
the Trust.
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND
WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller or AFL, the Owner
Trustee shall take any and all actions reasonably requested by the Seller,
AFL or Servicer, at the expense of the requesting party, to assign, without
recourse, representation or warranty, to the Seller, AFL or the Servicer, as
applicable, all the Trust's right, title and interest in and to such
purchased Receivable, all monies due thereon, the security interests in the
related Financed Vehicles, proceeds from any Insurance Policies, proceeds
from recourse against Dealers on such Receivables and the interests of the
Trust in certain rebates of premiums and other amounts relating to the
Insurance Policies and any documents relating thereto, such assignment being
an assignment outright and not for security; and the Seller, AFL or the
Servicer, as applicable, shall thereupon own such Receivable, and all such
security and documents, free of any further obligation to the Owner Trustee,
the Trust, the Indenture Trustee, the Security Insurer, the Indenture
Collateral Agent or the Noteholders with respect thereto.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its
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servicing of the Receivables shall be carried out in accordance with
customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the
degree of skill and attention that the Servicer exercises from time to time
with respect to all comparable motor vehicle receivables that it services for
itself or others. In performing such duties, so long as AFL is the Servicer,
it shall comply with the policies and procedures attached hereto as Schedule
B. The Servicer's duties shall include, without limitation, collection and
posting of all payments, responding to inquiries of Obligors on the
Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting any required tax information to Obligors, policing the
collateral, complying with the terms of the Lockbox Agreement, accounting for
collections and furnishing monthly and annual statements to the Owner
Trustee, the Indenture Trustee and the Security Insurer with respect to
distributions, monitoring the status of Insurance Policies with respect to
the Financed Vehicles and performing the other duties specified herein. The
Servicer shall also administer and enforce all rights and responsibilities of
the holder of the Receivables provided for in the Dealer Agreements (and
shall maintain possession of the Dealer Agreements, to the extent it is
necessary to do so), the Dealer Assignments and the Insurance Policies, to
the extent that such Dealer Agreements, Dealer Assignments and Insurance
Policies relate to the Receivables, the Financed Vehicles or the Obligors.
To the extent consistent with the standards, policies and procedures
otherwise required hereby, the Servicer shall follow its customary standards,
policies, and procedures and shall have full power and authority, acting
alone, to do any and all things in connection with such managing, servicing,
administration and collection that it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer is hereby
authorized and empowered by the Owner Trustee to execute and deliver, on
behalf of the Trust, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables and with respect to the Financed
Vehicles; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer
shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Receivable or waive the right to collect the unpaid balance of any Receivable
from the Obligor, except that the Servicer may forego collection efforts if
the amount subject to collection is DE MINIMIS and if it would forego
collection in accordance with its customary procedures. The Servicer is
hereby authorized to commence, in its own name or in the name of the Trust
(provided the Servicer has obtained the Owner Trustee's consent, which
consent shall not be unreasonably withheld), a legal proceeding to enforce a
Receivable pursuant to Section 3.3 or to commence or participate in any other
legal proceeding (including, without limitation, a bankruptcy proceeding)
relating to or involving a Receivable, an Obligor or a Financed Vehicle. If
the Servicer commences or participates in such a legal proceeding in its own
name, the Trust shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely for purposes of commencing or participating
in any such proceeding as a party or claimant, and the Servicer is authorized
and empowered by the Owner Trustee to execute and deliver in the Servicer's
name any notices,
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demands, claims, complaints, responses, affidavits or other documents or
instruments in connection with any such proceeding. The Owner Trustee shall
furnish the Servicer with any powers of attorney and other documents which
the Servicer may reasonably request and which the Servicer deems necessary or
appropriate and take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due, and shall follow such collection procedures as
it follows with respect to all comparable automobile receivables that it
services for itself or others and otherwise act with respect to the Receivables,
the Dealer Agreements, the Dealer Assignments, the Insurance Policies and the
other Trust Property in such manner as will, in the reasonable judgment of the
Servicer, maximize the amount to be received by the Trust with respect thereto.
The Servicer is authorized in its discretion to waive any prepayment charge,
late payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification, amendment
or extension of a Receivable in order to (i) change the Obligor's regular due
date to a date within the Monthly Period in which such due date occurs,
(ii) re-amortize the scheduled payments on the Receivable following a partial
prepayment of principal and (iii) grant extensions on a Receivable, provided
that the Servicer shall not be permitted to extend the monthly payments on a
Receivable more than two times in any twelve-month period, and provided further
that the aggregate period of all extensions on a Receivable shall not exceed six
months.
(c) The Servicer may grant payment extensions or deferrals on, or
other modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension, deferral,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; PROVIDED,
HOWEVER, that:
(i) In no event may a Receivable be extended beyond the Monthly
Period immediately preceding the Final Scheduled Distribution Date;
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(ii) So long as an Insurer Default shall not have occurred
and be continuing, the Servicer shall not amend or modify a Receivable
(except as provided in Section 3.2(b)) without the consent of the
Security Insurer;
(iii) So long as an Insurer Default shall not have
occurred and be continuing, the Aggregate Principal Balance of
Receivables which have been extended during any Monthly Period (A)
shall not exceed 6.5% of the Aggregate Principal Balance of Receivables
during such Monthly Period (computed as of the Accounting Date
immediately prior to the first day of the related Monthly Period) and
(B) shall not exceed 4.0% of the average of the Aggregate Principal
Balance of Receivables for such Monthly Period and the three prior
Monthly Periods (computed as of the Accounting Date immediately prior
to the first day of the related Monthly Period);
(iv) So long as an Insurer Default shall not have occurred
and be continuing, the Aggregate Principal Balance of Receivables for
which payment deferrals have been granted during any Monthly Period (A)
shall not exceed 3.0% of the Aggregate Principal Balance of Receivables
during such Monthly Period (computed as of the Accounting Date
immediately prior to the first day of the related Monthly Period) and
(B) shall not exceed 2.0% of the average of the Aggregate Principal
Balance of Receivables for such Monthly Period and the three prior
Monthly Periods (computed as of the Accounting Date immediately prior
to the first day of the related Monthly Period);
(v) No such extension, modification or amendment shall be
granted if such action, when aggregated with all previous extensions,
modifications and amendments of Receivables, would have the effect of
causing any Notes to be deemed to have been exchanged for other Notes
within the meaning of Section 1001 of the Internal Revenue Code of
1986, as amended, or any proposed, temporary or final Treasury
Regulations issued thereunder; and
(vi) If an Insurer Default shall have occurred and be
continuing, the Servicer may not extend or modify any Receivable (other
than as permitted by Section 3.2(b)).
(d) The Servicer shall use its reasonable best efforts to cause
Obligors to make all payments on the Receivables, whether by check or by
direct debit of the Obligor's bank account, to be made directly to one or
more Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox
Agreement. Amounts received by a Lockbox Bank in respect of the Receivables
may initially be deposited into a demand deposit account maintained by the
Lockbox Bank as agent for the Trust and for other owners of automobile
receivables serviced by the Servicer. The Servicer shall use its reasonable
best efforts to cause any Lockbox Bank to deposit all payments on the
Receivables in the Lockbox Account no later than the Business Day after
receipt, and
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to cause all amounts credited to the Lockbox Account on account of such
payments to be transferred to the Collection Account no later than the second
Business Day after receipt of such payments. The Lockbox Account shall be a
demand deposit account held by the Lockbox Bank, or at the request of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing) an Eligible Account satisfying clause (i) of the definition
thereof.
Prior to the Closing Date and each Subsequent Transfer Date, as
applicable, the Servicer shall have notified each Obligor that makes its
payments on the Receivables by check to make such payments thereafter
directly to the Lockbox Bank (except in the case of Obligors that have
already been making such payments to the Lockbox Bank), and shall have
provided each such Obligor with a supply of mailing address labels in order
to enable such Obligors to make such payments directly to the Lockbox Bank
for deposit into the Lockbox Account, and the Servicer will continue, not
less often than every three months, to so notify those Obligors who have
failed to make payments to the Lockbox Bank. If and to the extent requested
by the Security Insurer (unless an Insurer Default shall have occurred and be
continuing), the Servicer shall request each Obligor that makes payment on
the Receivables by direct debit of such Obligor's bank account, to execute a
new authorization for automatic payment which in the judgment of the Security
Insurer is sufficient to authorize direct debit by the Lockbox Bank on behalf
of the Trust. If at any time the Lockbox Bank is unable to directly debit an
Obligor's bank account that makes payment on the Receivables by direct debit
and if such inability is not cured within 15 days or cannot be cured by
execution by the Obligor of a new authorization for automatic payment, the
Servicer shall notify such Obligor that it cannot make payment by direct
debit and must thereafter make payment by check.
Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Owner Trustee, Indenture Trustee and Noteholders
for servicing and administering the Receivables and the other Trust Property
in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue thereof.
In the event the Servicer shall for any reason no longer be acting
as such, the successor Servicer shall thereupon assume all of the rights and
obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing
Servicer as a party to each such Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under
such Lockbox Agreement. The outgoing Servicer shall, upon request of the
Owner Trustee but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such Agreement
and an accounting of amounts collected and held by the Lockbox Bank
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and otherwise use its best efforts to effect the orderly and efficient
transfer of any Lockbox Agreement to the successor Servicer. In the event
that the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing) or a Note Majority (if an Insurer Default shall
have occurred and be continuing) elects to change the identity of the Lockbox
Bank, the outgoing Servicer, at its expense, shall cause the Lockbox Bank to
deliver, at the direction of the Security Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Note Majority (if an
Insurer Default shall have occurred and be continuing) to the Owner Trustee
or a successor Lockbox Bank, all documents and records relating to the
Receivables and all amounts held (or thereafter received) by the Lockbox Bank
(together with an accounting of such amounts) and shall otherwise use its
best efforts to effect the orderly and efficient transfer of the lockbox
arrangements and the Servicer shall notify the Obligors to make payments to
the Lockbox established by the successor.
(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Subcollection Account or to
the Lockbox Bank for deposit into the Collection Account without deposit into
any intervening account as soon as practicable, but in no event later than the
Business Day after receipt thereof.
SECTION 3.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
all or any portion of a Scheduled Payment has become 91 days delinquent. The
Servicer is authorized to follow such customary practices and procedures as it
shall deem necessary or advisable, consistent with the standard of care required
by Section 3.1, which practices and procedures may include reasonable efforts to
realize upon any recourse to Dealers, the sale of the related Financed Vehicle
at public or private sale, the submission of claims under an Insurance Policy
and other actions by the Servicer in order to realize upon such a Receivable.
The foregoing is subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with any repair or towards the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair and/or
repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. All amounts
received upon liquidation of a Financed Vehicle shall be remitted directly by
the Servicer to the Subcollection Account without deposit into any intervening
account as soon as practicable, but in no event later than the Business Day
after receipt thereof. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a Financed
Vehicle into cash proceeds, but only out of the cash proceeds of such Financed
Vehicle, any
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deficiency obtained from the Obligor or any amounts received from the related
Dealer, which amounts may be retained by the Servicer (and shall not be
required to be deposited as provided in Section 3.2(e)) to the extent of such
expenses. The Servicer shall pay on behalf of the Trust any personal
property taxes assessed on repossessed Financed Vehicles; the Servicer shall
be entitled to reimbursement of any such tax from Liquidation Proceeds with
respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce
a Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Trust to the Servicer of the rights under
such Dealer Agreement and Dealer Assignment for purposes of collection only.
