<PAGE>
As filed with the Securities and Exchange Commission on January 21, 1998
Registration No. 33-85608
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
A.I. RECEIVABLES CORP.
(Depositor to the Trust described herein)
(Exact name as specified in registrant's charter)
AIC PREMIUM FINANCE LOAN MASTER TRUST
(Issuer with respect to the Certificates)
<TABLE>
<S> <C> <C>
Delaware 9999 Application Pending
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
A.I. RECEIVABLES CORP.
160 Water Street
New York, New York 10038
(212) 428-5500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
--------------
MICHAEL D. VOGEN
TREASURER
A.I. RECEIVABLES CORP.
160 Water Street
New York, New York 10038
(212) 428-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
SYLVIE DURHAM ANDREA G. PODOLSKY, ESQ.
Weil, Gotshal & Manges LLP Cleary, Gottlieb, Steen & Hamilton
767 Fifth Avenue One Liberty Plaza
New York, New York 10153 New York, New York 10006
(212) 310-8000 (212) 225-2000
--------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable on or after this registration statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF SECURITIES AMOUNT TO PROPOSED MAXIMUM MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED BE REGISTERED OFFERING PRICE PER UNIT* OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Series 1998-1 Floating Rate
Class A Asset Backed Certificates $900,000 100% $900,000 $265.50
Series 1998-1 Floating Rate
Class B Asset Backed Certificates $100,000 100% $100,000 $ 29.50
</TABLE>
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* Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
A.I. RECEIVABLES CORP.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM
NUMBER NAME AND CAPTION IN FORM S-1 CAPTION IN PROSPECTUS
- ------ ---------------------------- ---------------------
<S> <C> <C>
Item 1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.............. Front Cover Page of Registration Statement;
Outside Front Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover Pages
of Prospectus....................................... Inside Front Cover Page; Outside Back
Cover Page of Prospectus
Item 3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Prospectus Summary; Special Considerations
Item 4. Use of Proceeds..................................... Use of Proceeds
Item 5. Determination of Offering Price..................... *
Item 6. Dilution............................................ *
Item 7. Selling Security Holders............................ *
Item 8. Plan of Distribution................................ Underwriting
Item 9. Description of Securities to be Registered.......... Prospectus Summary; Description of the Offered
Certificates
Item 10. Interests of Named Experts and Counsel.............. Legal Matters
Item 11. Information with Respect to the Registrant.......... Business of A.I. Receivables Corp., A.I. Credit Corp.
and AICCO, Inc.
Item 12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... *
Item 13. Other Expenses of Issuance and Distribution......... See Part II
Item 14. Indemnification of Directors and Officers........... See Part II
Item 15. Recent Sales of Unregistered Securities............. *
Item 16. Exhibits and Financial Statement Schedules.......... See Part II
Item 17. Undertakings........................................ See Part II
</TABLE>
- ----------
* Not applicable.
2
<PAGE>
PROSPECTUS
[GRAPHIC OMITTED]
$[----------]
AIC PREMIUM FINANCE LOAN MASTER TRUST
$[_________] Series 1998-1 Floating Rate Class A Asset Backed Certificates
$[_________] Series 1998-1 Floating Rate Class B Asset
Backed Certificates
A.I. RECEIVABLES CORP.
Transferor
A.I. CREDIT CORP.
AICCO, INC.
Original Transferors and Servicer
Each Series 1998-1 Floating Rate Class A Asset Backed Certificate
(collectively, the "Series 1998-1 Class A Certificates") and each Series 1998-1
Floating Rate Class B Asset Backed Certificate (collectively, the "Series 1998-1
Class B Certificates" and, together with the Series 1998-1 Class A Certificates,
the "Offered Certificates") offered hereby will evidence an undivided interest
in the assets of AIC Premium Finance Loan Master Trust (the "Trust") created
pursuant to a Pooling and Servicing Agreement dated as of December 1, 1994, as
will be amended and restated as of the Closing Date (together with all
supplements to such agreement, the "Agreement"), among A.I. Receivables Corp.
("AIR"), as transferor (the "Transferor"), A.I. Credit Corp. ("AIC"), as an
original transferor and servicer, AICCO, Inc. ("AICCO"), as an original
transferor and servicer (together with AIC, the "Original Transferors" or the
"Servicer"), and The First National Bank of Chicago, as trustee (the "Trustee").
AICCO is a wholly owned subsidiary of AIC which, in turn, is a wholly owned
subsidiary of American International Group, Inc. ("AIG"). Each of AIC and AICCO
owns 50% of AIR.
The assets of the Trust will include the entire beneficial interest
in commercial premium finance loans to borrowers to finance premiums on property
and casualty insurance policies governed by the law of a State in the United
States of America or the District of Columbia under which the borrowers are the
insureds, made or purchased by either AIC or AICCO (the "Loans"), including (i)
all amounts due and to become due and all collections and recoveries on the
Loans, and (ii) the proceeds of certain collateral security securing the Loans,
each as described herein. The beneficial interests described above are herein
referred to as the "Receivables." AIC and AICCO will service the Loans. The
Trust has previously issued a Series of certificates (the "Series 1994-1
Certificates").
(continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE OFFERED CERTIFICATES
AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD
CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN "SPECIAL
CONSIDERATIONS," WHICH DESCRIBES MATERIAL RISKS INVOLVED WITH AN INVESTMENT IN
THE OFFERED CERTIFICATES.
-----------------
<PAGE>
THE OFFERED CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND
DO NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF A.I. RECEIVABLES CORP.,
A.I. CREDIT CORP., AICCO, INC., AMERICAN INTERNATIONAL GROUP, INC. OR ANY OF
THEIR RESPECTIVE AFFILIATES. NEITHER THE OFFERED CERTIFICATES, THE LOANS NOR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY OTHER PERSON.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------
================================================================================
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT TRANSFEROR(1)
<S> <C> <C> <C> <C>
Per 1998-1 Class A Certificate [_____]% [____]% [_____]%
Per 1998-1 Class B Certificate [_____]% [____]% [_____]%
Total....................... $[_______] $[_____] $[________]
</TABLE>
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(1) Before deduction of expenses of the offering payable by AIR estimated to be
$[______].
-----------------
The Offered Certificates are offered by the Underwriters as
specified herein, subject to receipt and acceptance by the Underwriters and
subject to their right to reject in whole or in part. It is expected that the
Offered Certificates will be delivered in book-entry form on or about January
[___], 1998, through the facilities of The Depository Trust Company.
GOLDMAN, SACHS & CO.
-----------------
The date of this Prospectus is January [__], 1998
1
<PAGE>
(continued from previous page)
Concurrently with the issuance of the Series 1998-1 Class A
Certificates and Series 1998-1 Class B Certificates, the Trust will issue from
the same Series another class of certificates (the "Series 1998-1 Class C
Certificates," and collectively with the Series 1998-1 Class A Certificates and
the Series 1998-1 Class B Certificates, the "Series 1998-1 Certificates")
described herein, which will be owned by the Transferor. The Transferor will
also own the undivided interest in the Trust represented neither by the Series
1998-1 Certificates nor the Series 1994-1 Certificates (the "Transferor
Ownership Interest"). The Transferor may offer from time to time other Series of
certificates which evidence fractional undivided interests in certain assets of
the Trust, which may have terms significantly different from the Series 1998-1
Certificates, by reducing its interest in the Trust. See "Description of the
Offered Certificates--New Series Issuances."
Interest will accrue on the Series 1998-1 Class A Certificates from
[_____________], 1998 (the "Closing Date") through [__________], 1998 at the per
annum rate of [_______]%. From [________], 1998 through [________], 1998 and
with respect to each Interest Period thereafter, interest will accrue on the
Series 1998-1 Class A Certificates at the per annum rate of [____]% above the
rate per annum shown on page 3750 of the Telerate screen or any successor page
as the composite London interbank offered rate for one-month United States
dollar deposits ("LIBOR") determined as set forth herein on the related LIBOR
Determination Date with respect to each such period, but in no event in excess
of [______]% per annum (the "Series 1998-1 Class A Certificate Rate"). Interest
will accrue on the Series 1998-1 Class B Certificates from the Closing Date
through [______________], 1998 at the per annum rate of [______]%. From
[________], 1998 through [________________], 1998 and with respect to each
Interest Period thereafter, interest will accrue on the Series 1998-1 Class B
Certificates at the per annum rate of [____]% above LIBOR determined as set
forth herein on the related LIBOR Determination Date with respect to each such
period, but in no event in excess of [____]% per annum (the "Series 1998-1 Class
B Certificate Rate"). The initial LIBOR Determination Date will be [_________],
1998. Interest with respect to the Series 1998-1 Certificates will be
distributed on [_________], 1998 and on the 15th day of each month thereafter
(or, if such 15th day is not a business day, the next succeeding business day)
(each a "Distribution Date").
Principal with respect to the Series 1998-1 Class A Certificates is
scheduled to be distributed monthly on each Distribution Date during the Series
1998-1 Class A Controlled Amortization Period (as defined herein). The first
such Distribution Date is scheduled to occur in [_______] and the last such
Distribution Date is scheduled to occur in [______]; however, principal with
respect to the Series 1998-1 Class A Certificates may be paid earlier or later
under certain limited circumstances described herein. Principal with respect to
the Series 1998-1 Class B Certificates is scheduled to be distributed in a
single payment, after the Series 1998-1 Class A Certificates have been paid in
full, on the Distribution Date in [______], but may be paid earlier or later
under certain limited circumstances described herein. See "Maturity
Considerations" and "Description of the Offered Certificates--Pay Out Events."
During the Series 1998-1 Class A Controlled Amortization Period, the amount
scheduled to be paid as principal on the Series 1998-1 Class A Certificates on
each of the aforementioned Distribution Dates, out of collections received with
respect to the Receivables, and to the extent of the Series 1998-1 Class A
Ownership Interest (as defined herein) will equal $[_____________]. See
"Description of the Offered Certificates--Principal Payments."
On each Distribution Date distributions of interest will be made first
in respect of the Series 1998-1 Class A Certificates, second in respect of the
Series 1998-1 Class B Certificates and third in respect of the Series 1998-1
Class C Certificates. On each Distribution Date on which principal is
distributable in respect of the Series 1998-1 Class A Certificates, such
principal will be payable after interest on the Series 1998-1 Class A
Certificates and
2
<PAGE>
Series 1998-1 Class B Certificates has been paid. Principal payments will not be
made to Series 1998-1 Class B Certificateholders until the final principal
payment due in respect of the Series 1998-1 Class A Certificates has been paid.
Thus on each Distribution Date on which principal is distributable in respect of
the Series 1998-1 Class B Certificates, such principal will be payable after
interest on the Series 1998-1 Class A Certificates and Series 1998-1 Class B
Certificates and principal on the Series 1998-1 Class A Certificates have been
paid. On each such Distribution Date no payments of interest or principal will
be made in respect of the Series 1998-1 Class C Certificates unless principal
due in respect of the Series 1998-1 Class B Certificates has been paid. For
further information regarding the extent to which the Series 1998-1 Class B
Certificates are subordinated to the Series 1998-1 Class A Certificates and the
extent to which the Series 1998-1 Class C Certificates are subordinated to the
Series 1998-1 Class A Certificates and Series 1998-1 Class B Certificates, see
"Description of the Offered Certificates--Application of Collections." In
addition, a portion of the Principal Receivables and Finance Charge Receivables
allocable to the Transferor Ownership Interest will be deposited monthly in the
Series 1998-1 Yield Enhancement Account and will be available to fund payments
due with respect to the Series 1998-1 Certificates to the extent described
herein.
Certain employee benefit plans, including plans subject to ERISA, may
not purchase any Offered Certificates. See "Summary--ERISA Plans" herein.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until [_________], 1998, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
REPORTS TO HOLDERS OF OFFERED CERTIFICATES
Unless and until Definitive Certificates (as defined herein) are
issued, monthly and annual reports, containing information concerning the Trust
and prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Offered Certificates, pursuant to the Agreement. See "Description
of the Offered Certificates--Book-Entry Registration," "--Reports to Holders of
Offered Certificates" and "--Evidence as to Compliance." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Transferor does not intend to send any of its
financial reports to Holders of Offered Certificates (as defined herein) or to
the owners of beneficial interests in the Offered Certificates ("Certificate
Owners"). The Servicer will file with the Securities and Exchange Commission
(the "Commission") such periodic reports with respect to the Trust as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder.
3
<PAGE>
AVAILABLE INFORMATION
The Transferor, as transferor to the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Commission on behalf of the Trust with respect to the Offered
Certificates offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement and amendments thereof and
exhibits thereto, which are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048;
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the Registration Statement and amendments thereof and
exhibits thereto may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a site on the World Wide Web at
"http://www.sec.gov" at which users can view and download copies of reports,
proxies and other information filed electronically through the Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system.
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus, including the description of
material risks set forth under "Special Considerations." Certain capitalized
terms used herein are defined elsewhere in this Prospectus. A listing of the
pages on which some of such terms are defined is found in the "Index of Key
Terms For Prospectus." Unless the context requires otherwise, certain
capitalized terms used herein relate only to the Offered Certificates.
<TABLE>
<S> <C>
Title of Securities................. Series 1998-1 Floating Rate Class A Asset Backed Certificates (the "Series
1998-1 Class A Certificates") and Series 1998-1 Floating Rate Class B Asset
Backed Certificates (the "Series 1998-1 Class B Certificates" and, together
with the Series 1998-1 Class A Certificates, the "Offered Certificates") that
are being issued pursuant to an Amended and Restated Pooling and Servicing
Agreement, to be dated as of the Closing Date, among AIR, as Transferor,
AIC and AICCO, as the Original Transferors and Servicer, and the Trustee,
and the Series 1998-1 Supplement thereto of the same date (collectively,
together with the Amended and Restated Series 1994-1 Supplement thereto,
to be dated as of the Closing Date, unless the context otherwise requires, the
"Agreement"). The original Pooling and Servicing Agreement that is to be
amended and restated is dated as of December 1, 1994 and was entered into
among AIC and AICCO, as the Transferors and Servicer, and the Trustee
(together with the original Series 1994-1 Supplement thereto of the same date
(the "Original Series 1994-1 Supplement"), the "Original Agreement").
Issuer of Securities................ AIC Premium Finance Loan Master Trust will issue on the Closing Date the
Offered Certificates, which will represent an undivided interest in the assets
of the Trust formed pursuant to the Agreement. Concurrently with the
issuance of the Offered Certificates, the Trust will issue from the same
Series another class of certificates (the "Series 1998-1 Class C Certificates,"
and, collectively with the Series 1998-1 Class A Certificates and the Series
1998-1 Class B Certificates, the "Series 1998-1 Certificates"), which will be
owned by the Transferor as the Series 1998-1 Class C Certificateholder. The
remaining undivided interest in the Trust not represented by the Series
4
<PAGE>
1998-1 Certificates or the Series 1994-1 Certificates will also be owned by the
Transferor as the Transferor Ownership Interest.
The Trust Generally................. AIC Premium Finance Loan Master Trust is a master trust. The Trust will
issue the Series 1998-1 Certificates as its second Series and may issue
additional Series from time to time. The Trust has previously issued a Series
of certificates (the "Series 1994-1 Certificates"). See "The Trust--Other
Series." The assets of the Trust will include a pool of Receivables which
relate to premium finance loans funded by AIC or AICCO ("funded" and
like terms, when used with respect to Loans, refer to the making or
purchasing of such Loans by AIC or AICCO, unless the context otherwise
requires; see "Business of A.I. Receivables Corp., A.I. Credit Corp. and
AICCO, Inc.--Premium Finance Loan Purchase Policies") and collections
thereon, as more fully described herein, and either (i) were transferred
directly to the Trust by AIC and AICCO pursuant to the Original Agreement
(the "Existing Receivables") or (ii) are to be sold to AIR by AIC and AICCO
pursuant to a Receivables Sale Agreement, to be dated as of the Closing
Date, among AIC, AICCO and AIR (the "Receivables Sale Agreement"),
and subsequently transferred to the Trust by AIR, as Transferor, pursuant to
the Agreement (the "Future Receivables"). The assets of the Trust are
expected to change over the life of the Trust as Additional Receivables are
transferred to the Trust and Receivables held by the Trust are collected,
charged off or removed from the Trust.
Collections in respect of Principal Receivables and Finance Charge
Receivables will be allocated among the Series 1998-1 Certificateholders, the
Series 1994-1 Certificateholders and the Transferor based generally on their
respective ownership interests in the Trust, as described herein, provided that
such collections allocable to the Series 1998-1 Certificates will be allocated
as more fully described herein to pay interest only on the Series 1998-1
Certificates during a revolving period and then to pay both principal and
interest thereon during an amortization period scheduled to commence in
[__________].
Transferor of Receivables
to the Trust........................ A.I. Receivables Corp., a Delaware corporation ("AIR"), was recently
created for the sole purpose of acting as Transferor of the Receivables under
the Trust. See "Business of A.I. Receivables Corp., A.I. Credit Corp. and
AICCO, Inc.--General." AIR will purchase the Receivables from its two
parent companies, A.I. Credit Corp., a New Hampshire corporation
("AIC"), and AICCO, Inc., a California corporation ("AICCO") and a
wholly-owned subsidiary of AIC, which collectively were the original
transferors of Receivables to the Trust under the Original Agreement. AIC
funds loans to commercial borrowers to finance premiums on property and
casualty insurance policies throughout the United States, except in California
where premium finance loans are funded by AICCO. AIC is a
wholly-owned subsidiary of American International Group, Inc., a Delaware
corporation ("AIG"). AIG is a holding company which through its
5
<PAGE>
subsidiaries is primarily engaged in a broad range of insurance and
insurance-related activities in the United States and abroad.
Trust Assets Generally.............. The assets of the Trust will include the entire beneficial interest in
commercial premium finance loans to borrowers ("Obligors") to finance
premiums on property and casualty insurance policies governed by the law of
a State of the United States of America or the District of Columbia under
which the Obligors are the insureds (the "Loans"), funded by AIC or
AICCO, including (i) all amounts due and to become due and all collections
and recoveries on the Loans, and (ii) the proceeds of certain collateral
security securing the Loans. The beneficial interests described above are
herein referred to as the "Receivables."
The Loans are usually short-term in duration, generally with maturities under
one year, and bear fixed interest rates that are established generally based on
spreads over interest rates on money market investments of comparable
maturities prevailing at the time the Loans are made. Obligors usually
secure their Loan obligations to AIC or AICCO by pledging the Obligors'
rights to recover any unearned premium from the insurance company upon
cancellation of the related insurance policy prior to its expiration. AIC and
AICCO generally have the right to cancel the insurance policy and collect
such unearned premium from the insurance company following a payment
default on the related Loan. At December 31, 1997, in excess of 35% of the
aggregate outstanding loan account balance (as defined herein in the table
entitled "Outstanding Loan Account Balances by Size" under "The
Receivables"), represented loans funded by AIC or AICCO to finance
premiums on insurance policies issued by insurance affiliates of AIG. See
"Business of A.I. Receivables Corp., A.I. Credit Corp. and AICCO,
Inc.--Premium Finance Loan Origination; Collection Policy" and
"--Premium Finance Loan Underwriting Procedures."
AIC and AICCO originally conveyed to the Trustee pursuant to the Original
Agreement all Eligible Receivables owned by them as of November 30, 1994
(the "Cut-Off Date") and, subsequently, all Eligible Receivables relating to
Loans funded by them thereafter. AIC and AICCO will continue to transfer
Receivables to the Trustee prior to the Closing Date, but will cease doing so
as of the Closing Date. Receivables arising on the Closing Date and from
time to time thereafter may, and under certain circumstances set forth in the
Agreement will, be transferred to the Trustee by the Transferor until
termination of the Trust (such Receivables, the "Additional Receivables").
The Transferor will acquire such Receivables from AIC and AICCO
pursuant to the Receivables Sale Agreement. See "Description of the
Offered Certificates--Addition of Receivables" and "--Removal of
Receivables."
As of December 31, 1997, the average outstanding loan account balance (as
defined herein in the table entitled "Outstanding Loan Account Balances by
Size" under "The Receivables") was approximately $16,100, ranging from
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
approximately 46,000 loan accounts with balances of under $5,000, to 12
loan accounts with balances in excess of $5 million. The Transferor has
agreed that in the event Receivables relating to a single Obligor result
in Default Amounts equal to 0.60% or more of the outstanding principal balance of
the Receivables owned by the Trust as of the end of a Monthly Period,
such Default Amounts in excess of 0.60% of the outstanding principal balance of
Receivables owned by the Trust will be allocated solely to the Transferor Ownership
Interest. See "The Receivables" and "Description of the Offered Certificates."
For a description of certain other Default Amounts that may be allocated solely to the
Transferor Ownership Interest based upon the proportion of Receivables in the Trust relating
to Loans made to finance premiums paid to certain insurers, see "Description of the Offered
Certificates--Defaulted Loans; Charge-Offs."
Securities Offered.................. The aggregate initial principal amount of the Series 1998-1 Class A
Certificates will be $[__________] and of the Series 1998-1 Class B
Certificates will be $[__________]. The aggregate initial principal amount
of the Series 1998-1 Class C Certificates, which will be acquired on the
Closing Date by the Transferor and are not being offered hereby, will be
$[__________]. The Offered Certificates will be issued in book-entry form
only and will be represented by one or more Offered Certificates registered
in the name of Cede. A Certificate Owner will not be entitled to receive a
definitive certificate representing such person's interest, except in the event
that Definitive Certificates are issued under the limited circumstances
described herein. In such event, interests in the Offered Certificates will be
available in minimum denominations of $1,000 and integral multiples
thereof. See "Description of the Offered Certificates--Definitive
Certificates."
As used herein, the term "Holders of Offered Certificates" refers collectively
to the holders of the Series 1998-1 Class A Certificates and the Series 1998-1
Class B Certificates; the term "Series 1998-1 Certificateholders" refers
collectively to the holders of the Series 1998-1 Certificates; the terms "Series
1998-1 Class A Certificateholders," "Series 1998-1 Class B
Certificateholders" and "Series 1998-1 Class C Certificateholders" refer to
the holders of the Series 1998-1 Class A Certificates, the Series 1998-1 Class
B Certificates and the Series 1998-1 Class C Certificates, respectively; and
the term "Series 1994-1 Certificateholders" refers collectively to the holders
of the Series 1994-1 Certificates. All references herein to Holders of
Offered Certificates shall include Certificate Owners except as otherwise
specified herein.
Rights of Series 1998-1
Certificateholders
Generally........................... Each of the Series 1998-1 Certificates offered hereby and issued pursuant to
the Agreement (and each of the Series 1994-1 Certificates, which were
previously issued) represents an undivided interest in the assets of the Trust.
Each Series 1998-1 Certificate offered hereby represents the right to receive
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
payments of interest and principal, funded from a percentage of the collections in
respect of Principal Receivables and Finance Charge Receivables allocated to the
Series 1998-1 Certificates, and, under certain circumstances, from funds on
deposit in the Series 1998-1 Yield Enhancement Account and its allocable
portion of funds on deposit in the Excess Funding Account. On each Distribution Date
distributions of interest will be made first in respect of the Series 1998-1 Class
A Certificates, second in respect of the Series 1998-1 Class B Certificates and
third in respect of the Series 1998-1 Class C Certificates. On each Distribution Date
on which principal is distributable in respect of the Series 1998-1 Class A
Certificates, such principal will be payable after interest on the Series 1998-1
Class A Certificates and Series 1998-1 Class B Certificates has been paid.
Principal payments will not be made to Series 1998-1 Class B Certificateholders
until the final principal payment due in respect of the Series 1998-1 Class A
Certificates has been paid. Thus on each Distribution Date on which principal is
distributable in respect of the Series 1998-1 Class B Certificates, such principal
will be payable after interest on the Series 1998-1 Class A Certificates and
Series 1998-1 Class B Certificates and principal on the Series 1998-1 Class A
Certificates has been paid. On each such Distribution Date no payments of interest
or principal will be made in respect of the Series 1998-1 Class C Certificates unless
principal due in respect of the Series 1998-1 Class B Certificates has been paid.
For further information regarding the extent to which the Series 1998-1 Class B
Certificates are subordinated to the Series 1998-1 Class A Certificates and the extent
to which the Series 1998-1 Class C Certificates are subordinated to the Series
1998-1 Class A Certificates and Series 1998-1 Class B Certificates, see
"Description of the Offered Certificates--Application of Collections."
The Series 1998-1 Yield Enhancement Account will be funded on each Transfer Date with a
portion of the collections in respect of the Receivables otherwise allocable to the
Transferor Ownership Interest to cover shortfalls, if any, in the allocable funds
of the Trust available to pay amounts due on the related Distribution Date with
respect to the Series 1998-1 Certificates, to the extent provided herein. See "Series
1998-1 Yield Enhancement Account" in this Summary and "Description of the Offered
Certificates--Series 1998-1 Yield Enhancement Account."
The Series 1998-1 Certificates represent interests in the Trust only and do
not represent interests in or recourse obligations of AIR, AIC, AICCO, AIG
or any of their respective affiliates. Neither the Series 1998-1 Certificates,
the Loans nor the Receivables are insured or guaranteed by any
governmental agency or instrumentality or any other person.
Allocations of Collections
Among the Certificateholders
and the Transferor
Generally........................... Collections with respect to the Receivables will be allocated, based on the
respective ownership interests, among (i) the Series 1998-1 Class A
Certificateholders, the Series 1998-1 Class B Certificateholders and the
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Series 1998-1 Class C Certificateholders, (ii) the Series 1994-1 Certificateholders,
(iii) the ownership interest of the certificateholders of any other Series that
may be issued by the Trust in the future pursuant to the Agreement and the
applicable Series Supplement and (iv) the retained Transferor Ownership Interest, as
described below. The Series 1998-1 Class C Ownership Interest in the initial amount of
$[________] (which amount represents approximately [___]% of the sum of the
Series 1998-1 Class A Initial Ownership Interest, the Series 1998-1 Class B Initial
Ownership Interest and the Series 1998-1 Class C Initial Ownership Interest)
constitutes credit enhancement for the Offered Certificates, to the extent
described herein, and the Series 1998-1 Class B Ownership Interest in the amount of
$[_________] (which amount represents approximately [__]% of the sum of the
Series 1998-1 Class A Initial Ownership Interest, the Series 1998-1 Class B Initial
Ownership Interest and the Series 1998-1 Class C Initial Ownership Interest)
constitutes credit enhancement for the Series 1998-1 Class A Certificates, to the
extent described herein. The Transferor Ownership Interest is not subordinate to
the Series 1998-1 Certificates, although a portion of the collections in respect of
Receivables otherwise allocable to the Transferor Ownership Interest will be
available to the Series 1998-1 Certificates as yield enhancement (see "Description of
the Offered Certificates--Series 1998-1 Yield Enhancement Account") and under the
circumstances described under "Description of the Offered Certificates--Excess Funding
Account," a portion of losses on Receivables meeting specified concentration
levels (based on the identity of the related Obligor or the insurer to whom
financed premiums were paid) that would otherwise be allocable to the Series 1998-1
Certificates may be allocated to the Transferor Ownership Interest. See
"Description of Offered Certificates--Series 1998-1 Yield Enhancement Account," "--Excess
Funding Account" and "--Defaulted Loans; Charge-Offs."
Allocations of Finance
Charge Receivables,
Principal Receivables and
Default Amounts..................... The Series 1998-1 Class A Certificates, the Series 1998-1 Class B
Certificates and the Series 1998-1 Class C Certificates will each represent the
right to receive varying percentages of collections by the Trust of Finance
Charge Receivables and Principal Receivables, and will be allocated varying
percentages of Default Amounts, during each calendar month ending after the
Closing Date (a "Monthly Period"). Default Amounts arise as a result of a
charge-off by the Servicer as uncollectable of a Defaulted Loan related to a
Receivable held by the Trust. Collections of Finance Charge Receivables
and Default Amounts at all times, and collections of Principal Receivables
during the Series 1998-1 Revolving Period, will be allocated to the Series
1998-1 Certificateholders Ownership Interests based on the Series 1998-1
Floating Investor Percentage. Collections of Principal Receivables during the
Series 1998-1 Controlled Amortization Period and, if applicable, the Series
1998-1 Rapid Amortization Period will be allocated to the Series 1998-1
Certificateholders Ownership Interests based on the Series 1998-1 Fixed
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Investor Percentage. See "Description of the Offered Certificates--Allocation Percentages"
and "--Pay Out Events."
Payment Rights of Series
1998-1 Class A
Certificateholders
Generally........................... The Series 1998-1 Class A Certificates will represent the right to receive from collections
with respect to the Receivables allocated to the Series 1998-1 Class A Certificates funds up
to (but not in excess of) the amounts required to make (a) payments of interest accruing from
the Closing Date through [____________] at the per annum rate of [______]% and, with
respect to each Interest Period thereafter, at the per annum rate of [____]% above the
rate per annum shown on page 3750 of the Telerate screen or any successor page as
the composite London interbank offered rate for one-month United States dollar deposits
("LIBOR") determined as set forth herein on the related LIBOR Determination Date, but
in no event in excess of [____]% per annum (such rate, the "Series 1998-1 Class A
Certificate Rate"), and (b) payments of principal in the amounts described below
during the Series 1998-1 Class A Controlled Amortization Period or, if applicable,
during the Series 1998-1 Rapid Amortization Period, to the extent of the Series 1998-1
Class A Ownership Interest. Principal will be payable on each Distribution Date during
such period to Series 1998-1 Class A Certificateholders only after interest
payable on such date in respect of the Series 1998-1 Class A Certificates and the
Series 1998-1 Class B Certificates has been paid. The Series 1998-1 Class A Ownership
Interest may be less than the unpaid principal balance of the Series 1998-1
Class A Certificates in certain circumstances described herein, such as in
the event of significant losses on the Receivables. In the event of a reduction in
the Series 1998-1 Class A Ownership Interest, the Series 1998-1 Class A Monthly
Interest payable with respect to the Series 1998-1 Class A Certificates may be reduced.
Payment Rights of Series
1998-1 Class B
Certificateholders
Generally........................... The Series 1998-1 Class B Certificates will represent the right to receive from collections
with respect to the Receivables allocated to the Series 1998-1 Class B Certificates funds up
to (but not in excess of) the amounts required to make (a) payments of interest accruing from
the Closing Date through [____________] at the per annum rate of [_______]% and, with
respect to each Interest Period thereafter, at the per annum rate of [___]% above LIBOR
determined as set forth herein on the related LIBOR Determination Date, but in no event in
excess of [_____]% per annum (such rate, the "Series 1998-1 Class B Certificate Rate"),
and (b) payments of principal in the amounts described below during the Series 1998-1 Class B
Controlled Amortization Period or, if applicable, during the Series 1998-1 Rapid Amortization
Period, to the extent of the Series 1998-1 Class B Ownership Interest. If Series 1998-1
Available Investor Principal Collections are sufficient to pay the Series 1998-1 Controlled
Amortization Amount on
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each Distribution Date during the Series 1998-1 Controlled Amortization Period, the
principal amount of the Series 1998-1 Class B Ownership Interest will be paid in a
single payment on the [________] Distribution Date. No principal will be
paid to the Series 1998-1 Class B Certificateholders until the final
principal payment has been made in respect of the Series 1998-1 Class A Certificates.
On each Distribution Date, no interest will be paid to the Series 1998-1 Class B
Certificateholders until interest due and owing the Series 1998-1 Class A
Certificateholders on such Distribution Date is paid in full. The Series 1998-1
Class B Ownership Interest may be less than the total unpaid principal balance of the
Series 1998-1 Class B Certificates in certain circumstances described herein,
such as in the event of significant losses on the Receivables. In the event of a
reduction in the Series 1998-1 Class B Ownership Interest, the Series 1998-1 Class
B Monthly Interest payable with respect to the Series 1998-1 Class B Certificates may
be reduced.
Possible Reductions in
Series 1998-1
Certificateholders
Ownership Interests................. The initial amount of the Series 1998-1 Class A Ownership Interest is $[________] and
the initial amount of the Series 1998-1 Class B Ownership Interest is $[________].
The Series 1998-1 Class A Ownership Interest is subject to reduction, in the absence of
distributions thereon, in certain circumstances if the Series 1998-1 Class B Ownership
Interest and the Series 1998-1 Class C Ownership Interest are zero and (a) collections of
Principal Receivables otherwise allocable to the Series 1998-1 Certificateholders
Ownership Interests are reallocated to cover interest payable in respect of the
Offered Certificates and (b) Default Amounts allocated to the Series 1998-1
Class A Certificates exceed amounts available therefor as described herein.
The Series 1998-1 Class B Ownership Interest is subject to reduction, in the
absence of distributions thereon, in certain circumstances as a result of (a)
the reallocation of collections of Principal Receivables otherwise allocable to
the Series 1998-1 Certificateholders Ownership Interests to cover interest
payable in respect of the Offered Certificates and (b) the allocation to the
Series 1998-1 Class B Ownership Interest of Default Amounts, including
such amounts otherwise allocable to the Series 1998-1 Class A Ownership
Interest, in each case when the Series 1998-1 Class C Ownership Interest is
zero. See "Description of the Offered Certificates--Defaulted Loans;
Charge-Offs" and "--Reallocation of Cash Flows."
Payment Rights of the
Transferor Ownership
Interest............................ The Transferor Ownership Interest will represent the right to collections with
respect to the Receivables not allocated to the Series 1998-1 Class A
Ownership Interest, the Series 1998-1 Class B Ownership Interest, the Series
1998-1 Class C Ownership Interest, the Series 1994-1 Certificateholders or
the future holders of other Series of certificates that may be issued by the
Trust. As Additional Receivables are added to the Trust and as collections
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with respect to Principal Receivables and Default Amounts, if any, are
allocated to the Transferor Ownership Interest, the Transferor Ownership Interest
will fluctuate. Also, pursuant to the Agreement, (i) the Transferor may reduce
the Transferor Ownership Interest or (ii) if provided in the relevant Supplement,
certificateholders may tender certificates representing any outstanding Series of
certificates to the Trustee and the Transferor may reduce Transferor Ownership
Interest, and, upon satisfying certain conditions in the Agreement and as
described herein, cause the Trustee to issue one or more new Series as described
below in this Summary under "New Series Issuances Generally" and in "Description of
the Offered Certificates--New Series Issuances."
Series 1998-1
Termination......................... The final distribution by the Trust of principal and interest on the Offered
Certificates will be made no later than the [_________] Distribution Date (the
"Series 1998-1 Termination Date"). After the Series 1998-1 Termination
Date, the Trust will have no further obligation to pay principal or interest on
the Offered Certificates.
Other Series........................ The Trust has previously issued one other Series of certificates. In addition
to the Series 1998-1 Certificates to be issued pursuant to the Agreement on
the Closing Date, the Trust has previously offered by means of a separate
prospectus $200,000,000 in aggregate principal amount of Class A Floating
Rate Asset Backed Certificates, Series 1994-1 and $7,600,000 in aggregate
principal amount of Class B Floating Rate Asset Backed Certificates, Series
1994-1 (the "Series 1994-1 Offered Certificates"). Concurrently with the
issuance of the Series 1994-1 Offered Certificates, the Trust issued another
class of certificates (the "Series 1994-1 Class C Certificates") which are and
will continue to be held by the Original Transferors. See "The Trust--Other
Series" for a summary of the terms of the Series 1994-1 Offered Certificates.
Additional Series may be issued from time to time by the Trust. See
"Description of the Offered Certificates--New Series Issuances."
Receivables......................... The Receivables represent the entire beneficial interest in the related Loans,
including all monies due or to become due from the Obligors in payment of
finance charges, fees and service charges (collectively, together with
recoveries on Defaulted Loans, "Finance Charge Receivables") and principal
("Principal Receivables") owing or to become owing with respect to the
Loans and recoveries received with respect to Defaulted Loans. The
aggregate amount of Principal Receivables as of the Closing Date will be no
less than $[________]. The amounts of the Series 1998-1 Certificateholders
Ownership Interests, the Series 1994-1 certificateholders ownership interests
and the Transferor Ownership Interest will be determined on the basis of the
amount of Principal Receivables in the Trust from time to time. The
aggregate undivided interest in the Principal Receivables in the Trust
evidenced by the Series 1998-1 Certificates will never exceed the amount of
the Series 1998-1 Certificateholders Ownership Interests regardless of the
total amount of Principal Receivables in the Trust at any time.