If, however, in any enforcement suit or legal proceeding, it is held that the
Servicer may not enforce a Dealer Agreement or Dealer Assignment on the grounds
that it is not a real party in interest or a Person entitled to enforce the
Dealer Agreement or Dealer Assignment, the Owner Trustee, at the Servicer's
expense, or the Seller, at the Seller's expense, shall take such steps as the
Servicer deems necessary to enforce the Dealer Agreement or Dealer Assignment,
including bringing suit in its name or the name of the Seller or of the
Indenture Collateral Agent for the benefit of the Issuer Secured Parties. All
amounts recovered shall be remitted directly by the Servicer as provided in
Section 3.2(e).
SECTION 3.4. INSURANCE.
(a) The Servicer shall require that each Financed Vehicle be insured
by the Insurance Policies referred to in Paragraph 24 of the Schedule of
Representations and Warranties and shall monitor the status of such physical
loss and damage insurance coverage thereafter, in accordance with its customary
servicing procedures. Each Receivable requires the Obligor to maintain such
physical loss and damage insurance, naming AFL and its successors and assigns as
additional insureds, and permits the holder of such Receivable to obtain
physical loss and damage insurance at the expense of the Obligor if the Obligor
fails to maintain such insurance. If the Servicer shall determine that an
Obligor has failed to obtain or maintain a physical loss and damage Insurance
Policy covering the related Financed Vehicle which satisfies the conditions set
forth in clause (1)(A) of such Paragraph 24 (including, without limitation,
during the repossession of such Financed Vehicle) the Servicer shall enforce the
rights of the holder of the Receivable under the Receivable to require the
Obligor to obtain such physical loss and damage insurance.
(b) The Servicer may, if an Obligor fails to obtain or maintain a
physical loss and damage Insurance Policy, obtain insurance with respect to the
related Financed Vehicle and advance on behalf of such Obligor, as required
under the terms of the insurance policy, the premiums for such insurance (such
insurance being referred to herein as "Force-Placed Insurance"). All policies
of Force-Placed Insurance shall be endorsed with clauses providing for loss
payable to the Owner Trustee. Any cost incurred by the Servicer in maintaining
such Force-Placed
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Insurance shall only be recoverable out of premiums paid by the Obligors or
Liquidation Proceeds with respect to the Receivable, as provided in Section
3.4(c).
(c) In connection with any Force-Placed Insurance obtained hereunder,
the Servicer may, in the manner and to the extent permitted by applicable law,
require the Obligors to repay the entire premium to the Servicer. In no event
shall the Servicer include the amount of the premium in the Amount Financed
under the Receivable. For all purposes of this Agreement, the Insurance Add-On
Amount with respect to any Receivable having Force-Placed Insurance will be
treated as a separate obligation of the Obligor and will not be added to the
Principal Balance of such Receivable, and amounts allocable thereto will not be
available for distribution on the Notes. The Servicer shall retain and
separately administer the right to receive payments from Obligors with respect
to Insurance Add-On Amounts or rebates of Force-Placed Insurance premiums. If
an Obligor makes a payment with respect to a Receivable having Force-Placed
Insurance, but the Servicer is unable to determine whether the payment is
allocable to the Receivable or to the Insurance Add-On Amount, the payment shall
be applied first to any unpaid Scheduled Payments and then to the Insurance
Add-On Amount. Liquidation Proceeds on any Receivable will be used first to pay
the Principal Balance and accrued interest on such Receivable and then to pay
the related Insurance Add-On Amount. If an Obligor under a Receivable with
respect to which the Servicer has placed Force-Placed Insurance fails to make
scheduled payments of such Insurance Add-On Amount as due, and the Servicer has
determined that eventual payment of the Insurance Add-On Amount is unlikely, the
Servicer may, but shall not be required to, purchase such Receivable from the
Trust for the Purchase Amount on any subsequent Deposit Date. Any such
Receivable, and any Receivable with respect to which the Servicer has placed
Force-Placed Insurance which has been paid in full (excluding any Insurance
Add-On Amounts) will be assigned to the Servicer.
(d) The Servicer may xxx to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Owner Trustee, on behalf of the Trust, at the Servicer's expense, or
the Seller, at the Seller's expense, shall take such steps as the Servicer deems
necessary to enforce such Insurance Policy, including bringing suit in its name
or the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties.
(e) The Servicer shall maintain a vendor's single interest or other
collateral protection insurance policy with respect to all Financed Vehicles,
which policy shall by its terms insure against physical damage in the event any
Obligor fails
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to maintain physical loss and damage insurance with respect to the related
Financed Vehicle. Costs incurred by the Servicer in maintaining such
insurance shall be paid by the Servicer. The Servicer will cause itself to
be named as named insured and the Owner Trustee to be named a loss payee
under all such policies. The Servicer may, with the consent of the Security
Insurer, elect not to maintain such insurance policy but in such event will
be obligated to indemnify the Trust against any losses arising from an
Obligor's failure to maintain physical loss and damage insurance with respect
to the related Financed Vehicle.
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Trust, including but not limited to obtaining
the execution by the Obligors and the recording, registering, filing,
re-recording, re-filing, and re-registering of all security agreements,
financing statements and continuation statements as are necessary to maintain
the security interest granted by the Obligors under the respective Receivables.
The Owner Trustee hereby authorizes the Servicer, and the Servicer agrees, to
take any and all steps necessary to re-perfect such security interest on behalf
of the Trust as necessary because of the relocation of a Financed Vehicle or for
any other reason. In the event that the assignment of a Receivable to the Owner
Trustee on behalf of the Trust is insufficient, without a notation on the
related Financed Vehicle's certificate of title, or without fulfilling any
additional administrative requirements under the laws of the state in which the
Financed Vehicle is located, to perfect a security interest in the related
Financed Vehicle in favor of the Trust, the Servicer hereby agrees that the
Servicer's designation as the secured party on the certificate of title is in
its capacity as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
the Security Insurer may (so long as an Insurer Default shall not have occurred
and be continuing) instruct the Owner Trustee and the Servicer to take or cause
to be taken, or, if an Insurer Default shall have occurred, upon the occurrence
of a Servicer Termination Event, the Owner Trustee and the Servicer shall take
or cause to be taken such action as may, in the opinion of counsel to the
Security Insurer (or, if an Insurer Default shall have occurred and be
continuing, counsel to the Owner Trustee), be necessary to perfect or re-perfect
the security interests in the Financed Vehicles securing the Receivables in the
name of the Trust by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the Security
Insurer or the Owner Trustee (as applicable), be necessary or prudent. AFL
hereby agrees to pay all expenses related to such perfection or re-perfection
and to take all action necessary therefor. In addition, prior to the occurrence
of an Insurance Agreement Event of Default, the Security Insurer may (unless an
Insurer Default shall have occurred and be continuing) instruct the Owner
Trustee and the Servicer to take or cause to be taken
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such action as may, in the opinion of counsel to the Security Insurer, be
necessary to perfect or re-perfect the security interest in the Financed
Vehicles underlying the Receivables in the name of the Trust, including by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Security Insurer,
be necessary or prudent; PROVIDED, HOWEVER, that (unless an Insurer Default
shall have occurred and be continuing) if the Security Insurer requests that
the title documents be amended prior to the occurrence of an Insurance
Agreement Event of Default, the out-of-pocket expenses of the Servicer or the
Owner Trustee in connection with such action shall be reimbursed to the
Servicer or the Owner Trustee, as applicable, by the Security Insurer.
SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER.
By its execution and delivery of this Agreement, the Servicer makes the
following representations, warranties and covenants on which the Owner Trustee
relies in accepting the Receivables in trust and issuing the Notes on behalf of
the Trust, on which the Indenture Trustee relies in authenticating the Notes and
on which the Security Insurer relies in issuing the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing each
Receivable shall not be released in whole or in part from the security
interest granted by the Receivable, except upon payment in full of the
Receivable or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair
the rights of the Trust, the Noteholders in the Receivables, the
Dealer Agreements, the Dealer Assignments, the Insurance Policies or
the other Trust Property; and
(iii) NO AMENDMENTS. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance with
Section 3.2.
(b) The Servicer represents, warrants and covenants as of the Closing
Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been
duly organized and is validly existing and in good standing under the
laws of its jurisdiction of organization, with power, authority and
legal right to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power,
authority and legal right to enter into and perform its obligations
under this Agreement;
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(ii) DUE QUALIFICATION. The Servicer is duly qualified to
do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of property or the conduct of its
business (including the servicing of the Receivables as required by
this Agreement) requires or shall require such qualification;
(iii) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, respectively,
and the execution, delivery and performance of this Agreement and the
Servicer's Related Documents have been duly authorized by the Servicer
by all necessary corporate action;
(iv) BINDING OBLIGATION. This Agreement and the Servicer's
Related Documents shall constitute legal, valid and binding
obligations of the Servicer enforceable in accordance with their
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(v) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Servicer's Related Documents,
and the fulfillment of the terms of this Agreement and the Servicer's
Related Documents, shall not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
any of its properties;
(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Servicer's knowledge, threatened
against the Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or any of
the Related Documents,
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(B) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by this Agreement or any of
the Related Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability
of, this Agreement or any of the Related Documents or (D) seeking
to adversely affect the federal income tax or other federal, state
or local tax attributes of the Notes;
(vii) NO CONSENTS. The Servicer is not required to obtain
the consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution,
delivery, performance, validity or enforceability of this Agreement;
(viii) COLLATERAL INSURANCE. The Collateral Insurance is
in full force and effect.
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Servicer, the Security Insurer, the Owner Trustee or the
Indenture Trustee of a breach of any of the covenants set forth in Sections
3.5(a) or 3.6(a), the party discovering such breach shall give prompt written
notice to the others; PROVIDED, HOWEVER, that the failure to give any such
notice shall not affect any obligation of the Servicer. As of the second
Accounting Date following its discovery or receipt of notice of any breach of
any covenant set forth in Sections 3.5(a) or 3.6(a) which materially and
adversely affects the interests of the Noteholders, the Trust or the Security
Insurer in any Receivable (including any Liquidated Receivable) (or, at the
Servicer's election, the first Accounting Date so following), the Servicer
shall, unless it shall have cured such breach in all material respects, purchase
from the Trust the Receivable affected by such breach and, on the related
Deposit Date, the Servicer shall pay the related Purchase Amount. It is
understood and agreed that the obligation of the Servicer to purchase any
Receivable (including any Liquidated Receivable) with respect to which such a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against the Servicer for such breach available to the
Security Insurer, the Noteholders, or the Indenture Trustee on behalf of
Noteholders; PROVIDED, HOWEVER, that the Servicer shall indemnify the Owner
Trustee, the Backup Servicer, the Collateral Agent, the Security Insurer, the
Trust, the Indenture Trustee and the Noteholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted against or incurred by any of them as a result
of third party claims arising out of the events or facts giving rise to such
breach.
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. On each Distribution Date, the Servicer shall be entitled to receive
out of the Collection Account the Basic Servicing Fee and any Supplemental
Servicing Fee
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for the related Monthly Period pursuant to Section 4.6. The Servicer shall
be required to pay all expenses incurred by it in connection with its
activities under this Agreement (including taxes imposed on the Servicer,
expenses incurred in connection with distributions and reports to Noteholders
and the Security Insurer and all other fees and expenses of the Trust,
including taxes levied or assessed against the Trust, and claims against the
Trust in respect of indemnification, unless such fees, expenses or claims in
respect of indemnification are expressly stated to be for the account of AFL
or not to be for the account of the Servicer). The Servicer shall be liable
for the fees and expenses of the Owner Trustee, the Administrator, the
Indenture Collateral Agent, the Indenture Trustee, the Custodian, the Backup
Servicer, the Collateral Agent, the Lockbox Bank (and any fees under the
Lockbox Agreement) and the Independent Accountants. Notwithstanding the
foregoing, if the Servicer shall not be AFL, a successor to AFL as Servicer
permitted by Section 7.2 or an Affiliate of any of the foregoing, such
Servicer shall not be liable for taxes levied or assessed against the Trust
or claims against the Trust in respect of indemnification.