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Pursuant to the Agreement, the Transferor may, and under certain
circumstances set forth in the Agreement will be required to, transfer to the
Trust Additional Receivables relating to Loans funded by AIC or AICCO in
the ordinary course of their businesses, and, in each case, sold to the
Transferor from time to time under the Receivables Sale Agreement. AIC
and AICCO presently expect to transfer all Eligible Receivables relating to
Loans funded by them from time to time to the Transferor for subsequent
transfer to the Trust. The Transferor will in any event be required to
transfer sufficient Additional Receivables to the Trust to maintain the
Minimum Transferor Ownership Interest; otherwise, a Pay Out Event will
occur and the Series 1998-1 Rapid Amortization Period will commence. See
"Description of the Offered Certificates--Addition of Receivables" and
"--Pay Out Events."
Further, pursuant to the Agreement, the Transferor has the right, subject to
certain limitations and conditions set forth in the Agreement and as described
herein, to remove certain Receivables designated by the Transferor from the
Trust (the "Removed Receivables") and accept the transfer of all the
Removed Receivables from the Trust. In connection with any permitted
removal of Receivables, the selection procedure for removal cannot be
materially adverse to Series 1998-1 Certificateholders and neither the then
ratings nor the federal income tax treatment of the Offered Certificates shall
be adversely affected by such removal. The Transferor does not presently
expect to remove Receivables from the Trust. See "Description of the
Offered Certificates--Removal of Receivables."
Servicer and
Servicing Fee....................... AIC is the servicer with respect to all Loans, other than those originated in
California, for which AICCO is the servicer. AIC will be fully obligated to
the Trust for AICCO's servicing performance. In certain limited
circumstances set forth in the Agreement and as described herein, AIC and
AICCO may resign or be removed as Servicer, in which event the Trustee or
a third party servicer may be appointed as successor servicer (AIC and
AICCO collectively (unless the context otherwise requires), or any such
successor servicer, are referred to herein as the "Servicer"). The Servicer is
permitted to delegate certain of its duties as servicer under the Agreement to
any of its affiliates other than AIR, but any such delegation will not relieve
the Servicer of its obligations thereunder.
For so long as AIC and AICCO are the Servicer, the Servicer will not be
paid a monthly fee as servicing compensation from the Trust (the "Servicing
Fee"). If AIC and AICCO cease to be the Servicer, then the monthly
Servicing Fee allocable to the Series 1998-1 Certificateholders will be equal
to one-twelfth of the product of 0.50% per annum and the then aggregate
Series 1998-1 Certificateholders Ownership Interests. On each Transfer
Date, funds on deposit in the Finance Charge Account will, if necessary, be
withdrawn for payment to the Servicer in respect of the Servicing Fee to be
allocated among the Series 1998-1 Certificateholders as described under
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"Description of the Offered Certificates--Servicing Compensation and
Payment of Expenses."
AIG Support
Agreements.......................... AIC, AICCO and AIG are parties to a support agreement in which AIG has
agreed to cause each of AIC and AICCO to have a minimum net worth of at
least $1 and to provide AIC and AICCO with sufficient funds on a timely
basis to meet when due their respective obligations under the Agreement and
certain other obligations as described herein. AIG and AIR will enter into a
similar support agreement on the Closing Date in which AIG will agree to
cause AIR to have a minimum net worth of at least $1 and to provide AIR
with sufficient funds on a timely basis to meet when due its obligations under
the Agreement and certain other obligations as described herein. AIG, AIC
and AIR have not, however, agreed to guarantee payment of the Series 1998-1
Certificates, Loans or Receivables. See "Description of the Offered
Certificates--Support Agreements" and "Special Considerations--Bankruptcy
Considerations."
Interest............................ Interest on the Offered Certificates for each Interest Period will be distributed on
[_________], 1998 and on the 15th day of each month thereafter, or if such day is
not a business day, on the next succeeding business day (each, a "Distribution Date"),
in an amount equal to (a) with respect to the Series 1998-1 Class A Certificates, the
product of (i) the actual number of days in the related Interest Period divided by 360,
(ii) the Series 1998-1 Class A Certificate Rate for such Interest Period and (iii) the
Series 1998-1 Class A Ownership Interest as of the preceding Record Date (or, in the
case of the first Distribution Date, as of the Closing Date) and (b) with respect to
the Series 1998-1 Class B Certificates, the product of (i) the actual number of days in
the related Interest Period divided by 360, (ii) the Series 1998-1 Class B Certificate
Rate for such Interest Period and (iii) the Series 1998-1 Class B Ownership Interest as
of the preceding Record Date (or, in the case of the first Distribution Date, as of
the Closing Date). Interest for any Distribution Date due but not paid on such
Distribution Date will be payable on the next succeeding Distribution Date, together
with additional interest on such amount at 2% over the applicable Certificate Rate
(such overdue interest, and additional interest thereon, "Additional Interest").
If the Series 1998-1 Class B Ownership Interest or the Series 1998-1 Class A
Ownership Interest is reduced as a result of the allocation of Default Amounts, the
related interest payable with respect to the Series 1998-1 Class B Certificates or
the Series 1998-1 Class A Certificates, as the case may be, in subsequent months will
be less than the amount of interest that would be payable by applying the applicable
Certificate Rate to the unpaid principal balance of the related class of Series
1998-1 Certificates. If the Series 1998-1 Class A Ownership Interest or the Series
1998-1 Class B Ownership Interest is reimbursed in full on any subsequent
Transfer Date from funds available for such purpose as described elsewhere herein,
interest that would have accrued on the Series 1998-1 Class A Ownership Interest or
Series 1998-1 Class B Ownership Interest, as the case may be, had the same not
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been reduced ("Prior Period Interest"), will be payable on the next succeeding
Distribution Date at the rate described under "Description of the Offered
Certificates--Application of Collections." In addition, the Agreement will provide
that payment of any Series 1998-1 Class B Additional Interest shall be suspended
during any period when the Series 1998-1 Class B Ownership Interest is zero and will
further provide for the cancellation of any such interest remaining unpaid on the first
date during the Series 1998-1 Class B Controlled Amortization Period or, if
applicable, the Series 1998-1 Rapid Amortization Period when the Series 1998-1
Class B Ownership Interest is or becomes zero. See "Description of the Offered
Certificates--Defaulted Loans; Charge-Offs," "--Series 1998-1 Yield Enhancement Account"
and "--Interest Payments."
The "Interest Period," with respect to any Distribution Date, will be the
period from the previous Distribution Date through the day preceding such
Distribution Date, except the initial Interest Period will be the period from
the Closing Date through the day preceding the initial Distribution Date.
In general, interest payments distributable to the Series 1998-1 Class A
Certificateholders will be funded from the portion of Finance Charge Receivables
collected during the preceding Monthly Period that is allocable to the Series
1998-1 Certificateholders Ownership Interests. If on any Transfer Date such
collections are insufficient to fully fund the Series 1998-1 Class A Monthly Interest,
then funds on deposit in the Series 1998-1 Yield Enhancement Account will be
allocated, to the extent available, for distribution to the Series 1998-1 Class A
Certificateholders in payment of such shortfall. If funds on deposit in the
Series 1998-1 Yield Enhancement Account are insufficient to fund the Series 1998-1
Class A Required Amount, which includes any shortfall in the payment of Series 1998-1
Class A Monthly Interest, then Series 1998-1 Reallocated Principal Collections
will be allocated, to the extent available, to fund the Series 1998-1 Class A Monthly
Interest.
In general, interest payments distributable to the Series 1998-1 Class B
Certificateholders will be funded from the portion of Finance Charge
Receivables collected during the preceding Monthly Period allocable to the
Series 1998-1 Certificateholders Ownership Interests remaining after payment
of interest due and owing the Series 1998-1 Class A Certificateholders on
each Distribution Date. If on any Transfer Date such collections are
insufficient to fully fund the Series 1998-1 Class B Monthly Interest, then
funds on deposit in the Series 1998-1 Yield Enhancement Account will be
allocated, to the extent available, for distribution to the Series 1998-1 Class
B Certificateholders in payment of such shortfall. If funds on deposit in the
Series 1998-1 Yield Enhancement Account are insufficient to fund the Series
1998-1 Class B Required Amount, which includes any shortfall in the
payment of Series 1998-1 Class B Monthly Interest, then Series 1998-1
Reallocated Principal Collections will be allocated, to the extent available, to
fund the Series 1998-1 Class B Monthly Interest. See "Series 1998-1 Yield
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Enhancement Account Generally" in this Summary and "Description of the
Offered Certificates--Interest Payments," "--Principal Payments" and
"--Reallocation of Cash Flows."
Revolving Period Prior to
Principal Amortization.............. The "Series 1998-1 Revolving Period" with respect to the Series 1998-1 Certificates means the
period from and including the Closing Date to, but not including, the earlier of (a) the
commencement of the Series 1998-1 Controlled Amortization Period and (b) the commencement of
the Series 1998-1 Rapid Amortization Period. The purpose of the Series 1998-1 Revolving
Period is to provide the Series 1998-1 Certificateholders with a period of time
during which they will be entitled to receive interest only, and no principal,
thereby extending the expected weighted average lives of the Series 1998-1
Certificates. During the Series 1998-1 Revolving Period, collections in respect of
Principal Receivables otherwise allocable in respect of one or more classes of the
Series 1998-1 Certificates will, subject to certain limitations set forth in the
Agreement and as described herein, be available to cover payments of interest on
the Offered Certificates. Any remaining such collections will be treated as Shared
Principal Collections and will be available to be applied to cover principal payments
due to or for the benefit of the Series 1994-1 Certificateholders and/or
certificateholders of other Series that may be issued in the future by the Trust, if so
specified in the Supplements for such other Series, or paid to the holder of the
Transferor Certificate. Conversely, Shared Principal Collections from the Series
1994-1 Certificates may be available to be applied to cover principal payments due to
or for the benefit of the Series 1998-1 Certificateholders. See "Description of the
Offered Certificates--Shared Principal Collections." Payment of principal with
respect to the Series 1998-1 Certificates is not scheduled to commence until the
[_______] Distribution Date, when principal payments are scheduled to begin with
respect to the Series 1998-1 Class A Certificates during the Series 1998-1 Class
A Controlled Amortization Period. See "Description of the Offered
Certificates--Principal Payments." See also the description under "Description of the
Offered Certificates--Pay Out Events" for the events which would lead to the
commencement of the Series 1998-1 Rapid Amortization Period and that could result
in earlier payments of principal with respect to the Offered Certificates.
Controlled Amortization
Period Generally.................... Unless a Pay Out Event has occurred, the Series 1998-1 Revolving Period
will end and the controlled amortization period with respect to the Series
1998-1 Certificates (the "Series 1998-1 Controlled Amortization Period"),
which includes controlled amortization periods for each class (the "Series
1998-1 Class A Controlled Amortization Period," the "Series 1998-1 Class B
Controlled Amortization Period" and the "Series 1998-1 Class C Controlled
Amortization Period," respectively), will commence on [________] (and the
first distribution of principal to the Series 1998-1 Class A Certificateholders
will occur on the [________________] Distribution Date). The purpose of
the Series 1998-1 Controlled Amortization Period is to provide the Series
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1998-1 Certificateholders with a period of time during which they will be entitled to
receive scheduled principal payments, thereby enabling them to estimate the
expected weighted average lives of the Series 1998-1 Certificates. The Series
1998-1 Class A Controlled Amortization Period will end on the earliest of (a) the
commencement of the Series 1998-1 Rapid Amortization Period, (b) the payment in
full of the Series 1998-1 Class A Ownership Interest or (c) the Series 1998-1
Termination Date. Unless a Pay Out Event has occurred, the Series 1998-1 Class B
Controlled Amortization Period will commence on the Distribution Date on which
the Series 1998-1 Class A Ownership Interest is paid in full (the "Series
1998-1 Class B Principal Commencement Date") and end on the earliest of (a) the
commencement of the Series 1998-1 Rapid Amortization Period, (b) the payment in
full of the Series 1998-1 Class B Ownership Interest or (c) the Series 1998-1
Termination Date. Unless a Pay Out Event has occurred, the Series 1998-1 Class C
Controlled Amortization Period will commence on the Distribution Date on which
the Series 1998-1 Class B Ownership Interest is paid in full (the "Series
1998-1 Class C Principal Commencement Date") and end on the earliest of (a) the
commencement of the Series 1998-1 Rapid Amortization Period, (b) the payment in
full of the Series 1998-1 Class C Ownership Interest or (c) the Series 1998-1
Termination Date.
Principal Amortization
of the Series 1998-1 Class
A Certificates...................... No principal will be payable to Series 1998-1 Class A Certificateholders until
the first Distribution Date with respect to the Series 1998-1 Class A
Controlled Amortization Period, or, upon the occurrence of a Pay Out Event
as described herein, the first Distribution Date with respect to the Series
1998-1 Rapid Amortization Period. On each Distribution Date during the
Series 1998-1 Class A Controlled Amortization Period, the Series 1998-1
Class A Certificateholders will receive a principal payment equal to the least
of (i) Series 1998-1 Available Investor Principal Collections on deposit in the
Principal Account with respect to such Distribution Date, (ii) the Series
1998-1 Controlled Distribution Amount, which is equal to the sum of the
Series 1998-1 Controlled Amortization Amount, which is $[_________], and
any existing applicable Series 1998-1 Deficit Controlled Amortization
Amount and (iii) the Series 1998-1 Class A Ownership Interest for such
Distribution Date. See "Description of the Offered Certificates--Principal
Payments" and "--Application of Collections."
Principal Amortization of
the Series 1998-1
Class B Certificates................ No principal will be payable to the Series 1998-1 Class B Certificateholders
until the Series 1998-1 Class A Ownership Interest is paid in full. On each
Distribution Date during the Series 1998-1 Class B Controlled Amortization
Period, the Series 1998-1 Class B Certificateholders will receive a principal
payment equal to the least of (i) Series 1998-1 Available Investor Principal
Collections on deposit in the Principal Account with respect to such
Distribution Date (minus the portion of such Series 1998-1 Available Investor
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Principal Collections applied to Series 1998-1 Class A Monthly Principal on such
date), (ii) the Series 1998-1 Controlled Distribution Amount (minus the portion of
such Series 1998-1 Controlled Distribution Amount applied to Series 1998-1 Class A
Monthly Principal on such date) and (iii) the Series 1998-1 Class B Ownership
Interest for such Distribution Date. If Series 1998-1 Available Investor Principal
Collections are sufficient to pay the Series 1998-1 Controlled Amortization
Amount on each Distribution Date during the Series 1998-1 Controlled Amortization
Period, the Series 1998-1 Class B Ownership Interest will be paid in a single payment
on the [______] Distribution Date. No principal will be payable to the Series
1998-1 Class C Certificateholders until the Series 1998-1 Class A Ownership Interest
and Series 1998-1 Class B Ownership Interest are paid in full. See "Description
of the Offered Certificates--Principal Payments" and "--Application of Collections."
Rapid Amortization
Period.............................. During the period from the day on which a Pay Out Event has occurred and ending on
the earlier of (a) the date on which the Series 1998-1 Certificateholders Ownership
Interests have been paid in full and (b) the Series 1998-1 Termination Date (the
"Series 1998-1 Rapid Amortization Period"), all Series 1998-1 Available Investor
Principal Collections received during each Monthly Period will be distributed on the
related Distribution Date in the order of priority described below, up to the
aggregate Series 1998-1 Certificateholders Ownership Interests on such date. This is
in contrast to the Series 1998-1 Controlled Amortization Period during which the amount
of collections in respect of Principal Receivables to be distributed to Series
1998-1 Certificateholders on any related Distribution Date will be subject to
specific limits as described above and may be less than the total Series 1998-1
Available Investor Principal Collections received by the Trust during the related
Monthly Period. During the Series 1998-1 Rapid Amortization Period, all Series
1998-1 Available Investor Principal Collections will be distributed monthly on
each Distribution Date to the Series 1998-1 Class A Certificateholders and, following
payment in full of the Series 1998-1 Class A Ownership Interest, to the Series 1998-1
Class B Certificateholders and, following payment in full of the Series 1998-1 Class
B Ownership Interest, to the Series 1998-1 Class C Certificateholders, beginning with
the first Distribution Date following commencement of the Series 1998-1 Rapid
Amortization Period.
Pay Out Events...................... Pay Out Events, that is, events that will cause the commencement of the
Series 1998-1 Rapid Amortization Period and may result in the payment of
Principal Receivables collections allocable to the Series 1998-1
Certificateholders earlier than scheduled generally include such events as (a)
specified defaults in the remittance or deposit of funds or covenant breaches
by AIC, AICCO or the Transferor, (b) breaches of specified representations
and warranties by AIC, AICCO or the Transferor, (c) a Series 1998-1
Annualized Monthly Excess Spread Amount below 400 basis points for three
consecutive Monthly Periods, (d) specified failure of the Transferor to
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maintain the Transferor Ownership Interest at least equal to the Minimum Transferor
Ownership Interest, (e) specified Servicer Defaults, (f) a Monthly Payment Rate of
less than 14% for three consecutive Monthly Periods, (g) a Financed Premium Percentage
of more than 90% in respect of Additional Receivables transferred to the Trust for
three consecutive Monthly Periods, (h) certain events of bankruptcy or insolvency
related to AIC, AICCO or the Transferor, (i) the inability, for any reason, of the
Transferor to transfer Additional Receivables to the Trust and (j) a breach
by AIG of the AIC Support Agreement or a breach by AIC of its support obligations
under the Agreement or the AIC Support Agreement with respect to AICCO or a breach
by AIG of the AIR Support Agreement. See "Description of the Offered
Certificates--Pay Out Events" for a further discussion of the events which might lead
to the commencement of the Series 1998-1 Rapid Amortization Period.
Payment Priorities.................. On each Distribution Date during the Series 1998-1 Revolving Period
collections allocable to the Series 1998-1 Certificates will be allocated as
described herein to pay, in the following priority: (i) interest due the Series
1998-1 Class A Certificateholders, (ii) interest due the Series 1998-1 Class B
Certificateholders, and (iii) interest due the Series 1998-1 Class C
Certificateholders. On each Distribution Date during the Series 1998-1
Controlled Amortization Period or the Series 1998-1 Rapid Amortization
Period, collections allocable to the Series 1998-1 Certificates will be
allocated as described herein to pay, in the following priority: (i) interest due
the Series 1998-1 Class A Certificateholders, (ii) interest due the Series
1998-1 Class B Certificateholders, (iii) principal due the Series 1998-1 Class
A Certificateholders, (iv) principal due the Series 1998-1 Class B
Certificateholders, (v) interest due the Series 1998-1 Class C
Certificateholders, and (vi) principal due the Series 1998-1 Class C
Certificateholders. See "Description of the Offered
Certificates--Application of Collections."
Series 1998-1 Yield
Enhancement Account
Generally........................... On each Transfer Date, the Servicer shall deposit into an account (the
"Series 1998-1 Yield Enhancement Account") maintained by the Trustee for
the benefit of the Series 1998-1 Certificateholders an amount equal to the
Series 1998-1 Available Yield Enhancement Amount for such date out of
Receivables collections otherwise allocable to the holder of the Transferor
Certificate in respect of the immediately preceding Monthly Period. In
addition, the Servicer will deposit into the Series 1998-1 Yield Enhancement
Account on each Transfer Date any Series 1998-1 Excess Finance Charges.
The Series 1998-1 Available Yield Enhancement Amount on any Transfer
Date will equal (a) during the Series 1998-1 Revolving Period, the product of
(i) [___]% and (ii) the product of (A) the collections for the related Monthly
Period otherwise allocable to the Transferor Ownership Interest and (B) the
Series 1998-1 Floating Investor Percentage divided by one minus the
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Aggregate Investor Percentage, and (b) during the Series 1998-1 Controlled
Amortization Period and the Series 1998-1 Rapid Amortization Period, if any, the
product of (i) [___]% and (ii) the product of (A) the collections for the related
Monthly Period otherwise allocable to the Transferor Ownership Interest and (B) in
the case of collections of Finance Charge Receivables allocable to the Transferor
Ownership Interest, the Series 1998-1 Floating Investor Percentage divided by one
minus the Aggregate Investor Percentage, and in the case of collections of Principal
Receivables allocable to the Transferor Ownership Interest, the Series 1998-1 Fixed
Investor Percentage divided by one minus the Aggregate Investor Percentage; provided
that the Series 1998-1 Available Yield Enhancement Amount for any Transfer Date
will be capped so that it will not exceed the sum of Series 1998-1 Class A Monthly
Interest, Series 1998-1 Class A Additional Interest, Series 1998-1 Class B Monthly
Interest, Series 1998-1 Class B Additional Interest, Series 1998-1 Class C Monthly
Interest and Series 1998-1 Class C Additional Interest, for such Transfer
Date. See "Description of the Offered Certificates--Series 1998-1 Yield
Enhancement Account" and "--Interest Payments."
Uses of Funds in the
Series 1998-1 Yield
Enhancement Account
Generally........................... Funds on deposit in the Series 1998-1 Yield Enhancement Account on each
Transfer Date will be available for application on the next Distribution Date
in respect of the Series 1998-1 Certificates to the extent and in the priorities
set forth under "Description of the Offered Certificates--Series 1998-1 Yield
Enhancement Account." In general, such funds will be available to cover
interest payments due on the Series 1998-1 Certificates, to cover servicing
fees allocable to the Series 1998-1 Certificates, to avoid a reduction in their
respective ownership interests due to Default Amounts otherwise allocable to
the Series 1998-1 Certificates and to reimburse reductions in such ownership
interests due to allocation of Default Amounts in respect of previous Transfer
Dates. There can be no assurance that funds on deposit in the Series 1998-1
Yield Enhancement Account, together with the portion of Finance Charge
Receivables collections allocable to the Series 1998-1 Certificates on any
particular Transfer Date, will be sufficient to cover any or all of such
purposes.
On each Transfer Date, any amount in excess of the Series 1998-1 91 Day
Delinquency Amount remaining in the Series 1998-1 Yield Enhancement
Account after application of the funds on deposit therein for the purposes
described above will be paid to the holder of the Transferor Certificate,
provided that a Pay Out Event has not occurred. Amounts so paid will not
be available on future Distribution Dates for payment or allocation to the
holders of the Series 1998-1 Certificates. See "Description of the Offered
Certificates--Series 1998-1 Yield Enhancement Account."
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Principal Collections
Available to Supplement
Series 1998-1 Yield
Enhancement Amount.................. If, on any Transfer Date, funds on deposit in the Series 1998-1 Yield Enhancement
Account are less than the Series 1998-1 Class A Required Amount, collections in respect of
Principal Receivables during the preceding Monthly Period that are allocable first to the
Series 1998-1 Class C Ownership Interest, then to the Series 1998-1 Class B Ownership Interest
and finally to the Series 1998-1 Class A Ownership Interest with respect to such Monthly
Period will be used to fund the remaining Series 1998-1 Class A Required Amount. Any
reallocation of Principal Receivables collections to fund the Series 1998-1 Class A Required
Amount or, as described in the following paragraph, the Series 1998-1 Class B
Required Amount will result in a corresponding reduction in the Series
1998-1 Certificateholders Ownership Interests. The amount of any such reduction
will be allocated first to reduce the Series 1998-1 Class C Ownership Interest,
second to reduce the Series 1998-1 Class B Ownership Interest and lastly to reduce the
Series 1998-1 Class A Ownership Interest.
If Series 1998-1 Reallocated Principal Collections are insufficient to fund
such remaining Series 1998-1 Class A Required Amount, then the Series
1998-1 Class C Ownership Interest (after giving effect to reductions therein
for any Series 1998-1 Class C Charge-Offs and Series 1998-1 Reallocated
Principal Collections on such Transfer Date) will be reduced by the amount
of such deficiency. In the event that such reduction would cause the Series
1998-1 Class C Ownership Interest to be a negative number, the Series
1998-1 Class C Ownership Interest will be reduced to zero, and the Series
1998-1 Class B Ownership Interest (after giving effect to reductions therein
for any Series 1998-1 Class B Charge-Offs and any Series 1998-1
Reallocated Principal Collections on such Transfer Date) will be reduced by
the amount by which the Series 1998-1 Class C Ownership Interest would
have been reduced below zero. In the event that such reduction would cause
the Series 1998-1 Class B Ownership Interest to be a negative number, the
Series 1998-1 Class B Ownership Interest will be reduced to zero and the
Series 1998-1 Class A Ownership Interest (after giving effect to reductions
therein for any Series 1998-1 Reallocated Principal Collections on such
Transfer Date) will be reduced (but not below zero) by the amount by which
the Series 1998-1 Class B Ownership Interest would have been reduced
below zero (such reduction, a "Series 1998-1 Class A Charge-Off"). If the
Series 1998-1 Class C Ownership Interest and the Series 1998-1 Class B
Ownership Interest are reduced to zero, the Series 1998-1 Class A
Certificateholders will bear directly the credit risks associated with their
undivided interests in the Trust. See "Special Considerations--Premium
Finance Loan Credit and Related Considerations," "Description of the
Offered Certificates--Reallocation of Cash Flows" and "--Defaulted Loans;
Charge-Offs."
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If, on any Transfer Date, funds on deposit in the Series 1998-1 Yield Enhancement
Account and not required to pay the Series 1998-1 Class A Required Amount are less
than the Series 1998-1 Class B Required Amount, collections in respect of Principal
Receivables during the preceding Monthly Period that are available but not required
to pay the Series 1998-1 Class A Required Amount will be used to fund such remaining
Series 1998-1 Class B Required Amount. If Series 1998-1 Reallocated Principal
Collections are insufficient to fund the remaining Series 1998-1 Class B Required
Amount, then the Series 1998-1 Class C Ownership Interest (after giving effect to
reductions therein for any Series 1998-1 Class C Charge-Offs and Series 1998-1
Reallocated Principal Collections on such Transfer Date) will be reduced by the
amount of such deficiency. In the event that such reduction would cause the Series
1998-1 Class C Ownership Interest to be a negative number, the Series 1998-1 Class C
Ownership Interest will be reduced to zero, and the Series 1998-1 Class B Ownership
Interest (after giving effect to reductions therein for any Series 1998-1 Reallocated
Principal Collections on such Transfer Date) will be reduced (but not below zero)
by the amount by which the Series 1998-1 Class C Ownership Interest would have been
reduced below zero (such reduction, a "Series 1998-1 Class B Charge-Off"). If the
Series 1998-1 Class C Ownership Interest is reduced to zero, the Series 1998-1 Class B
Certificateholders will bear directly the credit risks associated with their
undivided interests in the Trust.
Any reallocation of Principal Receivables collections described above that
occurs during the Series 1998-1 Controlled Amortization Period or any
Series 1998-1 Rapid Amortization Period could slow the rate of amortization
of the Series 1998-1 Class A Certificates and/or the Series 1998-1 Class B
Certificates.
In the event of a reduction of the Series 1998-1 Class A Ownership Interest,
the Series 1998-1 Class B Ownership Interest or the Series 1998-1 Class C
Ownership Interest, the percentage of future collections of Finance Charge
Receivables and Principal Receivables available to fund payments with
respect to the Series 1998-1 Class A Certificates and the Series 1998-1 Class
B Certificates will be decreased. See "Description of the Offered
Certificates--Reallocation of Cash Flows" and "--Defaulted Loans;
Charge-Offs."
New Series Issuances
Generally........................... The Agreement will authorize the Trustee to issue pursuant to one or more
supplements to the Agreement (each, a "Supplement") two types of
certificates: (i) one or more series of certificates (each, a "Series") which
may be issued in more than one class with varying rights and priorities and
which will be transferable and have the characteristics described below and
(ii) certificates evidencing the Transferor Ownership Interest (collectively,
the "Transferor Certificate"), currently held by AIC and AICCO and to be
transferred to the Transferor on or about the Closing Date, and thereafter
held by the Transferor. Such Transferor Certificate will be transferable only
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as provided in the Agreement. The Series 1994-1 Certificates have previously been
issued pursuant to such authority under the Original Agreement. See "The Trust--Other
Series." The Agreement also provides that, pursuant to any one or more Supplements,
the Transferor may reduce the Transferor Ownership Interest (a "Transferor Ownership
Interest Reduction") or, if provided in the relevant Supplement, certificateholders may
tender certificates representing any outstanding Series of certificates to the
Trustee and the Transferor may reduce the Transferor Ownership Interest (an "Investor
Exchange"), in either case to effectuate the issuance of one or more new Series (any
new Series issuance pursuant to a Transferor Ownership Interest Reduction or
an Investor Exchange is referred to as a "New Series Issuance"). The Series 1998-1
Supplement permits an Investor Exchange and corresponding New Series Issuance with
respect to the Series 1998-1 Certificates. See "Description of the Offered
Certificates--New Series Issuances." Under the Agreement, the Transferor may define,
with respect to any Series, the Principal Terms of the Series. The Transferor may
offer any Series to the public or other investors under a prospectus or other
disclosure document (a "Disclosure Document") in transactions either
registered under the Securities Act or exempt from registration thereunder,
directly or through the Underwriters or one or more other underwriters or placement
agents, in fixed-price offerings or in negotiated transactions or otherwise. The
Transferor may offer, from time to time, additional Series issued by the Trust. The
Trust will, as promptly as practicable, include in a periodic report filed with the
Securities and Exchange Commission with respect to the Series 1998-1 Certificates,
disclosure of all information related to issuance of any Series not required to be
registered under the Securities Act that is material to the holders of, or potential
investors in, the Series 1998-1 Certificates. See "Description of the
Offered Certificates--New Series Issuances." However, at all times, the interest in the
Principal Receivables in the Trust represented by the Transferor Ownership
Interest is required to equal or exceed the Minimum Transferor Ownership Interest.
Requirements For
New Series Issuances................ Under the Agreement and pursuant to a Supplement, a New Series Issuance
may occur only upon delivery to the Trustee of the following: (i) a
Supplement specifying the Principal Terms of such Series, (ii) an opinion of
counsel covering certain tax matters as described herein, (iii) if required by
the related Supplement, the form of Enhancement, (iv) if an Enhancement is
required by the Supplement, an appropriate Enhancement instrument or
agreement, (v) written confirmation from each Rating Agency that the New
Series Issuance will not result in such Rating Agency reducing or
withdrawing its then existing rating on any then outstanding Series rated by
it, and (vi) if applicable, the certificates representing the Series to be
exchanged.
In light of the aforementioned requirements for a New Series Issuance,
including the required ratings confirmation and tax opinion, the Transferor
does not presently expect that any New Series Issuance, including any
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issuance as part of an Investor Exchange, will have a material adverse effect on the
Series 1998-1 Certificates. There can be no assurance, however, that the Principal
Terms of any other Series, including any Series issued from time to time hereafter,
might not have an impact on the timing and amount of payments received by a Series
1998-1 Certificateholder, including as a result of the refixing of the percentage
utilized with respect to the allocation of the Principal Receivables. See "Description
of the Offered Certificates--New Series Issuances" and "--Allocation Percentages."
Denomination........................ The Offered Certificates will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof.
Registration of
Certificates........................ The Offered Certificates will initially be represented by certificates registered
in the name of Cede, as the nominee of DTC. No Certificate Owner will be
entitled to receive a definitive certificate representing such person's interest,
except in the event that Definitive Certificates are issued under the limited
circumstances described herein. See "Description of the Offered
Certificates--Definitive Certificates."
Collections......................... The Servicer will deposit collections of Receivables in the Collection
Account described under "Description of the Offered Certificates--The
Collection Account" at the times and to the extent therein described. All
amounts deposited in the Collection Account will be allocated in the manner
provided in the Agreement, as supplemented by the Series 1994-1
Supplement, the Series 1998-1 Supplement and the Supplements relating to
any future Series, by the Servicer between amounts collected on Principal
Receivables and amounts collected on Finance Charge Receivables. All such
amounts will then be allocated in accordance with the respective interests of
the Series 1998-1 Certificateholders, the Series 1994-1 Certificateholders, the
certificateholders of any other Series and the holder of the Transferor
Certificate in the Principal Receivables and in the Finance Charge
Receivables of the Trust. See "Description of the Offered
Certificates--Allocation Percentages."
Shared Principal
Collections......................... The Offered Certificates are included in Series 1998-1. The Series 1994-1
Certificates were previously issued and other Series may be issued in the
future. Collections of Principal Receivables allocated to the Series 1998-1
Certificateholders Ownership Interests with respect to the Series 1998-1
Certificates that are not needed to make payments on the Series 1998-1
Certificates will be allocated, if necessary, to cover principal payments due
to or for the benefit of the Series 1994-1 Certificateholders and may be
allocated for such purposes with respect to other Series of certificates
("Shared Principal Collections"). Any such reallocation will not result in a
reduction in the Series 1998-1 Certificateholders Ownership Interests. In
addition, collections of Principal Receivables and certain other amounts
otherwise allocable to the Series 1994-1 Certificateholders, to the extent such
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collections are not needed to make payments to or deposits for the benefit of
the Series 1994-1 Certificateholders, will be allocated, if necessary, to cover
principal payments due to or for the benefit of the Series 1998-1
Certificateholders and may be applied for such purposes with respect to other
Series of certificates. See "Description of the Offered Certificates--Shared
Principal Collections."
Deposits in the
Excess Funding
Account............................. In certain circumstances as described herein, if on any date the Transferor
Ownership Interest equals or is less than the Minimum Transferor Ownership
Interest as of the end of the preceding Monthly Period, funds (to the extent
available therefor as described herein) otherwise payable to the holder of the
Transferor Certificate on such date will be deposited in the Excess Funding
Account. Funds allocable to the Series 1998-1 Certificates on deposit in the
Excess Funding Account at the beginning of any Series 1998-1 Rapid
Amortization Period for the Series 1998-1 Certificates will be available for
payment to the Series 1998-1 Certificateholders in respect of principal. See
"Description of the Offered Certificates--Excess Funding Account."
Optional
Repurchase.......................... The Series 1998-1 Certificates will be subject to optional repurchase by the
Transferor on any Distribution Date on or after the Distribution Date on
which the Series 1998-1 Certificateholders Ownership Interests are reduced
to an amount less than or equal to $[________] (10% of the Series 1998-1
Initial Certificateholders Ownership Interests), if certain conditions set forth
in the Agreement and as described herein are met (a "Cleanup Call"). The
repurchase price will be equal to the sum of the unpaid Series 1998-1
Certificateholders Ownership Interests and all accrued and unpaid interest on
the Series 1998-1 Certificates through the day preceding the Distribution
Date on which the Cleanup Call occurs less amounts, if any, on deposit at
such Distribution Date in the Series 1998-1 Distribution Account for the
payment of principal and interest due on the Series 1998-1 Certificates. See
"Description of the Offered Certificates--Final Payment of Principal;
Termination of the Trust."
Trustee............................. The First National Bank of Chicago, a national banking association (the
"Trustee"). The Corporate Trust Office is located at One First National
Plaza, Suite 0126, Chicago, Illinois, 60670-0126, except that for purposes of
notices to the Trustee and the registration of transfer and exchange of the
Series 1998-1 Certificates, the Corporate Trust Office is located at 14 Wall
Street, Eighth Floor, New York, New York 10005.
Tax Status.......................... On the Closing Date, counsel to the Transferor will issue its opinion, subject
to the assumptions set forth therein, that under existing law, as more fully
discussed under "Certain United States Federal Income Tax Consequences,"
the Offered Certificates will be characterized as debt secured by the
Receivables for federal income tax purposes. Under the Agreement, the
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holder of the Transferor Certificate and the Certificate Owners will agree to treat
the Offered Certificates as debt of the Transferor for federal, state and local
income, franchise and other tax purposes. See "Certain United States Federal Income
Tax Consequences" for additional information concerning the application of
United States federal income and certain state and local tax laws to an investment
in the Offered Certificates.
ERISA Plans......................... The purchase of Offered Certificates by (a) any employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (b) any plan or other arrangement (including an
individual retirement account or Keogh plan) that is subject to section 4975
of the Code, or (c) any entity whose underlying assets include "plan assets"
under regulations issued by the Department of Labor by reason of any such
plan's investment in the entity ("ERISA Plans") may constitute or result in
prohibited transactions or other violations of ERISA. Therefore, the Offered
Certificates may not be acquired by any ERISA Plans. By their acceptance
of Offered Certificates, the Holders of Offered Certificates will be deemed to
have represented and warranted that they are not subject to the foregoing
limitation.
Ratings of Offered
Certificates........................ It is a condition to the issuance of the Series 1998-1 Class A Certificates that
they be rated "AAA" by Standard & Poor's Ratings Group ("Standard &
Poor's") and Aaa by Moody's Investors Service, Inc. ("Moody's"). The
rating of the Series 1998-1 Class A Certificates is based on the collectability
of the Receivables, the terms of the Series 1998-1 Class B Certificates and of
the Series 1998-1 Class C Certificates, including the subordination terms, the
availability of funds to be deposited into the Series 1998-1 Yield
Enhancement Account, the loss allocation method and the Support
Agreements with AIG.
It is a condition to the issuance of the Series 1998-1 Class B Certificates that
they be rated at least "A" by Standard & Poor's and "A2" by Moody's. The
rating of the Series 1998-1 Class B Certificates is based on the collectability
of the Receivables, the terms of the Series 1998-1 Class C Certificates,
including the subordination terms, the availability of funds to be deposited
into the Series 1998-1 Yield Enhancement Account, the loss allocation
method and the Support Agreements with AIG.
The ratings address the likelihood of full payment of principal and interest of
the Offered Certificates by the Series 1998-1 Termination Date. Any such
rating will not address the possibility of the occurrence of a Pay Out Event
with respect to any such class or the possibility of the imposition of United
States withholding tax with respect to non-U.S. Holders of Offered
Certificates. The rating will not be a recommendation to purchase, hold or
sell any such Offered Certificates, and such rating will not comment as to the
marketability of such Offered Certificates, any market price or suitability for
a particular investor. There is no assurance that any rating will not be
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lowered or withdrawn entirely by a Rating Agency if in such Rating
Agency's judgment future circumstances relating to the basis of the ratings,
such as adverse changes in the collectability of the Receivables or a lowering
of AIG's present long-term debt rating, so warrant. See "Special
Considerations--Certificate Rating."
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SPECIAL CONSIDERATIONS
Limited Liquidity. There is currently no market for the Offered
Certificates. The Underwriters intend to make a market in the Offered
Certificates but are not obligated to do so. There is no assurance that a
secondary market will develop or, if it does develop, that it will provide
Holders of Offered Certificates with liquidity of investment or that it will
continue until the Offered Certificates are paid in full.
Premium Finance Loan Credit and Related Considerations. Commercial
premium finance loans entail several different risks, including (a) the
creditworthiness of the borrower (the "Obligor"), (b) the creditworthiness of
the insurance company, in those cases where reliance is placed on the right to
unearned premiums as collateral for the loan, and (c) the capabilities and
operating procedures of the insurance agent or broker that (i) places the
insurance policy, (ii) serves as a source of significant information concerning
the loan transaction and (iii) may disburse the loan proceeds or collect
unearned premium funds. Application of federal and state bankruptcy, debtor
relief or insolvency laws to an insolvency of an Obligor, insurance company or
insurance agent or broker involved with a loan would affect the interests of the
Holders of Offered Certificates in the Receivables if such laws result in any
Receivables being written off as uncollectable or prevent the cancellation of
such Obligor's insurance policy or the collection of related unearned premium,
if any, which may serve as collateral for such Obligor's Loan. See "Business of
A.I. Receivables Corp., A.I. Credit Corp. and AICCO, Inc.--Premium Finance Loan
Underwriting Procedures" and "Description of the Offered Certificates--Defaulted
Loans; Charge-Offs."
Bankruptcy Considerations. The Transferor will transfer to the Trust
pursuant to the Agreement the entire beneficial interest in the Loans funded by
AIC or AICCO to Obligors to finance premiums on property and casualty insurance
policies, including (a) the right to receive payments on the Loans, all amounts
due and to become due and all collections and recoveries thereon and (b) the
proceeds of certain collateral security with respect thereto. Only the
beneficial interest in the Loans has heretofore been transferred to the Trust by
the Original Transferors under the Original Agreement, and only the beneficial
interest therein will be transferred by the Original Transferors to the
Transferor under the Receivables Sale Agreement and by the Transferor to the
Trust under the Agreement. It is intended that AIC or AICCO, as the case may be,
will hold legal title to the Loans for state regulatory purposes and in order to
service and collect the Loans, but that otherwise AIC or AICCO will be acting as
nominal title holder only. Accordingly, the Trust's rights with respect to the
Loans will be derivative through the Transferor and AIC and AICCO. Neither the
Transferor nor the Trust will (i) have made any loans directly to any Obligor,
(ii) directly purchase any loans from Third Party Originators, (iii) have any
direct contractual relationships with any Obligors or (iv) have any direct
security interest in, or direct rights with respect to, any assets or rights of
any Obligors pledged as collateral for the Loans. Accordingly, the Trustee may
not have the ability to exercise remedies directly against Obligors and the
exercise of any such remedies may require the assistance or cooperation of AIC
or AICCO.
The Transferor will represent and warrant in the Agreement that its
transfer of Future Receivables to the Trust as of the Closing Date and
thereafter is a valid transfer of Receivables to the Trust. The Transferor will
also warrant and covenant in the Agreement that the Future Receivables have been
and will be transferred free and clear of any adverse claim and that, except for
transfers to the Trust pursuant to the Agreement or as otherwise provided
therein with respect to a permitted merger, consolidation or sale of assets by
the Transferor, the Transferor will not sell, pledge, assign, transfer or grant
any adverse claim on any Receivable (or interest therein) or any other asset of
the Trust. The Original Transferors will have made similar representations,
warranties and covenants with respect to the Existing Receivables under the
Agreement.
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Section 541(d) of the United States Bankruptcy Code (the "Bankruptcy
Code") provides, in pertinent part, that where a debtor retains only legal title
to property to service the property, but does not retain an equitable interest,
the property included in the debtor's bankruptcy estate will be limited to the
debtor's legal title interest only and not to any equitable interest it does not
hold. Since (i) there appears to be uncertainty as to the application of Section
541(d) to property interests outside of real estate mortgage loans, (ii) AIC and
AICCO will be retaining an equitable interest in the Receivables through the
ownership of the Series 1994-1 Class C Certificates, and (iii) the Transferor
will be retaining an equitable interest in the Receivables through the
Transferor Ownership Interest and through the ownership of the Series 1998-1
Class C Certificates, a court could find that the Receivables had not been sold
and removed from the estate of either AIC, AICCO or the Transferor, but remain
part of any such entity's estate in the event of bankruptcy. Further, in Octagon
Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), cert. den., 114 S.
Ct. 554, the United States Court of Appeals for the 10th Circuit suggested that
even where a transfer of accounts from a seller to a buyer constitutes a "true
sale," the accounts would nevertheless constitute property of the seller's
estate in a bankruptcy of the seller.
In light of the foregoing, a creditor or trustee-in-bankruptcy of any
of AIC, AICCO or AIR could attempt to take the position that the transfer of
such beneficial interest pursuant to the Receivables Sale Agreement or the
Agreement was not a sale and should be recharacterized as an assignment of
collateral as security for the benefit of the Transferor or the holders of
certificates issued by the Trust. If the transfer to the Transferor or to the
Trust were deemed to be a grant to the Transferor or to the Trust of a security
interest in the Receivables, the Trustee may have an unperfected security
interest therein that will not have a priority over other, unsecured creditors,
and would be subordinate to secured creditors, of AIC, AICCO or the Transferor.
Also, if it were determined that the Trust or the Transferor had only an
unperfected security interest in its assets, payments made within one year of a
bankruptcy proceeding in respect of AIC, AICCO or the Transferor could be
subject to recapture as assets of such entity's bankruptcy estate pursuant to
Section 547 of the Bankruptcy Code. Holders of Offered Certificates,
consequently, could experience delays in payment or possibly losses in their
investment in the Offered Certificates if a bankruptcy proceeding in respect of
AIC, AICCO or the Transferor were to occur. AIG has agreed for the benefit of
the Trustee and the certificateholders of all outstanding Series in the AIC
Support Agreement described elsewhere herein to cause each of AIC and AICCO to
have a minimum net worth of at least $1 and, if AIC or AICCO has insufficient
funds to (a) meet any of its obligations under the Agreement or (b) pay any of
its other obligations when due (except for any such obligations which are the
subject of a bona fide dispute), the non-payment of which could constitute a
basis for the filing of an involuntary case against either AIC or AICCO under
the Bankruptcy Code, to provide AIC or AICCO, as the case may be, funds on a
timely basis to cause such obligations to be satisfied when due. AIG has agreed
for the benefit of the Trustee and the certificateholders of all outstanding
Series in the AIR Support Agreement described elsewhere herein to cause AIR to
have a minimum net worth of at least $1 and, if (a) AIR has insufficient funds
to meet any of its obligations under the Agreement or (b) AIR has insufficient
funds to pay any of its other obligations when due (except for any such
obligations which are the subject of a bona fide dispute), the non-payment of
which could constitute a basis for the filing of an involuntary case against AIR
under the Bankruptcy Code, to provide AIR funds on a timely basis to cause such
obligations to be satisfied when due. The Support Agreements and AIC's
undertaking in the Agreement reduce the probability that an Original Transferor
or the Transferor might be subject to a bankruptcy proceeding or have unpaid
creditors who might take the aforementioned position. See "Description of the
Offered Certificates--Support Agreements."
If a bankruptcy-related event involving AIC, AICCO or the Transferor
were to occur, then a Pay Out Event could occur with respect to all Series then
outstanding and, pursuant to the Agreement, Additional Receivables would not be
transferred to the Trust and the Trustee would be obligated to sell the
Receivables (unless holders of more than 50% of the certificateholders ownership
interests of each Series of certificates issued and outstanding, including any
certificates held by the Transferor if no bankruptcy-related event has occurred
as
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to the Transferor (or, with respect to any Series with two or more classes, more
than 50% of each class) and the holder of the Transferor Certificate (if no
bankruptcy-related event has occurred as to such holder), instruct otherwise) in
accordance with the Agreement in a commercially reasonable manner and on
commercially reasonable terms, which may cause early termination of the Trust
and a loss to certificateholders of each such Series (including the Series
1998-1 Certificateholders) if the proceeds from such early sale allocable to
such Series, if any, and the amounts available under any Enhancement applicable
to such Series were insufficient to pay certificateholders of such Series in
full. If a Pay Out Event occurs that is due to the bankruptcy of either AIC or
AICCO, a bankruptcy trustee may have the power to prohibit continued transfers
of Receivables to the Transferor and to repudiate the servicing obligations of
AIC or AICCO, as the case may be. If a Pay Out Event occurs that is due either
to the bankruptcy of the Transferor or the appointment of a trustee for the
Transferor, the trustee would have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Series
1998-1 Rapid Amortization Period. A bankruptcy trustee in such event may also
have the power to cause the early sale of the Receivables and the early
retirement of the Offered Certificates and to prohibit the continued transfer of
Additional Receivables to the Trust.
In addition, in the event of a Servicer Default relating to the
bankruptcy of the Servicer, if no Servicer Default other than such bankruptcy
exists, the trustee for the Servicer may have the power to prevent either the
Trustee or the certificateholders of outstanding Series of certificates from
appointing a successor servicer.
State Regulation of Premium Finance Lending. The making, purchasing and
servicing of insurance premium loans is subject to numerous state laws and
regulations which impose requirements on the making, enforcement and collection
of insurance premium loans. The states may enact additional laws and regulations
and amendments to existing laws and regulations to regulate further the premium
loan industry or to reduce finance charges or other fees or charges applicable
to insurance premium loans. Such laws, as well as any new laws or rulings which
may be adopted, may adversely affect the Servicer's ability to collect on the
Receivables or maintain the required level of finance charges and other fees and
charges and the ability of the Trust to retain a successor servicer in the event
AIC or AICCO shall cease for any reason to continue as a Servicer. Since neither
the Trust nor the Transferor makes or services premium finance loans or has
acquired legal title to any such loans, AIC and AICCO believe that there is no
requirement that either the Transferor or the Trust be licensed under any state
premium finance licensing laws.
Pursuant to the Agreement, the Transferor will covenant to accept
reassignment of each Future Receivable, and AIC or AICCO, as the case may be,
will covenant to accept reassignment of each Existing Receivable, that does not
comply with certain representations and warranties, including representations
concerning compliance with applicable state law and regulations, if, as a result
of such noncompliance, the related Loan becomes a Defaulted Loan. Pursuant to
the Receivables Sale Agreement, each of the Original Transferors will covenant
to accept reassignment of each Future Receivable sold by it to the Transferor
that may be reassigned to the Transferor because of a breach of a representation
and warranty. See "Description of the Offered Certificates--Representations and
Warranties." The Trustee has not made, and it is not anticipated that it will
make, any examination of the Receivables or the records relating thereto for the
purpose of establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The Trust's remedy if
any such representation or warranty is breached and such breach continues beyond
the applicable cure period and the related Loan becomes a Defaulted Loan because
of such breach is that (i) in the case of a Future Receivable, the Transferor
will be obligated to accept reassignment of the Receivable affected thereby and,
in turn, the Transferor will reassign such Future Receivable to either AIC or
AICCO, as applicable, which will be obligated to accept a reassignment of such
Receivable pursuant to the terms of the Receivables Sale Agreement, or (ii) in
the case of an Existing Receivable, the applicable Original Transferor will be
obligated to
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accept reassignment of such Receivable. See "--Bankruptcy Considerations" and
"Description of the Offered Certificates--Representations and Warranties."
Competition in the Premium Finance Loan Industry. The premium finance
loan industry is competitive and includes banks as well as other premium finance
lending companies that offer financing to companies that purchase commercial
insurance. Insurance premium lenders may compete on the basis of loan pricing
and terms, underwriting criteria and servicing quality. If commercial insurance
consumers choose to utilize competing sources of credit, the amount of available
Additional Receivables relating to Loans funded by AIC or AICCO may be reduced.
The size of the Trust will be dependent upon the Transferor's continued ability
to transfer to the Trust Additional Receivables, which in turn will be dependent
upon the continued ability of AIC and AICCO to generate Additional Receivables
for subsequent sale to the Transferor and transfer by the Transferor to the
Trust. If the amount of Additional Receivables generated declines significantly,
Additional Receivables available to be transferred to the Trust will decline. If
the amount of Additional Receivables generated declines to such an extent that
the Transferor is unable to maintain the Minimum Transferor Ownership Interest,
a Pay Out Event would occur, in which event the Series 1998-1 Rapid Amortization
Period would commence. If the Series 1998-1 Rapid Amortization Period commences,
Series 1998-1 Certificateholders are likely to be repaid principal amounts
earlier than anticipated with respect to their Series 1998-1 Certificates, which
would affect the anticipated average life of the Series 1998-1 Certificates and
could result in reinvestment risk with respect to such earlier repayments. In
addition, the amount otherwise allocable to the holder of the Transferor
Certificate that would be available to be deposited into the Series 1998-1 Yield
Enhancement Account could be reduced thereby, reducing funds available to pay
amounts due with respect to the Series 1998-1 Certificates. See "Description of
the Offered Certificates--Pay Out Events" and "--Series 1998-1 Yield Enhancement
Account."
Economic Factors. Economic factors, including the occurrence of a
recession, the rate of inflation, and relative interest rates, may have an
adverse impact upon the performance of the Receivables and on the ability of AIC
and AICCO to generate Additional Receivables for subsequent sale to the
Transferor and transfer by the Transferor to the Trust. In particular, negative
economic developments could have an adverse impact on the timing and amounts of
payments made by Obligors in respect of Receivables and could cause such
Obligors to become bankrupt or insolvent. See "--Premium Finance Loan Credit and
Related Considerations" and "Maturity Considerations."
Limitations on Subordination and Yield Enhancement. Although the
probability of payment of amounts due with respect to the Offered Certificates
is intended to be enhanced by the subordination described herein of payments on
the Series 1998-1 Class C Certificates and by the availability of amounts in the
Series 1998-1 Yield Enhancement Account as described herein and, in the case of
the Series 1998-1 Class A Certificates, also by the subordination of payments on
the Series 1998-1 Class B Certificates to the Series 1998-1 Class A Certificates
as described herein, the amount of such enhancement is limited and may decline
during the Series 1998-1 Controlled Amortization Period or any Series 1998-1
Rapid Amortization Period or as a result of Defaulted Loans. If the
subordination of payments on the Series 1998-1 Class C Certificates and any
amounts deposited into the Series 1998-1 Yield Enhancement Account are
insufficient to protect the Series 1998-1 Class B Certificates from shortfalls
or delays in collections on the Receivables, then the Series 1998-1 Class B
Certificateholders will bear directly the credit risk associated with their
undivided interests in the Trust. If the subordination of payments on the Series
1998-1 Class C Certificates and the Series 1998-1 Class B Certificates and any
amounts deposited into the Series 1998-1 Yield Enhancement Account are
insufficient to protect the Series 1998-1 Class A Certificates from shortfalls
or delays in collections on the Receivables, then the Series 1998-1 Class A
Certificateholders will bear directly the credit risk associated with their
undivided interests in the Trust. The credit risk associated with the Series
1998-1 Certificateholders' undivided interests in the Trust is the risk that the
Trust will not receive full and timely payment of the Receivables. This risk is
described further in "--Premium Finance Loan Credit and
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Related Considerations" above. Series of certificates issued in the future may
share with the Offered Certificates in the benefits of the subordination of the
Series 1998-1 Class C Certificates, the yield enhancement provided by deposits
into the Series 1998-1 Yield Enhancement Account and any amounts deposited into
the Excess Funding Account. The Series 1994-1 Offered Certificates will share
with the Offered Certificates in the benefits of amounts deposited into the
Excess Funding Account. See "Description of the Offered
Certificates--Subordination," "--Series 1998-1 Yield Enhancement Account" and
"--Excess Funding Account."
Master Trust Considerations. The Trust, as a master trust, has issued
the Series 1994-1 Certificates, will issue the Series 1998-1 Certificates, and
may issue additional Series of certificates. While the Principal Terms of any
Series will be specified in a Supplement, the provisions of a Supplement and,
therefore, the terms of any additional Series, will not be subject to the prior
review or consent of holders of the certificates of any previously issued
Series, including the Series 1998-1 Certificateholders. Such Principal Terms may
include methods for determining applicable investor percentages and allocating
collections, provisions creating different or additional security or other
Enhancement and/or provisions subordinating such Series to another Series (if
the Supplement relating to such Series so permits; the Series 1998-1 Supplement
will not permit such subordination of the Offered Certificates to any other
Series). It is a condition precedent to any New Series Issuance that either (A)
each Rating Agency deliver written confirmation to the Trustee that such
issuance will not result in such Rating Agency reducing or withdrawing its
then-existing rating on any outstanding Series or (B) if at the time of the
issuance there is no outstanding Series which is currently rated by a Rating
Agency, a nationally recognized investment banking firm or commercial bank
deliver a certificate to the Trustee to the effect that the issuance will not
have an adverse effect on the timing or distribution of payments to such other
Series. There can be no assurance, however, that the Principal Terms of any
other Series, including Series 1994-1 and any other Series issued from time to
time hereafter, will not have an impact on the timing and amount of payments
received by a Series 1998-1 Certificateholder, including as a result of the
refixing of the percentage utilized with respect to the allocation of the
Principal Receivables. See "Description of the Offered Certificates--New Series
Issuances" and "--Allocation Percentages."
If the Trust issues any additional Series in a future public offering,
the Trust will do so pursuant to a registration statement (and prospectus) under
the Securities Act that is separate from this Prospectus and its related
registration statement. The new prospectus will not take the form of a
supplement to this Prospectus as is utilized in shelf offerings under the
Securities Act.
Certificateholder Control Limitations. Subject to certain exceptions,
the certificateholders of each Series may take certain actions, or direct
certain actions to be taken, under the Agreement, including the related
Supplement. However, under certain circumstances, the consent or approval of a
specified percentage of the aggregate certificateholders ownership interests of
all Series or of the certificateholders ownership interests of each Series or of
classes within a Series will be required to take or direct certain actions,
including requiring the appointment of a successor Servicer following a Servicer
Default, amending the Agreement in certain circumstances and directing a
repurchase by the Transferor and/or the Original Transferors of some or all
outstanding Receivables upon the breach of certain representations and
warranties by the Transferor and/or the Original Transferors. In such instances,
the interests of the Series 1998-1 Certificateholders may not be aligned with
the interests of the holders of certificates of such other Series. Thus, even if
the requisite majority of Series 1998-1 Certificateholders votes to take or
direct such action, the holders of certificates of such other Series may control
whether or not such action occurs.
Additional Receivables Considerations. The Transferor expects, and in
some cases will be obligated, to transfer Additional Receivables to the Trust.
Such Additional Receivables may include Receivables originated using criteria
different from those which were applied to the Existing Receivables because such
Receivables were
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originated at a different date. Consequently, there can be no assurance that
Additional Receivables designated in the future will be of the same credit
quality as previously designated Receivables. The designation of Additional
Receivables will be subject to the satisfaction of certain conditions described
herein under "Description of the Offered Certificates--Addition of Receivables."
Payments And Maturity. There is no assurance that there will be at any
time after the Closing Date sufficient Additional Receivables available for
transfer to the Transferor and to the Trust to avoid a Pay Out Event. The
commencement and continuation of a Series 1998-1 Controlled Amortization Period
for a class with respect to the Trust will be dependent upon the continued
generation of Additional Receivables to be conveyed to the Trust. A significant
decline in the amount of Receivables generated could result in the occurrence of
a Pay Out Event and the commencement of the Series 1998-1 Rapid Amortization
Period. See "Maturity Considerations" and "Description of the Offered
Certificates--Pay Out Events."
Certificate Rating. Any rating assigned to a class of the Offered
Certificates by Standard & Poor's or Moody's (individually, a "Rating Agency"
and collectively, the "Rating Agencies") will reflect such Rating Agency's
assessment of the likelihood that certificateholders of such class will receive
the payments of interest and principal required to be made under the Agreement
and will be based on the collectability of the Receivables in the Trust, the
terms, including the subordination terms, of other classes, the availability of
amounts in the Series 1998-1 Yield Enhancement Account, the loss allocation
method and the Support Agreements with AIG. The rating addresses the likelihood
of full payment of principal and interest of the Offered Certificates by the
Series 1998-1 Termination Date. Any such rating will not address the possibility
of the occurrence of a Pay Out Event with respect to such class or the
possibility of the imposition of United States withholding tax with respect to
non-U.S. Holders of Offered Certificates. The rating will not be a
recommendation to purchase, hold or sell certificates of such class, and such
rating will not comment as to the marketability of such Offered Certificates,
any market price or suitability for a particular investor. There is no assurance
that any rating will remain for any given period of time or that any rating will
not be lowered or withdrawn entirely by a Rating Agency if in such Rating
Agency's judgment future circumstances relating to the basis of the rating, such
as adverse changes in the collectability of the Receivables or a lowering of
AIG's long-term debt rating, so warrant.
The Transferor will request a rating of the Offered Certificates by the
two Rating Agencies. There can be no assurance as to whether any rating agency
not requested to rate the Offered Certificates will nonetheless issue a rating
with respect to any Offered Certificate or class thereof, and, if so, what such
rating would be. A rating assigned to any Offered Certificates or class thereof
by a rating agency that has not been requested by the Transferor to do so may be
lower than the rating assigned by a Rating Agency pursuant to the Transferor's
request.
Book-Entry Registration. The Offered Certificates will be initially
represented by one or more certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Because of this, unless and until Definitive
Certificates are issued, Certificate Owners will not be recognized by the
Trustee as Series 1998-1 Certificateholders, as that term will be used in the
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Series 1998-1 Certificateholders indirectly through DTC
and its participating organizations. See "Description of the Offered
Certificates--Book-Entry Registration" and "--Definitive Certificates."
Reports To Certificateholders. Unless and until Definitive Certificates
are issued, monthly and annual reports containing information concerning the
Trust and prepared by the Trustee will be sent on behalf of the Trust to Cede,
as nominee for DTC and the registered holder of the Offered Certificates. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles and will not
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be sent by the Servicer or the Trustee to the Certificate Owners. See
"Description of the Offered Certificates--Book-Entry Registration,"
"--Definitive Certificates," and "--Reports to Holders of Offered Certificates."
MATURITY CONSIDERATIONS
The Agreement provides that the Series 1998-1 Class A
Certificateholders will not receive payments of principal until the first
Distribution Date with respect to the Series 1998-1 Controlled Amortization
Period, which is the [__________] Distribution Date, or earlier in the event of
a Pay Out Event which results in the commencement of the Series 1998-1 Rapid
Amortization Period. Series 1998-1 Class A Certificateholders will receive
payments of principal on each Distribution Date following the commencement of
the Series 1998-1 Rapid Amortization Period, to the extent of funds available
therefor, until the Series 1998-1 Class A Ownership Interest has been paid in
full or the Series 1998-1 Termination Date has occurred. The Series 1998-1 Class
B Certificateholders will not begin to receive payments of principal until the
Series 1998-1 Class A Ownership Interest has been fully paid.
On each Distribution Date during the Series 1998-1 Class A Controlled
Amortization Period (which is presently scheduled to include the Distribution
Dates occurring in the months from [_______ to ______]), the Series 1998-1 Class
A Certificateholders will be entitled to receive monthly payments of principal
until the Series 1998-1 Class A Ownership Interest has been paid in full equal
to the least of (a) Series 1998-1 Available Investor Principal Collections (see
"Description of the Offered Certificates--Principal Payments") on deposit in the
Principal Account with respect to the related Transfer Date, (b) the applicable
Series 1998-1 Controlled Distribution Amount, which is equal to the sum of the
applicable Series 1998-1 Controlled Amortization Amount and any existing
applicable Series 1998-1 Deficit Controlled Amortization Amount (both as defined
under "Description of the Offered Certificates--Principal Payments") and (c) the
Series 1998-1 Class A Ownership Interest. On each Distribution Date during the
Series 1998-1 Class B Controlled Amortization Period (which is presently
scheduled to be only the Distribution Date occurring in [________]), the Series
1998-1 Class B Certificateholders will be entitled to receive monthly payments
of principal until the Series 1998-1 Class B Ownership Interest has been paid in
full equal to the least of (a) Series 1998-1 Available Investor Principal
Collections (see "Description of the Offered Certificates--Principal Payments")
on deposit in the Principal Account with respect to the related Transfer Date
(minus the portion of such Series 1998-1 Available Investor Principal
Collections applied to Series 1998-1 Class A Monthly Principal on such date),
(b) the applicable Series 1998-1 Controlled Distribution Amount (minus the
portion of such Series 1998-1 Controlled Distribution Amount applied to Series
1998-1 Class A Monthly Principal on such date), and (c) the Series 1998-1 Class
B Ownership Interest.
If a Pay Out Event occurs before or during the Series 1998-1 Controlled
Amortization Period, the Series 1998-1 Rapid Amortization Period will commence.
To the extent that the Series 1998-1 Class A Ownership Interest has not been
paid in full, the Series 1998-1 Class A Certificateholders will be entitled to
monthly payments of principal equal to the Series 1998-1 Available Investor
Principal Collections until the earlier of the date on which the Series 1998-1
Class A Ownership Interest has been paid in full and the Series 1998-1
Termination Date. After the Series 1998-1 Class A Ownership Interest has been
paid in full, Series 1998-1 Available Investor Principal Collections will be
paid to the Series 1998-1 Class B Certificateholders on each Distribution Date
until the earlier of the date on which the Series 1998-1 Class B Ownership
Interest has been paid in full and the Series 1998-1 Termination Date. A Pay Out
Event occurs, either automatically or after specified notice, upon certain
events, including generally (a) the failure of AIC, AICCO or the Transferor to
make certain remittances or deposits of funds for the benefit of the Series
1998-1 Certificateholders within the time periods stated in the Agreement, (b)
breaches of specified representations and warranties by AIC, AICCO or the
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Transferor, (c) a Series 1998-1 Annualized Monthly Excess Spread Amount below
400 basis points for three consecutive Monthly Periods, (d) specified failure of
the Transferor to maintain the Transferor Ownership Interest at an amount at
least equal to the Minimum Transferor Ownership Interest, (e) specified Servicer
Defaults, (f) a Monthly Payment Rate of less than 14% for three consecutive
Monthly Periods, (g) a Financed Premium Percentage of more than 90% in respect
of Additional Receivables transferred to the Trust for three consecutive Monthly
Periods, (h) certain events of bankruptcy or insolvency related to AIC, AICCO or
the Transferor, (i) the inability, for any reason, of the Transferor to transfer
Additional Receivables to the Trust, and (j) a breach by AIG of either of the
Support Agreements or a breach of AIC of its support obligations under the
Agreement or the AIC Support Agreement with respect to AICCO. See "Description
of the Offered Certificates--Pay Out Events."
Because there may be a slowdown in the payment rate of the Receivables
below the payment rates used to determine the Series 1998-1 Controlled
Distribution Amounts, or a Pay Out Event may occur which would initiate the
Series 1998-1 Rapid Amortization Period, there can be no assurance that the
respective final Distribution Dates of the Series 1998-1 Class A Certificates
and the Series 1998-1 Class B Certificates will be as indicated herein. See
"Special Considerations--Payments and Maturity."
The ability of the Series 1998-1 Certificateholders to receive payments
of principal during the Series 1998-1 Controlled Amortization Period or any
Series 1998-1 Rapid Amortization Period depends on the amount and schedule of
installments of outstanding Receivables, delinquencies, charge-offs and the
generation and transfer of Additional Receivables and the potential issuance by
the Trust of additional Series. There can be no assurance as to the actual rate
of payment of principal of the Series 1998-1 Certificates. See "Description of
the Offered Certificates--Principal Payments."
In addition, the amount of outstanding Receivables, as well as
delinquencies, charge-offs and the generation of new Receivables may vary from
month to month due to seasonal variations, regulatory factors, general economic
conditions and conditions in the markets for the services offered by AIC and
AICCO. There can be no assurance that collections of Receivables with respect to
the Trust, and thus the rate at which the Series 1998-1 Certificateholders could
expect to receive payments of principal on the Series 1998-1 Certificates, will
be as indicated herein. In addition, the Trust, as a master trust, may issue
additional Series from time to time, and there can be no assurance that the
terms of any such Series would not have an impact on the timing or amount of
payments received by the Holders of Offered Certificates. Further, if a Pay Out
Event occurs, the average life and maturity of the Offered Certificates could be
significantly reduced. No prepayment premium will be payable on account of any
prepayment of the Series 1998-1 Certificates as the result of the occurrence of
the Series 1998-1 Rapid Amortization Period.
If an event of bankruptcy relating to AIC, AICCO or the Transferor were
to occur, then a Pay Out Event could occur with respect to all Series then
outstanding and, pursuant to the Agreement, the Transferor would immediately
cease to transfer Receivables to the Trust, and the Trustee would sell all
Receivables then in the Trust (unless holders of more than 50% of the
certificateholders ownership interests of each Series issued and outstanding,
including any certificates held by the Transferor if no bankruptcy-related event
has occurred as to the Transferor (or, with respect to any Series with two or
more classes, more than 50% of each class) and the holder of the Transferor
Certificate (if no bankruptcy-related event has occurred as to such holder),
instruct otherwise), in accordance with the Agreement in a commercially
reasonable manner and on commercially reasonable terms, which may cause early
termination of the Trust. However, in a bankruptcy proceeding, neither the
Trustee nor the Transferor may be permitted to suspend transfers of Receivables
to the Trust and the Transferor, respectively, and the instructions to sell or
not to sell the Receivables may not be given effect. See "Special
Considerations--Bankruptcy Considerations." The proceeds from the sale of the
Receivables would be treated as collections on the Receivables and allocated
accordingly among holders of certificates of each Series and the
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holder of the Transferor Certificate. If the proceeds from such early sale
allocable to such Series, if any, and the amounts available under any
Enhancement applicable to such Series were insufficient to pay
certificateholders of such Series fully, a loss to certificateholders of each
such Series (including the Series 1998-1 Certificateholders) would result.
THE TRUST
General. The Trust was formed pursuant to the Original Agreement in
accordance with the laws of the State of New York. Prior to its formation, the
Trust did not have any assets or obligations. The Trust has not engaged and will
not engage in any activity, other than as described herein. In addition to the
Receivables, the assets of the Trust will also include (a) all monies on deposit
in certain bank accounts of the Trust, (b) all monies on deposit in certain bank
accounts established and maintained for the benefit of certificateholders of any
Series, and (c) any Enhancement issued with respect to any other Series (the
benefits of such Enhancement with respect to other Series will not be available
for the benefit of the Series 1998-1 Certificateholders). The term "Enhancement"
shall mean, with respect to any Series, any letter of credit, cash collateral
account, surety bond, guaranteed rate agreement, maturity guaranty facility, tax
protection agreement, interest rate swap or other contract or agreement
principally for the benefit of certificateholders of such Series. The Trust will
exist only for the transactions described herein, including the collection of
payments with respect to the Receivables and holding such Receivables, the
issuance of the Transferor Certificate, the issuance of the Series 1998-1
Certificates, the Series 1994-1 Certificates and certificates representing
additional Series and related activities (including, with respect to any Series,
receiving any Enhancement and entering into the Enhancement agreement relating
thereto) and making payments thereon. As a consequence, the Trust is not
expected to have any need for additional capital resources.
Other Series. The Trust previously issued pursuant to the Original
Agreement and the Original Series 1994-1 Supplement the Series 1994-1
Certificates, consisting of $200,000,000 in aggregate principal amount of Series
1994-1 Floating Rate Class A Asset Backed Certificates (the "Series 1994-1 Class
A Certificates"), $7,600,000 in aggregate principal amount of Series 1994-1
Floating Rate Class B Asset Backed Certificates (the "Series 1994-1 Class B
Certificates") and the Series 1994-1 Class C Certificates, and the Transferor
Certificate. The Series 1994-1 Class C Certificates and the Transferor
Certificate have been and until the Closing Date or thereabout will continue to
be held by AIC and AICCO and represent their respective interests in the Trust
as Original Transferors. Simultaneously with the issuance of the Series 1998-1
Certificates, the Transferor Certificate will be transferred to AIR by AIC and
AICCO. AIC and AICCO will retain the Series 1994-1 Class C Certificates. AIC and
AICCO will, on the Closing Date, cease to transfer Receivables to the Trust and
all such future conveyances to the Trust will be made by AIR, which will
purchase Receivables from AIC and AICCO pursuant to the terms of the Receivables
Sale Agreement.
The table below sets forth the principal economic characteristics of
the Series 1994-1 Offered Certificates heretofore issued by the Trust. For more
specific information with respect to any Series, any prospective investor should
contact the Servicer at [____________]. The Servicer will provide, without
charge, to any prospective purchaser of the Series 1998-1 Certificates, a copy
of the prospectus for the Series 1994-1 Certificates.
Series 1994-1
<TABLE>
<S> <C> <C>
1. Class A Certificates
Initial Ownership Interest $200,000,000
Certificate Rate One-month LIBOR + 0.23%, subject to a cap of 16.00%
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C>
Current Ownership Interest $200,000,000
Controlled Amortization Amount $28,571,428.58
Expected Commencement of
Controlled Amortization Period September 1, 1999
Monthly Servicing Fee No fee while AIC and AICCO are Servicer;
otherwise one-twelfth of the product of 0.5% and the
Series 1994-1 Class A Ownership Interest
Other Enhancement Subordination of Series 1994-1 Class B
Certificates and Series 1994-1 Class C Certificates;
series-specific yield enhancement account
Expected Final Payment Date March 2000
Scheduled Series Termination Date October 2001
Series Issuance Date December 22, 1994
2. Class B Certificates
Initial Ownership Interest $7,600,000
Certificate Rate One-month LIBOR + 0.43%, subject to a cap of 16.00%
Current Ownership Interest $7,600,000
Controlled Amortization Amount $28,571,428.58
Expected Commencement of
Controlled Amortization Period April 2000
Monthly Servicing Fee No fee while AIC and AICCO are Servicer;
otherwise one-twelfth of the product of 0.5% and the
Series 1994-1 Class B Ownership Interest
Other Enhancement Subordination of Series 1994-1 Class C Certificates; series-
specific yield enhancement account
Expected Final Payment Date April 2000
Scheduled Series Termination Date October 2001
Series Issuance Date December 22, 1994
</TABLE>
37
<PAGE>
BUSINESS OF A.I. RECEIVABLES CORP., A.I. CREDIT CORP. AND AICCO, INC.
General
A.I. Receivables Corp. was incorporated in Delaware in January of 1998
and is wholly owned by A.I. Credit Corp. and AICCO, Inc., each of which holds a
50% interest therein. AIR was created for the sole and limited purpose of acting
as Transferor under the Trust and as purchaser under the Receivables Sale
Agreement. Receivables relating to Loans funded by AIC and AICCO, as described
below, will be purchased by AIR pursuant to the Receivables Sale Agreement and
subsequently transferred from AIR to the Trust pursuant to the Agreement. The
principal executive office of AIR is located at 160 Water Street, New York, New
York 10038, telephone number (212) 428-5500.