SECTION 3.9. SERVICER'S CERTIFICATE. No later than 10:00 a.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer,
the Collateral Agent and each Rating Agency a Servicer's Certificate executed by
a Responsible Officer of the Servicer containing, among other things, (i) all
information necessary to enable the Indenture Trustee to make any withdrawal and
deposit required by Section 5.1, to give any notice required by Section 5.2, to
make the distributions required by Sections 4.6 and 4.7(b), to make the
withdrawals, distributions and deliveries required by Section 4.7(a) and to
determine the amount to which the Servicer is entitled to be reimbursed or has
been reimbursed during the related Monthly Period for Monthly Advances pursuant
to Section 4.4(c), (ii) all information necessary to enable the Indenture
Trustee to send the statements to Noteholders required by Section 4.9, (iii) a
listing of all Warranty Receivables and Administrative Receivables purchased as
of the related Deposit Date, identifying the Receivables so purchased, and
(iv) all information necessary to enable the Indenture Trustee to reconcile all
deposits to, and withdrawals from, the Collection Account for the related
Monthly Period and Distribution Date, including the accounting required by
Section 4.8. Receivables purchased by the Servicer or by the Seller or AFL on
the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Monthly Period shall be
identified by account number (as set forth in the Schedule of Receivables). A
copy of such certificate may be obtained by any Noteholder (or by a Note Owner,
upon certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof) by a request in writing to the
Indenture Trustee addressed to the Corporate Trust Office. In addition to the
information set forth in the preceding sentence, the Servicer's Certificate
delivered to the Security Insurer, the Collateral Agent and the Indenture
Trustee on the Determination Date shall also contain the following
information: (a) the Delinquency Ratio, Average Delinquency Ratio, Cumulative
Default Rate and Cumulative Net Loss Rate for
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such Determination Date; (b) whether any Trigger Event has occurred as of
such Determination Date; (c) whether any Trigger Event that may have occurred
as of a prior Determination Date is Deemed Cured as of such Determination
Date; (d) whether to the knowledge of the Servicer an Insurance Agreement
Event of Default has occurred, (e) if AFL shall be the Servicer, whether a
Capture Event shall have occurred and be continuing, and (f) if AFL shall be
the Servicer, whether any Capture Event specified in any prior Servicer's
Certificate has been cured by a permanent waiver, effective in accordance
with the terms of the Purchase Agreements.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer and each Rating Agency, on or
before March 31 (or 90 days after the end of the Servicer's fiscal year, if
other than December 31) of each year, beginning on March 31, 1998, an officer's
certificate signed by any Responsible Officer of the Servicer, dated as of
December 31 (or other applicable date) of the immediately preceding year,
stating that (i) a review of the activities of the Servicer during the
preceding 12-month period (or such other period as shall have elapsed from the
Closing Date to the date of the first such certificate) and of its performance
under this Agreement has been made under such officer's supervision, and
(ii) to such officer's knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such period, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent, and
each Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an officer's
certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 8.1(a). The
Seller or the Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent, the
Servicer or the Seller (as applicable) and each Rating Agency promptly after
having obtained knowledge thereof, but in no event later than two Business Days
thereafter, written notice in an officer's certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under any other clause of Section 8.1.
SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver to
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer and
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each Rating Agency, on or before March 31 (or 90 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
March 31, 1998, with respect to the twelve months ended the immediately
preceding December 31 (or other applicable date) (or such other period as
shall have elapsed from the Closing Date to the date of such certificate), a
statement (the "Accountant's Report") addressed to the Board of Directors of
the Servicer, to the Owner Trustee, the Indenture Trustee, the Backup
Servicer and to the Security Insurer, to the effect that such firm has
audited the financial statements of the Servicer and issued its report
thereon and that such audit was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary
in the circumstances, including procedures as determined by the Independent
Accountants related to (1) the documents and records concerning the servicing
of automobile installment sales contracts under pooling and servicing
agreements and sale and servicing agreements substantially similar one to
another (such statement to have attached thereto a schedule setting forth the
pooling and servicing agreements and sale and servicing agreements covered
thereby, including this Agreement); and (2) the delinquency and loss
statistics relating to the Servicer's portfolio of automobile installment
sales contracts; and except as described in the statement, disclosed no
exceptions or errors in the records relating to automobile and light truck
loans serviced for others that, in the firm's opinion, generally accepted
auditing standards requires such firm to report. The Accountants' Report
shall further state that (1) a review in accordance with agreed upon
procedures was made of three randomly selected Servicer's Certificates for
each Trust and (2) except as disclosed in the Report, no exceptions or errors
in the Servicer's Certificates so examined were found.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Noteholder (or by any Note Owner, upon certification that such Person is a Note
Owner and payment of any expenses associated with the distribution thereof) by a
request in writing to the Indenture Trustee addressed to the Corporate Trust
Office.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Owner Trustee, Indenture Trustee, the Backup Servicer and the Security Insurer
reasonable access to the documentation regarding the Receivables. The Servicer
shall provide such access to any Noteholder (or Note Owner) only in such cases
where the Servicer is required by applicable statutes or regulations (whether
applicable to the Servicer or to such Noteholder or Note Owner) to permit such
Noteholder (or Note Owner) to review such documentation. In each case, such
access shall be afforded without charge but only upon reasonable request and
during normal business hours. Nothing in this Section shall derogate from the
obligation of the Servicer to
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observe any applicable law prohibiting disclosure of information regarding
the Obligors, and the failure of the Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a breach
of this Section. Any Noteholder (or Note Owner), by its acceptance of a Note
(or by acquisition of its beneficial interest therein), as applicable, shall
be deemed to have agreed to keep confidential and not to use for its own
benefit any information obtained by it pursuant to this Section, except as
may be required by applicable law.
SECTION 3.13. MONTHLY TAPE. On or before the third Business Day, but
in no event later than the fifth calendar day, of each month, the Servicer will
deliver to the Indenture Trustee and the Backup Servicer a computer tape and a
diskette (or any other electronic transmission acceptable to the Indenture
Trustee and the Backup Servicer) in a format acceptable to the Indenture Trustee
and the Backup Servicer containing the information with respect to the
Receivables as of the preceding Accounting Date necessary for preparation of the
Servicer's Certificate relating to the immediately succeeding Determination Date
and necessary to determine the application of collections as provided in Section
4.3. The Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Indenture Trustee and the Backup Servicer) to
verify the Servicer's Certificate delivered by the Servicer (based on the
information contained in such tape or diskette), and the Backup Servicer shall
certify to the Security Insurer that it has verified the Servicer's Certificate
in accordance with this Section 3.13 and shall notify the Servicer and the
Security Insurer of any discrepancies, in each case, on or before the second
Business Day following the Determination Date. In the event that the Backup
Servicer reports any discrepancies, the Servicer and the Backup Servicer shall
attempt to reconcile such discrepancies prior to the related Deficiency Claim
Date, but in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to the
related Distribution Date. In the event that the Backup Servicer and the
Servicer are unable to reconcile discrepancies with respect to a Servicer's
Certificate by the related Distribution Date, the Servicer shall cause the
Independent Accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the third Business Day, but in no event later than the
fifth calendar day, of the following month, reconcile the discrepancies. The
effect, if any, of such reconciliation shall be reflected in the Servicer's
Certificate for such next succeeding Determination Date. In addition, the
Servicer shall, if so requested by the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) deliver to the Backup Servicer
its Collection Records and its Monthly Records within one Business Day of demand
therefor and a computer tape containing as of the close of business on the date
of demand all of the data maintained by the Servicer in computer format in
connection with servicing the Receivables. Other than the duties specifically
set forth in this Agreement, the Backup Servicer shall have no obligations
hereunder, including, without limitation, to supervise, verify, monitor or
administer the performance of the Servicer. The Backup Servicer shall have no
liability for any actions taken or omitted by the Servicer. The duties and
obligations of the Backup Servicer shall be determined solely by the express
provisions of this Agreement and no implied
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covenants or obligations shall be read into this Agreement against the Backup
Servicer.
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on March 31, 1998, which term
shall be extendible by the Security Insurer for successive quarterly terms
ending on each successive June 30, September 30, December 31 and March 31 (or,
pursuant to revocable written standing instructions from time to time to the
Servicer, the Indenture Trustee and the Owner Trustee, for any specified number
of terms greater than one), until the termination of the Trust. Each such
notice (including each notice pursuant to standing instructions, which shall be
deemed delivered at the end of successive quarterly terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be delivered
by the Security Insurer to the Owner Trustee, the Indenture Trustee and the
Servicer. The Servicer hereby agrees that, as of the date hereof and upon its
receipt of any such Servicer Extension Notice, the Servicer shall become bound,
for the initial term beginning on the Closing Date and for the duration of the
term covered by such Servicer Extension Notice, to continue as the Servicer
subject to and in accordance with the other provisions of this Agreement. Until
such time as an Insurer Default shall have occurred and be continuing, the
Indenture Trustee agrees that if as of the fifteenth day prior to the last day
of any term of the Servicer the Indenture Trustee shall not have received any
Servicer Extension Notice from the Security Insurer, the Indenture Trustee will,
within five days thereafter, give written notice of such non-receipt to the
Owner Trustee, the Security Insurer and the Servicer.
SECTION 3.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Trust
and the Owner Trustee the following duties of the Trust or the Owner Trustee, as
applicable, under the Indenture (references are to the applicable Sections in
the Indenture):
(a) the direction to the Paying Agents, if any, to deposit moneys
with the Indenture Trustee (Section 3.03);
(b) the obtaining and preservation of the Issuer's qualification
to do business in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of the
Indenture, the Notes, the Indenture Collateral and each other instrument
and agreement included in the Trust Estate (Section 3.04);
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(c) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance
and other instruments, in accordance with Section 3.05 of the Indenture,
necessary to protect the Trust Estate (Section 3.05);
(d) the delivery of the Opinion of Counsel on the Closing Date and
the annual delivery of Opinions of Counsel, in accordance with Section
3.06 of the Indenture, as to the Trust Estate, and the annual delivery
of the Officers' Certificate and certain other statements, in accordance
with Section 3.09 of the Indenture, as to compliance with the Indenture
(Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officers' Certificate and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(g) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or
removal of any co-trustee or separate trustee (Sections 6.08 and 6.10);
(h) the opening of one or more accounts in the Trust's name, the
preparation of Issuer Orders, Officers' Certificates and Opinions of
Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(i) the preparation of Trust Orders and the obtaining of Opinions
of Counsel with respect to the execution of supplemental indentures
(Sections 9.01, 9.02 and 9.03);
(j) the preparation of all Officers' Certificates, Opinions of
Counsel and Independent Certificates with respect to any requests by the
Issuer to the Indenture Trustee or the Indenture Collateral Agent to
take any action under the Indenture (Section 11.01(a));
(k) the preparation and delivery of Officers' Certificates and the
obtaining of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.01(b)); and
(l) the recording of the Indenture, if applicable (Section 11.15).
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In addition to the duties of the Servicer set forth above, the Servicer
shall, and hereby agrees that it will, prepare, distribute and file any
reports required by Section 313(b) of the Trust Indenture Act of 1939, as
amended, as a result of any transfer of Subsequent Receivables. Such
distribution and filing is to be effected by the Servicer's distribution and
filing of the Servicer's Certificate.
SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE AGREEMENT.