A.I. Credit Corp. was incorporated in New Hampshire in 1973 and is a
wholly-owned subsidiary of American International Group, Inc., a Delaware
corporation ("AIG"). AIG is a holding company which through its subsidiaries is
primarily engaged in a broad range of insurance and insurance related activities
in the United States and abroad. The principal business of A.I. Credit Corp.
consists of funding loans to commercial borrowers ("Obligors") to finance
property and casualty insurance premiums throughout the United States, other
than in California. AICCO, Inc. ("AICCO"), a wholly-owned subsidiary of A.I.
Credit Corp. that was incorporated in California in 1974, conducts such premium
finance lending activities in California. As used in this "Business" section
(unless otherwise indicated), "AIC" refers to A.I. Credit Corp. and AICCO
collectively. AIC finances premiums for most lines of property and casualty
insurance. AIC believes that it is the second largest insurance premium finance
company in the United States. AIC financed insurance premiums during each of
1996 and 1997 in excess of $2 billion. The principal executive office of AIC is
located at 160 Water Street, New York, New York 10038, telephone number (212)
428-5400 and of AICCO is located at 777 South Figueroa Street, Los Angeles,
California 90017, telephone number (213) 689-3600.
A commercial premium finance loan typically is an installment loan made
to a commercial insurance buyer, the proceeds of which pay premiums which are
due to the insurance company. Financed commercial insurance policies commonly
(a) are for a term of one year or less, (b) require the full premium to be paid
at inception and (c) provide upon early cancellation for a return of unearned
premium to the insured. Obligors generally make fixed scheduled payments which
include a finance charge based on a spread over the estimated yield at the date
of origination of the loan of money market investments with a maturity
comparable to the loan. The finance charges on premium finance loans funded by
AIC may vary considerably, depending on the term and amount of the loan, the
insured's credit payment history, the size of the premium down payment and other
considerations. During each of calendar years 1995, 1996 and 1997, the average
yield on the Loan Portfolio has exceeded the monthly average of the daily rates
in the London interbank market for offers of one-month United States dollar
deposits by at least 200 basis points for each monthly period. Due to future
changes in the interest rate environment, competition from other lenders and
other relevant factors, there can be no assurance the average spread between the
Loans and one-month LIBOR will not be lower in the future. For additional
information concerning the calculation of AIC's finance charges, see
"Description of the Offered Certificates--Allocation Percentages." For
information concerning additional amounts intended to be available as yield
enhancement for the Offered Certificates, see "The Receivables" and "Description
of the Offered Certificates--Series 1998-1 Yield Enhancement Account."
AIC utilizes standardized premium finance loan agreements that give AIC
a limited power of attorney allowing it to cancel the insurance coverage upon
non-payment of a loan installment by the Obligor and to collect from the
insurance company any unearned premium that may secure the loan. Depending on
the terms of the loan
38
<PAGE>
and of the related insurance policy, the return premium may or may not be
sufficient to pay off the outstanding balance of the loan. AIC also has a right
to recover any unpaid loan balance directly from the Obligor.
A common premium finance loan structure may include a 20% down payment
on the premium paid by the Obligor with the remaining 80% funded by a loan from
the insurance premium finance company to be repaid by the Obligor in nine equal
monthly installments. AIC's premium finance loans generally have terms that
range from 6 to 12 monthly installments with higher or lower down payment
percentages depending upon AIC's applicable credit and underwriting policies.
Certain loans do not have level repayment requirements, usually to accommodate a
borrower's cash flow. Given the relatively short duration of most premium
finance loans, such loans are generally not prepaid prior to the scheduled
payment dates although the loan terms do not prohibit prepayments or provide for
penalties in the event of prepayment.
Financed commercial insurance policies usually require that the full
insurance premium be paid at the commencement of the policy period. The
insurance company customarily earns the right to the full premium over the
course of the policy period. If the insured cancels the policy prior to the end
of the policy period, the insured is commonly entitled to a repayment of the
portion of premium payment that is unearned by the insurance company at the time
of cancellation. Depending on the type of insurance coverage and the terms of
the particular insurance policy, the amount of unearned premium available upon
cancellation will vary in light of relevant factors such as (a) the applicable
method for measuring unearned premium which may be by proration over the policy
term or, as required by some states, by an accelerated method under which more
premium is earned in the earlier portion of the policy period, (b) the extent of
the policy period that has expired at the time of cancellation, (c) the loss
experience under the policy prior to cancellation and (d) variations after the
commencement of the policy period in the scope of the risks covered. The
insurance company may, depending on the terms of the policy, be entitled to
retroactively review and evaluate factors (c) and (d) above after cancellation
which may result in a reduction of the amount, and affect the timing, of
repayment of any unearned premiums. Also, in certain cases the insurance company
may earn the entire premium at inception of the policy or upon the occurrence of
an insured loss under the policy, in either of which cases there would be no
unearned premium to be returned.
Premium finance lending activities are regulated by most states. Among
other matters, many states regulate various terms of the premium finance loans
such as refund policies and rates of interest and late charges that may be
charged an insured. Premium finance loans are funded by AIC on standardized loan
forms, the provisions and format of which are also usually subject to state
regulation. AIC regards its relations with state regulatory agencies as good.
See "--State Regulation of Premium Finance Lending Activities" below.
Premium Finance Loan Origination; Collection Policy
AIC generally locates premium finance borrowers through independent
insurance agents and brokers that are licensed under state laws, who offer
premium loan programs to enable their commercial customers to purchase the full
amount of insurance coverage needed and spread out the premium payments over
time. Thus, origination is usually dependent on relationships with insurance
brokers and agents and knowledge of the insurance marketplace. The funding by
AIC of insurance premium finance loans is commonly commenced by an agent or
broker contacting AIC to initiate the premium loan process and outlining to AIC
the proposed loan transaction, including borrower and insurance company
information and coverage types and amounts. AIC then reviews the information
submitted by such agent or broker in light of its underwriting procedures. See
"--Premium Finance Loan Underwriting Procedures" below. After AIC approval, the
borrower executes a standard premium finance loan agreement, which contains a
promise to repay the loan, a limited power of attorney giving AIC the authority
in the event of default on the loan to contact the insurance company directly
and cancel coverage, and a collateral assignment to AIC of the unearned
insurance premium, if any, returnable following such cancellation.
39
<PAGE>
Following receipt and acceptance of the signed premium finance loan
agreement, AIC either sends the loan proceeds to the insurance company to pay
the premium balance due or releases funds to the insurance agent or broker who
then pays the insurance company. AIC bills the borrower directly on a monthly
basis. Each borrower is directed to remit payments to the appropriate regional
lockbox account maintained by AIC.
Since the insurance company generally earns a portion of the premium
each day, thereby reducing unearned premium amounts for loans secured by such
collateral, prompt action on loan defaults is important. On defaulted loans,
most states allow premium finance companies such as AIC to issue a notice of
"intent to cancel" the related insurance policy within five or ten days after
the premium loan installment due date on which the borrower defaulted. A "notice
of cancellation" can then be issued generally ten days after an "intent to
cancel" notice has been mailed. Once a cancellation notice has been issued, AIC
will customarily proceed to take steps to collect any unearned premium available
from the insurance company and apply it to the loan balance. If the returned
premium does not retire the loan balance due, AIC will customarily seek payment
from the borrower pursuant to the terms of the premium finance loan agreement.
AIC's policy is to (a) seek to collect past due installments prior to policy
cancellation and (b) if a cancellation occurs, attempt to both collect the
delinquent payment and obtain reinstatement of the insurance coverage. Since
borrowers usually need to maintain insurance (and to reinstate cancelled
policies) to meet their business objectives, collections often continue even
after policy cancellation and cancelled policies are often reinstated.
Generally, the policy cancellation date occurs within one month of the
related loan installment default. The current policy of AIC is to charge off as
a loss the unpaid defaulted loan balance one year after the cancellation of the
related policy. Following cancellation, AIC will process the collection of any
unearned premium with the appropriate insurance company or may pursue collection
against the borrower if sufficient unearned premium is unavailable. If during
this period AIC determines the unpaid loan is not likely to be collected, AIC
may charge off the loan prior to such first anniversary. Under the terms of the
Agreement, any recoveries with respect to Loans that have been written off will
be included in the assets of the Trust and considered Finance Charge
Receivables. See "The Receivables."
Premium Finance Loan Purchase Policies
In addition to directly originating premium finance loans, AIC has
entered into purchase agreements whereby AIC purchases premium finance loans
("Purchased Loans") from third party premium finance loan originators ("Third
Party Originators") immediately upon their origination by such Third Party
Originators. The terms "fund," "funded" and "funding," when used herein with
respect to Loans, refer both to the making of such Loans directly by AIC or
AICCO to Obligors and to the purchase of such Loans by AIC or AICCO from Third
Party Originators immediately upon the origination of such Loans by Third Party
Originators, unless the context otherwise requires. Third Party Originators are
commonly affiliated with insurance agents and/or brokers. Purchased Loans are
originated on substantially similar terms as, and pursuant to the same credit
standards, policies and procedures applied to, loans directly originated by AIC.
The beneficial interest and rights in and to the Purchased Loans acquired by AIC
as purchaser are substantially similar to those in loans which are directly
originated by AIC, including, but not limited to, the limited power of attorney
allowing it to cancel the insurance coverage upon non-payment of a loan
installment by the Obligor and to collect from the insurance company any
unearned premium that may secure the loan. AIC will make identical
representations and warranties with respect to Purchased Loans sold to the
Transferor pursuant to the Receivables Sale Agreement as are made with respect
to Loans directly originated by AIC.
40
<PAGE>
Premium Finance Loan Underwriting Procedures
AIC considers and evaluates a variety of risks in evaluating each
instance of funding an insurance premium finance loan. These include (a) the
loan structure (the loan term, the amount of down payment and the availability
of unearned premium as collateral), (b) the creditworthiness of the borrower,
(c) the creditworthiness of the insurance company, in those cases where reliance
is placed on the right to unearned premiums, and (d) the capabilities and
operating procedures of the insurance agent or broker that (i) places the
insurance policy, (ii) serves as a source of significant information regarding
the loan transaction, and (iii) may disburse the loan proceeds or collect
unearned premium funds for AIC. These factors may be given different weight in
the case of any particular loans.
All applications from insureds for loans to be funded by AIC are
reviewed for completeness and creditworthiness based on the loan underwriting
criteria established by AIC. Under AIC's current underwriting policies, loan
applications are reviewed by a branch office. Loans that have special factors,
such as large principal amounts, low down payments or the absence of unearned
premium collateral, are also subject to evaluation and approval by the head
office credit department. In most cases AIC receives applications directly from
insurance agents or brokers.
AIC's general guideline for approval of an insurance company is a rating
of at least B+ by A.M. Best Company. Based upon AIC's own credit determination,
it may finance insurance policies issued by insurance companies that have a
lower rating or, in the case of foreign insurers and certain domestic insurers
that meet AIC credit requirements, that are unrated. While Receivables may
relate to Loans made to finance premiums payable to such unrated or lower rated
foreign or domestic insurers, AIC believes that each of such insurers is subject
to state insurance law requirements relating to the repayment of unearned
insurance premiums upon cancellation of the related policy. At December 31,
1997, in excess of 35% of the aggregate outstanding loan account balance (as
defined herein in the table entitled "Outstanding Loan Account Balances by Size"
under "The Receivables") represented loans funded by AIC to finance premiums on
policies issued by insurance affiliates of AIG. As of such date, no other
insurance company group accounted for more than 5.0% of the outstanding
insurance premium loans funded by AIC. With respect to agents and brokers, AIC
monitors loans in its portfolio originated by particular agents and brokers to
assist in assessing their capabilities and performance as agents or brokers.
State Regulation of Premium Finance Lending Activities
The making, purchasing, enforcement and collection of insurance premium
loans is subject to extensive regulation by many states' laws. Such laws vary
widely by state, but often (i) require that premium finance lenders be licensed
by the state, (ii) restrict the content of premium finance loan agreements, and
impose certain disclosure requirements on such agreements, (iii) limit the
amount of finance charges that may be lawfully imposed, (iv) regulate the amount
of refunds due an obligor who prepays the premium finance loan prior to
maturity, (v) regulate the amount of late fees, if any, and finance charges that
may be charged upon a premium finance loan becoming overdue, (vi) regulate the
manner and method of cancelling an insurance policy upon non-payment of the
premium finance loan, including a requirement that the premium finance lender
provide the obligor with appropriate notice prior to such cancellation, and
(vii) allow imposition of penalties, which may be significant, upon premium
finance lenders for violations of the state's premium finance laws. See "Special
Considerations--State Regulation of Premium Finance Lending."
As Servicer
AIC and AICCO will act as the Servicer for the Loans giving rise to
Receivables in accordance with the Agreement. In certain limited circumstances,
AIC and AICCO may resign or be removed as Servicer, in which
41
<PAGE>
case a third party may be appointed as its successor. See "Special
Considerations--State Regulation of Premium Finance Lending," "Description of
the Offered Certificates--Collection and Other Servicing Procedures," "--Certain
Matters Regarding the Servicer, the Transferor and the Original Transferors" and
"--Servicer Default."
THE RECEIVABLES
The assets of the Trust will include (i) the entire beneficial interest
in Loans, which interest has been previously transferred to the Trust by AIC and
AICCO prior to the Closing Date, and (ii) to the extent described under
"Description of Offered Certificates--Addition of Receivables," the entire
beneficial interest in Loans funded by either AIC or AICCO on the Closing Date
and from time to time thereafter, including (A) all amounts due and to become
due and all collections and recoveries on such Loans, and (B) the proceeds of
certain collateral security securing such Loans. The beneficial interests
described above are herein referred to as the "Receivables." The Trust assets
will not include, as of any date of determination, (a) with respect to any
Receivable arising under a Loan which is not a Defaulted Loan, any collections
received by the Servicer on such Loan in excess of the sum of (i) the amounts
due and payable on such Loan during the month in which such date occurs and (ii)
all accrued and unpaid amounts, if any, on such Loan in respect of any month or
months prior to the month in which such date occurs or (b) with respect to any
Receivable arising under a Defaulted Loan, any collections received by the
Servicer on such Defaulted Loan in excess of all amounts due thereon (each, a
"Credit Balance").
Each Loan will have been funded by AIC or AICCO to finance commercial
insurance premiums. Neither the Loans nor the Receivables are guaranteed by AIR,
AIC, AICCO, AIG or any affiliate thereof, and the Trust, as holder of the
Receivables, has no recourse against AIR, AIC, AICCO, AIG or any affiliate
thereof for the non-collectability of the Receivables, except that, under
certain limited circumstances, the Transferor and each of the Original
Transferors will be required to repurchase certain Receivables from the Trust
and to provide indemnification to the Trust in certain events. See "Description
of the Offered Certificates--Certain Matters Regarding the Servicer, the
Transferor and the Original Transferors." AIC and AICCO will each act as
Servicer with respect to the Receivables relating to Loans it funded and which
it transferred to the Trust (or sold to AIR for transfer to the Trust). As set
forth in the Agreement, each Receivable to be transferred to the Trust must
satisfy certain eligibility criteria. See "Description of the Offered
Certificates--Representations and Warranties."
Certain information regarding the performance and composition of the
portfolio of Loans of AIC and AICCO (the "Loan Portfolio") is set forth below.
While AIC and AICCO expect to transfer their beneficial interest in the entire
Loan Portfolio to the Transferor for transfer to the Trust pursuant to the
Receivables Sale Agreement, there can be no assurance that the performance
experience of the Receivables transferred to the Trust will be comparable to
that set forth below. In addition, there are many legal, economic and
competitive factors that could adversely affect the amount and collectability of
the Loans related to the Receivables, including insureds' decisions to use new
sources of credit, which would affect the ability of AIC and AICCO to generate
Additional Receivables, and changes in usage of credit, payment patterns and
general economic conditions. Because the impact of these and other factors
(including the composition of the Receivables and the interest rates, fees and
charges assessed thereon) may change in the future, the text and tables set
forth below are not necessarily indicative of the future performance of the
Receivables that are transferred to the Trust.
The following tables set forth certain summary information regarding the
Loan Portfolio. During each of the calendar years 1995, 1996 and 1997, the
average yield on the Loan Portfolio has exceeded the monthly average of the
daily rates in the London interbank market for offers of one-month United States
dollar deposits by at least 200 basis points for each monthly period. Due to
future changes in the interest rate environment,
42
<PAGE>
competition from other lenders and other relevant factors, there can be no
assurance the average spread between the Loans and one-month LIBOR will not be
lower in the future. Also, during each of the calendar years 1995, 1996 and
1997, the average monthly payment rate on commercial premium finance loans
exceeded 17%. Assuming (i) a 17% payment rate each month, (ii) twelve equal
30-day monthly periods, and (iii) ownership by the Transferor during each
Monthly Period of at least the Minimum Transferor Ownership Interest, the amount
available under the Agreement during the Series 1998-1 Revolving Period for
yield enhancement would be [___] basis points on the outstanding principal of
the Offered Certificates on an annualized basis and may be greater during an
amortization period (unless the amount of interest due on the outstanding
principal of the Offered Certificates during such Monthly Period is less than
[___] basis points on an annualized basis, in which case the amount available
for yield enhancement would be such lesser amount). There can be no assurance,
however, that the monthly payment rate on the Loans will not be less than 17%
since the payment rate will vary depending on a variety of factors, including
loan maturities, interest rates and delinquency and default rates. Lower payment
rates will result in lower yield enhancement amounts. See "Description of the
Offered Certificates--Series 1998-1 Yield Enhancement Account."
43
<PAGE>
Outstanding Loan Account Balances by Size
as of December 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
% of
Aggregate
Outstanding Outstanding
Loan Loan
No. of Loan % of Loan Account Account
OUTSTANDING LOAN ACCOUNT BALANCE(1) Accounts(2) Accounts Balance Balance
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
$5,000 or less................................. 45,931 72.38% $63,811 6.26%
$5,001 to $10,000.............................. 6,914 10.90% 48,660 4.77%
$10,001 to $25,000............................. 5,691 8.97% 89,185 8.75%
$25,001 to $50,000............................. 2,264 3.57% 78,696 7.72%
$50,001 to $75,000............................. 774 1.22% 46,959 4.61%
$75,001 to $100,000............................ 439 0.69% 37,916 3.72%
$100,001 to $250,000........................... 860 1.36% 133,429 13.09%
$250,001 to $500,000........................... 339 0.53% 117,154 11.49%
$500,001 to $1,000,000......................... 146 0.23% 99,558 9.77%
$1,000,001 to $5,000,000....................... 90 0.14% 174,603 17.13%
Over $5,000,000................................ 12 0.02% 129,443 12.70%
Total (3)...................................... 63,460 100.00% $1,019,414 100.00%
</TABLE>
- ----------
(1) Loan account balances include outstanding principal balances (including
committed but unfunded amounts) and unearned finance charges.
(2) A loan account is generally a single Obligor that may have loans with
respect to one or more commercial insurance policies outstanding at the
time of determination.
(3) The average outstanding loan account balance of each loan as of
December 31, 1997 was approximately $16,100.
Composition of Loan Accounts by Remaining Installment Term
as of December 31, 1997
(Dollars In Thousands)
<TABLE>
<CAPTION>
% of Aggregate
Outstanding Outstanding
No. Of Loan Loan Account Loan Account
REMAINING INSTALLMENT TERM(1) Accounts Balance Balance
------------- --------------- -------------
<S> <C> <C> <C>
3 months or less...................... 26,703 $118,582 11.63%
4 to 6 months......................... 17,115 233,538 22.91%
7 to 9 months......................... 15,511 293,252 28.77%
10 to 12 months....................... 3,586 119,698 11.74%
13 to 18 months....................... 276 63,569 6.24%
More than 18 months................... 269 190,775 18.71%
Total................................. 63,460 $1,019,414 100.00%
</TABLE>
- ----------
(1) Terms of the loans commonly provide for level payments of principal and
finance charges on a monthly basis, although certain loans do not have
level repayment requirement.
44
<PAGE>
Geographic Concentration
The Loan Portfolio includes commercial premium finance loans originated
in all 50 states and the District of Columbia. The following table sets forth
information regarding the concentration of loans by outstanding loan account
balance in the Loan Portfolio among the states with the largest concentration of
loans as of December 31, 1997. No other state accounted for more than 2% of the
Loan Portfolio at such date.
Geographic Distribution
As Of December 31, 1997
(Dollars In Thousands)
% of Aggregate
Outstanding Outstanding
Loan Account Loan Account
Balance Balance
------------ --------------
New York(1).............................. 238,838 23.43%
California(1)............................ 172,286 16.90%
Texas.................................... 98,385 9.65%
New Jersey............................... 69,672 6.83%
Pennsylvania............................. 42,063 4.13%
Massachusetts............................ 38,463 3.77%
Florida.................................. 36,111 3.54%
Illinois................................. 29,377 2.88%
Tennessee................................ 22,044 2.16%
Georgia.................................. 20,945 2.05%
Alabama.................................. 20,813 2.04%
All Others(2)............................ 230,417 22.60%
Total.................................... 1,019,414 100.00%
- ----------
(1) Significant percentages of the loans funded by AIC and AICCO are
originated in New York and California, and accordingly, adverse economic
developments in such areas could adversely affect collections of
Receivables related to loans originated in such areas.
(2) States with 2% or less of the total loan account balances.
45
<PAGE>
Loan Loss Experience
(Dollars In Thousands)
The following table sets forth loss experience with respect to payments
by Obligors on loans for each of the periods shown. There can be no assurance
that the loss experience for the Trust with respect to the Receivables will be
similar to the historical experience set forth below.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Average Aggregate Outstanding
Principal Balance(1)..................... 924,616 796,566 802,881
Gross Loan Charge-Offs(2).................... 12,582 9,160 6,410
Recoveries(3)................................ 2,598 2,145 2,697
Net Loan Charge-Offs as Percentage .......... 9,984 7,015 3,713
of Average Aggregate Outstanding.........
Principal Balance, Net(2)................ 1.08% 0.88% 0.46%
</TABLE>
- ----------
(1) Calculated as the average of (a) the average monthly beginning receivables
balance and (b) the average monthly ending receivables balance, over the
relevant periods.
(2) A loan is generally charged-off one year after cancellation. The related
insurance policy is cancelled generally within one month following an
Obligor's failure to make a scheduled loan installment payment.
(3) A recovery occurs if, after a loan is written off, AIC or AICCO, as the
case may be, receives additional funds to pay in whole or in part the
outstanding balance due.
46
<PAGE>
Loan Delinquency Experience Following Cancellation
The following table sets forth the delinquency experience with respect to
payments by Obligors on loans at each of the dates shown. In conformity with
state requirements regarding cancellation notification, insurance policies are
generally cancelled within one month following an Obligor's failure to make a
related scheduled loan installment payment. Cancellation occurs on an automated
basis unless the loan is carried in the "hold" category by AIC. The "hold"
category includes primarily loans that require manual servicing procedures and
loans where cancellation of the related policy is stayed due to the Obligors'
bankruptcy, some of which loans may be delinquent. At December 31, 1997 "hold"
category loans represented approximately 0.44% of the aggregate principal loan
balance (excluding unearned finance charges) for the Loan Portfolio. The loan
delinquency data presented in the following table are measured from the date of
insurance policy cancellation. The percentages presented for each aging category
reflect the sum of the balance of principal and unearned finance charges
(including the overdue installment(s) as well as all of the remaining
installment payments not yet due) on all canceled accounts within each category
divided by the aggregate principal loan balance (excluding unearned finance
charges) for the Loan Portfolio. Since the table reflects percentages calculated
by including unearned finance charges in the cancelled accounts, but not
including such amounts in the aggregate loan balances, the resulting percentages
may reflect higher percentages of delinquencies than actually experienced.
Variations from one measurement date to another measurement date within aging
categories are primarily a reflection of the variability of time required to
collect the unearned insurance premium from the insurance carrier or,
alternatively, the remaining loan balance from the Obligor, on a revolving pool
of loans. There can be no assurance that the delinquency experience with respect
to the Receivables will be similar to the historical experience set forth below.
Number Of Days A Loan Remains Overdue After At December 31,
-----------------------------
Cancellation Of The Related Insurance Policy: 1997 1996 1995
-------- -------- ------
1-30 days..................................... 1.60% 1.90% 1.94%
31-60 days.................................... 0.78% 0.63% 0.46%
61-90 days.................................... 0.69% 0.52% 0.70%
91-120 days................................... 0.72% 0.39% 0.43%
121-150 days.................................. 0.35% 0.32% 0.18%
151 days or greater(1)........................ 1.18% 1.44% 0.92%
Total......................................... 5.31% 5.19% 4.63%
- ----------
(1) A loan is generally charged-off one year after cancellation of the related
insurance policy.
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USE OF PROCEEDS
The net proceeds from the sale of the Offered Certificates, approximately
$[________], before deduction of expenses, will be paid to the Transferor. The
Transferor will use such proceeds to purchase a portion of the Transferor
Ownership Interest from AIC and AICCO.
DESCRIPTION OF THE OFFERED CERTIFICATES
The Offered Certificates will be issued pursuant to the Agreement, which
includes the Series 1998-1 Supplement, to be entered into between AIR, as
Transferor of the Receivables, AIC, as an Original Transferor of the Receivables
and as Servicer of the Loans, AICCO, as an Original Transferor of the
Receivables and as Servicer of the Loans, and The First National Bank of
Chicago, as Trustee for the certificateholders, substantially in the form filed
as exhibits to the Registration Statement of which this Prospectus is a part.
Pursuant to the Agreement, the Transferor may execute further Supplements
thereto between the Transferor, the Original Transferors, the Servicer and the
Trustee in order to issue additional Series of certificates. See "--New Series
Issuances." The Trustee will provide a copy of the Agreement (without exhibits
or schedules), including the related Supplement, to Series 1998-1
Certificateholders without charge upon written request. The following summary
describes certain terms of, and is qualified in its entirety by reference to,
the Agreement (including the Series 1998-1 Supplement and the Series 1994-1
Supplement).
General
The Series 1998-1 Certificates will represent an undivided interest in the
assets of the Trust, including the right to the applicable allocation percentage
of all payments on the Receivables in the Trust. Each Series 1998-1 Class A
Certificate represents the right to receive payments of interest at the Series
1998-1 Class A Certificate Rate for the related Interest Period and payments of
principal, to the extent of the Series 1998-1 Class A Ownership Interest, during
the Series 1998-1 Controlled Amortization Period or, if applicable, the Series
1998-1 Rapid Amortization Period, funded from collections of Finance Charge
Receivables and Principal Receivables, allocated to the Series 1998-1
Certificates and certain other available amounts. Each Series 1998-1 Class B
Certificate represents the right to receive payments of interest at the
applicable Series 1998-1 Class B Certificate Rate for the related Interest
Period and, after the Series 1998-1 Class A Ownership Interest has been paid in
full, payments of principal to the extent of the Series 1998-1 Class B Ownership
Interest during the Series 1998-1 Controlled Amortization Period or, if
applicable, the Series 1998-1 Rapid Amortization Period, funded from collections
of Finance Charge Receivables and Principal Receivables, allocated to the Series
1998-1 Certificates and certain other available amounts. In addition to
representing the right to payment from collections of Finance Charge Receivables
and Principal Receivables allocated to such class, each Series 1998-1 Class A
Certificate also represents the right to receive payments from funds on deposit
in the Series 1998-1 Yield Enhancement Account, Series 1998-1 Reallocated
Principal Collections and Shared Principal Collections and certain other
available amounts. In addition to representing the right to payment from
collections of Finance Charge Receivables and Principal Receivables allocated to
such class, each Series 1998-1 Class B Certificate also represents the right to
receive payments from funds on deposit in the Series 1998-1 Yield Enhancement
Account and not applied in respect of Series 1998-1 Class A Certificates, Series
1998-1 Reallocated Principal Collections and Shared Principal Collections and
certain other available amounts, all as more fully described below. Payments of
interest and principal will be made on each Distribution Date on which such
amounts are due to Series 1998-1 Certificateholders in whose names the Series
1998-1 Certificates were registered on the last business day of the calendar
month preceding such Distribution Date (each a "Record Date").
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The Transferor will own the Transferor Certificate. The Transferor
Certificate will represent the right to receive certain payments from the assets
of the Trust, including the right to a percentage of all payments on the
Receivables in the Trust equal to 100% minus the sum of the applicable investor
percentages for all Series of certificates then outstanding. The Transferor
Certificate may be transferred in whole or in part only upon certain merger or
consolidation events with respect to the Transferor set forth in the Agreement.
See "--Certain Matters Regarding the Servicer, the Transferor and the Original
Transferors."
The Offered Certificates will initially be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set forth
below. The Offered Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form. The
Transferor has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the holder of record of the Offered
Certificates. No Certificate Owner acquiring an interest in the Offered
Certificates will be entitled to receive a definitive certificate representing
such person's interest in the Offered Certificates except under the limited
circumstances described below. Unless and until Definitive Certificates are
issued under such limited circumstances, all references herein to actions by
Holders of Offered Certificates shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to distributions, notices, reports and statements to Holders of Offered
Certificates shall refer to distributions, notices, reports and statements to
DTC or Cede, as the registered holder of the Offered Certificates, as the case
may be, for distribution to Certificate Owners in accordance with DTC
procedures. See "--Book-Entry Registration" and "--Definitive Certificates."
Book-Entry Registration
Holders of Offered Certificates may hold their Offered Certificates
through DTC (in the United States) or Cedel or Euroclear (in Europe) if they are
participants of such system, or indirectly through organizations that are
participants in such system.
Cede, as nominee for DTC, will hold the Offered Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries,
which in turn will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers (including the Underwriters), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
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Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (Brussels time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Offered Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal and of interest on the Offered Certificates from the Trustee through
the Participants who in turn will receive them from DTC. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments to its Participants which
thereafter will forward them to Indirect Participants or Certificate Owners. It
is anticipated that the only "Certificateholder" (as such term will be used in
the Agreement) of the Series 1998-1 Class A Certificates and of the Series
1998-1 Class B Certificates will be Cede, as nominee of DTC. Certificate Owners
will not be recognized by the Trustee as Certificateholders, as such term will
be used in the Agreement, and Certificate Owners will only be permitted to
exercise the rights of Holders of Offered Certificates indirectly through the
Participants who in turn will exercise the rights of Holders of Offered
Certificates through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Offered Certificates and is required
to receive and transmit distributions of principal and interest on the Offered
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Offered Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Offered Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Offered Certificates, may be limited due to the lack of a physical certificate
for such Offered Certificates. The laws of some jurisdictions require that
certain persons take physical delivery in definitive form. Consequently, the
ability to transfer Offered Certificates to such persons may be limited.
DTC has advised the Transferor that it will take any action permitted to
be taken by any of the Holders of Offered Certificates under the Agreement only
at the direction of one or more Participants to whose account with
50
<PAGE>
DTC the Offered Certificates are credited. Additionally, DTC has advised the
Transferor that it will take such actions with respect to specified percentages
of the Series 1998-1 Class A Ownership Interest or Series 1998-1 Class B
Ownership Interest, as the case may be, only at the direction of and on behalf
of Participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of [28] currencies, including United States dollars.
Cedel provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of the Offered
Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may be settled in any of [27]
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of the Offered Certificates. Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The
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<PAGE>
Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants and has no record or relationship with persons holding
through Euroclear Participants.
Distributions with respect to Series 1998-1 Certificates held through
Cedel or Euroclear will be credited to the cash accounts of Cedel Participants
or Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain United States Federal Income Tax Consequences." Cedel
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by any of the Holders of Offered Certificates under the
Agreement on behalf of a Cedel Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Offered Certificates among participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Neither the Transferor nor the Trustee will have any responsibility for the
performance by DTC, Cedel or Euroclear or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Definitive Certificates
The Offered Certificates will be issued in fully registered, certificated
form to Certificate Owners or their nominees ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee in
writing that DTC is no longer willing or able to properly discharge its
responsibilities as Depository with respect to the Offered Certificates, and
neither the Trustee nor the Transferor is able to locate a qualified successor,
(ii) the Transferor, at its option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of a Servicer Default, Certificate
Owners representing not less than 50% of the Series 1998-1 Class A Ownership
Interest or Series 1998-1 Class B Ownership Interest, as the case may be, advise
the Trustee and DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all the Certificate Owners
through Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the definitive certificate representing the Offered
Certificates and instructions for re-registration, the Trustee will issue the
Offered Certificates as Definitive Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Certificates as holders of the Offered
Certificates under the Agreement ("Holders").
Distribution of principal and interest on the Offered Certificates will be
made by The First National Bank of Chicago, as paying agent, or its successor in
such capacity (the "Paying Agent") directly to Holders of Definitive
Certificates in accordance with the procedures set forth in the Agreement.
During the Series 1998-1 Revolving Period, interest payments, and during either
the Series 1998-1 Controlled Amortization Period or Series 1998-1 Rapid
Amortization Period, interest and principal payments in respect of the Offered
Certificates, will be made to Holders of Offered Certificates on each
Distribution Date to the Holders in whose names the Definitive Certificates were
registered at the close of business on the related Record Date. Distributions
will be made by check mailed to the address of such Holder as it appears on the
certificate register. The final payment on any Offered Certificate (whether a
Definitive Certificate or a certificate registered in the name of Cede
representing such Series 1998-1 Certificate), however, will be made only upon
presentation and surrender of such Offered
52
<PAGE>
Certificate at the office or agency specified in the notice of final
distribution to Holders of Offered Certificates. The Trustee will provide such
notice to registered Holders of Offered Certificates not later than the fifth
day of the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of The First National Bank of Chicago, as transfer agent and registrar,
or its successor in such capacity (the "Transfer Agent and Registrar"). No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith. The
Transfer Agent and Registrar shall not be required to register the transfer or
exchange of any Offered Certificates for a period of 5 business days preceding
the due date for any payment with respect to such Offered Certificates.
Interest Payments
Interest will accrue on the Series 1998-1 Class A Ownership Interest at
the Series 1998-1 Class A Certificate Rate and on the Series 1998-1 Class B
Ownership Interest at the Series 1998-1 Class B Certificate Rate from the
Closing Date. Interest will be distributed on [_________], 1998, and on each
Distribution Date thereafter to Holders of Offered Certificates. Interest
payments on the Series 1998-1 Class A Certificates and the Series 1998-1 Class B
Certificates on any Distribution Date will be calculated on the Series 1998-1
Class A Ownership Interest and the Series 1998-1 Class B Ownership Interest, as
applicable, as of the preceding Record Date, except that interest for the first
Distribution Date will accrue at the applicable Certificate Rate on the Series
1998-1 Class A Initial Ownership Interest (which is $[_______]) and the Series
1998-1 Class B Initial Ownership Interest (which is $[__________]) from the
Closing Date. Interest due on the Series 1998-1 Class A Certificates but not
paid on any Distribution Date will be payable on the next succeeding
Distribution Date together with additional interest on such amount at the
applicable Certificate Rate plus 2% per annum (together, the "Series 1998-1
Class A Additional Interest"). Interest due on the Series 1998-1 Class B
Certificates but not paid on any Distribution Date will be payable on the next
succeeding Distribution Date together with additional interest on such amount at
the applicable Certificate Rate plus 2% per annum (together, the "Series 1998-1
Class B Additional Interest"). Interest due on the Series 1998-1 Class C
Certificates but not paid on any Distribution Date will be payable on the next
succeeding Distribution Date together with additional interest on such amount at
the applicable Certificate Rate plus 2% per annum (together, the "Series 1998-1
Class C Additional Interest"). Such Additional Interest shall accrue on the same
basis as interest on the Series 1998-1 Certificates, and shall accrue from the
date such overdue interest became due, to but excluding the Distribution Date on
which such overdue interest is paid. Subject to the priority of payments for
each Distribution Date described under "--Application of Collections" below,
interest payments on the Series 1998-1 Class A Certificates on any Distribution
Date will be paid from Series 1998-1 Class A Available Funds for the related
Monthly Period and, to the extent such Series 1998-1 Class A Available Funds are
insufficient to pay such interest, from amounts on deposit in the Series 1998-1
Yield Enhancement Account and Series 1998-1 Reallocated Principal Collections
(in each case, to the extent available therefor) for such Monthly Period.