The Servicer shall, and hereby agrees that it will, perform on behalf of the
Trust and the Owner Trustee the following duties of the Trust under the
Insurance Agreement (references are to the applicable Sections in the Insurance
Agreement):
(a) the maintenance of books and records of accounts of the
Trust's assets and business and the furnishing to the Security Insurer
of reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee or the Noteholders pursuant to the
Related Documents (Section 2.02(b));
(b) the delivery to the Security Insurer and, upon request, any
Noteholder, of certificates with respect to compliance with, and other
matters under, the Related Documents (Section 2.02(c));
(c) the filing of financing statements, assignments or other
instruments, and amendments or continuation statements relating thereto
to preserve and protect fully the lien and security interest in, and all
rights of the Indenture Trustee and the Security Insurer with respect
to, the Trust Estate (Section 2.02(f));
(d) the maintenance of licenses, permits, charters and
registrations of the Trust material to the performance by the Trust of
its obligations under the Insurance Agreement and the Related Documents
(Section 2.02(g));
(e) the provision to the Security Insurer of executed original
copies of the documents executed in connection with the closing of the
offering of the Notes (Section 2.02(k)); and
(f) the taking of actions to ensure that the Trust is taxable as a
partnership for federal and state income tax purposes and not as an
association (or publicly traded partnership) taxable as a corporation
(Section 2.02(l)).
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator of any actions to be
taken by the Trust necessary for
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compliance with such laws and prepare on behalf of the Trust and the
Administrator all notices, filings or other documents or instruments required
to be filed under such laws.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
SECTION 4.1. TRUST ACCOUNTS.
(a) The Servicer shall establish the Collection Account in the
name of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties (as defined in the Indenture). The Collection Account shall be an
Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.
(b) The Servicer shall establish the Pre-Funding Account in the
name of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties. The Pre-Funding Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Indenture Collateral
Agent and maintained with the Indenture Collateral Agent.
(c) The Servicer shall establish the Note Distribution Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties. The Note Distribution Account shall be an Eligible Account
and initially shall be a segregated trust account established with the
Indenture Collateral Agent and maintained with the Indenture Collateral Agent.
(d) The Servicer shall establish the Reserve Account (including
the Class A-1 Holdback Subaccount) in the name of the Indenture Collateral
Agent for the benefit of the Issuer Secured Parties. The Reserve Account
shall be an Eligible Account and initially shall be a segregated trust
account established with the Indenture Collateral Agent and maintained with
the Indenture Collateral Agent.
(e) All amounts held in the Collection Account, the Pre-Funding
Account, the Note Distribution Account and the Reserve Account (collectively,
the "Trust Accounts") shall, to the extent permitted by applicable laws,
rules and regulations, be invested, as directed in writing by the Servicer,
in Eligible Investments that, in the case of amounts held in the Collection
Account, the Note Distribution Account and the Reserve Account, mature not
later than one Business Day prior to the Distribution Date for the Monthly
Period to which such amounts relate, and, in the case of amounts held in the
Pre-Funding Account, mature in such amounts and on such dates, not later than
one Business Day prior to the last day of the Funding Period, as the Servicer
may direct in writing. Any such written direction shall certify that any
such investment is authorized by this Section 4.1.
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Investments in Eligible Investments shall be made in the name of the
Indenture Trustee on behalf of the Trust, and such investments shall not be
sold or disposed of prior to their maturity. Any investment of funds in the
Trust Accounts shall be made in Eligible Investments held by a financial
institution in accordance with the following requirements: (a) all Eligible
Investments shall be held in an account with such financial institution in
the name of the Indenture Trustee, (b) with respect to securities held in
such account, such securities shall be (i) certificated securities (as such
term is used in N.Y. UCC Section 8-313(1)(d)(i)), securities deemed to be
certificated securities under applicable regulations of the United States
government, or uncertificated securities issued by an issuer organized under
the laws of the State of New York or the State of Delaware, (ii) either (A)
in the possession of such institution, (B) in the possession of a clearing
corporation (as such term is used in N.Y. UCC Section 8-313(1)(g)) in the
State of New York, registered in the name of such clearing corporation or its
nominee, not endorsed for collection or surrender or any other purpose not
involving transfer, not containing any evidence of a right or interest
inconsistent with the Indenture Trustee's security interest therein, and held
by such clearing corporation in an account of such institution, (C) held in
an account of such institution with the Federal Reserve Bank of New York or
the Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated
securities, issued in the name of such institution, and (iii) identified, by
book entry or otherwise, as held for the account of, or pledged to, the
Indenture Trustee on the records of such institution, and such institution
shall have sent the Indenture Trustee a confirmation thereof, (c) with
respect to repurchase obligations held in such account, such repurchase
obligations shall be identified by such institution, by book entry or
otherwise, as held for the account of, or pledged to, the Indenture Trustee
on the records of such institution, and the related securities shall be held
in accordance with the requirements of clause (b) above, and (d) with respect
to other Eligible Investments other than securities and repurchase
agreements, such Eligible Investments shall be held in a manner acceptable to
the Indenture Collateral Agent. Subject to the other provisions hereof, the
Indenture Collateral Agent shall have sole control over each such investment
and the income thereon, and any certificate or other instrument evidencing
any such investment, if any, shall be delivered directly to the Indenture
Collateral Agent or its agent, together with each document of transfer, if
any, necessary to transfer title to such investment to the Indenture
Collateral Agent in a manner which complies with this Section 4.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Trust Accounts shall be deposited in the
Collection Account and distributed on the next Distribution Date pursuant to
Section 4.6. The Servicer shall deposit in the applicable Trust Account an
amount equal to any net loss on such investments immediately as realized.
(f) On the Closing Date, the Servicer shall deposit in the Collection
Account (i) all Scheduled Payments and prepayments of Initial Receivables
received by the Servicer after the Initial Cutoff Date and on or prior to the
Business Day immediately
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preceding the Closing Date or received by the Lockbox Bank after the Initial
Cutoff Date and on or prior to the second Business Day immediately preceding
the Closing Date and (ii) all Liquidation Proceeds and proceeds of Insurance
Policies realized in respect of a Financed Vehicle and applied by the
Servicer after the Initial Cutoff Date. On each Subsequent Transfer Date,
the Servicer shall deposit in the Collection Account (x) all Scheduled
Payments and prepayments of the related Subsequent Receivables received by
the Servicer after the related Subsequent Cutoff Date and on or prior to the
Business Day immediately preceding the related Subsequent Transfer Date or
received by the Lockbox Bank after the related Subsequent Cutoff Date and on
or prior to the second Business Day immediately preceding the related
Subsequent Transfer Date and (y) all Liquidation Proceeds and proceeds of
Insurance Policies related in respect of a Financed Vehicle and applied by
the Servicer after the related Subsequent Cutoff Date.
SECTION 4.2. COLLECTIONS.
(a) The Servicer shall establish the Subcollection Account in the
name of the Indenture Trustee for the benefit of the Noteholders. The
Subcollection Account shall be an Eligible Account satisfying clause (ii) of
the definition of "Eligible Account," and shall initially be established with
the Indenture Trustee. The Servicer shall remit directly to the Subcollection
Account without deposit into any intervening account all payments by or on
behalf of the Obligors on the Receivables and all Liquidation Proceeds received
by the Servicer, in each case, as soon as practicable, but in no event later
than the Business Day after receipt thereof. Within two days of deposit of
payments into the Subcollection Account, the Indenture Trustee shall transfer
all amounts credited to the Subcollection Account on account of such payments to
the Collection Account. Amounts in the Subcollection Account shall not be
invested. Notwithstanding the foregoing, the Servicer may utilize an
alternative remittance schedule acceptable to the Servicer if the Security
Insurer consents in writing (so long as an Insurer Default shall not have
occurred and be continuing) and the Servicer provides to the Indenture Trustee
written confirmation from each Rating Agency that such alternative remittance
schedule will not result in the downgrading or withdrawal by the Rating Agency
of the rating then assigned to the Notes.
(b) Notwithstanding the provisions of subsection (a) hereof, the
Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer or the
Lockbox Bank to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Distribution Date pursuant to Section
4.6(iii) upon certification by the Servicer of such amounts and the provision of
such information to the Indenture Trustee and the Security Insurer as may be
necessary in the opinion of the Indenture Trustee and the Security Insurer to
verify the accuracy of such certification. In the event that the Security
Insurer has not received evidence satisfactory to it of the Servicer's
entitlement to reimbursement pursuant to this Section 4.2(b), the Security
Insurer shall (unless an Insurer Default shall have
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occurred and be continuing) give the Indenture Trustee notice to such effect,
following receipt of which the Indenture Trustee shall not make a
distribution to the Servicer in respect of such amount pursuant to Section
4.6, or if the Servicer prior thereto has been reimbursed pursuant to Section
4.6 or Section 4.8, the Indenture Trustee shall withhold such amounts from
amounts otherwise distributable to the Servicer on the next succeeding
Distribution Date.
SECTION 4.3. APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Monthly Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable, payments by or on behalf of
the Obligor thereof (other than of Supplemental Servicing Fees with
respect to such Receivable, to the extent collected) shall be applied to
interest and principal with respect to such Receivable in accordance
with the terms of such Receivable. With respect to each Liquidated
Receivable, Liquidation Proceeds shall be applied to interest and
principal with respect to such Receivable in accordance with the terms
of such Receivable, and then to any Insurance Add-On Amount due and
payable with respect to such Receivable. The Servicer shall not be
entitled to any Supplemental Servicing Fees with respect to a Liquidated
Receivable.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied,
for purposes of this Agreement only, to interest and principal on the
Receivable in accordance with the terms of the Receivable as if the
Purchase Amount had been paid by the Obligor on the Accounting Date.
The Servicer shall not be entitled to any Supplemental Servicing Fees
with respect to such a Receivable. Nothing contained herein shall
relieve any Obligor of any obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the
Collection Account and paid to the Servicer in accordance with
Section 4.6(iii).
(d) All payments by or on behalf of an Obligor received with
respect to any Purchased Receivable after the Accounting Date
immediately preceding the Deposit Date on which the Purchase Amount was
paid by the Seller, AFL or the Servicer shall be paid to the Seller, AFL
or the Servicer, respectively, and shall not be included in the
Available Funds.
SECTION 4.4. MONTHLY ADVANCES.
(a) If with respect to a Receivable, the amount deposited into the
Collection Account during a Monthly Period in respect of such Receivable and
allocable to interest (determined in accordance with Section 4.3) is less
than an
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amount of interest equal to interest accrued on such Receivable (for the
number of calendar days in such Monthly Period) (calculated according to the
method specified in the related retail installment sale contract or
promissory note at the APR on the Principal Balance of such Receivable as of
the Accounting Date preceding such Distribution Date), the Servicer shall
make a Monthly Advance equal to the amount of such shortfall; PROVIDED,
HOWEVER, that the Servicer shall not be required to make a Monthly Advance
with respect to a Receivable extended pursuant to Section 3.2(b) for any
Monthly Period during which no Scheduled Payment is due according to the
terms of such extension; and PROVIDED FURTHER, that the Servicer shall not be
required to make a Monthly Advance with respect to a Receivable that is less
than 31 days delinquent.
(b) On or before each Determination Date and prior to the delivery
of the Servicer's Certificate for such Determination Date pursuant to Section
3.9, the Servicer shall deposit in the Collection Account the aggregate
amount of Monthly Advances required for the related Monthly Period in
immediately available funds (subject to Section 4.8).
(c) The Servicer shall be entitled to be reimbursed for
Outstanding Monthly Advances with respect to a Receivable pursuant to Section
4.6(i) or pursuant to Section 4.8 from the following sources with respect to
such Receivable on any day subsequent to the Distribution Date in respect of
which such Monthly Advance was made: (i) subsequent payments by or on behalf
of the Obligor with respect to such Receivable, (ii) collections of
Liquidation Proceeds with respect to such Receivable if such Receivable
becomes a Liquidated Receivable and (iii) payment of any Purchase Amount with
respect to such Receivable if such Receivable becomes a Purchased Receivable.
If any Receivable shall become a Liquidated Receivable and the Servicer
shall not have been fully reimbursed for Outstanding Monthly Advances with
respect to such Receivable from the sources of funds previously described in
this paragraph, the Servicer shall be entitled to reimbursement from
collections on Receivables other than the Receivable in respect of which such
Outstanding Monthly Advance shall have been made.
SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Deposit Date,
the Servicer or AFL shall deposit in the Collection Account the aggregate
Purchase Amounts with respect to Administrative Receivables and Warranty
Receivables, respectively. All such deposits of Purchase Amounts shall be
made in immediately available funds. On or before each Draw Date, the
Indenture Trustee shall deposit in the Collection Account any amounts
delivered to the Indenture Trustee by the Collateral Agent.
SECTION 4.6. DISTRIBUTIONS. On each Distribution Date, the
Indenture Trustee shall (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) distribute the
following amounts and in the order of priority specified below. Within each
order of priority, amounts
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shall be deemed withdrawn first from Available Funds, second from the Reserve
Account and third from any Deficiency Claim Amounts.
(i) first, from the Distribution Amount, (A) to the Trust
for payment of any taxes due and unpaid with respect to the Trust, to
the extent such taxes have not been previously paid by AFL or by the
Servicer pursuant to Section 3.8, and (B) then to the Servicer, the
amount of Outstanding Monthly Advances for which the Servicer is
entitled to be reimbursed pursuant to Section 4.4(c) and for which the
Servicer has not previously been reimbursed pursuant to Section 4.8;
(ii) second, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Owner Trustee, any accrued and
unpaid fees of the Owner Trustee in accordance with the Trust Agreement
and including amounts with respect to which the Administrator is
entitled to be reimbursed pursuant to the Administration Agreement; to
the Indenture Trustee, any accrued and unpaid fees of the Indenture
Trustee in accordance with the Indenture; to any Lockbox Bank,
Custodian, Backup Servicer, Collateral Agent, Indenture Collateral Agent
or Administrator (including the Owner Trustee or Indenture Trustee if
acting in any such additional capacity), any accrued and unpaid fees (in
each case, to the extent such Person has not previously received such
amount from the Servicer or AFL), to the Backup Servicer, any transition
expenses (not to exceed $100,000) in accordance with Section 8.3;
PROVIDED, HOWEVER, in the event that the rating assigned by Standard &
Poor's to the claims-paying ability of the Security Insurer is not AAA,
the accrued and unpaid fees of the Owner Trustee, the Indenture Trustee,
the Backup Servicer, the Collateral Agent, the Indenture Collateral
Agent and the Administrator shall be distributed pursuant to this clause
(ii) to the extent such fees are not in excess of the amount (the
"Servicer Fee Threshold") obtained by dividing (x) .20% of the Aggregate
Principal Balance by (y) twelve, and any accrued and unpaid fees in
excess of the Servicer Fee Threshold remaining to be distributed
pursuant to this clause (ii) shall not be distributed pursuant to this
clause (ii) but shall be distributed after the distributions to be made
pursuant to clause (v) below but before the distributions to be made
pursuant to clause (vi) below;
(iii) third, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Servicer, the Basic Servicing
Fee for the related Monthly Period, any Supplemental Servicing Fees for
the related Monthly Period, and any amounts specified in Section 4.2(b),
to the extent the Servicer has not reimbursed itself in respect of such
amounts pursuant to Section 4.8;
(iv) fourth, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Note Distribution Account, an
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amount equal to the Noteholders' Interest Distributable Amount for such
Distribution Date;
(v) fifth, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Note Distribution Account, an
amount equal to the Noteholders' Principal Distributable Amount for such
Distribution Date;
(vi) sixth, from the Distribution Amount then remaining on
deposit in the Collection Account, to the Security Insurer, to the
extent of any amounts owing to the Security Insurer under the Insurance
Agreement and not paid, whether or not AFL is also obligated to pay such
amounts, such amounts representing a portion of the Credit Enhancement
Fee otherwise payable on a subordinated basis to the Seller; and
(vii) seventh, any remaining Available Funds to the Collateral
Agent for deposit in the Spread Account, such amounts representing a
portion of the Credit Enhancement Fee payable on a subordinated basis to
the Seller.
SECTION 4.7. PRE-FUNDING ACCOUNT.
(a) On the Closing Date, the Indenture Trustee will deposit, on
behalf of the Seller, in the Pre-Funding Account $205,532,634.94 from the
proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Indenture Trustee in writing:
(i) to withdraw from the Pre-Funding Account the Spread
Account Additional Deposit, if any, on such Subsequent Transfer Date,
and to deliver such funds to the Collateral Agent for deposit in the
Spread Account,
(ii) to withdraw from the Pre-Funding Account the amount, if
any, by which the Requisite Reserve Amount for such Subsequent Transfer
Date exceeds the Reserve Amount, and to deposit such funds in the
Reserve Account,
(iii) to withdraw from the Pre-Funding Account the Class A-1
Holdback Amount, if any, for such Subsequent Transfer Date, and to
deposit such funds in the Class A-1 Holdback Subaccount,
(iv) to withdraw from the Pre-Funding Account the amount, if
any, on deposit therein in excess of the remaining Prefunded Amount,
after giving effect to the withdrawals specified in clauses (i) - (iii)
above, and to distribute such amount to or upon the order of the Seller
upon satisfaction of the conditions set forth in Section 2.4 with
respect to such transfer, and
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(v) to withdraw from the Reserve Account an amount equal to
the excess, if any, of the Reserve Amount (after giving effect to
withdrawals from the Reserve Account pursuant to Section 5.1 on the
immediately following Distribution Date, if such Subsequent Transfer
Date falls between a Determination Date and the related Distribution
Date) over the Requisite Reserve Amount for such Subsequent Transfer
Date and to distribute such amount to or upon the order of the Depositor.
(b) If (x) the Pre-Funded Amount has not been reduced to zero on
the Distribution Date on or immediately following the end of the Funding
Period) or (y) the Pre-Funded Amount has been reduced to $100,000 or less on
any Distribution Date, in either case after giving effect to any reductions
in the Pre-Funded Amount on such Distribution Date pursuant to paragraph (a)
above, the Servicer shall provide written instructions to the Indenture
Trustee to withdraw from the Pre-Funding Account on such Distribution Date an
amount equal to the sum of the Class A-1 Prepayment Amount, the Class A-2
Prepayment Amount, the Class A-3 Prepayment Amount and the Class A-4
Prepayment Amount and deposit such amount in the Note Distribution Account.
Any remaining funds on deposit in the Pre-Funding Account shall be
distributed to the Depositor. If the funds on deposit in the Pre-Funding
Account are less than the amount described above, then the Servicer shall
provide written instructions to the Indenture Trustee to withdraw the funds
on deposit in the Pre-Funding Account and deposit such funds in the Note
Distribution Account and Collection Account, pro rata in accordance with the
amount specified above.
(c) If the Pre-Funded Amount is greater than $100,000 at the end
of the Funding Period, the Seller will deposit into the Note Distribution
Account an amount equal to the sum of the Class A-1 Prepayment Premium, the
Class A-2 Prepayment Premium, the Class A-3 Prepayment Premium and the Class
A-4 Prepayment Premium; PROVIDED, HOWEVER, that the obligation of the Seller
to make the deposits referred to in this sentence is expressly limited to the
extent of the amount of Liquidated Damages (as defined in the Closing Date
Purchase Agreement) paid to the Seller by AFL and by the Seller to the Trust.
SECTION 4.8. NET DEPOSITS. Subject to payment by the Servicer of
amounts otherwise payable pursuant to Section 4.6(ii) and provided that no
Servicer Termination Event shall have occurred and be continuing with respect
to such Servicer, the Servicer may make the remittances to be made by it
pursuant to Sections 4.2, 4.4 and 4.5 net of amounts (which amounts may be
netted prior to any such remittance for a Monthly Period) to be distributed
to it pursuant to Sections 3.8, 4.2(b) and 4.6(i); PROVIDED, HOWEVER, that
the Servicer shall account for all of such amounts in the related Servicer's
Certificate as if such amounts were deposited and distributed separately;
and, PROVIDED, FURTHER, that if an error is made by the Servicer in
calculating the amount to be deposited or retained by it, with the result
that an amount less than required is deposited in the Collection Account, the
Servicer shall
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make a payment of the deficiency to the Collection Account, immediately upon
becoming aware, or receiving notice from the Indenture Trustee, of such error.
SECTION 4.9. STATEMENTS TO NOTEHOLDERS.
(a) On each Distribution Date, the Indenture Trustee shall include
with each distribution to each Noteholder, the Servicer's Certificate (which
statement shall also have been provided to the Security Insurer and to each
Rating Agency by the Servicer) delivered on the related Determination Date
pursuant to Section 3.9, setting forth for the Monthly Period relating to
such Payment Date the following information with respect to each class of
Notes:
(i) the amount of such distribution allocable to principal;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Reserve Account, the Class A-1 Holdback Subaccount,
the Spread Account or pursuant to a claim on the Note Policy;
(iv) the outstanding principal balance of the Notes (after
giving effect to distributions made on such Distribution Date);
(v) the Class A-1 Interest Carryover Shortfall, the Class
A-2 Interest Carryover Shortfall, the Class A-3 Interest Carryover
Shortfall, the Class A-4 Interest Carryover Shortfall, and the
Noteholders' Principal Carryover Shortfall, if any, and the change in
such amounts from the preceding statement;
(vi) the amount of fees paid by the Trust with respect to
such Monthly Period;
(vii) for Payment Dates during the Funding Period, the
remaining Pre-Funded Amount, the remaining Reserve Amount and the amount
on deposit in the Class A-1 Holdback Subaccount;
(viii) for the Payment Date on or immediately following the
end of the Funding Period, the Class A-1 Prepayment Amount, the Class
A-2 Prepayment Amount, the Class A-3 Prepayment Amount, the Class A-4
Prepayment Amount, the Class A-1 Prepayment Premium, the Class A-2
Prepayment Premium, the Class A-3 Prepayment Premium, the Class A-4
Prepayment Premium, if any, and the remaining Reserve Amount that has
not been distributed pursuant to Section 4.6 or to the Depositor; and
(ix) the Note Pool Factor with respect to each class of
Notes (after giving effect to distributions made on such Payment Date).
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Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a
Note.
(b) Note Owners may obtain copies of the statements delivered by
the Indenture Trustee pursuant to subsection (b) above upon written request
to the Indenture Trustee at its Corporate Trust Office (together with a
certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof).
SECTION 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture Trustee,
in holding all funds in the Trust Accounts and in making distributions as
provided in this Agreement, shall act solely on behalf of and as agent for
the Noteholders.
SECTION 4.11. ELIGIBLE ACCOUNTS. Any account which is required to
be established as an Eligible Account pursuant to this Agreement and which
ceases to be an Eligible Account shall within five Business Days (or such
longer period, not to exceed 30 days, as to which each Rating Agency and the
Security Insurer may consent) be established as a new account which shall be
an Eligible Account and any cash and/or any investments shall be transferred
to such new account.