Subject to the aforementioned priority of payments, interest payments on the
Series 1998-1 Class B Certificates on any Distribution Date will be paid from
Series 1998-1 Class B Available Funds for the related Monthly Period and, to the
extent such Series 1998-1 Class B Available Funds are insufficient to pay such
interest, from amounts on deposit in the Series 1998-1 Yield Enhancement Account
and Series 1998-1 Reallocated Principal Collections (in each case, to the extent
available therefor) remaining after certain other payments have been made with
respect to the Series 1998-1 Class A Certificates. The Agreement will provide
that payment of any Series 1998-1 Class B Additional Interest shall be suspended
during any period when the Series 1998-1 Class B Ownership Interest is zero and
will further provide for the cancellation of any such interest remaining unpaid
on the first date during the Series 1998-1 Class B Controlled Amortization
Period
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<PAGE>
or, if applicable, the Series 1998-1 Rapid Amortization Period when the Series
1998-1 Class B Ownership Interest is or becomes zero.
"Series 1998-1 Class A Available Funds" means, with respect to any Monthly
Period, an amount equal to the Series 1998-1 Class A Floating Allocation of
collections of Finance Charge Receivables allocated to the Series 1998-1
Certificateholders Ownership Interests with respect to such Monthly Period.
"Series 1998-1 Class B Available Funds" means, with respect to any Monthly
Period, an amount equal to the Series 1998-1 Class B Floating Allocation of
collections of Finance Charge Receivables allocated to the Series 1998-1
Certificateholders Ownership Interests with respect to such Monthly Period.
The Series 1998-1 Class A Certificates will bear interest from the Closing
Date through [___________] at the per annum rate of [______]% and with respect
to each Interest Period thereafter at a per annum rate of [____]% above
one-month LIBOR prevailing on the related LIBOR Determination Date with respect
to each such period, but in no event in excess of [______]% (the "Series 1998-1
Class A Certificate Rate").
The Series 1998-1 Class B Certificates will bear interest from the Closing
Date through [___________] at the per annum rate of [______]% and with respect
to each Interest Period thereafter at a per annum rate of [____]% above
one-month LIBOR prevailing on the related LIBOR Determination Date with respect
to each such period, but in no event in excess of [_____]% (the "Series 1998-1
Class B Certificate Rate").
The Trustee will determine LIBOR for each Interest Period commencing after
[_________], on the second business day prior to the Distribution Date on which
such Interest Period commences (each, a "LIBOR Determination Date"). For
purposes of calculating LIBOR, a business day is any day other than a day on
which banking institutions in London trading in United States dollar deposits in
the London interbank market are authorized or obligated by law or executive
order to be closed. The Trustee will determine LIBOR in accordance with the
following provisions:
(i) On each LIBOR Determination Date, the Trustee will determine
LIBOR on the basis of the rate for deposits in United States dollars for a
period equal to one month (commencing on the first day of the applicable
Interest Period) which appears on Telerate Page 3750 as of 11:00 a.m.
(London time) on such LIBOR Determination Date (or such other page as may
replace that page on the Dow Jones Telerate Service for the purpose of
displaying London interbank offered rates of major banks).
(ii) If, on any LIBOR Determination Date, such rate does not appear
on Telerate Page 3750 (or such other page), then LIBOR for the applicable
Interest Period shall be determined on the basis of the rates at which
deposits in United States dollars are offered by four major banks in the
London interbank market selected by the Servicer (the "Reference Banks")
as of approximately 11:00 a.m. (London time). LIBOR as determined by the
Trustee is the arithmetic mean of such quotations (rounded, if necessary,
to the nearest multiple of 0.0625%) if at least two such quotations are
provided.
(iii) If, on the LIBOR Determination Date, only one or none of the
Reference Banks provides such offered quotations, LIBOR will be:
(a) the rate per annum (rounded as aforesaid) that the Trustee
determines to be either (x) the arithmetic mean of the offered
quotations that leading banks in The City of New York selected by the
Servicer are quoting at or about 11:00 a.m. (New York time) on the
relevant LIBOR Determination Date to leading European banks for
one-month United States dollar deposits; or
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<PAGE>
(b) if the banks selected as aforesaid by the Servicer are not
quoting as described in clause (a) above, LIBOR for such Interest
Period will be LIBOR as determined on the previous LIBOR
Determination Date (or [_____]%, in the case of the first LIBOR
Determination Date).
The Series 1998-1 Class A Certificate Rate and the Series 1998-1 Class B
Certificate Rate applicable to the then current and immediately preceding
Interest Period may be obtained by telephoning the Trustee at its Corporate
Trust Office at (800) 524-9472 or (312) 407-4660.
Interest on the Series 1998-1 Class A Certificates and on the Series
1998-1 Class B Certificates will be calculated on the basis of the actual number
of days in the Interest Period and a 360-day year.
Principal Payments
During the Series 1998-1 Revolving Period (which begins on the Closing
Date and ends on the day before the commencement of the Series 1998-1 Controlled
Amortization Period or, if earlier, the Series 1998-1 Rapid Amortization
Period), no principal payments will be made to the Series 1998-1
Certificateholders. During the Series 1998-1 Controlled Amortization Period,
which is scheduled to begin on [_______], and during the Series 1998-1 Rapid
Amortization Period, which will begin upon the occurrence of a Pay Out Event,
and until the Series 1998-1 Termination Date occurs, principal will be paid
first to the Series 1998-1 Class A Certificateholders until the Series 1998-1
Class A Ownership Interest has been paid in full, and then to the Series 1998-1
Class B Certificateholders until the Series 1998-1 Class B Ownership Interest
has been paid in full, and then to the Series 1998-1 Class C Certificateholders
until the Series 1998-1 Class C Ownership Interest has been paid in full.
On each Distribution Date with respect to the Series 1998-1 Class A
Controlled Amortization Period, unless the Series 1998-1 Class A Ownership
Interest has been paid in full or a Series 1998-1 Rapid Amortization Period
commences, the Series 1998-1 Class A Certificateholders will be entitled to
receive for each related Monthly Period an amount equal to the least of (i)
Series 1998-1 Available Investor Principal Collections on deposit in the
Principal Account with respect to the related Transfer Date, (ii) the Series
1998-1 Controlled Distribution Amount and (iii) the Series 1998-1 Class A
Ownership Interest. After payment in full of the Series 1998-1 Class A Ownership
Interest, the Series 1998-1 Class B Certificateholders will be entitled to
receive on each Distribution Date during the Series 1998-1 Class B Controlled
Amortization Period the least of (i) the amount of Series 1998-1 Available
Investor Principal Collections on deposit in the Principal Account with respect
to the related Transfer Date (minus the portion of such Series 1998-1 Available
Investor Principal Collections applied to Series 1998-1 Class A Monthly
Principal on such Transfer Date), (ii) the Series 1998-1 Controlled Distribution
Amount (minus the portion of such Series 1998-1 Controlled Distribution Amount
applied to Series 1998-1 Class A Monthly Principal on such Transfer Date), and
(iii) the Series 1998-1 Class B Ownership Interest. After payment in full of the
Series 1998-1 Class A Ownership Interest and the Series 1998-1 Class B Ownership
Interest, the Series 1998-1 Class C Certificateholders will be entitled to
receive on each Distribution Date during the Series 1998-1 Class C Controlled
Amortization Period the least of (i) the amount of Series 1998-1 Available
Investor Principal Collections on deposit in the Principal Account with respect
to the related Transfer Date (minus the portion of such Series 1998-1 Available
Investor Principal Collections applied to Series 1998-1 Class A Monthly
Principal and Series 1998-1 Class B Monthly Principal on such Transfer Date),
(ii) the Series 1998-1 Controlled Distribution Amount (minus the portion of such
Series 1998-1 Controlled Distribution Amount applied to Series 1998-1 Class A
Monthly Principal and Series 1998-1 Class B Monthly Principal on such Transfer
Date), and (iii) the Series 1998-1 Class C Ownership Interest.
"Series 1998-1 Available Investor Principal Collections" means, with
respect to any Monthly Period, an amount generally equal to the sum of (a)(i)
collections of Principal Receivables received during such Monthly
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Period allocable to the Series 1998-1 Certificateholders Ownership Interests
minus (ii) the amount of Series 1998-1 Reallocated Principal Collections with
respect to such Monthly Period used to fund the Series 1998-1 Class A Required
Amount and the Series 1998-1 Class B Required Amount as described under
"--Reallocation of Cash Flows" below, plus (b) any Shared Principal Collections
with respect to any other Series (including Series 1994-1) that are allocated to
Series 1998-1, plus (c) amounts withdrawn from the Series 1998-1 Yield
Enhancement Account on the related Transfer Date for the purpose of covering the
Series 1998-1 Class A Default Amount, the Series 1998-1 Class B Default Amount
and/or the Series 1998-1 Class C Default Amount, plus (d) amounts withdrawn from
the Excess Funding Account allocable to the Series 1998-1 Certificateholders
Ownership Interests (as more fully described under "--Series 1998-1 Yield
Enhancement Account" and "--Excess Funding Account" below).
"Series 1998-1 Controlled Distribution Amount" means, for any Distribution
Date with respect to the Series 1998-1 Controlled Amortization Period, an amount
equal to the sum of the Series 1998-1 Controlled Amortization Amount for such
Distribution Date and any Series 1998-1 Deficit Controlled Amortization Amount
for the immediately preceding Distribution Date.
"Series 1998-1 Controlled Amortization Amount" means for any Distribution
Date during the Series 1998-1 Controlled Amortization Period, $[_____________].
"Series 1998-1 Deficit Controlled Amortization Amount" means (a) on the
first Distribution Date with respect to the Series 1998-1 Class A Controlled
Amortization Period, the Series 1998-1 Class B Controlled Amortization Period or
the Series 1998-1 Class C Controlled Amortization Period, the excess, if any, of
the Series 1998-1 Controlled Amortization Amount for such Distribution Date over
the amount distributed from the Series 1998-1 Distribution Account as Series
1998-1 Class A Monthly Principal, Series 1998-1 Class B Monthly Principal or
Series 1998-1 Class C Monthly Principal, as the case may be, for such
Distribution Date and (b) on each subsequent Distribution Date with respect to
the Series 1998-1 Class A Controlled Amortization Period, the Series 1998-1
Class B Controlled Amortization Period or the Series 1998-1 Class C Controlled
Amortization Period, the excess, if any, of the Series 1998-1 Controlled
Amortization Amount for such subsequent Distribution Date plus any Series 1998-1
Deficit Controlled Amortization Amount for the prior Distribution Date over the
amount distributed from the Series 1998-1 Distribution Account as Series 1998-1
Class A Monthly Principal, Series 1998-1 Class B Monthly Principal or Series
1998-1 Class C Monthly Principal, as the case may be, for such subsequent
Distribution Date.
On each Distribution Date during the Series 1998-1 Rapid Amortization
Period, the Series 1998-1 Class A Certificateholders will be entitled to receive
Series 1998-1 Available Investor Principal Collections for the related Monthly
Period until the earlier of the date the Series 1998-1 Class A Ownership
Interest is paid in full and the Series 1998-1 Termination Date. After payment
in full of the Series 1998-1 Class A Ownership Interest, the Series 1998-1 Class
B Certificateholders will be entitled to receive on each Distribution Date
during the Series 1998-1 Rapid Amortization Period Series 1998-1 Available
Investor Principal Collections (minus the portion of such Series 1998-1
Available Investor Principal Collections applied to Series 1998-1 Class A
Monthly Principal on such date) until the earlier of the date the Series 1998-1
Class B Ownership Interest is paid in full and the Series 1998-1 Termination
Date. After payment in full of the Series 1998-1 Class B Ownership Interest, the
Series 1998-1 Class C Certificateholders will be entitled to receive on each
Distribution Date during the Series 1998-1 Rapid Amortization Period Series
1998-1 Available Investor Principal Collections (minus the portion of such
Series 1998-1 Available Investor Principal Collections applied to Series 1998-1
Class A Monthly Principal and Series 1998-1 Class B Monthly Principal on such
date) until the earlier of the date the Series 1998-1 Class C Ownership Interest
is paid in full and the Series 1998-1 Termination Date. See "--Pay Out Events"
below for a discussion of events which might lead to the commencement of the
Series 1998-1 Rapid Amortization Period.
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Subordination
On each Distribution Date distributions of interest will be made first in
respect of the Series 1998-1 Class A Certificates, second in respect of the
Series 1998-1 Class B Certificates and third in respect of the Series 1998-1
Class C Certificates. On each Distribution Date on which principal is
distributable in respect of the Series 1998-1 Class A Certificates, such
principal will be payable after interest on the Series 1998-1 Class A
Certificates and Series 1998-1 Class B Certificates has been paid. Principal
payments will not be made to Series 1998-1 Class B Certificateholders until the
final principal payment due in respect of the Series 1998-1 Class A Certificates
has been paid. Thus on each Distribution Date on which principal is
distributable in respect of the Series 1998-1 Class B Certificates, such
principal will be payable after interest on the Series 1998-1 Class A and Series
1998-1 Class B Certificates and principal on the Series 1998-1 Class A
Certificates has been paid. On each such Distribution Date no payments of
interest or principal will be made in respect of the Series 1998-1 Class C
Certificates unless principal due in respect of the Series 1998-1 Class B
Certificates has been paid. For further information regarding the extent to
which the Series 1998-1 Class B Certificates are subordinated to the Series
1998-1 Class A Certificates and the extent to which the Series 1998-1 Class C
Certificates are subordinated to the Series 1998-1 Class A and Series 1998-1
Class B Certificates, including a description of the manner in which Principal
Receivables collections and Default Amounts may be preferentially allocated
among the classes of Series 1998-1 Certificates, see "Description of the Offered
Certificates--Application of Collections" and "--Reallocation of Cash Flows."
Conveyance of Receivables
AIC and AICCO originally conveyed to the Trustee pursuant to the Original
Agreement their entire beneficial interest in all Loans owned by them as of
November 30, 1994 (the "Cut-Off Date") and all Loans funded by them thereafter
relating to Eligible Receivables, including (i) all amounts due and to become
due and all collections and recoveries on such Loans, and (ii) the proceeds of
certain collateral security securing such Loans. AIC and AICCO will continue to
transfer such beneficial interests to the Trustee until the Closing Date. On the
Closing Date and thereafter, AIC and AICCO will transfer such beneficial
interests to the Transferor pursuant to the Receivables Sale Agreement and the
Transferor will immediately thereafter transfer such beneficial interests to the
Trust pursuant to the Agreement. The beneficial interests in Loans so
transferred may include beneficial interests in Loans where the Obligor has
filed for protection under the bankruptcy laws of the United States. The
beneficial interests to be transferred by the Transferor to the Trust are
referred to herein as the "Future Receivables," and the beneficial interests in
the Loans existing in the Trust prior to the Closing Date, which have been
transferred directly from the Original Transferors to the Trust pursuant to the
Original Agreement, are referred to herein as the "Existing Receivables." The
Future Receivables and the Existing Receivables together will comprise the
Receivables.
On or prior to the Determination Date immediately following a Monthly
Period during which Additional Receivables are conveyed to the Trust as
contemplated by the Agreement, the Transferor (i) will cause AIC and AICCO to
provide the Trustee an updated list of each Receivable transferred to the Trust
since the Cut-Off Date, identified by account number and indicating the total
outstanding receivable balance as of the end of such Monthly Period, and (ii)
will provide the Trustee a written assignment of Additional Receivables conveyed
to the Trust during such Monthly Period. The Transferor will not deliver or
cause to be delivered to the Trustee any other records or agreements relating to
the Receivables. Except as stated above, the records and agreements relating to
the Receivables maintained or caused to be maintained by the Transferor or the
Servicer will not be segregated or caused to be segregated by the Transferor or
the Servicer from other documents and agreements relating to other premium
finance loan receivables and will not be stamped or marked (or caused to be
stamped or marked) to reflect the transfer of the entire beneficial interest in
the Loans to the Trust, but AIC and AICCO are required to
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indicate on their computer records that the Receivables have been transferred to
the Trust. Neither the Original Transferors nor the Transferor have taken or
will be obligated to take any actions in order to perfect for the benefit of the
Transferor or the Trust, respectively, a security interest in the Receivables,
other than the filing in the appropriate filing offices in the States of New
York, Delaware and California of financing statements on Form UCC-1. See
"Special Considerations--Bankruptcy Considerations."
New Series Issuances
The Agreement will authorize the Trustee to issue two types of
certificates: (i) one or more Series of certificates which may be issued in more
than one class with varying rights and priorities and which will be transferable
and have the characteristics described below and (ii) certificates evidencing
the Transferor Ownership Interest (collectively, the "Transferor Certificate").
The Transferor Certificate has been held by AIC and AICCO and will be, on or
about the Closing Date, transferred to and thereafter held by the Transferor.
Such Transferor Certificate will be transferable only as provided in the
Agreement. The Agreement will also provide that, pursuant to any one or more
Supplements, the Transferor may reduce the Transferor Ownership Interest (a
"Transferor Ownership Interest Reduction") or, if provided in the relevant
Supplement, certificateholders may tender certificates representing any
outstanding Series of certificates to the Trustee and the Transferor may reduce
the Transferor Ownership Interest (an "Investor Exchange"), in either case for
the purpose of effectuating the issuance of one or more new Series (any new
Series issuance pursuant to a Transferor Ownership Interest Reduction or an
Investor Exchange is referred to as a "New Series Issuance"). The Series 1998-1
Supplement permits, but does not require in any circumstance, an Investor
Exchange and corresponding New Series Issuance with respect to the Offered
Certificates.
Under the Agreement, the Transferor may define, with respect to any newly
issued Series (including a Series being issued in an Investor Exchange) certain
terms of a new Series, which will be described in the Disclosure Document being
used in connection with such New Series Issuance. These terms may include: (i)
its name or designation; (ii) its initial principal amount (or method for
calculating such amount); (iii) its coupon rate (or formula for the
determination thereof); (iv) the closing date; (v) the rating agency or
agencies, if any, rating the Series; (vi) the interest periods, the interest
payment date or dates and the date or dates from which interest shall accrue
including the interest accrual period with respect to such Series; (vii) the
name of the clearing agency, if any; (viii) the periods during which or dates on
which principal will be paid or accrued; (ix) the method for allocating
collections with respect to Principal Receivables for such Series and, if
applicable, with respect to other Series and the method by which certificates of
such Series shall amortize or accrete and the method for allocating collections
with respect to Finance Charge Receivables and Recoveries; (x) any other
collections with respect to Receivables or other amounts available to be paid
with respect to such Series; (xi) the Receivables to be allocated with respect
to such Series and the provisions governing the allocations of any such
Receivables; (xii) the names of any accounts to be used by such Series and the
terms governing the operation of any such account and use of moneys therein;
(xiii) the Series Servicing Fee and the percentage used to calculate monthly
servicing fees; (xiv) the Minimum Transferor Ownership Interest; (xv) the
enhancer, if any, and terms of any Enhancement with respect thereto; (xvi) the
base rate, if any, applicable to such Series; (xvii) the terms on which the
certificates of such Series may be repurchased by the Transferor or remarketed
to other investors; (xviii) the Series termination date; (xix) any deposit into
any account maintained for the benefit of certificateholders of such Series;
(xx) the number of classes of such Series and, if more than one class, the
rights and priorities of each such class; (xxi) the extent to which the
certificates of such Series will be issuable in temporary or permanent global
form (and, in such case, the depositary for such global certificate or
certificates, the terms and conditions, if any, upon which such global
certificate may be exchanged, in whole or in part, for definitive certificates,
and the manner in which any interest payable on a temporary or global
certificate will be paid); (xxii) whether the certificates of such Series may be
issued in bearer form and any limitations imposed thereon; (xxiii) the priority
of any Series with respect
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to any other Series; (xxiv) the rights of the holder of the Transferor
Certificate that have been transferred to the holders of such Series; (xxv)
whether such Series will or may be a companion Series and the Series with which
it will be paired; and (xxvi) any other relevant terms (all such terms, the
"Principal Terms" of such Series). None of the Original Transferors, the
Transferor, the Servicer, the Trustee or the Trust is required or intends to
obtain the consent of any Series 1998-1 Certificateholder to issue any
additional Series. However, as a condition of a New Series Issuance, the holder
of the Transferor Certificate will be required to deliver to the Trustee written
confirmation from each Rating Agency that the New Series Issuance will not
result in such Rating Agency reducing or withdrawing its rating of the
certificates of any outstanding Series, including the Series 1998-1
Certificates. The Transferor may offer any Series to the public under a
Disclosure Document in transactions either registered under the Securities Act
or exempt from registration thereunder directly, through the Underwriters or one
or more other underwriters or placement agents, in fixed-price offerings or in
negotiated transactions or otherwise. Any such Series may be issued in fully
registered or book-entry form in minimum denominations determined by the
Transferor. The Transferor may offer, from time to time, additional Series. The
Trust will, as promptly as practicable, include in a periodic report filed with
the Commission with respect to the Series 1998-1 Certificates, disclosure of all
information related to issuance of any Series not required to be registered
under the Securities Act that is material to the holders of, or potential
investors in, the Series 1998-1 Certificates.
The Agreement provides that the holder of the Transferor Certificate may
effect New Series Issuances and define Principal Terms such that each Series has
a period during which amortization of the principal amount thereof is intended
to occur which may have a different length and begin on a different date than
such period for any other Series. Further, one or more Series may be in their
amortization periods while other Series are not. Thus, certain Series may not be
amortizing, while other Series are amortizing. Moreover, each Series may have
the benefits of an Enhancement which is available only to such Series. Under the
Agreement, the Trustee shall hold any such form of Enhancement only on behalf of
the Series with respect to which each relates. Likewise, with respect to each
such form of Enhancement, the holder of the Transferor Certificate may deliver a
different form of Enhancement agreement. The Agreement also provides that the
holder of the Transferor Certificate may specify different coupon rates and
monthly servicing fees with respect to each Series (or a particular class within
such Series). The holder of the Transferor Certificate also has the option under
the Agreement to vary between Series the terms upon which a Series (or a
particular class within such Series) may be repurchased by the Transferor or
remarketed to other investors. In addition, a Series Supplement may permit (as
does the Series 1998-1 Supplement) an Investor Exchange where the holders of
such Series could elect to exchange their certificates for one or more newly
issued Series of certificates upon the satisfaction of certain conditions
specified in the Agreement and the related Supplement. Additionally, certain
Series may be subordinated to other Series, or classes within a Series may have
different priorities. The Series 1998-1 Supplement will not permit the
subordination of such Series to Series 1994-1 or any other Series which may
hereafter be issued by the Trust. There is no limit to the number of New Series
Issuances that may be performed under the Agreement. The Trust will terminate
only as provided in the Agreement.
Under the Agreement and pursuant to a Supplement, a New Series Issuance
may only occur upon the satisfaction of certain conditions provided in the
Agreement. Under the Agreement, the holder of the Transferor Certificate may
effect a New Series Issuance by notifying the Trustee at least three days in
advance of the date upon which the New Series Issuance is to occur. Under the
Agreement, the notice will state the designation of any Series (and class
thereof, if applicable) to be issued on the date of the New Series Issuance and,
with respect to each such Series: (i) its initial principal amount (or method
for calculating such amount) which amount may not be greater than the then
current Transferor Ownership Interest plus, in the case of an Investor Exchange,
the certificateholders ownership interests of the certificates to be exchanged,
(ii) its certificate rate (or method for calculating such rate) and (iii) the
provider of the Enhancement, if any, which is expected to provide credit
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support with respect to it. On the date of the New Series Issuance, the
Agreement provides that the Trustee will execute and authenticate any such
Series only upon delivery to it of the following, among others, (i) a Supplement
in form satisfactory to the Trustee signed by the Transferor and specifying the
Principal Terms of such Series, (ii) an opinion of counsel that, for United
States federal income tax purposes and for income and/or franchise tax purposes
of the states (or, if appropriate, localities) in which the Servicers maintain
their principal places of business and any additional states (or, if
appropriate, localities) in which the Servicers, after the date of the
Agreement, conduct substantial servicing activities in respect of Receivables,
(1) the issuance of such Series will not adversely affect the characterization
of any outstanding Series of certificates (other than certificates retained by
the Transferor) as indebtedness, (2) the Trust will not be treated as a taxable
entity and (3) the issuance of such Series will not cause or constitute a
taxable event to any certificateholder of any outstanding Series, (iii) the
Enhancement, if any, and an appropriate form of Enhancement agreement or
instrument with respect thereto executed by the Transferor and the issuer of the
Enhancement, (iv) written confirmation from each Rating Agency that the New
Series Issuance will not result in such Rating Agency's reducing or withdrawing
its rating on any outstanding Series, and (v) in the case of an Investor
Exchange, the existing certificates of the Series to be exchanged. Upon
satisfaction of such conditions, the Trustee will execute and authenticate the
new Series (and, in the case of an Investor Exchange, cancel the certificates of
the exchanged Series).
In light of the aforementioned requirements for a New Series Issuance,
including the required ratings confirmation and tax opinion, the Transferor does
not presently expect that any New Series Issuance, including any New Series
Issuance as part of an Investor Exchange, will have a material adverse effect on
the Series 1998-1 Certificates. There can be no assurance, however, that the
Principal Terms of any other Series, including any Series issued from time to
time hereafter, might not have an impact on the timing and amount of payments
received by a Series 1998-1 Certificateholder, including as a result of the
refixing of the percentage utilized with respect to the allocation of the
Principal Receivables. See "Description of the Offered Certificates--New Series
Issuances" and "--Allocation Percentages."
Representations and Warranties
Each of the Original Transferors and the Transferor will make upon
execution of each Supplement (including the Series 1998-1 Supplement) certain
representations and warranties to the Trust to the effect that, among other
things, as of the closing date of the issuance by the Trust of the related
Series (including the Closing Date), it is duly incorporated and in good
standing and that it has the authority to consummate the transactions
contemplated by the Agreement. If (i) any of these representations and
warranties proves to have been incorrect in any material respect when made, and
continues to be materially incorrect for 60 days after notice to the related
Original Transferor or the Transferor, as applicable, by the Trustee, and (ii)
as a result the interests of the Series 1998-1 Certificateholders are materially
adversely affected, and continue to be materially adversely affected during such
period, then the Trustee or the specified percentage of Series 1998-1
Certificateholders may give notice to the Transferor declaring that a Pay Out
Event has occurred, thereby commencing the Series 1998-1 Rapid Amortization
Period. See "--Pay Out Events."
The Original Transferors will make with respect to the Existing
Receivables, and the Transferor will make with respect to the Future
Receivables, upon the execution of each Supplement (including the Series 1998-1
Supplement), representations and warranties to the Trust to the effect, among
other things, that, as of the date of transfer of each such Receivable to the
Trust (a) such Receivable is an Eligible Receivable (as defined below), and (b)
all material consents, licenses, approvals or authorizations of or registrations
or declarations with any governmental authority required to be obtained,
effected or given in connection with the origination and/or servicing of the
related Loan and the conveyance of each such Receivable to the Trust have been
duly effected or given and are in full force and effect. In the event of a
breach of any representation and warranty set forth in this
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paragraph as a result of which the Loan relating to a Receivable becomes a
Defaulted Loan, within 60 days, or such longer period as may be agreed to by the
Trustee (but no longer than 120 days), of receipt by the related Original
Transferor or the Transferor, as applicable, of written notice of such breach
given by the Trustee, the related Original Transferor or the Transferor, as
applicable, shall accept reassignment of each Receivable as to which such breach
relates if such breach continues throughout the aforementioned applicable period
(an "Ineligible Receivable") on the terms and conditions referred to below. The
Transferor, with respect to the Future Receivables, or the related Original
Transferor, with respect to the Existing Receivables, shall accept reassignment
of each such Ineligible Receivable by (i) depositing into the Collection Account
an amount equal to the Finance Charge Receivables due but not collected with
respect to such Ineligible Receivable, (ii) in the case of the Transferor with
respect to Future Receivables, directing the Servicer to deduct the unpaid
principal amount of each such Ineligible Receivable from the aggregate amount of
Principal Receivables used to calculate the Transferor Ownership Interest and
(iii) in the case of the Original Transferors with respect to Existing
Receivables, depositing into the Collection Account an amount equal to the
principal balance of such Ineligible Receivable; provided, however, that if the
exclusion of an Ineligible Receivable from the calculation of the Transferor
Ownership Interest would cause the Transferor Ownership Interest to be less than
the Minimum Transferor Ownership Interest or would otherwise not be permitted by
law, then such Ineligible Receivable shall be removed upon the Transferor,
depositing in the Principal Account (for allocation as a Principal Receivable)
in immediately available funds an amount equal to the amount by which the
Transferor Ownership Interest would be reduced below the Minimum Transferor
Ownership Interest. Upon any such reassignment of a Future Receivable to the
Transferor, the Transferor shall reassign such Receivable to AIC or AICCO, as
applicable, pursuant to the terms of the Receivables Sale Agreement. The
obligation of the Transferor or the related Original Transferor, as applicable,
to accept reassignment of any Ineligible Receivable is the sole remedy
respecting any breach of the representations and warranties referred to in this
paragraph with respect to such Receivable available to the Series 1998-1
Certificateholders or the Trustee on behalf of the Series 1998-1
Certificateholders.
The Transferor will make upon the execution of each Supplement (including
the Series 1998-1 Supplement) with respect to the Future Receivables,
representations and warranties to the Trust to the effect, among other things,
that as of the closing date of the issuance by the Trust of the related Series
of certificates (including the Closing Date) (a) the Agreement, including the
related Supplement, constitutes a valid and legally binding obligation of it,
(b) the transfer of Receivables by it to the Trust under the Agreement
constitutes a valid transfer to the Trust of the entire right, title and
interest of it in and to the related Receivables and the proceeds thereof
(including amounts in any of the accounts established for the benefit of the
related certificateholders), and recoveries thereon. Each Original Transferor
and the Transferor will make upon the execution of each Supplement (including
the Series 1998-1 Supplement), representations and warranties to the Trust to
the effect, among other things, that as of the closing date of the issuance by
the Trust of the related Series of certificates (including the Closing Date) (x)
all information previously furnished by it or to be furnished by it in writing
to the Trustee in connection with the Agreement and the transactions
contemplated thereby is and will be true and accurate in all material respects,
and (y) all approvals, authorizations, consents, orders or other actions of any
person or of any governmental body or official required in connection with the
execution and delivery of the Agreement and the certificates and the performance
of the transactions contemplated by the Agreement have been obtained. The
Transferor will make with respect to the Future Receivables, representations and
warranties to the Trust similar to those described in the two foregoing
sentences in connection with each assignment of Receivables added to the Trust
from time to time in accordance with the terms and conditions of the Agreement.
In the event of a breach of any of the representations and warranties described
in clause (a) or (b) above, if such breach has a material adverse effect on the
Trust, the Trustee, by written notice to the Transferor, may direct the
Transferor to accept reassignment of all the Receivables in the Trust portfolio
within 60 days of such notice, or within such longer period specified in such
notice (but no longer than 120 days). Such reassignment will not be required to
be made, however, if at any time during such applicable period, or such longer
period, the representations and
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warranties described in (a) above shall be true and correct in all respects and
the representations and warranties described in (b) above shall be true and
correct in all material respects. The deposit amount for such reassignment with
respect to each Series of certificates required to be repurchased following such
notice, including the Series 1998-1 Certificates, will generally be equal to the
certificateholders ownership interests of such Series on the last day of the
Monthly Period preceding the date on which the reassignment is scheduled to be
made plus an amount equal to all interest accrued but unpaid on such
certificates at the applicable certificate rate (less the amounts previously
allocated for payment of interest and principal with respect to each such Series
of certificates) through the end of the interest accrual period in which such
reassignment occurs of each such Series. The reassignment deposit amount shall
equal the sum of the reassignment deposits with respect to each Series then
issued and outstanding which is required to be repurchased following such
notice. The payment of the allocable portion of such reassignment deposit amount
into the Series 1998-1 Distribution Account will be considered a prepayment in
full of all Receivables and will be paid in full to the certificateholders of
such Series upon presentation and surrender of their certificates. If the
Trustee or the holders of the outstanding certificates give notice directing the
Transferor to accept reassignment as provided in the Agreement, the obligation
of the Transferor to accept reassignment of the Receivables and to pay the
reassignment deposit amount will constitute the sole remedy respecting a breach
of the representations and warranties described in (a) or (b) above.
"Eligible Receivable" is defined to mean each Receivable (a) which has
arisen from a Loan, having a stated maturity, that was in material compliance
with all requirements of law applicable to AIC, AICCO, any Third Party
Originator (each, an "Originator") and the Servicer and which, at the time of
the transfer of such Receivable to the Trust, complies in all material respects
with all requirements of law applicable to AIC, AICCO, any Third Party
Originator and the Servicer, (b) with respect to which all material consents,
licenses, approvals or authorizations of, or registrations or declarations with,
each governmental authority required to be obtained, effected or given in
connection with the creation of such Receivable or the execution, delivery and
performance by the related Originator of the Loan relating to such Receivable,
have been duly obtained, effected or given and are in full force and effect as
of the date of transfer to the Trust, (c) which, at the time of transfer of such
Receivable to the Trust, represents a beneficial interest in a Loan that has
been originated in accordance with AIC's underwriting guidelines and has not
been waived or modified except for waivers or modifications that were made by
the Servicer in accordance with its customary servicing standards, (d) as to
which the related Loan is not subject to any right of rescission, setoff,
counterclaim, defense arising out of violations of usury laws, or any other
defenses of any Obligor at the time of the transfer of such Receivable to the
Trust, other than defenses that may arise after the time of transfer out of
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights in general and general equity
principles, (e) as to which all obligations of the related Originator with
respect to such Receivable required to be fulfilled pursuant to the related
premium finance loan agreement and the Agreement, including the funding of the
related Loan, are satisfied, (f) as to which, at the time of transfer of such
Receivable to the Trust, the related Originator has not taken any action which
would impair, or failed to take any action necessary to avoid impairing, the
rights of the Trust or the certificateholders therein, (g) with respect to
which, in the case of Existing Receivables transferred to the Trust after the
Initial Closing Date and Additional Receivables only, the Obligor under the
related Loan is not the direct obligor under any Defaulted Loan (other than
under any Loan which is a Defaulted Loan solely due to an event of bankruptcy
with respect to an obligor other than such direct obligor), (h) which, in the
case of Existing Receivables transferred to the Trust after the Initial Closing
Date and Additional Receivables only, does not relate to a Defaulted Loan or a
Loan which is overdue, (i) as to which the related Loan and all amounts due
thereon are denominated and payable only in United States dollars, (j) which has
arisen from a Loan whereby the related premium finance agreement provides the
related Originator a limited power of attorney allowing it to cancel the related
insurance policy, if cancelable, in accordance with state law upon non-payment
of a loan installment by the Obligor thereunder, and (k) which has arisen from a
Loan whereby the related premium finance agreement allows the related Originator
to direct the insurance company to pay to such party any unearned
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premium under the related insurance policy calculated as of the time of
cancellation of the insurance policy, if cancelable.
The Trustee has not made, and it is not required or anticipated that the
Trustee will make, any general examination of the Receivables or any records
relating to the Receivables for the purpose of establishing the presence or
absence of defects, compliance with an Original Transferor's or the Transferor's
representations and warranties or for any other purpose.
Addition of Receivables
The Transferor has the right and, in some circumstances, is obligated to
designate from time to time Additional Receivables to be transferred to the
Trust. The Original Transferors presently expect to sell to the Transferor all
Additional Receivables generated by them from time to time. The Transferor will
be required in any event to transfer sufficient Additional Receivables to the
Trust to maintain the Minimum Transferor Ownership Interest; otherwise, a Pay
Out Event will occur and the Series 1998-1 Rapid Amortization Period will
commence. Each such Additional Receivable must be an "Eligible Additional
Receivable." An "Eligible Additional Receivable" is, as of the date such
Receivable is added to the Trust, a Receivable which satisfies the criteria set
forth in the definition of Eligible Receivable. The Transferor will convey to
the Trust its entire interest in all such Additional Receivables, subject to the
following additional conditions, among others: (i) no selection procedures
materially adverse to the interests of the holders of any Series of
certificates, including the Holders of Offered Certificates, were used in
selecting the Additional Receivables, (ii) the Transferor shall deliver, on or
prior to the Determination Date following a Monthly Period during which
Additional Receivables are conveyed to the Trust, a written assignment to the
Trust of the Additional Receivables and a computer file or microfiche list
containing a true and complete list of all Receivables, including Additional
Receivables, as of the end of such Monthly Period and (iii) the transfer of
Additional Receivables by the Transferor to the Trust constitutes a valid
transfer and sale of the entire right and beneficial interest in and to the
Additional Receivables. The Transferor is not required to give notice to either
Rating Agency of its intention to convey Additional Receivables to the Trust.
Removal of Receivables
Subject to the conditions set forth in the next succeeding sentence, on
each Determination Date on which the Transferor Ownership Interest exceeds the
Minimum Transferor Ownership Interest on such Determination Date, the Transferor
may, but shall not be obligated to, not more than once during the Monthly Period
during which such Determination Date occurs, designate Receivables for deletion
and removal from the Trust with five business days' prior written notice to the
Trustee and Servicer but without notice to the Series 1998-1 Certificateholders
(the "Removed Receivables"). The Transferor is permitted to designate and
require reassignment of Removed Receivables only upon satisfaction of the
following conditions among other things: (i) on or prior to the reassignment
date, the Transferor shall have delivered to the Trustee for execution a written
reassignment and, within five business days after the reassignment date, the
Transferor shall have delivered to the Trustee a computer file or microfiche
list containing a true and complete list of all Removed Receivables, the Removed
Receivables to be identified by, among other things, account number and their
aggregate amount of Principal Receivables as of the date of their removal (the
"Removal Date"); (ii) the Transferor shall represent and warrant that no
selection procedure used by the Transferor which is materially adverse to the
interests of the holders of any certificates issued by the Trust was utilized in
selecting the Removed Receivables; (iii) the removal of any Removed Receivables
shall not, in the reasonable belief of the Transferor, (a) cause a Pay Out Event
to occur, (b) cause the Transferor Ownership Interest to be less than the
Minimum Transferor Ownership Interest on such Removal Date or (c) result in the
failure to make any payment with respect to any Series; (iv) the Transferor
shall
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have delivered prior written notice of the removal to the Rating Agencies and
prior to the date on which such Receivables are to be removed, the Transferor
shall not have received notice from either Rating Agency that such removal will
result in the reduction or withdrawal of the then-existing rating of any Series
of certificates; (v) the Transferor shall have delivered to the Trustee an
officer's certificate confirming the items set forth in clauses (i) through (iv)
above; and (vi) the Transferor, the Trustee and each Rating Agency will have
received an opinion of counsel that the proposed removal will not adversely
affect the federal income tax characterization of the Trust. The Transferor does
not presently expect to remove Receivables from the Trust, nor do AIC or AICCO
presently expect that any such removal will take place.
The Collection Account
The Servicer has established and will maintain, or cause to be maintained,
in the name of the Trust, for the benefit of the certificateholders of all
outstanding Series, a "Collection Account," which is a non-interest bearing
segregated account established with a Qualified Institution. A "Qualified
Institution" is a depositary institution (which may include the Trustee),
organized under the laws of the United States or any one of the states thereof
or the District of Columbia, which either (a) has corporate trust powers and at
all times has a certificate of deposit rating of at least P-1 by Moody's
Investors Service, Inc. ("Moody's") and of A-1 by Standard & Poor's Ratings
Group ("Standard & Poor's") or a long-term rating of at least A by Moody's and
of at least A by Standard & Poor's and deposit insurance as required by the
Federal Deposit Insurance Corporation (the "FDIC") or (b) at all times has a
certificate of deposit rating of at least P-1 by Moody's and A-1+ by Standard &
Poor's or a long-term rating of at least Aa by Moody's and of at least AA by
Standard & Poor's and deposit insurance as required by the FDIC. In addition,
the Supplement with respect to any Series may require the Trustee to establish
and maintain a subaccount of the Collection Account for such Series (such
subaccount, a "Collection Subaccount"). Funds in the Collection Account or, as
provided in the related Supplement, any Collection Subaccount that are not both
deposited and to be withdrawn on the same date may be invested to the extent
provided in such Supplement, at the direction of the Servicer, in (i)
obligations of or fully guaranteed by the United States of America, (ii) demand
deposits, time deposits or certificates of deposit of (A) depositary
institutions with corporate trust powers, the certificates of deposit of which
have ratings from Moody's and Standard & Poor's of P-1 and A-1, respectively,
and long-term unsecured debt obligations of which have a rating from Moody's and
Standard & Poor's of A and A, respectively or (B) depositary institutions, the
certificates of deposit of which have ratings from Moody's and Standard & Poor's
of P-1 and A-1+, respectively, and long-term unsecured debt obligations of which
have a rating from Moody's and Standard & Poor's of Aa and AA, respectively,
(iii) commercial paper having, at the time of the Trust's investment or
contractual commitment to invest therein, a rating of P-1 and A-1+,
respectively, from Moody's and Standard & Poor's, (iv) demand deposits, time
deposits and certificates of deposit which are fully insured to the limits as
required by law and by the FDIC, (v) bankers acceptances issued by any
depositary institution or trust company described in clause (ii) above, (vi)
money market funds rated AAA-M or AAA-MG by Standard & Poor's or P-1 by Moody's
or which have otherwise been approved in writing by each Rating Agency and (vii)
certain open end diversified investment companies which each Rating Agency
designates in writing will not result in a withdrawal or downgrade of its then
current rating of any Series it rates ("Permitted Investments"). Any such
investment shall mature and such funds shall be available for withdrawal on or
prior to the Transfer Date related to the Monthly Period in which such funds
were received or deposited. Any earnings (net of losses and investment expenses)
on funds in the Collection Account or any Collection Subaccount will be paid
monthly to the holder of the Transferor Certificate. If such losses and
investment expenses exceed earnings on funds in the Collection Account or any
Collection Subaccount during a Monthly Period, then such excess shall be treated
in the same manner as Default Amounts are treated. The Transferor is not
required to reimburse the Trust with respect to such excess. See "--Defaulted
Loans; Charge-Offs."
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Except as otherwise provided below, the Servicer will deposit into the
Collection Account, no later than the second business day following the date of
receipt, any payment collected by the Servicer on the Receivables; provided,
however, that for as long as AIC remains a Servicer under the Agreement and
either (i) the AIC Support Agreement remains in effect with respect to the
Servicer and is not terminated, amended or modified other than in accordance
with its terms, and AIG has and maintains a long-term rating of at least Aa by
Moody's and of at least AA by Standard & Poor's or (ii) AIC has and maintains a
commercial paper rating of P-1 by Moody's and of A-1 by Standard & Poor's, then
the Servicer may make such deposits into the Collection Account monthly on each
Transfer Date, in an amount equal to the lesser of (a) collections received in
the immediately preceding Monthly Period allocable to the certificateholders
ownership interests of all outstanding Series and (b) the amount required to be
deposited into the Finance Charge Account, the Principal Account or any other
Series account or, without duplication, distributed on or prior to the related
Distribution Date to certificateholders of all outstanding Series. On the same
date as any deposit is made to the Collection Account, the Servicer will (i)
transfer funds from the Collection Account to the Finance Charge Account and
Principal Account to the extent required under "--Application of Collections"
below, and (ii) make such further distributions and payments as required
thereunder. Deposits required to be made by AIC as Servicer into the Finance
Charge Account, Principal Account, the Series 1998-1 Yield Enhancement Account,
Excess Funding Account and any other account established for the benefit of the
holders of any Series of certificates may also be made on a monthly basis rather
than on a more frequent basis if the conditions referred to in the first
sentence of this paragraph are met.
With respect to the certificates of any outstanding Series, whether the
Servicer is required to make monthly or daily deposits from the Collection
Account into the Finance Charge Account, the Principal Account or any other
Series account, with respect to any Monthly Period, (i) the Servicer will only
be required to deposit Collections from the Collection Account into the Finance
Charge Account, the Principal Account or any other Series account up to the
required amount to be deposited into any such deposit account or, without
duplication, distributed on or prior to the related Distribution Date to
certificateholders of such outstanding Series and (ii) if at any time prior to
such Distribution Date the amount of Collections deposited in the Collection
Account exceeds the amount required to be deposited pursuant to clause (i)
above, the Servicer will be permitted to withdraw the excess from the Collection
Account and allocate and pay such excess to the holder of the Transferor
Certificate as provided in the Agreement.
The Paying Agent shall have the revocable power to withdraw funds from the
Collection Account or any Collection Subaccount for the purpose of making
distributions to the certificateholders of all outstanding Series in the manner
provided in the related Supplement.
Series 1998-1 Accounts
The Trustee has established and will maintain with a Qualified Institution
in the name of the Trust, two non-interest bearing segregated trust accounts, a
"Finance Charge Account," for deposits of collections in respect of Finance
Charge Receivables, and a "Principal Account," for deposits of collections in
respect of Principal Receivables, for the benefit of the certificateholders of
all outstanding Series. The Trustee will establish a "Series 1998-1 Distribution
Account" (a non-interest bearing segregated trust account established with a
Qualified Institution).
Funds in the Principal Account and the Finance Charge Account will be
invested, at the direction of the Transferor, in Permitted Investments. Any
earnings (net of losses and investment expenses) on funds in the Finance Charge
Account or the Principal Account will be paid monthly to the holder of the
Transferor Certificate. If losses and investment expenses exceed earnings on
funds in the Principal Account or the Finance Charge Account during a Monthly
Period, then such excess shall be treated in the same manner as Default Amounts
are
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treated. The Transferor is not required to reimburse the Trust with respect to
such excess. The Servicer will have the revocable power to withdraw funds from
the Collection Account, the Finance Charge Account, the Principal Account, the
Series 1998-1 Yield Enhancement Account and the Excess Funding Account referred
to below for the purpose of carrying out the Servicer's duties under the
Agreement. The Paying Agent shall have the revocable power to withdraw funds
from the Series 1998-1 Distribution Account for the purpose of making
distributions to the Series 1998-1 Certificateholders. The Series 1998-1
Distribution Account shall not contain any funds of the Transferor or amounts
allocable to the Transferor Ownership Interest, and no amounts on deposit
therein shall be made available to the Transferor.
The Finance Charge Account, Principal Account, Series 1998-1 Yield
Enhancement Account, Excess Funding Account and Series 1998-1 Distribution
Account are collectively referred to as the "Accounts."
Series 1998-1 Yield Enhancement Account
The Servicer will establish and maintain or cause to be maintained with a
Qualified Institution in the name of the Trustee, on behalf of the Trust, a
segregated account, the "Series 1998-1 Yield Enhancement Account," for the
benefit of the Series 1998-1 Certificateholders. Amounts on deposit in the
Series 1998-1 Yield Enhancement Account will be invested in the manner directed
by the Transferor in Permitted Investments. Any earnings (net of losses and
investment expenses) on funds in the Series 1998-1 Yield Enhancement Account
will be paid monthly to the holder of the Transferor Certificate. If losses and
investment expenses exceed earnings on funds in the Series 1998-1 Yield
Enhancement Account during a Monthly Period, then such excess shall be charged
against funds on deposit in such account. The Transferor is not required to
reimburse the Trust with respect to such excess. On each Transfer Date, an
amount equal to the Series 1998-1 Available Yield Enhancement Amount shall be
deposited into the Series 1998-1 Yield Enhancement Account out of collections
otherwise allocable to the holder of the Transferor Certificate for the Monthly
Period immediately preceding such Transfer Date. If collections otherwise
allocable to the holder of the Transferor Certificate for such Monthly Period on
such Transfer Date are not sufficient therefor, then the Transferor shall
deposit the amount of the insufficiency out of its own funds. Notwithstanding
the two preceding sentences, if AIR is no longer the Transferor or if the AIR
Support Agreement is not in effect with respect to AIR, then prior to any
payment to the holder of the Transferor Certificate of any collections with
respect to Principal Receivables or Finance Charge Receivables not allocated to
the Series 1998-1 Certificateholders, there shall be deposited into the Series
1998-1 Yield Enhancement Account on each date amounts allocable to the Series
1998-1 Certificates which would otherwise be allocable to the holder of the
Transferor Certificate until the amount so deposited equals the Series 1998-1
Maximum Yield Enhancement Amount for the next Transfer Date. The "Series 1998-1
Maximum Yield Enhancement Amount" shall mean, with respect to any Transfer Date,
the amount calculated pursuant to the proviso to the definition of "Series
1998-1 Available Yield Enhancement Amount" set forth below, determined on the
assumption that the Series 1998-1 Class A Certificate Rate, the Series 1998-1
Class B Certificate Rate and the Series 1998-1 Class C Certificate Rate used in
determining Series 1998-1 Class A Monthly Interest, Series 1998-1 Class B
Monthly Interest and Series 1998-1 Class C Monthly Interest, respectively,
equals in each case [16.00]% per annum. In addition, in all cases the Servicer
will deposit into the Series 1998-1 Yield Enhancement Account on each Transfer
Date any Series 1998-1 Excess Finance Charges. "Series 1998-1 Excess Finance
Charges" means, with respect to any Transfer Date, an amount equal to the excess
of Series 1998-1 Class A Available Funds, Series 1998-1 Class B Available Funds
and Series 1998-1 Class C Available Funds for the related Monthly Period over
the aggregate, with respect to such Transfer Date, of the amounts set forth in
clauses (a) through (e) of the definitions of Series 1998-1 Class A Required
Amount, Series 1998-1 Class B Required Amount and Series 1998-1 Class C Required
Amount. See "--Reallocation of Cash Flows."
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On each Transfer Date the Servicer will calculate the "Series 1998-1
Available Yield Enhancement Amount," which with respect to any Transfer Date (a)
during the Series 1998-1 Revolving Period means the product of (i) [___]% and
(ii) the product of (A) the collections for the related Monthly Period otherwise
allocable to the Transferor Ownership Interest and (B) the Series 1998-1
Floating Investor Percentage divided by one minus the Aggregate Investor
Percentage, and (b) during the Series 1998-1 Controlled Amortization Period and
the Series 1998-1 Rapid Amortization Period means the product of (i) [____]% and
(ii) the product of (A) the collections for the related Monthly Period otherwise
allocable to the Transferor Ownership Interest and (B) in the case of
collections of Finance Charge Receivables allocable to the Transferor Ownership
Interest, the Series 1998-1 Floating Investor Percentage divided by one minus
the Aggregate Investor Percentage, and in the case of collections of Principal
Receivables allocable to the Transferor Ownership Interest, the Series 1998-1
Fixed Investor Percentage divided by one minus the Aggregate Investor
Percentage; provided that in no event shall the Series 1998-1 Available Yield
Enhancement Amount for any Transfer Date exceed the sum of Series 1998-1 Class A
Monthly Interest, Series 1998-1 Class A Additional Interest, Series 1998-1 Class
B Monthly Interest, Series 1998-1 Class B Additional Interest, Series 1998-1
Class C Monthly Interest and Series 1998-1 Class C Additional Interest for such
Transfer Date. "Aggregate Investor Percentage" with respect to Principal
Receivables and Finance Charge Receivables, as the case may be, means, as of any
date of determination, the sum of the applicable Investor Percentages of all
Series of certificates issued and outstanding on such date of determination, to
a maximum of 100%. "Investor Percentage," with respect to a Series, means, for
any Monthly Period, (a) with respect to Finance Charge Receivables and Default
Amounts at any time and Principal Receivables during the Revolving Period for
such Series, the floating investor percentage for such Series and (b) with
respect to Principal Receivables during the Controlled Amortization Period for
such Series or the Rapid Amortization Period for such Series, the fixed investor
percentage for such Series.
During each of the calendar years 1995, 1996 and 1997, the average monthly
payment rate on commercial premium finance loans exceeded 17%. Assuming (i) a
17% payment rate each month, (ii) twelve equal 30-day monthly periods, and (iii)
ownership by the Transferor during each Monthly Period of at least the Minimum
Transferor Ownership Interest, the amount available under the Agreement during
the Series 1998-1 Revolving Period for yield enhancement would be [___] basis
points on the outstanding principal of the Offered Certificates on an annualized
basis and may be greater during an amortization period (unless the amount of
interest due on the outstanding principal of the Offered Certificates during
such Monthly Period is less than [___] basis points on an annualized basis, in
which case the amount available for yield enhancement would be such lesser
amount). There can be no assurance, however, that the monthly payment rate on
the Loans will not be less than 17% since the payment rate will vary depending
on a variety of factors, including loan maturities, interest rates and
delinquency and default rates. Lower payment rates will result in lower yield
enhancement amounts.
On each Transfer Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply funds on deposit in the Series 1998-1 Yield Enhancement
Account with respect to the related Monthly Period to make the following
distributions in the following priority:
(a) an amount equal to the Series 1998-1 Class A Required Amount, if
any, with respect to such Transfer Date will be transferred to the Finance
Charge Account and used to fund the Series 1998-1 Class A Required Amount;
provided, that in the event the Series 1998-1 Class A Required Amount for
such Transfer Date exceeds the funds on deposit in the Series 1998-1 Yield
Enhancement Account, such funds shall be applied to pay amounts due with
respect to such Transfer Date pursuant to clauses (a), (b), (c), (d) and
(e) (in that order) under the definition of Series 1998-1 Class A Required
Amount;
(b) an amount equal to the Series 1998-1 Class B Required Amount, if
any, with respect to such Transfer Date will be transferred to the Finance
Charge Account and used to fund the Series 1998-1 Class B
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Required Amount; provided, that in the event the Series 1998-1 Class B
Required Amount for such Transfer Date exceeds the funds on deposit in the
Series 1998-1 Yield Enhancement Account after giving effect to clause (a)
above, such funds shall be applied to pay amounts due with respect to such
Transfer Date pursuant to clauses (a), (b), (c), (d) and (e) (in that
order) under the definition of Series 1998-1 Class B Required Amount;
(c) an amount equal to the aggregate amount by which the Series
1998-1 Class A Ownership Interest has been reduced below the initial
Series 1998-1 Class A Ownership Interest on previous Transfer Dates for
reasons other than the payment of principal to the Series 1998-1 Class A
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account on such Transfer Date (and the Series 1998-1
Class A Ownership Interest shall be deemed to have been reimbursed by such
amount up to the initial Series 1998-1 Class A Ownership Interest but only
if the Series 1998-1 Class A Ownership Interest shall not have previously
been reduced to zero during the Series 1998-1 Class A Controlled
Amortization Period or the Series 1998-1 Rapid Amortization Period);
(d) an amount equal to the aggregate amount by which the Series
1998-1 Class B Ownership Interest has been reduced below the initial
Series 1998-1 Class B Ownership Interest on previous Transfer Dates for
reasons other than the payment of principal to the Series 1998-1 Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account on such Transfer Date (and the Series 1998-1
Class B Ownership Interest shall be deemed to have been reimbursed by such
amount up to the initial Series 1998-1 Class B Ownership Interest but only
if the Series 1998-1 Class B Ownership Interest shall not have previously
been reduced to zero during the Series 1998-1 Class B Controlled
Amortization Period or the Series 1998-1 Rapid Amortization Period);
(e) an amount equal to the Series 1998-1 Class C Required Amount, if
any, with respect to such Transfer Date will be transferred to the Finance
Charge Account and used to fund the Series 1998-1 Class C Required Amount;
provided, that in the event the Series 1998-1 Class C Required Amount for
such Transfer Date exceeds the funds on deposit in the Series 1998-1 Yield
Enhancement Account after giving effect to clauses (a), (b), (c) and (d)
above, such funds shall be applied to pay amounts due with respect to such
Transfer Date pursuant to clauses (a), (b), (c), (d) and (e) (in that
order) under the definition of Series 1998-1 Class C Required Amount;
(f) an amount equal to the aggregate amount by which the Series
1998-1 Class C Ownership Interest has been reduced below the initial
Series 1998-1 Class C Ownership Interest on previous Transfer Dates for
reasons other than the payment of principal to the Series 1998-1 Class C
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account on such Transfer Date (and the Series 1998-1
Class C Ownership Interest shall be deemed to have been reimbursed by such
amount up to the initial Series 1998-1 Class C Ownership Interest but only
if the Series 1998-1 Class C Ownership Interest shall not have previously
been reduced to zero during the Series 1998-1 Class C Controlled
Amortization Period or the Series 1998-1 Rapid Amortization Period); and
(g) the balance, if any, in excess of the Series 1998-1 91 Day
Delinquency Amount, after giving effect to the payments made pursuant to
subparagraphs (a) through (f) above, shall be distributed to the holder of
the Transferor Certificate provided that a Pay Out Event has not occurred
and will not be available for any future payments to the Series 1998-1
Certificateholders; provided, however, that such amount shall be paid
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to the holder of the Transferor Certificate only to the extent that the
Transferor Ownership Interest as of such date is greater than the Minimum
Transferor Ownership Interest as of the end of the immediately preceding
Monthly Period (after giving effect to the inclusion in the Trust of all
Receivables transferred to the Trust on or prior to such date and the
application of collections received) and otherwise shall be deposited into
the Excess Funding Account; provided further, that in no event shall the
amount payable to the holder of the Transferor Certificate be greater than
the Transferor Ownership Interest.
The "Series 1998-1 91 Day Delinquency Amount" shall equal, as of each
Transfer Date, the product of (a) the Series 1998-1 Floating Investor Percentage
and (b) the aggregate outstanding principal amount as of the end of the
preceding Monthly Period of the Loans relating to Receivables in the Trust that
are then overdue 91 days or more (i) after cancellation of the related insurance
policies or (ii) if cancellation is delayed, whether due to a stay by reason of
an Obligor's bankruptcy or other reason, after the date the policy would have
been cancelled in the absence of such delay. Funds remaining on deposit in the
Series 1998-1 Yield Enhancement Account under clause (g) above shall be
available on the next Transfer Date for application, together with any
additional amounts required to be deposited therein on such Transfer Date, in
accordance with clauses (a) through (g) above.
Excess Funding Account
The Servicer has established and maintained or caused to be maintained
with a Qualified Institution in the name of the Trustee, on behalf of the Trust,
a segregated account, the "Excess Funding Account," for the benefit of the
certificateholders of all outstanding Series, including the Series 1998-1
Certificateholders. If on any date the Transferor Ownership Interest equals or
is less than the Minimum Transferor Ownership Interest as of the end of the
immediately preceding Monthly Period, funds (to the extent available therefor as
described herein) otherwise payable to the holder of the Transferor Certificate
on such date will be deposited in the Excess Funding Account. Funds on deposit
in the Excess Funding Account will be withdrawn and paid to the holder of the
Transferor Certificate to the extent that on any day the Transferor Ownership
Interest exceeds the Minimum Transferor Ownership Interest as of the end of the
immediately preceding Monthly Period as a result of the transfer of Additional
Receivables to the Trust. Such deposits in and withdrawals from the Excess
Funding Account may be made on a daily basis (except, if AIC is the Servicer,
under the circumstances described above under "--The Collection Account").
The allocable portion of funds on deposit in the Excess Funding Account at
the beginning of the Series 1998-1 Rapid Amortization Period will be paid to the
Series 1998-1 Certificateholders as a payment in respect of principal, and
during the Series 1998-1 Controlled Amortization Period will be paid to the
Series 1998-1 Certificateholders as a payment in respect of principal to the
extent that monthly collections received in respect of Principal Receivables and
Shared Principal Collections allocable to the Series 1998-1 Certificateholders
Ownership Interests are insufficient to pay the Series 1998-1 Controlled
Distribution Amount. Funds on deposit in the Excess Funding Account will be
allocated, if necessary, among the certificateholders ownership interests of
each outstanding Series of certificates on a pro rata basis in accordance with
each such Series' fixed investor percentage.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee at the direction of the Transferor in Permitted Investments. All net
investment income earned on amounts in the Excess Funding Account will be
retained in the Excess Funding Account to the extent that the Transferor
Ownership Interest is less than the Minimum Transferor Ownership Interest. If
losses and investment expenses exceed earnings on funds in the Excess Funding
Account during a Monthly Period, then such excess shall be treated in the same
manner as Default Amounts are treated. The Transferor is not required to
reimburse the Trust with respect to such excess.
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The "Minimum Transferor Ownership Interest" shall mean, as of any date of
determination, an amount equal to the sum of (a) (i) 107% of an amount equal to
the aggregate initial certificateholders ownership interests of all outstanding
Series minus (ii) the aggregate certificateholders ownership interests of all
outstanding Series as of such date and (b) the Excess Receivables Amount for
such date; provided, however, that the Minimum Transferor Ownership Interest
shall be calculated without reference to the Excess Receivables Amount if (i)
prior to such date there shall have been delivered to the Trustee (a) a written
agreement, in form and substance satisfactory to the Rating Agencies, executed
by a person having a long-term unsecured debt rating of AAA from Standard &
Poor's and Aaa from Moody's pursuant to which such person shall have
unconditionally agreed to indemnify the Trust for all losses in respect of
amounts constituting the Excess Receivables Amount at any time and (b) written
confirmation from each of the Rating Agencies to the effect that such
substitution will not result in such Rating Agency reducing or withdrawing its
rating on any then outstanding class of investor certificates of any Series,
including the Series 1994-1 Certificates and the Series 1998-1 Certificates, and
(ii) the agreement and the rating referred to in clause (a) above remain in
effect on such date of determination.
"Excess Receivables Amount" shall mean, as of any date of determination,
the sum of:
(i) the aggregate unpaid principal balance of all Receivables in
the Trust as of the end of the immediately preceding Monthly Period having
the same Obligor but only to the extent such aggregate balance is in
excess of 0.60% of the aggregate unpaid principal balance of all
Receivables in the Trust as of the end of such Monthly Period; and
(ii) the greater of:
(a) the sum, for each Moody's Non-Investment Grade Insurer (including
for this purpose any affiliated Moody's Non-Investment Grade Insurer) of,
if more than [5]% of the aggregate unpaid principal balance of all
Receivables in the Trust as of the end of such Monthly Period arise from
Loans made to finance premiums due to such insurer (including any such
affiliated insurer), the aggregate unpaid principal balance of such
Receivables but only to the extent in excess of such percentage;
(b) the sum, for each insurer (including any affiliated insurer)
referred to below, of the greater of:
(I) if more than [2]% of the aggregate unpaid principal
balance of all Receivables in the Trust as of the end of such
Monthly Period arise from Loans made to finance premiums due to
the same S&P Non-Investment Grade Insurer (including for this
purpose any affiliated S&P Non-Investment Grade Insurer), the
aggregate unpaid principal balance of such Receivables but only
to the extent in excess of such percentage; and
(II) if more than [4]% of the aggregate unpaid principal
balance of all Receivables in the Trust as of the end of such
Monthly Period arise from Loans made to finance premiums due to
the same S&P Non-AAA Insurer (including for this purpose any
affiliated S&P Non-AAA Insurer), the aggregate unpaid principal
balance of such Receivables but only to the extent in excess of
such percentage.
For purposes of making any calculation: (x) pursuant to clause (ii) above, an
amount that would be part of the Excess Receivables Amount under such clause
shall be taken into account only to the extent not already taken into account
under clause (i) above and (y) pursuant to clause (i) or clause (ii) above, the
aggregate of the losses, if any, previously realized in respect of any Obligor
subject to clause (i) above or any insurer referred to in subclauses (a), (b)(I)
and/or (b)(II) of clause (ii) above (to the extent relating to insurer
insolvency) shall reduce
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the percentage levels used in calculating the excess amounts set forth or
referred to in such clause or subclauses with respect to any single Obligor or
insurer.
"Moody's Non-Investment Grade Insurer" shall mean, on any date of
determination, an insurer that as of the end of the immediately preceding
Monthly Period did not have an insurance financial strength rating of at least
investment grade (i.e., in one of the top four generic rating categories,
irrespective of any plus or minus) by Moody's (other than AIG or any wholly
owned subsidiary of AIG), unless Moody's shall have previously notified the
Transferor in writing that such insurer is not to be deemed a "Moody's
Non-Investment Grade Insurer" (and shall not have revoked such notification).
"S&P Non-AAA Insurer" shall mean, on any date of determination, an insurer
that as of the end of the immediately preceding Monthly Period did not have a
claims-paying ability rating at least as high as the then applicable rating
assigned by Standard & Poor's to the Series 1998-1 Class A Certificates or the
Series 1994-1 Class A Certificates unless Standard & Poor's shall have
previously notified the Transferor in writing that such insurer is not to be
deemed an "S&P Non-AAA Insurer" (and shall not have revoked such notification).
"S&P Non-Investment Grade Insurer" shall mean, on any date of
determination, an insurer that as of the end of the immediately preceding
Monthly Period did not have a claims-paying ability rating of at least
investment grade (i.e., in one of the top four generic rating categories,
irrespective of any plus or minus) by Standard & Poor's (other than any
affiliate of AIG with a Standard & Poor's qualified solvency rating of BBBq)
unless Standard & Poor's shall have previously notified the Transferor in
writing that such insurer is not to be deemed an "S&P Non-Investment Grade
Insurer" (and shall not have revoked such notification).
Shared Principal Collections
Collections of Principal Receivables for any Monthly Period allocated to
the Series 1998-1 Certificateholders Ownership Interests will first be used to
cover, with respect to any Monthly Period during the Series 1998-1 Controlled
Amortization Period, deposits of the Series 1998-1 Controlled Distribution
Amount to the Series 1998-1 Distribution Account, and during the Series 1998-1
Rapid Amortization Period, payments to the Holders of Offered Certificates and
then payments to the Series 1998-1 Class C Certificateholders. The Servicer will
determine the amount of collections of Principal Receivables for any Monthly
Period allocated to the Series 1998-1 Certificateholders Ownership Interests
remaining after covering required payments to the Series 1998-1
Certificateholders and any similar amounts remaining for the Series 1994-1
Certificates or any additional Series ("Shared Principal Collections"). The
Servicer will allocate the Shared Principal Collections to cover any scheduled
or permitted principal distributions to certificateholders and deposits to
principal funding accounts, if any, for any Series which have not been covered
out of the collections of Principal Receivables allocable to such Series and
certain other amounts for such Series ("Principal Shortfalls"). Shared Principal
Collections will not be used to reimburse certificateholders for investor
charge-offs for any Series to cover interest shortfalls for any Series. If
Principal Shortfalls exceed Shared Principal Collections for any Monthly Period,
Shared Principal Collections will be allocated pro rata among the applicable
Series based on the relative amounts of Principal Shortfalls. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance will be
paid to the holder of the Transferor Certificate; provided, however, that such
amount shall be paid to the holder of the Transferor Certificate only to the
extent that the Transferor Ownership Interest on such date is greater than the
Minimum Transferor Ownership Interest as of the immediately preceding Monthly
Period (after giving effect to the inclusion in the Trust of all Receivables
transferred to the Trust on or prior to such date and the application of
collections received) and otherwise shall be deposited into the Excess Funding
Account; provided further, that in no event shall the amount payable to the
holder of the Transferor Certificate be greater than the Transferor Ownership
Interest.
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Defaulted Loans; Charge-Offs
Losses resulting from the charge-off of Loans in each Monthly Period
("Default Amounts") are generally shared between the certificateholders
ownership interests of each outstanding Series, based on their respective
floating investor percentages (see "--Allocation Percentages" below with respect
to Series 1998-1), and the Transferor Ownership Interest. Certain losses
resulting from charge-offs of Receivables in excess of specified levels will be
allocated entirely to the Transferor Ownership Interest. Accordingly, such
excess losses will not be borne by the Series 1998-1 Certificateholders
Ownership Interests and will not be taken into account in calculating the Series
1998-1 Investor Default Amount (defined below). The circumstances under which
excess losses will be allocated entirely to the Transferor Ownership Interest
will occur when there are losses on Receivables relating to Loans to a single
Obligor exceeding 0.60% of the aggregate principal balances of Receivables at
the end of any Monthly Period, or when losses on Receivables resulting from the
insolvency of certain insurance carriers (to the extent not taken into account
as a result of the single Obligor excess loss allocation) exceed 2% of the
aggregate principal balances of Receivables at the end of any Monthly Period
(see the definition of "Excess Receivables Amount" under "--Excess Funding
Account" above). In addition, all losses will be allocated to the Transferor
Ownership Interest after the occurrence of the Pay Out Event described under
clause (d) of "--Pay Out Events" below or after the Transferor Ownership
Interest falls below the Minimum Transferor Ownership Interest following the
occurrence of any other Pay Out Event.
On the fourth business day preceding each Transfer Date (the
"Determination Date"), the Servicer will calculate the Series 1998-1 Investor
Default Amount for the preceding Monthly Period. The term "Series 1998-1
Investor Default Amount" means, with respect to any Monthly Period and any
Receivable under a Loan that became a Defaulted Loan during such Monthly Period,
an amount equal to the product of (a) the unpaid amount (including both
principal and accrued unpaid finance charges) of such Receivable as of the date
that such Loan became a Defaulted Loan and (b) the Series 1998-1 Floating
Investor Percentage with respect to such Monthly Period. The term "Defaulted
Loan" shall mean any Loan which (i) remains in default as of the beginning of
the month immediately following the first anniversary of the cancellation of the
related insurance policy, which cancellation results from such default, or (ii)
is overdue and which the Servicer determines, in accordance with the Servicer's
policies and procedures relating to the operation of their business, is
incapable of collection. A Loan shall be considered to be a Defaulted Loan upon
the earlier to occur of (i) or (ii) above.
State laws impose limitations on the amount of finance charges that may
accrue upon the unpaid balance of a Loan after its scheduled maturity and the
late fees that may be imposed upon an Obligor's default in payment of any
installments due under a Loan. Such laws vary widely by state, but often provide
for the recovery of only minimal additional interest and fees, if any.
A portion of the Series 1998-1 Investor Default Amount will be allocated
to the Series 1998-1 Class A Certificateholders (the "Series 1998-1 Class A
Default Amount") on each Transfer Date in an amount equal to the product of the
Series 1998-1 Class A Floating Allocation applicable during the related Monthly
Period and the Series 1998-1 Investor Default Amount for such Monthly Period. A
portion of the Series 1998-1 Investor Default Amount will be allocated to the
Series 1998-1 Class B Certificateholders (the "Series 1998-1 Class B Default
Amount") on each Transfer Date in an amount equal to the product of the Series
1998-1 Class B Floating Allocation applicable during the related Monthly Period
and the Series 1998-1 Investor Default Amount for such Monthly Period. A portion
of the Series 1998-1 Investor Default Amount will be allocated to the Series
1998-1 Class C Certificateholders (the "Series 1998-1 Class C Default Amount")
on each Transfer Date in an amount equal to the product of the Series 1998-1
Class C Floating Allocation applicable during the related Monthly Period and the
Series 1998-1 Investor Default Amount for such Monthly Period.
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On each Transfer Date, if the Series 1998-1 Class A Default Amount for
such Transfer Date exceeds the funds on deposit in the Series 1998-1 Yield
Enhancement Account available to cover such amount with respect to the Monthly
Period immediately preceding such Transfer Date, the Series 1998-1 Class C
Ownership Interest (after giving effect to reductions therein for any Series
1998-1 Class C Charge-Offs and any Series 1998-1 Reallocated Principal
Collections on such Transfer Date) will be reduced by the amount of such excess.
In the event that such reduction would cause the Series 1998-1 Class C Ownership
Interest to be a negative number, the Series 1998-1 Class C Ownership Interest
will be reduced to zero, and the Series 1998-1 Class B Ownership Interest (after
giving effect to reductions therein for any Series 1998-1 Class B Charge-Offs
and any Series 1998-1 Reallocated Principal Collections on such Transfer Date)
will be reduced by the amount by which the Series 1998-1 Class C Ownership
Interest would have been reduced below zero. In the event that such reduction
would cause the Series 1998-1 Class B Ownership Interest to be a negative
number, the Series 1998-1 Class B Ownership Interest will be reduced to zero,
and the Series 1998-1 Class A Ownership Interest (after giving effect to
reductions therein for any Series 1998-1 Reallocated Principal Collections on
such Transfer Date) will be reduced (but not below zero) by the amount by which
the Series 1998-1 Class B Ownership Interest would have been reduced below zero
(any such reduction, a "Series 1998-1 Class A Charge-Off"). The Series 1998-1
Class A Ownership Interest will also be reduced by the amount of Series 1998-1
Reallocated Principal Collections used to cover the Series 1998-1 Class A
Required Amount and Series 1998-1 Class B Required Amount if the Series 1998-1
Class B Ownership Interest and Series 1998-1 Class C Ownership Interest have
been reduced to zero. Such reductions in the Series 1998-1 Class A Ownership
Interest will have the effect of slowing or reducing the return of principal and
the payment of interest to the Series 1998-1 Class A Certificateholders. The
Series 1998-1 Class A Ownership Interest will thereafter be reimbursed if not
previously reduced to zero during the Series 1998-1 Class A Controlled
Amortization Period or the Series 1998-1 Rapid Amortization Period (but not in
excess of reductions in the Series 1998-1 Class A Ownership Interest that have
not been previously reimbursed) on any Transfer Date by the amount of funds on
deposit in the Series 1998-1 Yield Enhancement Account allocated and available
for such purpose as described under "--Series 1998-1 Yield Enhancement Account."