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to
any Determination Date shall state that the amount of Available Funds with
respect to such Determination Date is less than the sum of the amounts
payable on the related Distribution Date pursuant to clauses (i) through
(viii) of Section 4.6, then on the Draw Date immediately preceding such
Distribution Date, the Indenture Trustee, in accordance with written
instructions, shall (i) withdraw amounts on deposit in the Reserve Account,
other than any funds in the Class A-1 Holdback Subaccount (up to the amount
by which the amounts payable on the related Distribution Date pursuant to
clauses (i) through (viii) of Section 4.6 exceed the amount of Available
Funds with respect to such Determination Date) and (ii) deposit the amounts
so withdrawn from the Reserve Account into the Collection Account. On each
Distribution Date, any funds on deposit in the Reserve Account (other than
funds on deposit in the Class A-1 Holdback Subaccount) in excess of the
Requisite Reserve Amount (after giving effect to any withdrawals on the
immediately preceding Draw Date as described above) shall be paid to the
Depositor.
(b) In the event that the Servicer's Certificate with respect to
the Determination Date related to the Class A-1 Final Scheduled Distribution
Date shall
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state that the unpaid principal balance of the Class A-1 Notes (after giving
effect to the distribution of the Available Funds pursuant to clauses (i) -
(v) of Section 4.6 for such Distribution Date), is greater than zero, then on
the Draw Date immediately preceding such Distribution Date the Indenture
Trustee, in accordance with written instructions, shall withdraw an amount
equal to such unpaid principal balance from funds on deposit in the Class A-1
Holdback Subaccount (or the amount of funds on deposit in the Class A-1
Holdback Subaccount, if less) and deposit such funds in the Note Distribution
Account for distribution to the Class A-1 Noteholders on such Distribution
Date. Funds in the Class A-1 Holdback Subaccount shall not be available to
pay any other amounts. Any funds remaining in the Class A-1 Holdback
Subaccount, after withdrawal of any such amount on the Class A-1 Final
Scheduled Distribution Date, shall be released to the Depositor.
SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to
any Determination Date shall state that the Deficiency Claim Amount (as
defined below) with respect to the related Distribution Date is greater than
zero, then on the Deficiency Claim Date immediately preceding such
Distribution Date, the Indenture Trustee shall deliver to the Collateral
Agent, the Security Insurer, the Fiscal Agent, if any, the Owner Trustee and
the Servicer, by hand delivery, telex or facsimile transmission, a written
notice (a "Deficiency Notice"). Such Deficiency Notice shall direct the
Collateral Agent to remit such Deficiency Claim Amount (to the extent of the
funds available to be distributed pursuant to the Spread Account Agreement)
to the Indenture Trustee for deposit in the Collection Account. The
"Deficiency Claim Amount" with respect to any Distribution Date shall equal
the excess, if any, of
(i) the amount required to be distributed pursuant to
clauses (i) - (vi) of Section 4.6 (without giving effect to the
limitation of the Distribution Amount specified in each such clause) over
(ii) the sum of (A) the Actual Funds with respect to such
Distribution Date, plus (B) if such Distribution Date is the Class A-1
Final Scheduled Distribution Date, the amount, if any, withdrawn from
the Class A-1 Holdback Subaccount and deposited in the Note Distribution
Account pursuant to Section 5.1(b).
(b) any Deficiency Notice shall be delivered by 10:00 a.m., New
York City time, on the fourth Business Day preceding such Distribution Date.
The amounts distributed by the Collateral Agent to the Indenture Trustee
pursuant to a Deficiency Notice shall be deposited by the Indenture Trustee
into the Collection Account pursuant to Section 4.5.
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ARTICLE VI
THE SELLER
SECTION 6.1. LIABILITY OF SELLER.
(a) The Seller shall be liable hereunder only to the extent of the
obligations in this Agreement specifically undertaken by the Seller and the
representations made by the Seller.
SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION.
(a) The Seller shall not merge or consolidate with any other
Person or permit any other Person to become the successor to the Seller's
business without (so long as an Insurer Default shall not have occurred and
be continuing) the prior written consent of the Security Insurer. The
certificate of incorporation of any corporation (i) into which the Seller may
be merged or consolidated, (ii) resulting from any merger or consolidation to
which the Seller shall be a party, or (iii) succeeding to the business of
Seller, shall contain provisions relating to limitations on business and
other matters substantively identical to those contained in the Seller's
certificate of incorporation. Any such successor corporation shall execute
an agreement of assumption of every obligation of the Seller under this
Agreement and each Related Document and, whether or not such assumption
agreement is executed, shall be the successor to the Seller under this
Agreement without the execution or filing of any document or any further act
on the part of any of the parties to this Agreement. The Seller shall
provide prompt notice of any merger, consolidation or succession pursuant to
this Section 6.2 to the Owner Trustee, the Indenture Trustee, the Security
Insurer and the Rating Agencies. Notwithstanding the foregoing, the Seller
shall not merge or consolidate with any other Person or permit any other
Person to become a successor to the Seller's business, unless (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 2.5 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become a Servicer Termination Event shall have occurred and be
continuing, (y) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and the Security Insurer an officer's certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.2 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Seller shall have delivered
to the Owner Trustee, the Indenture Trustee and the Security Insurer an
Opinion of Counsel, stating that, in the opinion of such counsel, either (A)
all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Trust Property and reciting
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the details of the filings or (B) no such action shall be necessary to
preserve and protect such interest.
(b) The Seller hereby agrees that it shall not (i) take any action
prohibited by Article XVI of its certificate of incorporation or (ii) without
the prior written consent of the Owner Trustee and the Indenture Trustee and
(so long as an Insurer Default shall not have occurred and be continuing) the
Security Insurer and without giving prior written notice to the Rating
Agencies, amend Article III, Article IX, Article XIV or Article XVI of its
certificate of incorporation.
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The
Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as Seller of the Receivables under this
Agreement and that in its opinion may involve it in any expense or liability.
SECTION 6.4. SELLER MAY OWN NOTES. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become
the owner or pledgee of Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof except as otherwise specifically
provided herein or in the Related Documents. Notes so owned by or pledged to
the Seller or such Affiliate shall have an equal and proportionate benefit
under the provisions of this Agreement or any Related Document, without
preference, priority, or distinction as among all of the Notes, provided that
any Notes owned by the Seller or any Affiliate thereof, during the time such
Notes are owned by them, shall be without voting rights for any purpose set
forth in this Agreement or any Related Document. The Seller shall notify the
Owner Trustee, the Indenture Trustee and the Security Insurer promptly after
it or any of its Affiliates become the owner or pledgee of a Note.
ARTICLE VII
THE SERVICER
SECTION 7.1. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such and, in the case of AFL,
without limitation of its obligations under the Purchase Agreement) shall be
liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Servicer and the representations made by the
Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security
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Insurer, their respective officers, directors, agents and employees, and the
Noteholders from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation arising out of or resulting from the use, ownership or
operation by the Servicer or any Affiliate thereof of any Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any taxes that may at any time be
asserted against the Trust, the Owner Trustee, the Indenture Trustee, the
Backup Servicer, the Security Insurer or the Noteholders with respect to the
transactions contemplated in this Agreement, including, without limitation,
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the sale of the Receivables and the other Trust
Property to the Trust or the issuance and original sale of the Notes and
costs and expenses in defending against the same.
(d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon the Trust, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer or the Noteholders through the breach of this Agreement, the
negligence, willful misfeasance, or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless the
Owner Trustee, in its individual capacity, its officers, directors, agents
and employees, from and against all costs, taxes (other than income taxes on
fees and expenses payable to the Owner Trustee), expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained in the Trust
Agreement and the Related Documents, except to the extent that such cost,
taxes (other than income taxes), expense, loss, claim, damage or liability
(A) is due to the willful misfeasance or gross negligence of the Owner
Trustee, or (B) arises from the Owner Trustee's breach of any of its
representations or warranties set forth in Section 6.2 of the Trust
Agreement; PROVIDED, HOWEVER, that amounts payable under this paragraph shall
be increased by the amount of income taxes actually paid by the Owner Trustee
in respect of any indemnity payment unless the Owner Trustee received or can
reasonably be expected to receive a tax deduction for the related loss or
cost.
(f) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the
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Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.
(g) AFL, in its individual capacity, hereby acknowledges that the
indemnification provisions in the Purchase Agreement benefiting the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer and the
Security Insurer are enforceable by each hereunder.
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any other
person, convey, transfer or lease substantially all its assets as an entirety to
another Person, or permit any other Person to become the successor to the
Servicer's business unless, after the merger, consolidation, conveyance,
transfer, lease or succession, the successor or surviving entity shall be an
Eligible Servicer and shall be capable of fulfilling the duties of the Servicer
contained in this Agreement. Any corporation (i) into which the Servicer may
be merged or consolidated, (ii) resulting from any merger or consolidation to
which the Servicer shall be a party, (iii) which acquires by conveyance,
transfer, or lease substantially all of the assets of the Servicer, or
(iv) succeeding to the business of the Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Servicer under this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Servicer under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall provide
notice of any merger, consolidation or succession pursuant to this Section
7.2(a) to the Owner Trustee, the Indenture Trustee, the Security Insurer and
each Rating Agency. Notwithstanding the foregoing, the Servicer shall not merge
or consolidate with any other Person or permit any other Person to become a
successor to the Servicer's business, unless (x) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.6 shall have been breached (for purposes hereof, such representations
and warranties shall speak as of the date of the consummation of such
transaction) and no event that, after notice or lapse of time, or both, would
become an Insurance Agreement Event of Default shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Owner Trustee, the
Indenture Trustee and the Security Insurer an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 7.2(a) and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Servicer shall have delivered
to the Owner Trustee, the Indenture Trustee and the Security Insurer an Opinion
of Counsel, stating that, in the opinion of such counsel, either (A) all
financing statements and continuation
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statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Owner Trustee in the
Trust Property and reciting the details of the filings or (B) no such action
shall be necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to
which the Backup Servicer shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Backup
Servicer, or (iv) succeeding to the business of the Backup Servicer, in any
of the foregoing cases shall execute an agreement of assumption to perform
every obligation of the Backup Servicer under this Agreement and, whether or
not such assumption agreement is executed, shall be the successor to the
Backup Servicer under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to release the Backup
Servicer from any obligation.
SECTION 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS.
(a) Neither the Servicer, the Backup Servicer nor any of the
directors or officers or employees or agents of the Servicer or Backup
Servicer shall be under any liability to the Trust, or the Noteholders,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER,
that this provision shall not protect the Servicer, the Backup Servicer or
any such person against any liability that would otherwise be imposed by
reason of a breach of this Agreement or willful misfeasance, bad faith or
negligence (excluding errors in judgment) in the performance of duties, by
reason of reckless disregard of obligations and duties under this Agreement
or any violation of law by the Servicer, Backup Servicer or such person, as
the case may be; PROVIDED FURTHER, that this provision shall not affect any
liability to indemnify the Owner Trustee and the Indenture Trustee for costs,
taxes, expenses, claims, liabilities, losses or damages paid by the Owner
Trustee or the Indenture Trustee, each in its individual capacity. The
Servicer, the Backup Servicer and any director, officer, employee or agent of
the Servicer or Backup Servicer may rely in good faith on the advice of
counsel or on any document of any kind PRIMA FACIE properly executed and
submitted by any Person respecting any matters arising under this Agreement.
(b) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement, and the Owner Trustee, the Indenture
Trustee, the Seller, the Security Insurer and the Noteholders shall look only to
the Servicer to perform such obligations.
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SECTION 7.4. DELEGATION OF DUTIES. The Servicer may delegate
duties under this Agreement to an Affiliate of AFL with the prior written
consent of the Security Insurer, the Indenture Trustee, the Owner Trustee and
the Backup Servicer. The Servicer also may at any time perform the specific
duty of repossession of Financed Vehicles through sub-contractors who are in
the business of servicing automotive receivables and may perform other
specific duties through such sub-contractors with the prior written consent
of the Security Insurer (unless an Insurer Default shall have occurred and be
continuing), PROVIDED, HOWEVER, that no such delegation or sub-contracting
duties by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties. So long as no Insurer Default shall have occurred
and be continuing, neither AFL or any party acting as Servicer hereunder
shall appoint any subservicer hereunder without the prior written consent of
the Security Insurer, the Indenture Trustee, the Owner Trustee and the Backup
Servicer.
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject
to the provisions of Section 7.2, neither the Servicer nor the Backup
Servicer shall resign from the obligations and duties imposed on it by this
Agreement as Servicer or Backup Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements
in a manner which would have a material adverse effect on the Servicer or the
Backup Servicer, as the case may be, and the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or Note Majority
(if an Insurer Default shall have occurred and be continuing) does not elect
to waive the obligations of the Servicer or the Backup Servicer, as the case
may be, to perform the duties which render it legally unable to act or to
delegate those duties to another Person. Any such determination permitting
the resignation of the Servicer or Backup Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered and reasonably acceptable to the
Owner Trustee, the Indenture Trustee and the Security Insurer (unless an
Insurer Default shall have occurred and be continuing). No resignation of
the Servicer shall become effective until, so long as no Insurer Default
shall have occurred and be continuing, the Backup Servicer or an entity
acceptable to the Security Insurer shall have assumed the responsibilities
and obligations of the Servicer or, if an Insurer Default shall have occurred
and be continuing, the Backup Servicer or a successor Servicer that is an
Eligible Servicer shall have assumed the responsibilities and obligations of
the Servicer. No resignation of the Backup Servicer shall become effective
until, so long as no Insurer Default shall have occurred and be continuing,
an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Backup Servicer or, if an Insurer
Default shall have occurred and be continuing, a Person that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the
Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 7.5, the Backup Servicer may petition a court for its removal.
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ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Indenture Trustee
for distribution to Noteholders any proceeds or payment required to be so
delivered under the terms of this Agreement (or, if AFL is the Servicer,
the Purchase Agreement) that continues unremedied for a period of two
Business Days (one Business Day with respect to payment of Purchase
Amounts) after written notice is received by the Servicer from the
Indenture Trustee or (unless an Insurer Default shall have occurred and
be continuing) the Security Insurer or after discovery of such failure
by a Responsible Officer of the Servicer; or
(b) Failure by the Servicer to deliver to the Indenture Trustee, the
Owner Trustee and (so long as an Insurer Default shall not have occurred
and be continuing) the Security Insurer the Servicer's Certificate by the
fourth Business Day prior to the Distribution Date, or failure on the part
of the Servicer to observe its covenants and agreements set forth in
Section 7.2(a); or
(c) Failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in this Agreement (or, if AFL is the Servicer, the Purchase
Agreement), which failure (i) materially and adversely affects the rights
of Noteholders (determined without regard to the availability of funds
under the Note Policy), or of the Security Insurer (unless an Insurer
Default shall have occurred and be continuing), and (ii) continues
unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Owner Trustee, the Indenture Trustee
or the Security Insurer (or, if an Insurer Default shall have occurred
and be continuing, any Noteholder); or
(d) (i) The commencement of an involuntary case under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such
case is not dismissed within 60 days; or (ii) the entry of a decree or
order for relief by a court or regulatory authority having jurisdiction
in respect of the Servicer or the Seller in an involuntary case under
the federal bankruptcy laws, as now or hereafter in effect, or another
present or future, federal or state, bankruptcy, insolvency or similar
law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or the Seller or
of any substantial part of their respective properties
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or ordering the winding up or liquidation of the affairs of the Servicer
or the Seller; or
(e) The commencement by the Servicer or the Seller of a voluntary
case under the federal bankruptcy laws, as now or hereafter in effect, or
any other present or future, federal or state, bankruptcy, insolvency or
similar law, or the consent by the Servicer or the Seller to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the Servicer or the Seller or of any substantial part of its property or
the making by the Servicer or the Seller of an assignment for the benefit
of creditors or the failure by the Servicer or the Seller generally to
pay its debts as such debts become due or the taking of corporate action
by the Servicer or the Seller in furtherance of any of the foregoing; or
(f) Any representation, warranty or statement of the Servicer or the
Seller made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material
respect as of the time when the same shall have been made (excluding,
however, any representation or warranty set forth in Section 2.5(a)),
and the incorrectness of such representation, warranty or statement has
a material adverse effect on the Trust and, within 30 days after written
notice thereof shall have been given to the Servicer or the Seller by
the Owner Trustee, the Indenture Trustee or the Security Insurer (or,
if an Insurer Default shall have occurred and be continuing, a
Noteholder), the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have occurred and be
continuing, the Security Insurer shall not have delivered a Servicer
Extension Notice pursuant to Section 3.14 (in which case the Servicer
Termination Event will be deemed to have occurred as of the last day
of the term of the most recent Servicer Extension Notice received); or
(h) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default shall have occurred;
or
(i) A claim is made under the Note Policy.
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, either the
Indenture Trustee, the Owner Trustee, or a Note Majority), by notice given in
writing to the Servicer (and to the Indenture Trustee, the Backup Servicer and
the Owner Trustee if given by the Security Insurer or the Noteholders) may
terminate all of the rights
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and obligations of the Servicer under this Agreement. On or after (i) the
receipt by the Servicer of such written notice, or (ii) the receipt by the
Backup Servicer (or any alternate successor servicer appointed by the
Security Insurer pursuant to Section 8.3(b)) of written notice from the
Security Insurer that the Security Insurer is not extending the Servicer's
term pursuant to Section 3.14, all authority, power, obligations and
responsibilities of the Servicer under this Agreement, whether with respect
to the Notes or the Trust Property or otherwise, shall be terminated and
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Security Insurer); PROVIDED, HOWEVER, that the successor
Servicer shall have no liability with respect to any obligation which was
required to be performed by the terminated Servicer prior to the date that
the successor Servicer becomes the Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Servicer. The
successor Servicer is authorized and empowered by this Agreement to execute
and deliver, on behalf of the terminated Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and the other Trust Property and related
documents to show the Owner Trustee as lienholder or secured party on the
related Lien Certificates, or otherwise. The terminated Servicer agrees to
cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the terminated
Servicer, in the Collection Account or thereafter received with respect to
the Receivables and the delivery to the successor Servicer of all Receivable
Files, Monthly Records and Collection Records and a computer tape in readable
form as of the most recent Business Day containing all information necessary
to enable the successor Servicer or a successor Servicer to service the
Receivables and the other Trust Property. If requested by the Security
Insurer (unless an Insurer Default shall have occurred and be continuing),
the successor Servicer shall terminate the Lockbox Agreement and direct the
Obligors to make all payments under the Receivables directly to the successor
Servicer (in which event the successor Servicer shall process such payments
in accordance with Section 3.2(e)), or to a lockbox established by the
successor Servicer at the direction of the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), at the successor
Servicer's expense. In addition to any other amounts that are then payable
to the terminated Servicer under this Agreement, the terminated Servicer
shall then be entitled to receive out of Available Funds reimbursements for
any Outstanding Monthly Advances (in accordance with Section 4.4(c)) made
during the period prior to the notice pursuant to this Section 8.2 which
terminates the obligation and rights of the terminated Servicer under this
Agreement. The Owner Trustee, the Indenture Trustee and the successor
Servicer may set off and deduct any amounts owed by the terminated Servicer
from any amounts payable to the terminated Servicer pursuant to the preceding
sentence. The terminated Servicer shall grant the Owner Trustee, the
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Indenture Trustee, the successor Servicer and the Security Insurer reasonable
access to the terminated Servicer's premises at the terminated Servicer's
expense.
SECTION 8.3. APPOINTMENT OF SUCCESSOR.
(a) On and after (i) the time the Servicer receives a notice of
termination pursuant to Section 8.2, or (ii) the resignation of the Servicer
pursuant to Section 7.5, or (iii) the receipt by the Backup Servicer (or any
alternate successor servicer appointed by the Security Insurer pursuant to
Section 8.3(b)) of written notice from the Security Insurer that the Security
Insurer is not extending the Servicer's term pursuant to Section 3.14, the
Backup Servicer (unless the Security Insurer shall have exercised its option
pursuant to Section 8.3(b) to appoint an alternate successor Servicer) shall be
the successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for in this Agreement,
and shall be subject to all the responsibilities, restrictions, duties,
liabilities and termination provisions relating thereto placed on the Servicer
by the terms and provisions of this Agreement. The Owner Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it shall be subject to termination under Section 8.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer
and shall serve from term to term as provided in Section 3.14.
(b) The Security Insurer may (so long as an Insurer Default shall
not have occurred and be continuing) exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a Person other
than the Person serving as Backup Servicer at the time, and (without limiting
its obligations under the Note Policy) shall have no liability to the Owner
Trustee, the Indenture Trustee, AFL, the Seller, the Person then serving as
Backup Servicer, any Noteholders, any Note Owner or any other Person if it
does so. Notwithstanding the above, if the Backup Servicer shall be legally
unable or unwilling to act as Servicer and an Insurer Default shall have
occurred and be continuing, the Backup Servicer, the Indenture Trustee, a
Note Majority or the Owner Trustee may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the
Servicer. Pending appointment pursuant to the preceding sentence, the Backup
Servicer shall act as successor Servicer unless it is legally unable to do
so, in which event the outgoing Servicer shall continue to act as Servicer
until a successor has been appointed and accepted such appointment. Subject
to Section 7.5, no provision of this Agreement shall be construed as
relieving the Backup Servicer of its obligation to succeed as successor
Servicer upon the termination of the Servicer pursuant to Section 8.2 or the
resignation of the Servicer pursuant to Section 7.5. If upon the termination
of the Servicer pursuant to Section 8.2 or the resignation of the Servicer
pursuant to Section 7.5, the Security Insurer appoints a successor Servicer
other than the Backup Servicer, the Backup Servicer shall not be relieved of
its duties as Backup Servicer hereunder.
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(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not
resigned or been terminated hereunder, except that the Basic Servicing Fee
Rate for such successor Servicer shall be calculated on a pro rata basis at
the rate of 1.00% per annum for all loans originated under AFL's "Premier"
program and 1.50% per annum for all loans originated under AFL's "Classic"
program. If any successor Servicer is appointed as a result of the Backup
Servicer's refusal (in contravention of the terms of this Agreement) to act
as Servicer although it is legally able to do so, the Security Insurer and
such successor Servicer may agree on reasonable additional compensation to be
paid to such successor Servicer by the Backup Servicer, which additional
compensation shall be paid by the Backup Servicer in its individual capacity
and solely out of its own funds. If any successor Servicer is appointed for
any reason other than the Backup Servicer's refusal to act as Servicer
although legally able to do so, the Security Insurer and such successor
Servicer may agree on additional compensation to be paid to such successor
Servicer, which additional compensation shall be payable as provided in the
Spread Account Agreement. If the Backup Servicer is the successor Servicer,
the Backup Servicer shall be entitled to reimbursement, pursuant to Section
4.6(ii), of reasonable transition expenses, not in excess of $100,000,
incurred in acting as successor Servicer. In addition, any successor Servicer
shall be entitled to reimbursement, as provided in the Spread Account
Agreement, of reasonable transition expenses incurred in acting as successor
Servicer.
SECTION 8.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note Register.
SECTION 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer (or,
if an Insurer Default shall have occurred and be continuing, a Note Majority)
may, on behalf of all Holders of Notes, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
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ARTICLE IX
TERMINATION
SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION OF
TRUST ESTATE.