If on any Transfer Date, the Series 1998-1 Class B Default Amount for such
Transfer Date exceeds the amount of funds on deposit in the Series 1998-1 Yield
Enhancement Account which are allocated and available to fund such amount as
described under "--Series 1998-1 Yield Enhancement Account," the Series 1998-1
Class C Ownership Interest (after giving effect to reductions therein for any
Series 1998-1 Class C Charge-Offs and any Series 1998-1 Reallocated Principal
Collections on such Transfer Date and after giving effect to any adjustments
with respect thereto as described in the preceding paragraph) will be reduced by
the amount of such excess. In the event that such reduction would cause the
Series 1998-1 Class C Ownership Interest to be a negative number, the Series
1998-1 Class C Ownership Interest will be reduced to zero and the Series 1998-1
Class B Ownership Interest (after giving effect to reductions therein for any
Series 1998-1 Reallocated Principal Collections on such Transfer Date) will be
reduced (but not below zero) by the amount by which the Series 1998-1 Class C
Ownership Interest would have been reduced below zero (any such reduction, a
"Series 1998-1 Class B Charge-Off"). The Series 1998-1 Class B Ownership
Interest will also be reduced by the amount of Series 1998-1 Reallocated
Principal Collections in excess of the Series 1998-1 Class C Ownership Interest
and the amount of any portion of the Series 1998-1 Class B Ownership Interest
allocated to the Series 1998-1 Class A Certificates to avoid a reduction in the
Series 1998-1 Class A Ownership Interest. Such reductions in the Series 1998-1
Class B Ownership Interest will have the effect of slowing or reducing the
return of principal and the payment of interest to the Series 1998-1 Class B
Certificateholders. The Series 1998-1 Class B Ownership Interest will thereafter
be reimbursed if not previously reduced to zero during the Series 1998-1 Class B
Controlled Amortization Period or the Series 1998-1 Rapid Amortization Period
(but not in excess of reductions in the Series 1998-1 Class B Ownership Interest
that have not been previously reimbursed) on any Transfer Date by the amount of
funds on deposit in the Series 1998-1 Yield Enhancement Account allocated and
available for that purpose as described under "--Series 1998-1 Yield Enhancement
Account."
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If on any Transfer Date, the Series 1998-1 Class C Default Amount for such
Transfer Date exceeds the amount of funds on deposit in the Series 1998-1 Yield
Enhancement Account which are allocated and available to fund such amount as
described under "--Series 1998-1 Yield Enhancement Account," the Series 1998-1
Class C Ownership Interest will be reduced by the amount of such excess but not
more than the lesser of the Series 1998-1 Class C Default Amount and the Series
1998-1 Class C Ownership Interest for such Transfer Date (any such reduction, a
"Series 1998-1 Class C Charge-Off"). The Series 1998-1 Class C Ownership
Interest will also be reduced by the amount of Series 1998-1 Reallocated
Principal Collections used to cover payment of interest on the Offered
Certificates and the amount of any portion of the Series 1998-1 Class C
Ownership Interest allocated to the Series 1998-1 Class A Certificates to avoid
a reduction in the Series 1998-1 Class A Ownership Interest or to the Series
1998-1 Class B Certificates to avoid a reduction in the Series 1998-1 Class B
Ownership Interest. The Series 1998-1 Class C Ownership Interest will thereafter
be reimbursed if not previously reduced to zero during the Series 1998-1 Class C
Controlled Amortization Period or the Series 1998-1 Rapid Amortization Period
(but not in excess of reductions in the Series 1998-1 Class C Ownership Interest
that have not been previously reimbursed) on any Transfer Date by the amount of
funds on deposit in the Series 1998-1 Yield Enhancement Account allocated and
available for that purpose as described under "--Series 1998-1 Yield Enhancement
Account."
Allocation Percentages
Pursuant to the Agreement, with respect to each Monthly Period the
Servicer will allocate among the Series 1998-1 Certificateholders Ownership
Interests, the certificateholders ownership interests for each other Series
issued and outstanding and the Transferor Ownership Interest, all amounts
collected on Finance Charge Receivables, all amounts collected on Principal
Receivables and all Default Amounts with respect to such Monthly Period. Finance
charges on the Loans are recognized under the actuarial interest method.
Collections of Finance Charge Receivables, which under the terms of the
Agreement will include any recoveries with respect to Loans that have been
written off, and Default Amounts at any time and collections of Principal
Receivables during the Series 1998-1 Revolving Period will be allocated to the
Series 1998-1 Certificateholders Ownership Interests based on the Series 1998-1
Floating Investor Percentage. The "Series 1998-1 Floating Investor Percentage"
means, with respect to any Monthly Period, the percentage equivalent of a
fraction, the numerator of which is the Series 1998-1 Certificateholders
Ownership Interests as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the Series 1998-1
Initial Certificateholders Ownership Interests) and the denominator of which is
the greater of (x) the aggregate amount of Principal Receivables as of the close
of business on the last day of the preceding Monthly Period (or with respect to
the first Monthly Period, the aggregate amount of Principal Receivables as of
the close of business on the day immediately preceding the Closing Date that
will be included in the Trust on such date), and (y) the sum of the numerators
used to calculate the investor percentages for allocations with respect to
Finance Charge Receivables, Default Amounts or Principal Receivables, as
applicable, for all outstanding Series on such date of determination. Such
amounts so allocated will be further allocated between the Series 1998-1 Class A
Certificateholders, Series 1998-1 Class B Certificateholders and the Series
1998-1 Class C Certificateholders based on the Series 1998-1 Class A Floating
Allocation, the Series 1998-1 Class B Floating Allocation and the Series 1998-1
Class C Floating Allocation, respectively. The "Series 1998-1 Class A Floating
Allocation" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Series 1998-1 Class A Ownership Interest as of the close of
business on the last day of the preceding Monthly Period (or with respect to the
first Monthly Period, as of the Closing Date) and the denominator of which is
equal to the Series 1998-1 Certificateholders Ownership Interests as of the
close of business on such day. The "Series 1998-1 Class B Floating Allocation"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the
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numerator of which is equal to the Series 1998-1 Class B Ownership Interest as
of the close of business on the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Series 1998-1 Certificateholders Ownership
Interests as of the close of business on such day. The "Series 1998-1 Class C
Floating Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Series 1998-1 Class C Ownership Interest as
of the close of business on the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Series 1998-1 Certificateholders Ownership
Interests as of the close of business on such day.
Collections of Principal Receivables during the Series 1998-1 Controlled
Amortization Period and Series 1998-1 Rapid Amortization Period will be
allocated to the Series 1998-1 Certificateholders Ownership Interests based on
the Series 1998-1 Fixed Investor Percentage. The "Series 1998-1 Fixed Investor
Percentage" means, with respect to any Monthly Period, the percentage equivalent
of a fraction, the numerator of which is the Series 1998-1 Certificateholders
Ownership Interests as of the close of business on the last day of the Series
1998-1 Revolving Period and the denominator of which is the greater of (x) the
aggregate amount of Principal Receivables in the Trust as of the close of
business on the last day of the prior Monthly Period and (y) the sum of the
numerators used to calculate the investor percentages for allocations with
respect to Principal Receivables for all outstanding Series for such Monthly
Period.
"Series 1998-1 Certificateholders Ownership Interests" for any date means
an amount equal to the sum of (a) the Series 1998-1 Class A Ownership Interest,
(b) the Series 1998-1 Class B Ownership Interest and (c) the Series 1998-1 Class
C Ownership Interest, each as of such date.
"Series 1998-1 Class A Ownership Interest" for any date means an amount
equal to (a) $[___________] (the "Series 1998-1 Class A Initial Ownership
Interest"), minus (b) the aggregate amount of principal payments made to Series
1998-1 Class A Certificateholders prior to such date, minus (c) the aggregate
amount of Series 1998-1 Class A Charge-Offs for all prior Transfer Dates, minus
(d) the aggregate amount of Series 1998-1 Reallocated Principal Collections for
all prior Transfer Dates for which the Series 1998-1 Class B Ownership Interest
and the Series 1998-1 Class C Ownership Interest have not been reduced, and plus
(e) the aggregate amount of funds on deposit in the Series 1998-1 Yield
Enhancement Account allocated on all prior Transfer Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d);
provided, however, that the Series 1998-1 Class A Ownership Interest may not be
reduced below zero.
"Series 1998-1 Class B Ownership Interest" for any date means an amount
equal to (a) $[_________] (the "Series 1998-1 Class B Initial Ownership
Interest"), minus (b) the aggregate amount of principal payments made to Series
1998-1 Class B Certificateholders prior to such date, minus (c) the aggregate
amount of Series 1998-1 Class B Charge-Offs for all prior Transfer Dates, minus
(d) the aggregate amount of Series 1998-1 Reallocated Principal Collections for
all prior Transfer Dates for which the Series 1998-1 Class C Ownership Interest
has not been reduced, minus (e) an amount equal to the aggregate amount by which
the Series 1998-1 Class B Ownership Interest has been reduced to fund the Series
1998-1 Class A Default Amount on all prior Transfer Dates as described under
"--Defaulted Loans; Charge-Offs," and plus (f) the aggregate amount of funds on
deposit in the Series 1998-1 Yield Enhancement Account allocated on all prior
Transfer Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e); provided, however, that the Series 1998-1
Class B Ownership Interest may not be reduced below zero.
"Series 1998-1 Class C Ownership Interest" for any date means an amount
equal to (a) $[________] (the "Series 1998-1 Class C Initial Ownership
Interest"), minus (b) the aggregate amount of principal payments made
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to the holders of the Series 1998-1 Class C Ownership Interest prior to such
date, minus (c) the aggregate amount of Series 1998-1 Class C Charge-Offs for
all prior Transfer Dates, minus (d) the aggregate amount of Series 1998-1
Reallocated Principal Collections for all prior Transfer Dates for which the
Series 1998-1 Class C Ownership Interest has been reduced, minus (e) an amount
equal to the aggregate amount by which the Series 1998-1 Class C Ownership
Interest has been reduced to fund the Series 1998-1 Class A Default Amount and
the Series 1998-1 Class B Default Amount on all prior Transfer Dates as
described under "--Defaulted Loans; Charge-Offs," and plus (f) the aggregate
amount of funds on deposit in the Series 1998-1 Yield Enhancement Account
allocated on all prior Transfer Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e); provided, however,
that the Series 1998-1 Class C Ownership Interest may not be reduced below zero.
Reallocation of Cash Flows
With respect to each Transfer Date, the Servicer will determine the
"Series 1998-1 Class A Required Amount," which will be equal to the amount, if
any, by which the sum of (a) Series 1998-1 Class A Monthly Interest due on the
related Distribution Date, (b) Series 1998-1 Class A Additional Interest due on
such Distribution Date, (c) the Series 1998-1 Class A Servicing Fee for the
related Monthly Period and any overdue Series 1998-1 Class A Servicing Fee, (d)
the Series 1998-1 Class A Default Amount, if any, for the related Monthly Period
and (e) Series 1998-1 Class A Prior Period Interest, if any, exceeds the Series
1998-1 Class A Available Funds for the related Monthly Period. If the Series
1998-1 Class A Required Amount is greater than zero, funds on deposit in the
Series 1998-1 Yield Enhancement Account and available for such purpose will be
used to fund the Series 1998-1 Class A Required Amount with respect to such
Transfer Date. If the funds on deposit in the Series 1998-1 Yield Enhancement
Account are insufficient to fund the remaining Series 1998-1 Class A Required
Amount, first, Series 1998-1 Reallocated Class C Principal Collections, then,
Series 1998-1 Reallocated Class B Principal Collections and finally, Series
1998-1 Reallocated Class A Principal Collections will be used to fund the Series
1998-1 Class A Required Amount. Any reallocation of Principal Receivables
collections to fund the Series 1998-1 Class A Required Amount or, as described
in the next succeeding paragraph, the Series 1998-1 Class B Required Amount will
result in a corresponding reduction in the Series 1998-1 Certificateholders
Ownership Interests. The amount of such reduction will be allocated first to
reduce the Series 1998-1 Class C Ownership Interest, second to reduce the Series
1998-1 Class B Ownership Interest and lastly to reduce the Series 1998-1 Class A
Ownership Interest. If Series 1998-1 Reallocated Principal Collections with
respect to the Monthly Period, together with the funds on deposit in the Series
1998-1 Yield Enhancement Account, are insufficient to fund the Series 1998-1
Class A Required Amount for such related Monthly Period, then the Series 1998-1
Class C Ownership Interest (after giving effect to reductions therein for any
Series 1998-1 Class C Charge-Offs and Series 1998-1 Reallocated Principal
Collections for the related Transfer Date) will be reduced by the amount of such
excess. In the event that such reduction would cause the Series 1998-1 Class C
Ownership Interest to be a negative number, the Series 1998-1 Class C Ownership
Interest will be reduced to zero, and the Series 1998-1 Class B Ownership
Interest (after giving effect to reductions therein for any Series 1998-1 Class
B Charge-Offs and Series 1998-1 Reallocated Principal Collections for such
Transfer Date) will be reduced by the amount by which the Series 1998-1 Class C
Ownership Interest would have been reduced below zero. In the event that such
reduction would cause the Series 1998-1 Class B Ownership Interest to be a
negative number, the Series 1998-1 Class B Ownership Interest will be reduced to
zero and the Series 1998-1 Class A Ownership Interest (after giving effect to
reductions therein for any Series 1998-1 Class A Charge-Offs and Series 1998-1
Reallocated Principal Collections for such Transfer Date) will be reduced (but
not below zero) by the amount by which the Series 1998-1 Class B Ownership
Interest would have been reduced below zero. Any such reduction in the Series
1998-1 Class A Ownership Interest will have the effect of slowing or reducing
the return of principal and payment of interest to the Series 1998-1 Class A
Certificateholders. If the Series 1998-1 Class B Ownership Interest and the
Series 1998-1 Class C Ownership Interest have both been reduced to zero, the
Series
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1998-1 Class A Certificateholders will bear directly the credit risks associated
with their interests in the Trust. See "--Defaulted Loans; Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the
"Series 1998-1 Class B Required Amount," which will be equal to the amount, if
any, by which the sum of (a) Series 1998-1 Class B Monthly Interest due on the
related Distribution Date, (b) Series 1998-1 Class B Additional Interest due on
such Distribution Date, (c) the Series 1998-1 Class B Servicing Fee for the
related Monthly Period and any overdue Series 1998-1 Class B Servicing Fee, (d)
the Series 1998-1 Class B Default Amount, if any, for such Transfer Date and (e)
Series 1998-1 Class B Prior Period Interest, if any, exceeds the Series 1998-1
Class B Available Funds for the related Monthly Period. If the Series 1998-1
Class B Required Amount is greater than zero, funds on deposit in the Series
1998-1 Yield Enhancement Account not required to pay the Series 1998-1 Class A
Required Amount will be used to fund the Series 1998-1 Class B Required Amount
with respect to such Transfer Date. If funds on deposit in the Series 1998-1
Yield Enhancement Account are insufficient to fund the remaining Series 1998-1
Class B Required Amount, then Series 1998-1 Reallocated Principal Collections
not required to fund the Series 1998-1 Class A Required Amount for the related
Monthly Period will be used to fund the Series 1998-1 Class B Required Amount.
If such Series 1998-1 Reallocated Principal Collections with respect to the
related Monthly Period are insufficient to fund the remaining Series 1998-1
Class B Required Amount, then the Series 1998-1 Class C Ownership Interest
(after giving effect to reductions therein for any Series 1998-1 Class C
Charge-Offs and Series 1998-1 Reallocated Principal Collections for the related
Transfer Date) will be reduced by the amount of such deficiency. In the event
that such a reduction would cause the Series 1998-1 Class C Ownership Interest
to be a negative number, the Series 1998-1 Class C Ownership Interest will be
reduced to zero, and the Series 1998-1 Class B Ownership Interest (after giving
effect to reductions therein for any Series 1998-1 Class B Charge-Offs and
Series 1998-1 Reallocated Principal Collections for such Transfer Date) will be
reduced (but not below zero) by the amount by which the Series 1998-1 Class C
Ownership Interest would have been reduced below zero. Any such reduction in the
Series 1998-1 Class B Ownership Interest will have the effect of slowing or
reducing the return of principal and payment of interest to the Series 1998-1
Class B Certificateholders. If the Series 1998-1 Class C Ownership Interest has
been reduced to zero, the Series 1998-1 Class B Certificateholders will bear
directly the credit risks associated with their interests in the Trust. See
"--Defaulted Loans; Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the
"Series 1998-1 Class C Required Amount," which will be equal to the amount, if
any, by which the sum of (a) Series 1998-1 Class C Monthly Interest due on the
related Distribution Date, (b) Series 1998-1 Class C Additional Interest due on
such Distribution Date, (c) the Series 1998-1 Class C Servicing Fee for the
related Monthly Period and any overdue Series 1998-1 Class C Servicing Fee, (d)
the Series 1998-1 Class C Default Amount, if any, for such Transfer Date, and
(e) Series 1998-1 Class C Prior Period Interest, if any, exceeds the Series
1998-1 Class C Available Funds for the related Monthly Period.
Reductions of the Series 1998-1 Class A Ownership Interest or Series
1998-1 Class B Ownership Interest described above on any Transfer Date shall be
reimbursed by, and the Series 1998-1 Class A Ownership Interest or Series 1998-1
Class B Ownership Interest increased to the extent of, funds on deposit in the
Series 1998-1 Yield Enhancement Account available for such purposes on each
subsequent Transfer Date. See "--Series 1998-1 Yield Enhancement Account." If
and when such reductions of the Series 1998-1 Class A Ownership Interest and
Series 1998-1 Class B Ownership Interest have been fully reimbursed, reductions
of the Series 1998-1 Class C Ownership Interest shall be reimbursed in a similar
manner until reimbursed in full.
"Series 1998-1 Reallocated Class A Principal Collections" for any Monthly
Period means collections of Principal Receivables allocable to the Series 1998-1
Class A Ownership Interest for such Monthly Period in an
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amount not to exceed the amount required to fund the Series 1998-1 Class A
Required Amount and the Series 1998-1 Class B Required Amount for the related
Transfer Date; provided, however, that such amount will not exceed the Series
1998-1 Class A Ownership Interest after giving effect to any Series 1998-1 Class
A Charge-Offs for such Transfer Date.
"Series 1998-1 Reallocated Class B Principal Collections" for any Monthly
Period means collections of Principal Receivables allocable to the Series 1998-1
Class B Ownership Interest for such Monthly Period in an amount not to exceed
the amount applied to fund the Series 1998-1 Class A Required Amount and the
Series 1998-1 Class B Required Amount, if any; provided, however, that such
amount will not exceed the Series 1998-1 Class B Ownership Interest after giving
effect to any Series 1998-1 Class B Charge-Offs for the related Transfer Date.
"Series 1998-1 Reallocated Class C Principal Collections" for any Monthly
Period means collections of Principal Receivables allocable to the Series 1998-1
Class C Ownership Interest for such Monthly Period in an amount not to exceed
the amount applied to fund the Series 1998-1 Class A Required Amount and the
Series 1998-1 Class B Required Amount, if any; provided, however, that such
amount will not exceed the Series 1998-1 Class C Ownership Interest after giving
effect to any Series 1998-1 Class C Charge-Offs for the related Transfer Date.
"Series 1998-1 Reallocated Principal Collections" for any Monthly Period
means the sum of the Series 1998-1 Reallocated Series 1998-1 Class A Principal
Collections, the Series 1998-1 Reallocated Class B Principal Collections and the
Series 1998-1 Reallocated Class C Principal Collections, in each case for such
Monthly Period.
Application of Collections
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply funds on deposit in the Series 1998-1 Distribution
Account (consisting of Series 1998-1 Class A Available Funds, Series 1998-1
Class B Available Funds, Series 1998-1 Class C Available Funds, Series 1998-1
Available Investor Principal Collections (including allocable amounts from the
Excess Funding Account), Series 1998-1 Reallocated Principal Collections, and
amounts from the Series 1998-1 Yield Enhancement Account, in each case to the
extent deposited into the Series 1998-1 Distribution Account for purposes of
making distributions to Series 1998-1 Certificateholders) to pay the following
amounts (in each case determined as of the immediately preceding Transfer Date)
in the following order of priority:
(a) to the Series 1998-1 Class A Certificateholders:
(i) Series 1998-1 Class A Monthly Interest;
(ii) Series 1998-1 Class A Additional Interest, if any;
(iii) Series 1998-1 Class A Prior Period Interest, if any, to the
extent distributable on such Distribution Date;
(b) to the Series 1998-1 Class B Certificateholders:
(i) Series 1998-1 Class B Monthly Interest;
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(ii) Series 1998-1 Class B Additional Interest, if any;
(iii) Series 1998-1 Class B Prior Period Interest, if any, to the
extent distributable on such Distribution Date;
(c) during the Series 1998-1 Revolving Period, to the Series 1998-1 Class
C Certificateholders:
(i) Series 1998-1 Class C Monthly Interest;
(ii) Series 1998-1 Class C Additional Interest, if any;
(iii) Series 1998-1 Class C Prior Period Interest, if any, to the
extent distributable on such Distribution Date;
(d) during the Series 1998-1 Controlled Amortization Period or the Series
1998-1 Rapid Amortization Period:
(i) to the Series 1998-1 Class A Certificateholders, Series 1998-1
Class A Monthly Principal;
(ii) to the Series 1998-1 Class B Certificateholders, Series 1998-1
Class B Monthly Principal;
(iii) to the Series 1998-1 Class C Certificateholders, the amounts
set forth in clause (c) above (in the order of priority set forth in such
clause); and
(iv) to the Series 1998-1 Class C Certificateholders, Series 1998-1
Class C Monthly Principal.
"Series 1998-1 Class A Monthly Interest" with respect to any Transfer Date
will equal the product of (i) the Series 1998-1 Class A Certificate Rate for the
related Interest Period, (ii) the actual number of days in such Interest Period
divided by 360 and (iii) the Series 1998-1 Class A Ownership Interest on the
related Record Date; provided, however, with respect to the first Distribution
Date, Series 1998-1 Class A Monthly Interest shall be equal to the interest
accrued on the Series 1998-1 Class A Initial Ownership Interest at the
applicable Series 1998-1 Class A Certificate Rate for the period from the
Closing Date through [February 15, 1998.]
"Series 1998-1 Class B Monthly Interest" with respect to any Transfer Date
will equal the product of (i) the Series 1998-1 Class B Certificate Rate for the
related Interest Period, (ii) the actual number of days in such Interest Period
divided by 360 and (iii) the Series 1998-1 Class B Ownership Interest on the
related Record Date; provided, however, with respect to the first Distribution
Date, Series 1998-1 Class B Monthly Interest shall be equal to the interest
accrued on the Series 1998-1 Class B Initial Ownership Interest at the
applicable Series 1998-1 Class B Certificate Rate for the period from the
Closing Date through [February 15, 1998.]
"Series 1998-1 Class C Monthly Interest" with respect to any Transfer Date
will equal the product of (i) the Series 1998-1 Class C Certificate Rate for the
related Interest Period, (ii) the actual number of days in such Interest Period
divided by 360, and (iii) the Series 1998-1 Class C Ownership Interest on the
related Record Date; provided, however, with respect to the first Distribution
Date, Series 1998-1 Class C Monthly Interest shall be equal to the interest
accrued on the Series 1998-1 Class C Initial Ownership Interest at the
applicable Series 1998-1 Class C Certificate Rate for the period from the
Closing Date through [February 15, 1998.]
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"Series 1998-1 Class A Prior Period Interest," with respect to each
Interest Period in which the Series 1998-1 Class A Certificates would have
accrued interest on the Series 1998-1 Class A Ownership Interest had such Series
1998-1 Class A Ownership Interest not been reduced for reasons other than the
payment of principal to the Series 1998-1 Class A Certificateholders, will equal
the product of (i) the Series 1998-1 Class A Certificate Rate in effect during
such Interest Period plus 2% per annum, (ii) the actual number of days in such
Interest Period divided by 360 and (iii) the amount by which the Series 1998-1
Class A Ownership Interest was less than the Series 1998-1 Class A Ownership
Interest during such Interest Period for reasons other than the payment of
principal to the Series 1998-1 Class A Certificateholders; provided, however,
that Series 1998-1 Class A Prior Period Interest will not be distributed until
the Distribution Date(s) following the Transfer Date on which the Series 1998-1
Class A Ownership Interest has been reimbursed in full for any reductions.
"Series 1998-1 Class B Prior Period Interest," with respect to each
Interest Period in which the Series 1998-1 Class B Certificates would have
accrued interest on the Series 1998-1 Class B Ownership Interest had such Series
1998-1 Class B Ownership Interest not been reduced for reasons other than the
payment of principal to the Series 1998-1 Class B Certificateholders, will equal
the product of (i) the Series 1998-1 Class B Certificate Rate in effect during
such Interest Period plus 2% per annum, (ii) the actual number of days in such
Interest Period divided by 360 and (iii) the amount by which the Series 1998-1
Class B Ownership Interest was less than the Series 1998-1 Class B Ownership
Interest during such Interest Period for reasons other than the payment of
principal to the Series 1998-1 Class B Certificateholders; provided, however,
that Series 1998-1 Class B Prior Period Interest will not be distributed until
the Distribution Date(s) following the Transfer Date on which the Series 1998-1
Class B Ownership Interest has been reimbursed in full for any reductions.
"Series 1998-1 Class C Prior Period Interest," with respect to each
Interest Period in which the Series 1998-1 Class C Certificates would have
accrued interest on the Series 1998-1 Class C Ownership Interest had such Series
1998-1 Class C Ownership Interest not been reduced for reasons other than the
payment of principal to the Series 1998-1 Class C Certificateholders, will equal
the product of (i) the Series 1998-1 Class C Certificate Rate in effect during
such Interest Period plus 2% per annum, (ii) the actual number of days in such
Interest Period divided by 360 and (iii) the amount by which the Series 1998-1
Class C Ownership Interest was less than the Series 1998-1 Class C Ownership
Interest during such Interest Period for reasons other than the payment of
principal to the Series 1998-1 Class C Certificateholders; provided, however,
that Series 1998-1 Class C Prior Period Interest will not be distributed until
the Distribution Date(s) following the Transfer Date on which the Series 1998-1
Class C Ownership Interest has been reimbursed in full for any reductions.
"Series 1998-1 Class C Available Funds" means, with respect to any Monthly
Period, an amount equal to the Series 1998-1 Class C Floating Allocation of
collections of Finance Charge Receivables allocated to the Series 1998-1
Certificateholders Ownership Interests with respect to such Monthly Period.
"Series 1998-1 Class A Monthly Principal" with respect to any Transfer
Date relating to (i) the Series 1998-1 Class A Controlled Amortization Period,
prior to the payment in full of the Series 1998-1 Class A Ownership Interest,
will equal the least of (a) the Series 1998-1 Available Investor Principal
Collections on deposit in the Principal Account with respect to such Transfer
Date, (b) the Series 1998-1 Controlled Distribution Amount for the related
Distribution Date, and (c) the Series 1998-1 Class A Ownership Interest on such
Transfer Date, and (ii) the Series 1998-1 Rapid Amortization Period, prior to
payment in full of the Series 1998-1 Class A Ownership Interest, will equal the
lesser of (a) Series 1998-1 Available Investor Principal Collections on deposit
in the Principal Account with respect to such Transfer Date, and (b) the Series
1998-1 Class A Ownership Interest on such Transfer Date.
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"Series 1998-1 Class B Monthly Principal" with respect to any Transfer
Date relating to (i) the Series 1998-1 Class B Controlled Amortization Period,
after the Series 1998-1 Class A Ownership Interest has been paid in full (after
taking into account payments to be made on the related Distribution Date in
respect of the Series 1998-1 Class A Certificates), will equal the least of (a)
the Series 1998-1 Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date (minus the portion of such
Series 1998-1 Available Investor Principal Collections applied to Series 1998-1
Class A Monthly Principal on such Transfer Date), (b) the Series 1998-1
Controlled Distribution Amount for the related Distribution Date (minus the
portion of such Series 1998-1 Controlled Distribution Amount applied to Series
1998-1 Class A Monthly Principal on such Transfer Date), and (c) the Series
1998-1 Class B Ownership Interest for such Transfer Date, and (ii) the Series
1998-1 Rapid Amortization Period, after the Series 1998-1 Class A Ownership
Interest has been paid in full (after taking into account payments to be made on
the related Distribution Date in respect of the Series 1998-1 Class A
Certificates), will equal the lesser of (a) Series 1998-1 Available Investor
Principal Collections on deposit in the Principal Account with respect to such
Transfer Date (minus the portion of such Series 1998-1 Available Investor
Principal Collections applied to Series 1998-1 Class A Monthly Principal on such
Transfer Date), and (b) the Series 1998-1 Class B Ownership Interest on such
Transfer Date.
"Series 1998-1 Class C Monthly Principal" with respect to any Transfer
Date relating to (i) the Series 1998-1 Class C Controlled Amortization Period,
after the Series 1998-1 Class B Ownership Interest has been paid in full (after
taking into account payments to be made on the related Distribution Date in
respect of the Series 1998-1 Class A Certificates and the Series 1998-1 Class B
Certificates), will equal the least of (a) the Series 1998-1 Available Investor
Principal Collections on deposit in the Principal Account with respect to such
Transfer Date (minus the portion of such Series 1998-1 Available Investor
Principal Collections applied to Series 1998-1 Class A Monthly Principal, if
any, and Series 1998-1 Class B Monthly Principal on the related Distribution
Date), (b) the Series 1998-1 Controlled Distribution Amount for the related
Distribution Date (minus the portion of such Series 1998-1 Controlled
Distribution Amount applied to Series 1998-1 Class A Monthly Principal and
Series 1998-1 Class B Monthly Principal on such Transfer Date), and (c) the
Series 1998-1 Class C Ownership Interest for such Transfer Date, and (ii) the
Series 1998-1 Rapid Amortization Period, after the Series 1998-1 Class B
Ownership Interest has been paid in full (after taking into account payments to
be made on such Distribution Date in respect of the Series 1998-1 Class A
Certificates and the Series 1998-1 Class B Certificates), will equal the lesser
of (a) Series 1998-1 Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date (minus the portion of such
Series 1998-1 Available Investor Principal Collections applied to Series 1998-1
Class A Monthly Principal, if any, and Series 1998-1 Class B Monthly Principal
on such Distribution Date), and (b) the Series 1998-1 Class C Ownership Interest
on such Transfer Date.
Final Payment of Principal; Termination of Trust
The Series 1998-1 Certificates will be subject to optional repurchase by
the Transferor (a "Cleanup Call") on any Distribution Date on or after which the
Series 1998-1 Certificateholders Ownership Interests are reduced to an amount
less than or equal to [10% of $_________] (the "Series 1998-1 Initial
Certificateholders Ownership Interests"). Such Cleanup Call is conditioned upon
(i) deposit into the Series 1998-1 Distribution Account of the repurchase price
by or on behalf of the Transferor and (ii) receipt by the Trustee of an
acceptable opinion of counsel to the effect that such deposit would not
constitute a fraudulent transfer of the Transferor. The repurchase price will
generally be equal to the Series 1998-1 Certificateholders Ownership Interests,
plus accrued and unpaid interest on the Series 1998-1 Certificates at the
respective Series 1998-1 Certificate Rates through the date preceding the
Distribution Date on which the repurchase occurs, less the amounts, if any, on
deposit at such Distribution Date in the Series 1998-1 Distribution Account for
the payment of principal and interest thereon. The net proceeds of such Cleanup
Call and any collections on the Receivables available for such purpose will be
distributed pro rata and in accordance with the priority for each class under
the Agreement to the Series 1998-1
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Certificateholders on the Distribution Date following the Monthly Period in
which such Cleanup Call occurs as final payment of the Series 1998-1
Certificates. The Agreement provides that the final distribution of principal
and interest on the Offered Certificates will be made on the [_________]
Distribution Date (the "Series 1998-1 Termination Date").
Unless the Servicer and the holder of the Transferor Certificate instruct
the Trustee otherwise, the Trust will terminate on the earliest of: (a) the day
after the Distribution Date with respect to any Series following the day on
which funds shall have been deposited in the applicable distribution account for
each such Series sufficient to pay in full (i) the aggregate certificateholders
ownership interests plus accrued interest thereon at the applicable certificate
rates through the applicable interest accrual period prior to the Distribution
Date with respect to each such Series and (ii) all amounts owed to each person
that provides Enhancement; (b) if a trust extension has occurred, the extended
trust termination date, which shall be no later than the earlier of December 31,
2034 and the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the father of the late President of the United
States, living on the date of the Agreement; or (c) immediately following the
liquidation of all of the Receivables, as provided under "--Pay Out Events"
below, subsequent to the insolvency of the Transferor, AIC or AICCO. Upon the
termination of the Trust, payment of all amounts due under the Agreement and the
surrender of the Transferor Certificate, the Trustee shall convey to the holder
of the Transferor Certificate all right, title and interest of the Trust in and
to the Receivables and other assets of the Trust.
Pay Out Events
A Pay Out Event may occur during either the Series 1998-1 Revolving Period
or the Series 1998-1 Controlled Amortization Period, which is scheduled to
commence at the end of the Series 1998-1 Revolving Period on [______________].
The Series 1998-1 Rapid Amortization Period will commence on the day that a Pay
Out Event occurs. A "Pay Out Event" refers to any of the following events:
(a) failure on the part of either of the Original Transferors or the
Transferor (i) to make any payment or deposit on the date required under
the Agreement (or within the applicable grace period which shall not
exceed five business days) or (ii) to observe or perform in any material
respect any other covenants or agreements of either of the Original
Transferors or the Transferor set forth in the Agreement or the Series
1998-1 Supplement, which failure has a material adverse effect on the
Series 1998-1 Certificateholders (which determination shall be made
without reference to whether any funds are available in the Series 1998-1
Yield Enhancement Account or by reason of the subordination of any class
of the Series 1998-1 Certificates) and continues unremedied for a period
of 60 days after written notice and continues to materially and adversely
affect the interests of the Series 1998-1 Certificateholders (which
determination shall be made without reference to whether any funds are
available in the Series 1998-1 Yield Enhancement Account or by reason of
the subordination of any class of the Series 1998-1 Certificates) for such
period;
(b) any representation or warranty made by either of the Original
Transferors or the Transferor in the Agreement or the 1998-1 Supplement,
or any information required to be given by either of the Original
Transferors or the Transferor to the Trustee to identify the Receivables,
proves to have been incorrect in any material respect when made and which
continues to be incorrect in any material respect for a period of 60 days
after written notice and as a result of which the interests of the Series
1998-1 Certificateholders are materially and adversely affected (which
determination shall be made without reference to whether any funds are
available in the Series 1998-1 Yield Enhancement Account or by reason of
the subordination of any class of the Series 1998-1 Certificates) and
continue to be materially and adversely affected (which determination
shall be made without reference to whether any funds are available in the
Series 1998-1 Yield Enhancement
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Account or by reason of the subordination of any class of the Series
1998-1 Certificates) for such period; provided, however, that a Pay Out
Event described in this subparagraph (b) shall not be deemed to occur if
the related Original Transferor or the Transferor has accepted
reassignment of the related Receivable or all such Receivables, if
applicable, during such period in accordance with the provisions of the
Agreement;
(c) if the Series 1998-1 Annualized Monthly Excess Spread Amount is
less than 400 basis points for three consecutive Monthly Periods;
(d) the Transferor Ownership Interest as of the fourth business day
prior to each Transfer Date does not at least equal the Minimum Transferor
Ownership Interest as of the end of the immediately preceding Monthly
Period and on the immediately following Transfer Date the Transferor shall
have failed to transfer Additional Receivables to the Trust pursuant to
the Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Series 1998-1 Certificateholders (which determination shall
be made without reference to whether any funds are available in the Series
1998-1 Yield Enhancement Account or by reason of the subordination of any
class of the Series 1998-1 Certificates);
(f) if the Monthly Payment Rate is less than 14% for three
consecutive Monthly Periods;
(g) a Financed Premium Percentage of more than 90% in respect of
Additional Receivables transferred to the Trust for three consecutive
Monthly Periods;
(h) certain events of bankruptcy or insolvency, relating to either of
the Original Transferors or the Transferor;
(i) the Transferor becomes unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement; and
(j) AIG shall fail to meet its obligations under either of the
Support Agreements in any respect or AIC shall fail to meet its support
obligations with respect to AICCO under the Agreement or the AIC Support
Agreement or such support obligations of AIC shall have been modified,
amended or terminated, except as otherwise expressly permitted by the
terms of the Agreement.
In the case of any event described in clause (a), (b) or (e) above, after
any applicable grace period, a Pay Out Event will be deemed to have occurred
with respect to the Series 1998-1 Certificates on the tenth Business Day
thereafter unless prior to such day holders of Series 1998-1 Certificates
evidencing undivided interests aggregating not less than 50% of the Series
1998-1 Certificateholders Ownership Interests notify the Trustee, the Transferor
and the Servicer in writing that a Pay Out Event should not occur. In the case
of any event described in clause (h), (i) or (j), a Pay Out Event with respect
to all Series then outstanding, and in the case of any event described in clause
(c), (d), (f) or (g), a Pay Out Event with respect to only the Series 1998-1
Certificates, will be deemed to have occurred without any notice or other action
on the part of the Trustee or the Series 1998-1 Certificateholders or all
certificateholders of all outstanding Series, as appropriate, immediately upon
the occurrence of such event. On the date on which a Pay Out Event is deemed to
have occurred, the Series 1998-1 Rapid Amortization Period will commence. In
such event, distributions of principal to the Series 1998-1 Certificateholders
will begin on the first Distribution Date following the date on which such Pay
Out Event occurred. If, because of the occurrence of a Pay Out Event, the Series
1998-1 Rapid Amortization Period begins earlier than [____________], the
scheduled commencement of the Series 1998-1 Controlled Amortization Period,
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Series 1998-1 Certificateholders will begin receiving distributions of principal
earlier than they otherwise would have, which may shorten the average life of
the Series 1998-1 Certificates.
In addition to the consequences of a Pay Out Event discussed above, if a
bankruptcy-related event involving AIC, AICCO or the Transferor were to occur,
then a Pay Out Event could occur with respect to all Series then outstanding
and, pursuant to the Agreement, Additional Receivables would not be transferred
to the Trust, and the Trustee would be obligated to sell the Receivables (unless
certificateholders holding more than 50% of the certificateholders ownership
interests of each Series outstanding (or, with respect to any Series with two or
more classes, more than 50% of each class) instruct otherwise) in accordance
with the Agreement in a commercially reasonable manner and on commercially
reasonable terms which may cause early termination of the Trust and a loss to
certificateholders of each such Series (including the Series 1998-1
Certificateholders) if the proceeds from such early sale allocable to such
Series, if any, and the amounts available under any Enhancement applicable to
such Series were insufficient to pay certificateholders of such Series in full.
If a Pay Out Event occurs that is due either to the bankruptcy of AIC, AICCO or
the Transferor or the appointment of a trustee for AIC, AICCO or the Transferor,
the trustee would have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Series 1998-1 Rapid
Amortization Period. A bankruptcy trustee may also have the power to cause the
early sale of the Receivables and the early retirement of the Offered
Certificates, to prohibit the continued transfer of Additional Receivables to
the Trust, and to repudiate the servicing obligations of AIC or AICCO. The
proceeds from the sale of the Receivables will be treated as collections on the
Receivables and allocated accordingly among the certificateholders of all
outstanding Series and the Transferor.
"Series 1998-1 Annualized Monthly Excess Spread Amount" shall mean, in
respect of any Monthly Period, the number of basis points calculated by dividing
(i) the sum of (A) the amount of collections in respect of Finance Charge
Receivables allocable to Series 1998-1 Certificateholders for such Monthly
Period, plus (B) the Series 1998-1 Available Yield Enhancement Amount for the
immediately succeeding Transfer Date, minus (C) the aggregate Series 1998-1
Investor Default Amount for such Monthly Period minus (D) the Series 1998-1
Investor Servicing Fee payable on such Transfer Date minus (E) the aggregate
amount payable to Series 1998-1 Certificateholders in respect of interest on the
immediately succeeding Distribution Date by (ii) the Series 1998-1
Certificateholders Ownership Interests as of the end of such Monthly Period and
multiplying the resulting quotient by 12.
"Financed Premium Percentage" means, in respect of any Monthly Period, the
ratio (expressed as a percentage) of the aggregate of the portions of premiums
financed or committed to be financed, as of the respective dates of origination
of the related Loans, of all Additional Receivables transferred to the Trust
during such Monthly Period to the aggregate of the premiums paid or committed to
be paid with respect to such Loans.
"Monthly Payment Rate" shall mean, in respect of any Monthly Period, a
fraction (expressed as a percentage), the numerator of which shall equal the
aggregate of all collections received by the Trust in respect of the Receivables
during such Monthly Period and the denominator of which shall equal the
aggregate amount of Principal Receivables in the Trust at the end of the
preceding Monthly Period.
Upon the occurrence of a Pay Out Event, if more than 10% of the
principal balance of the Receivables have a remaining maturity of more than
twelve months, the Transferor will purchase from the Trust sufficient
Receivables with a remaining maturity of more than twelve months, at a price
equal to the principal amount thereof plus accrued but unpaid Finance Charges to
the date of purchase, so that the percentage of Receivables having a remaining
maturity as of the date of purchase of more than twelve months shall be no more
than 10% of the principal balance of Receivables remaining in the Trust after
giving effect to such purchase.
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Servicing Compensation and Payment of Expenses
The Series 1998-1 Investor Servicing Fee (as defined herein) will be
funded from collections of Finance Charge Receivables allocated to the Series
1998-1 Certificateholders Ownership Interests and will be paid each month from
amounts so allocated and on deposit in the Finance Charge Account and, if
necessary, from funds on deposit in the Series 1998-1 Yield Enhancement Account
available for such purpose. The remainder of the servicing fee for the Trust
will be allocable to the Transferor Ownership Interest and the
certificateholders ownership interests of any other Series issued by the Trust.
Neither the Trust nor the Series 1998-1 Certificateholders will have any
obligation to pay the portion of the servicing fee allocable to the Transferor
Ownership Interest.
For so long as AIC and AICCO are collectively the Servicer, then the
Servicer will not be paid the Servicing Fee. If AIC and AICCO cease to be the
Servicer, then the share of the Servicing Fee allocable to the Series 1998-1
Certificateholders Ownership Interests with respect to any Transfer Date (the
"Series 1998-1 Investor Servicing Fee") shall be equal to the sum of the Series
1998-1 Class A Servicing Fee, the Series 1998-1 Class B Servicing Fee and the
Series 1998-1 Class C Servicing Fee with respect to such date.
The share of the Series 1998-1 Investor Servicing Fee allocable to the
Series 1998-1 Class A Certificateholders with respect to any Transfer Date in
which AIC and AICCO are not the Servicer (the "Series 1998-1 Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Series 1998-1
Class A Floating Allocation, (b) 0.50% (the "Series 1998-1 Net Servicing Fee
Rate") and (c) the Series 1998-1 Certificateholders Ownership Interests as of
the last day of the Monthly Period preceding such Transfer Date. The share of
the Series 1998-1 Investor Servicing Fee allocable to the Series 1998-1 Class B
Certificateholders with respect to any Transfer Date in which AIC and AICCO are
not the Servicer (the "Series 1998-1 Class B Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Series 1998-1 Class B Floating Allocation,
(b) the Series 1998-1 Net Servicing Fee Rate and (c) the Series 1998-1
Certificateholders Ownership Interests as of the last day of the Monthly Period
preceding such Transfer Date. The share of the Series 1998-1 Investor Servicing
Fee allocable to the Series 1998-1 Class C Ownership Interest with respect to
any Transfer Date (the "Series 1998-1 Class C Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Series 1998-1 Class C Floating Allocation,
(b) the Series 1998-1 Net Servicing Fee Rate and (c) the Series 1998-1
Certificateholders Ownership Interests as of the last day of the Monthly Period
preceding such Transfer Date. The Series 1998-1 Class A Servicing Fee, Series
1998-1 Class B Servicing Fee and Series 1998-1 Class C Servicing Fee shall be
payable to the Servicer solely to the extent amounts are available for
distribution in respect thereof.
The Servicer will pay certain expenses incurred in connection with
servicing the Loans including, without limitation, payment of the fees and
disbursements of the Trustee and independent certified public accountants and
other fees which are not expressly stated in the Agreement to be payable by the
Trust, the Series 1998-1 Certificateholders or the Series 1994-1
Certificateholders other than federal, state and local income and franchise
taxes, if any, of the Trust.
Collection and Other Servicing Procedures
Pursuant to the Agreement, the Servicer is responsible for servicing,
collecting, enforcing and administering the Loans in accordance with the
Servicer's policies and procedures for servicing premium finance loan
receivables.
Servicing activities performed by the Servicer include collecting and
recording payments, communicating with obligors, investigating payment
delinquencies, providing billing records to obligors and maintaining internal
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records with respect to each premium finance loan. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Receivables by the Trustee pursuant to the Agreement, maintaining the
agreements, documents and files relating to the Receivables as custodian for the
Trust and providing related data processing and reporting services for
Certificateholders and on behalf of the Trustee.
Servicer Covenants
In the Agreement, the Servicer covenants with the certificateholders of
each outstanding Series and the Trustee, as to each Receivable, that: (a) it
will duly fulfill all obligations on its part to be fulfilled under or in
connection with the related Loan and will maintain in effect all licenses and
qualifications required in order to service such Receivable and the related Loan
and will comply with all requirements of law in servicing each Receivable and
the related Loan, the failure to comply with which would have a material adverse
effect on the certificateholders of any outstanding Series; (b) it will not
permit any rescission or cancellation of the Loans, except in accordance with
its customary and usual servicing procedures or as ordered by a court of
competent jurisdiction or other governmental authority; (c) it will take no
action which, nor will it omit to take any action the omission of which, would
materially impair the rights of the certificateholders of any outstanding Series
in the Receivables or the related Loans; and (d) it will not reschedule, revise
or defer payments due on the Loans except in accordance with its customary and
usual servicing procedures.
Under the terms of the Agreement, a Receivable will be assigned and
transferred or reassigned and transferred to the Servicer and such Receivable
shall no longer be included as a Receivable if the Servicer discovers, or
receives written notice from the Trustee, that any covenant of the Servicer set
forth above has not been complied with and such noncompliance has not been cured
within 60 days thereafter and has a material adverse effect on the interest of
the certificateholders of any outstanding Series in such Receivable. Such
reassignment and retransfer shall be made when the Servicer deposits an amount
equal to the amount of such Receivable in the Collection Account. The amount of
such deposit shall be for allocation as collections pursuant to the Agreement.
In either case, this retransfer and reassignment or transfer and assignment to
the Servicer constitutes the sole remedy available to the certificateholders of
each outstanding Series if such covenant or warranty of the Servicer is not
satisfied. In either case, the Trust's interest in any such assigned Receivables
shall be automatically assigned to the Servicer.
Certain Matters Regarding the Servicer, the Transferor and the Original
Transferors
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that performance of its duties is no longer
permissible, and there is no reasonable action the Servicer could take to make
the performance of such duties permissible, under applicable law and except as
described below. No such resignation will become effective until the Trustee or
a successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the Agreement. Notwithstanding the foregoing, each of AIC and
AICCO may transfer its servicing obligations to any of its affiliates (which
meets certain eligibility standards set forth in the Agreement) or, subject to
certain conditions set forth in the Agreement, to any other entity which each
Rating Agency has advised in writing will not result in the reduction or
withdrawal of its then-existing rating of the Series 1998-1 Certificates and be
relieved of its obligations and duties under the Agreement.
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of the certificateholders of all Series, and the Trustee from and
against any loss, liability, expense, damage or injury suffered or sustained by
reason of any acts or omissions or alleged acts or omissions of the Servicer
with respect to the activities of the Trust or the Trustee pursuant to the
Agreement; provided, however, that the Servicer shall not indemnify (a) the
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Trustee for liabilities imposed by or resulting from or by reason of fraud,
negligence, breach of fiduciary duty or willful misconduct by the Trustee in the
performance of its duties under the Agreement, (b) the Trust, the Series 1998-1
Certificateholders or the Certificate Owners for liabilities arising from
actions taken by the Trustee at the request of Series 1998-1 Certificateholders,
(c) the Trust, the Series 1998-1 Certificateholders or the Certificate Owners
for any losses, claims, damages or liabilities incurred by any Series 1998-1
Certificateholder in its capacity as an investor, including without limitation
losses incurred as a result of Defaulted Loans or (d) the Trust, the Series
1998-1 Certificateholders or the Certificate Owners for any liabilities, costs
or expenses of the Trust, the Series 1998-1 Certificateholders or the
Certificate Owners arising under any tax law, including without limitation any
United States federal, state or local or foreign income or franchise tax or any
other tax imposed on or measured by income (or any interest or penalties with
respect thereto or arising from a failure to comply therewith) required to be
paid by the Trust, the Series 1998-1 Certificateholders or the Certificate
Owners in connection therewith to any taxing authority (except to the extent
that such liabilities, taxes or expenses arose as a result of the Servicer's
breach of certain obligations set forth in the Agreement).
The Agreement provides that the Transferor with respect to the Future
Receivables and the Original Transferor with respect to the Existing Receivables
will indemnify the Trust, for the benefit of the certificateholders of all
Series, and the Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of any violation by the Trust, the
Trustee or the Servicer of any state premium finance licensing laws with respect
to any Receivable; provided, however, that the Transferor and the Original
Transferors shall not indemnify (a) the Trustee for liabilities imposed by
reason of fraud, negligence, or willful misconduct by the Trustee in the
performance of its duties under the Agreement or (b) the Trust, the Series
1998-1 Certificateholders or the Certificate Owners for liabilities, costs or
expenses of the Trust arising from actions taken by the Trustee at the request
of Series 1998-1 Certificateholders. Any such indemnification shall not be
payable from the assets of the Trust.
Under the Agreement, the Transferor has agreed to be liable directly to an
injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a certificateholder in the capacity of
an investor in the Series 1998-1 Certificates or the certificates of any other
Series) arising out of or based on the arrangement created by the Agreement as
though such agreement created a partnership under the New York Uniform
Partnership Act in which the Transferor were a general partner. The Transferor
has agreed to pay, indemnify and hold harmless each Series 1998-1
Certificateholder against and from such losses, claims, damages or liabilities
except to the extent that they arise from any action by such holder.
The Agreement provides that neither the Original Transferors, the
Transferor, the Servicer nor any of their respective directors, officers,
employees or agents will be under any other liability to the Trust, the Series
1998-1 Certificateholders or any other person for any action taken, or for
refraining from taking any action, in good faith pursuant to the Agreement.
Neither the Original Transferors, the Transferor, the Servicer nor any of their
respective directors, officers, employees or agents will be protected against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence of the Original Transferors, the Transferor, the
Servicer or any such person in the performance of its duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, the
Agreement provides that the Servicer is not under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its reasonable opinion may
expose it to any expense or liability.
Any person into which, in accordance with the Agreement, the Original
Transferors, the Transferor or the Servicer may be merged or consolidated or any
person resulting from any merger or consolidation to which the Original
Transferors, the Transferor or the Servicer is a party, or any person succeeding
to the business of the Original Transferors, the Transferor or the Servicer,
upon execution of an amendment to the Agreement and
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delivery of an officer's certificate with respect to the compliance of the
transaction with the applicable provisions of the Agreement and an opinion of
counsel to the effect that such supplemental agreement is legal, valid, binding
and enforceable, will be the successor to the Original Transferors, the
Transferor or the Servicer, as the case may be, under the Agreement. The
Original Transferor, the Transferor or Servicer may effect any merger,
consolidation or assumption which is in accordance with the provisions of the
preceding sentence so long as, among other conditions set forth in the
Agreement: (a) if the Original Transferors, the Transferor or the Servicer, as
the case may be, is not the surviving entity, such person certifies in writing
to the Trustee that all of the applicable representations and warranties are
true and correct with respect to such person; (b) each Rating Agency indicates
that such event will not adversely affect the then-existing rating of
certificates of any Series outstanding including the Series 1998-1 Certificates;
(c) the successor entity executes a supplemental agreement whereby such entity
agrees to assume all the obligations and covenants of the Original Transferors,
the Transferor or Servicer, as the case may be; and (d) in the case of merger or
consolidation of the Transferor when the Transferor is not the surviving entity,
the AIR Support Agreement remains in effect with respect to the successor
entity.
Under the Agreement, each of the Original Transferors, the Transferor, the
Servicer and the Trustee has agreed that it will not at any time institute
against the Trust, or join in any institution against the Trust of, any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the
certificateholders of any Series or the Agreement.
Support Agreements
AIC, AICCO and AIG have entered into a Support Agreement dated as of
December 1, 1994 (the "AIC Support Agreement"). Under the AIC Support Agreement,
AIG has agreed to be the ultimate beneficial owner of all of the voting capital
stock of AIC, and AIG or AIC has agreed to be the ultimate beneficial owner of
all of the voting capital stock of AICCO. AIR and AIG will enter into a similar
support agreement to be dated as of the Closing Date (the "AIR Support
Agreement" and, together with the AIC Support Agreement, the "Support
Agreements"). Under the AIR Support Agreement, AIG will agree to be the ultimate
beneficial owner of all of the voting capital stock of AIR.
The AIC Support Agreement further provides that AIG will cause each of AIC
and AICCO to maintain a net worth of not less than one dollar, and that if (a)
AIC or AICCO needs funds to meet any of its obligations as an Original
Transferor or a Servicer under the Agreement, or (b) AIC or AICCO has
insufficient funds to pay any of its obligations when due (except for any such
obligations which are the subject of a bona fide dispute) the non-payment of
which could constitute a basis for the filing of an involuntary case against
either AIC or AICCO under the Bankruptcy Code, AIG shall provide AIC or AICCO,
as the case may be, funds on a timely basis to cause such obligations to be
satisfied when due. The AIR Support Agreement will further provide that AIG will
cause AIR to maintain a net worth of not less than one dollar, and that if (a)
AIR needs funds to meet any of its obligations as Transferor under the Agreement
or (b) AIR has insufficient funds to pay any of its obligations when due (except
for any such obligations which are the subject of a bona fide dispute) the
non-payment of which could constitute a basis for the filing of an involuntary
case against AIR under the Bankruptcy Code, AIG shall provide AIR funds on a
timely basis to cause such obligations to be satisfied when due. The Support
Agreements are not direct or indirect guarantees by AIG to any person of the
payment of the principal of or interest on any indebtedness, liability or
obligation of AIC, AICCO or AIR. The Agreement will allow the Support Agreements
to be amended or terminated; provided, however, that no amendment or termination
will be effective unless each certificateholder of each outstanding Series
consents in writing to such amendment and each Rating Agency confirms in writing
that such termination or amendment will not adversely affect the then-existing
rating of any outstanding Series or class for which it is a Rating Agency. AIG
may terminate either or both of the Support
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Agreements by assuming the obligations of AIC and AICCO, or AIR, as the case may
be. See "--Pay Out Events" above.
In connection with the AIC Support Agreement, AIG has entered into a
letter agreement with the Trustee (the "AIC Letter Agreement") for the benefit
of the certificateholders of all outstanding Series pursuant to which AIG has
agreed that it will not default under the AIC Support Agreement and it will not
amend or terminate the AIC Support Agreement other than in accordance with its
terms; provided, however, that the AIC Letter Agreement may be amended with the
prior written consent of each such certificateholder and prior written
confirmation of each Rating Agency that such amendment will not have an adverse
effect on the then-existing ratings of the certificates of any outstanding
Series. The AIC Letter Agreement provides that if AIG fails to perform any of
the covenants or agreements contained in the Letter Agreement, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the certificateholders by appropriate judicial proceedings or by any other
proper remedy. AIG will enter into a similar letter agreement with the Trustee
in connection with the AIR Support Agreement (together with the AIC Letter
Agreement, the "Letter Agreements").
For purposes of determining whether a Pay Out Event occurs by reason of
any default by AIG under either of the Support Agreements, the Letter Agreements
shall be deemed to be part of the respective Support Agreements.
Servicer Default
In the event of any Servicer Default (as defined herein) which is not
remedied or otherwise cured, either the Trustee or holders representing
undivided interests aggregating more than 50% of the sum of the
certificateholders ownership interests of all certificates outstanding, by
written notice to the Servicer (and to the Trustee if given by the
certificateholders), may terminate all of the rights and obligations of the
Servicer as servicer under the Agreement and in and to the Receivables and the
proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and obligations of the Original Transferors and the
Transferor under the Agreement will not be affected by such termination. The
Trustee shall as promptly as possible appoint a successor Servicer, which
successor Servicer must satisfy certain eligibility criteria contained in the
Agreement. If no such Servicer has been appointed and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all authority,
power and obligations of the Servicer under the Agreement shall pass to and be
vested in the Trustee. If the Trustee is unable to obtain any bids from eligible
servicers and the Servicer delivers an officer's certificate to the effect that
it cannot in good faith cure the Servicer Default which gave rise to a transfer
of servicing, and if the Trustee is legally unable to act as successor Servicer,
then the Trustee shall give the Transferor the right to accept reassignment of
the Receivables at a price generally equal to the higher of the outstanding
principal balance of the certificates of all Series plus accrued interest
through the date of reassignment and the average bid quoted by two recognized
dealers for similar securities rated in comparable rating categories by the
Rating Agencies and having a remaining maturity approximately equal to the
remaining maturity of such Series.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit
(other than with respect to Credit Balances) or to give instructions to
the Trustee to make any withdrawal, on the date the Servicer is required
to do so under the Agreement (or within the applicable grace period, which
shall not exceed ten business days);
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(b) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the certificateholders of any outstanding
Series (including the Series 1998-1 Certificateholders) (which
determination shall be made without regard to whether funds are available
by reason of any credit enhancement or credit support device) and which
continues unremedied for a period of 60 days after written notice of such
failure and continues to have a material adverse effect on such
certificateholders for such period; or the delegation or assignment by the
Servicer of its duties under the Agreement, except as specifically
permitted thereunder; provided, however, that failure on the part of the
Servicer duly to observe or perform in any respect certain specified
covenants or agreements of the Servicer set forth in the Agreement, which
has a material adverse effect on the certificateholders of any outstanding
Series (which determination shall be made without regard to the
availability of any credit enhancement or credit support device) and which
continues after, and notwithstanding the removal by the Servicer of the
related Receivable, shall be a Servicer Default unless the Servicer shall
have, within 60 days after the date (following such removal) on which
written notice of such continuing material adverse effect shall have been
given to the Servicer, remedied such failure;
(c) any representation, warranty or certification made by the
Servicer in the Agreement (including any Supplement), or in any
certificate delivered pursuant to the Agreement or any Supplement, proves
to have been incorrect when made, which has a material adverse effect on
the rights of any of the certificateholders of any outstanding Series
(which determination shall be made without regard to whether funds are
available by reason of any credit enhancement or credit support device)
and which continues to be incorrect in any material respect for a period
of 60 days after written notice; or
(d) the occurrence of certain events of bankruptcy or insolvency of
the Servicer.
Reports to Holders of Offered Certificates
On each Distribution Date, the Trustee will forward to each Series 1998-1
Certificateholder of record a statement (the "Monthly Certificateholders
Statement") setting forth among other things: (a) the total amount distributed
to Series 1998-1 Certificateholders, (b) the amount of the distribution made on
such Distribution Date allocable to principal on the Series 1998-1 Certificates,
(c) the amount of the distribution made on such Distribution Date allocable to
interest on the Series 1998-1 Certificates, (d) the amount of collections of
Principal Receivables received during the preceding Monthly Period and allocated
in respect of the Series 1998-1 Certificates, (e) the aggregate amount of
Principal Receivables, the Series 1998-1 Certificateholders Ownership Interests
and the Series 1998-1 Certificateholders Ownership Interests as a percentage of
the aggregate amount of the Principal Receivables in the Trust as of the end of
the last day of the preceding Monthly Period, (f) following cancellation of the
related Loans, the aggregate outstanding balance of Receivables which are
delinquent, broken down by period of delinquency as provided in the Agreement,
in accordance with the Servicer's then-existing premium finance loan guidelines
as of the end of the preceding Monthly Period, (g) the aggregate Default Amount
for the preceding Monthly Period, (h) the aggregate amount of charge-offs
allocable to the Series 1998-1 Certificateholders Ownership Interests for the
preceding Monthly Period and the aggregate amount of charge-offs allocable to
the Series 1998-1 Certificateholders Ownership Interests which were deemed
reimbursed on the Transfer Date immediately preceding such Distribution Date,
(i) the amount of the Monthly Servicing Fee for the preceding Monthly Period,
(j) the "Pool Factor" as of the end of the last day of the preceding Monthly
Period (consisting of a seven-digit decimal expressing the ratio of Series
1998-1 Certificateholders Ownership Interests to Series 1998-1 Initial
Certificateholders Ownership Interests), (k) the aggregate amount of collections
of Finance Charge Receivables allocable to the Series 1998-1 Certificateholders
Ownership Interests for the preceding Monthly Period, (l) the amount, if any, of
funds required to be withdrawn from the Series 1998-1 Yield Enhancement Account
with respect to the Series 1998-1 Certificates and such Distribution Date, and
(m) certain
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information relating to the Series 1998-1 Class A Certificate Rate, the Series
1998-1 Class B Certificate Rate and the Series 1998-1 Class C Certificate Rate
for the Interest Period ending on such immediately preceding Transfer Date. The
Servicer shall not be required to calculate the Minimum Transferor Ownership
Interest for any Monthly Period if the Servicer certifies in the Monthly
Servicer Report for such Monthly Period that the Transferor Ownership Interest
as of the date thereof equals or exceeds 50% of the Trust assets as of the close
of business on the last business day of the preceding Monthly Period and that
such Transferor Ownership Interest exceeds the Minimum Transferor Ownership
Interest as of the end of such Monthly Period.
On or before January 31 of each calendar year, beginning with 1999, the
Trustee will furnish to each person who at any time during the preceding
calendar year was a Series 1998-1 Certificateholder of record a statement
prepared by the Trustee containing the information required to be contained in
the Monthly Servicer Report, as set forth in clauses (a), (b) and (c) above,
aggregated for such calendar year or the applicable portion thereof during which
such person was a Series 1998-1 Certificateholder, together with such other
customary information (consistent with the treatment of the Series 1998-1
Certificates as debt) as the Trustee deems necessary or desirable to enable the
Series 1998-1 Certificateholders to prepare their tax returns.
Evidence as to Compliance
The Agreement provides that on or before April 30 of each calendar year,
the Servicer will cause a firm of nationally recognized independent accountants
(who may also render other services to the Servicer or the Transferor) to
furnish a report to the effect that such firm has examined the assertion by an
officer of the Servicer, made pursuant to the Agreement, that the Servicer has
complied with the terms of the Agreement relating to the servicing of
Receivables, which examination includes a review of certain documents and
records relating to the servicing of the Receivables and has compared the
information contained in the Servicer's certificates delivered under the
Agreement during the period covered by the report with such documents and
records and that, on the basis of such examination, such firm is of the opinion
that the assertion by the Servicer's officer is fairly stated in all material
respects except for such exceptions as such firm shall believe to be immaterial
and such other exceptions as shall be set forth in such report. In addition, on
or before April 30 of each calendar year, the Servicer will also cause a firm of
nationally recognized independent accountants (who may also render other
services to the Servicer or Transferor) to furnish a report to the effect that
such firm has compared the mathematical calculations of each amount set forth in
the Servicer's certificates delivered under the Agreement during the period
covered by the report with the Servicer's computer reports which were the source
of such amounts and that, based on such comparison, such amounts are in
agreement except for such exceptions as such firm believes to be immaterial and
such other exceptions as set forth in such firms's report.
The Agreement provides for delivery to the Trustee on or before April 30
of each calendar year, of an annual statement signed by an officer of the
Servicer to the effect that, to the best of such officer's knowledge, the
Servicer has fully performed, or has caused to be performed, all its obligations
under the Agreement throughout the preceding year in all material respects, or,
if there has been a default in the performance of any such obligation in any
material respect, specifying the nature and status of the default.
Amendments
The Agreement and any Supplement may be amended in writing by the
Transferor, the Original Transferors, the Servicer and the Trustee, without
certificateholder consent, to cure any ambiguity, to correct or supplement any
provision therein which may be inconsistent with any other provision therein,
and to add any other provisions with respect to matters or questions arising
under the Agreement and any Supplement which are not inconsistent with the
provisions of the Agreement and any Supplement; provided, that such action does
not adversely affect in
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any material respect the interests of any certificateholder. The Agreement may
be amended in writing from time to time by the Transferor, the Original
Transferors, the Servicer and the Trustee, with the consent of the Trustee and
without the consent of the certificateholders, to provide for the purchase of
Principal Receivables by the Trust at a price which is less than 100% of the
outstanding balance thereof, and to provide for the treatment of collections of
Principal Receivables, in an amount up to the aggregate amount by which the
purchase price of Principal Receivables as sold thereafter is less than 100%, as
collections of Finance Charge Receivables; provided, however, that any such
action shall not adversely affect in any material respect the interests of the
certificateholders; further provided that the Servicer and the Trustee shall
have received notice from each Rating Agency that any such amendment will not
result in the reduction or withdrawal of its then-existing rating of the
certificates of any Series. Moreover, any Supplement in connection with a new
Series will not be considered amendments requiring certificateholder consent
under the provisions of the Agreement or any Supplement.
The Agreement may be amended in writing by the Transferor, the Original
Transferors, the Servicer and the Trustee with the consent of the holders of
certificates evidencing undivided interests aggregating not less than 66 2/3% of
the principal amount of all Series adversely affected, for the purpose of adding
any provisions to, changing in any manner or eliminating any of the provisions
of the Agreement or any Supplement or of modifying in any manner the rights of
certificateholders of any Series. No such amendment, however, may (a) reduce in
any manner the amount of, or delay the timing of, distributions required to be
made on such Series, (b) change the definition of or the manner of calculating
the certificateholders ownership interests, the aggregate default amount or the
investor percentage of such Series, (c) reduce the aforesaid percentage of
undivided interests, the holders of which are required to consent to any such
amendment, in each case without the consent of all certificateholders of all
Series adversely affected or (d) modify AIC's support obligations with respect
to AICCO, without the consent of the holders of certificates of all Series.
Promptly following the execution of any amendment to the Agreement or any
Supplement, the Trustee will furnish written notice of the substance of such
amendment to each certificateholder of all Series (or with respect to an
amendment of a Supplement, to the applicable Series).
List of Certificateholders
Upon written request of Series 1998-1 Certificateholders aggregating not
less than 20% of the Series 1998-1 Certificateholders Ownership Interests, the
Trustee, after having been adequately indemnified by such Series 1998-1
Certificateholders for its costs and expenses, and having given the Servicer
notice that such request has been made, will afford such Series 1998-1
Certificateholders access during business hours to the current list of
certificateholders of the Trust for purposes of communicating with other
certificateholders with respect to their rights under the Agreement or under the
related certificates. The Agreement generally does not provide for any annual or
other meetings of certificateholders. See "--Book-Entry Registration" and
"--Definitive Certificates" above.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is a discussion of certain of the material federal
income tax consequences of the ownership and disposition of the Offered
Certificates. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Regulations promulgated and proposed
thereunder (the "Regulations"), judicial decisions and published administrative
rulings and pronouncements of the Internal Revenue Service (the "Service") as in
effect on the date hereof. Legislative, judicial or administrative changes or
interpretations hereafter enacted or promulgated could alter or modify the
analysis and conclusions set forth below, possibly on a retroactive basis. This
summary does not purport to address the federal income tax consequences either
to special classes of taxpayers (such as S corporations, banks, thrifts, other
financial institutions, insurance companies, mutual funds, small business
investment companies, real estate investment trusts, regulated investment
companies, broker-dealers, tax-exempt organizations and persons that hold the
securities described herein as part of a straddle, hedging or conversion
transaction) or to a person or entity holding an interest in a holder (e.g., as
a stockholder, partner, or holder of an interest as a beneficiary). This summary
assumes that (i) the Offered Certificates will be held by the holders thereof as
capital assets as defined in the Code and (ii) except as indicated (and other
than for purposes of the discussion under "Treatment of the Certificates as
Indebtedness" and "Possible Alternative Characterization" below), the Offered
Certificates are properly characterized as debt for federal income tax purposes.
Except under "Certain State and Local Tax Considerations," no information is
provided herein with respect to any foreign, state or local tax consequences of
the ownership and disposition of the Offered Certificates nor of any federal
estate and gift tax considerations.
Except for "Non-United States Investors" and "Information Reporting and
Backup Withholding" below, the following discussion applies only to holders that
are citizens or residents of the United States, domestic corporations or
partnerships, or other entities subject to United States federal income tax on a
net income basis in respect of Offered Certificates (a "U.S.
Certificateholder").
Prospective investors are therefore advised to consult their own tax
advisors with regard to the United States federal income tax consequences of
holding and disposing of the Offered Certificates in their own particular
circumstances, as well as the tax consequences arising under the laws of any
state, foreign country or other jurisdiction to which they may be subject.
For purposes of the discussion set forth below, a "Certificateholder" will
mean a beneficial owner of an Offered Certificate.
Treatment of the Certificates as Indebtedness
The Transferor and Certificateholders express in the Agreement the intent
that, for United States federal, state and local income, franchise and other tax
purposes, the Offered Certificates will be indebtedness of the Transferor
secured by the Receivables. The Transferor, by entering into the Agreement, and
each Certificateholder, by the acceptance of an Offered Certificate, agree to
treat the Offered Certificates as indebtedness of the Transferor for all such
tax purposes. Because different criteria are used in determining the financial
and regulatory accounting treatment of the transaction, however, the Transferor
will treat the Agreement, for certain non-tax accounting purposes, as effecting
a transfer of ownership interests in the Receivables and not as creating debt
obligations of the Transferor.
A basic premise of federal income tax law is that the economic substance
of a transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers as
well as the Service to
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treat a transaction in accordance with its economic substance as determined
under federal income tax principles, even though the participants in the
transaction have characterized it differently for non-tax purposes.
The determination of whether the economic substance of a transfer of an
interest in property is instead a loan secured by the transferred property has
been made by the Service and the courts on the basis of numerous factors
designed to determine whether the transferor has relinquished (and the
transferee has obtained) substantial incidents of ownership in the property. The
primary factors examined are whether the transferee has the opportunity to gain
if the property increases in value, and has the risk of loss if the property
decreases in value. Based upon its analysis of such factors, Weil, Gotshal &
Manges LLP, counsel to the Transferor ("Counsel"), will render its opinion at
the closing that, subject to the assumptions set forth therein, and although no
transaction closely comparable to that contemplated herein has been the subject
of any Regulations, revenue ruling or judicial decision, for federal income tax
purposes the Offered Certificates will not constitute an ownership interest in
the Receivables, but properly will be characterized as debt secured by the
Receivables. In the further opinion of Counsel, the Trust will not be an
association or publicly-traded partnership taxable as a corporation. Except
where indicated to the contrary, the following discussion assumes that the
Offered Certificates are debt for federal income tax purposes.
Possible Alternative Characterization
Although as described above, it is the opinion of Counsel that the Offered
Certificates properly will be characterized as debt for federal income tax
purposes, none of the AICCO, AIR, AIC, or the Trust will seek a ruling from the
Service on the characterization of the Offered Certificates for federal income
tax purposes and the opinion of Counsel will not be binding on the Service.
Thus, no assurance can be given that such a characterization will prevail. Were
the Service to contend successfully that the Offered Certificates were not debt
obligations for federal income tax purposes, the Trust would be classified for
federal income tax purposes as a partnership.
If some or all of the Offered Certificates were treated as equity
interests in a partnership, the partnership would likely be treated as a
"publicly traded partnership." A publicly traded partnership is taxed in the
same manner as a corporation unless at least 90% of its gross income consists of
specified types of "qualifying income." Such qualifying income includes, among
other things, "interest income" that is "not derived in the conduct of a
financial or insurance business." It is unclear whether, were the Trust treated
as a partnership, interest received by it in respect of the Receivables would be
considered to be derived from the conduct of a financial or insurance business
by the Trust.
If a deemed partnership between the Transferor and the Certificateholders
were to qualify for the foregoing exception from taxation as a corporation, the
deemed partnership would not be subject to federal income tax, but each item of
income, gain, loss and deduction generated as a result of the ownership of the
Receivables by the partnership would be passed through to the partners in such a
partnership (including any Certificateholders that are treated as holding equity
interests in the partnership) according to their respective interests therein.
The amount of income reportable by the Certificateholders as partners in such a
partnership could differ from that reportable by the Certificateholders as
holders of debt. A cash basis Certificateholder treated as a partner, for
example, might be required to report income when it accrues to the partnership
rather than when it is received by the Certificateholder. Moreover, an
individual Certificateholder's share of expenses of the partnership would
constitute miscellaneous itemized deductions, which in the aggregate (i) are
allowed as deductions only to the extent they exceed two percent of the
Certificateholder's adjusted gross income and (ii) are subject to reduction in
the hands of a Certificateholder whose adjusted gross income exceeds a certain
amount. As a result, the