(a) On each Determination Date as of which the Aggregate Principal
Balance is less than 10% of the Original Pool Balance, the Servicer and the
Seller each shall have the option to purchase the corpus of the Trust (with
the consent of the Security Insurer, if a claim has previously been made
under the Note Policy or if such purchase would result in a claim on the Note
Policy or if such purchase would result in any amount owing to the Security
Insurer remaining unpaid); PROVIDED, HOWEVER, that the amount to be paid for
such purchase (as set forth in the following sentence) shall be sufficient to
pay the full amount of principal, premium, if any, and interest then due and
payable on the Notes. To exercise such option, the Servicer or the Seller,
as the case may be, shall pay the aggregate Purchase Amounts for the
Receivables, plus the appraised value of any other property (including the
right to receive any future recoveries) held as part of the Trust, such
appraisal to be conducted by an appraiser mutually agreed upon by the
Servicer or the Seller, as the case may be, and the Security Insurer (or the
Indenture Trustee, if an Insurer Default shall have accrued and be
continuing), and shall succeed to all interests in and to the Trust Property.
The fees and expenses related to such appraisal shall be paid by the party
exercising the option to purchase. The party exercising such option to
repurchase shall deposit the aggregate Purchase Amounts for the Receivables
and the amount of the appraised value of any other property held as part of
the Trust into the Collection Account, and the Indenture Trustee shall
distribute the amounts so deposited in accordance with Section 4.6.
(b) Upon any sale of the assets of the Trust pursuant to Section
8.2 of the Trust Agreement, the Owner Trustee shall instruct the Indenture
Trustee in writing to deposit the proceeds from such sale after all payments
and reserves therefrom have been made (the "Insolvency Proceeds") in the
Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are
not so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Owner Trustee shall instruct the Indenture
Trustee in writing to make the following deposits (after the application on
such Distribution Date of the Available Funds) from the Insolvency Proceeds:
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited
into the Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Class A-1 Prepayment
Premium, Class A-2 Prepayment Premium, Class A-3
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Prepayment Premium and Class A-4 Prepayment Premium (only to the extent
of the amount of Liquidated Damages (as defined in the Purchase
Agreement) received by the Trust from the Seller); and
(iii) to the Note Distribution Account, the outstanding
principal balance of the Notes (after giving effect to the reduction in
the outstanding principal balance of the Notes to result from the
deposits otherwise made in the Note Distribution Account on such
Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid, first, to the Security Insurer, to the extent of any amounts owing to
the Security Insurer under the Insurance Agreement and not paid, whether or
not AFL is obligated to pay such amounts, and second to the Collateral Agent
for deposit in the Spread Account.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee and the Indenture Trustee as soon as
practicable after the Servicer has received notice thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT.
(a) This Agreement may be amended by the Seller, the Servicer and the
Trust, with the prior written consent of the Indenture Trustee and the Security
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) but without the consent of any of the Noteholders, (i) to cure any
ambiguity, (ii) to correct or supplement any provisions in this Agreement or
(iii) for the purpose of adding any provision to or changing in any manner or
eliminating any provision of this Agreement or of modifying in any manner the
rights of the Noteholders; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of the Noteholders.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Trust with the prior written consent of the
Indenture Trustee and the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) and with the consent of a Note
Majority (which consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such Note
and of any Note issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the Note)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Notes; PROVIDED, HOWEVER,
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that, subject to the express rights of the Security Insurer under the Related
Documents, including its rights to agree to certain modifications of the
Receivables pursuant to Section 3.2 and its rights to cause the Indenture
Collateral Agent to liquidate the Collateral under the circumstances and
subject to the provisions of Section 5.04 of the Indenture, no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, collections of payments on Receivables or distributions
required to be made on any Note or the Class A-1 Interest Rate, Class A-2
Interest Rate, Class A-3 Interest Rate or Class A-4 Interest Rate, (b) amend
any provisions of Section 4.6 in such a manner as to affect the priority of
payment of interest, principal or premium to Noteholders, or (c) reduce the
aforesaid percentage required to consent to any such amendment or any waiver
hereunder, without the consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Indenture Trustee.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Indenture Trustee may
prescribe, including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement, the
Owner Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement, in addition to the Opinion of Counsel referred
to in Section 10.2(i). The Owner Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Owner Trustee's own rights,
duties or immunities under this Agreement or otherwise.
SECTION 10.2. PROTECTION OF TITLE TO TRUST PROPERTY.
(a) The Servicer shall execute and file such financing statements
and cause to be executed and filed such continuation and other statements,
all in such manner and in such places as may be required by law fully to
preserve, maintain and protect the interest of the Trust, the Owner Trustee
and the Indenture Collateral Agent in the Trust Property and in the proceeds
thereof. The Servicer shall deliver (or cause to be delivered) to the Owner
Trustee, the Indenture
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Collateral Agent and the Security Insurer file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller, the Servicer nor the Trust shall change
its name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed by the
Seller in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless it shall have given the Owner
Trustee, the Indenture Trustee and the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) at least 60 days'
prior written notice thereof, and shall promptly file appropriate amendments
to all previously filed financing statements and continuation statements.
(c) Each of the Seller, the Servicer and the Trust shall give the
Owner Trustee, the Indenture Trustee and the Security Insurer at least 60
days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The
Servicer shall at all times maintain each office from which it services
Receivables and its principal executive office within the United States of
America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Trust, the Servicer's master computer records (including any backup archives)
that refer to any Receivable indicate clearly (with reference to the
particular trust) that the Receivable is owned by the Trust. Indication of
the Trust's ownership of a Receivable shall be deleted from or modified on
the Servicer's computer systems when, and only when, the Receivable has been
paid in full or repurchased by the Seller or Servicer.
(f) If at any time the Seller or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender or
other transferee computer tapes, records or print-outs (including any
restored from backup archives) that, if they refer in any manner whatsoever
to any Receivable, indicate clearly that such Receivable has been sold and is
owned by the Trust unless such Receivable has been paid in full or
repurchased by the Seller or Servicer.
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(g) The Servicer shall permit the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Security Insurer and their respective
agents, at any time to inspect, audit and make copies of and abstracts from
the Servicer's records regarding any Receivables or any other portion of the
Trust Property.
(h) The Servicer shall furnish to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and the Security Insurer at any time upon
request a list of all Receivables then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each
of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust. Upon request, the Servicer shall
furnish a copy of any list to the Seller. The Owner Trustee shall hold any
such list and Schedule of Receivables for examination by interested parties
during normal business hours at the Corporate Trust Office upon reasonable
notice by such Persons of their desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee and the Security Insurer simultaneously with
the execution and delivery of this Agreement and of each amendment thereto
and upon the occurrence of the events giving rise to an obligation to give
notice pursuant to Section 10.2(b) or (c), an Opinion of Counsel either (a)
stating that, in the opinion of such Counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Owner Trustee and the Indenture
Collateral Agent in the Receivables and the other Trust Property, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (b) stating that, in the opinion
of such counsel, no such action is necessary to preserve and protect such
interest.
(j) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and the Security Insurer, within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning more than
three months after the Closing Date, an Opinion of Counsel, either (a)
stating that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Trust and the Indenture
Collateral Agent in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are given, or
(b) stating that, in the opinion of such counsel, no action shall be
necessary to preserve and protect such interest.
SECTION 10.3. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of laws thereof and the obligations,
rights and remedies of the parties under this Agreement shall be determined
in accordance with such laws.
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SECTION 10.4. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or
of the Notes or the rights of the Holders thereof.
SECTION 10.5. ASSIGNMENT. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 7.2 or
Section 8.2 (and as provided in the provisions of the Agreement concerning
the resignation of the Servicer and the Backup Servicer), this Agreement may
not be assigned by the Seller or the Servicer without the prior written
consent of the Owner Trustee, the Indenture Trustee and the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, the Owner
Trustee, the Indenture Trustee and a Note Majority).
SECTION 10.6. THIRD-PARTY BENEFICIARIES. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. The Security Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions
of this Agreement, and shall be entitled to rely upon and directly to enforce
such provisions of this Agreement so long as no Insurer Default shall have
occurred and be continuing. Nothing in this Agreement, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement. Except as expressly stated otherwise herein or in the Related
Documents, any right of the Security Insurer to direct, appoint, consent to,
approve of, or take any action under this Agreement, shall be a right
exercised by the Security Insurer in its sole and absolute discretion.
SECTION 10.7. DISCLAIMER BY SECURITY INSURER. The Security
Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a
written notice to the Owner Trustee and the Indenture Trustee.
SECTION 10.8. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
SECTION 10.9. INTENTION OF PARTIES. The execution and delivery of
this Agreement shall constitute an acknowledgement by the Seller, that it is
intended that the assignment and transfer herein contemplated constitute a
sale and assignment outright, and not for security, of the Receivables and
the other Trust Property, conveying good title thereto free and clear of any
Liens, from the Seller to
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the Trust, and that the Receivables and the other Trust Property shall not be
a part of the Seller's estate in the event of the insolvency, receivership,
conservatorship or the occurrence of another similar event, of, or with
respect to, the Seller. In the event that such conveyance is determined to
be made as security for a loan made by the Trust to the Seller, the Seller
intends that it shall have granted to the Owner Trustee a first priority
security interest in all of the Seller's right, title and interest in and to
the Trust Property conveyed to the Trust pursuant to Sections 2.1 and 2.4 of
this Agreement, and that this Agreement shall constitute a security agreement
under applicable law.
SECTION 10.10. NOTICES. All demands, notices and communications
under this Agreement shall be in writing, personally delivered, sent by
facsimile or mailed by certified mail-return receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of AFL, the
Seller or the Servicer, at the following address: Arcadia Receivables
Finance Corp., 0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx,
Xxxxxxxxx 00000-0000, with copies to: Arcadia Financial Ltd., 0000
Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Xxxx
X. Xxxxxx, (b) in the case of the Owner Trustee, Xxxxxx Square North, 0000
Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Corporate Trust
Administration, (c) in the case of the Indenture Trustee and, for so long as
the Indenture Trustee is the Backup Servicer or the Collateral Agent, at 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000-0000, Attention: Global Trust,
Structured Finance Services Group, (d) in the case of each Rating Agency, 00
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (for Xxxxx'x) and 00 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (for Standard & Poor's), Attention: Asset-Backed
Surveillance, and (e) in the case of the Security Insurer, Financial Security
Assurance Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Surveillance Department, Telex No.: (000) 000-0000, Confirmation: (212)
826-0100, Telecopy Nos.: (000) 000-0000, (000) 000-0000 (in each case in
which notice or other communication to Financial Security refers to an Event
of Default, a claim on the Note Policy or with respect to which failure on
the part of Financial Security to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication
should also be sent to the attention of the General Counsel and the
Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register, and any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Noteholder receives such notice.
SECTION 10.11. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Trust under the Trust
Agreement, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings
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and agreements herein made on the part of the Trust is made and intended not
as personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose for binding only the Trust,
(c) nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties to this Agreement and by any person
claiming by, through or under them and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure
of any obligation, representation, warranty or covenant made or undertaken by
the Trust under this Agreement or any related documents.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Issuer, the Seller, AFL, the Servicer and
the Backup Servicer have caused this Sale and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1997-D
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By /s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
SELLER:
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ Xxxx X. Xxxxxx
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President and Chief
Financial Officer
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
By /s/ Xxxx X. Xxxxxx
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President and Chief
Financial Officer
BACKUP SERVICER:
THE CHASE MANHATTAN BANK
By /s/ Xxxx Xxxxxx
-----------------------------------------------
Name: Xxxx Xxxxxx
Title: Assistant Vice President
Acknowledged and Accepted:
THE CHASE MANHATTAN BANK,
not in its individual capacity but as Indenture Trustee
By /s/ Xxxx Xxxxxx
----------------------------------------
Name: Xxxx Xxxxxx
Title: Assistant Vice President
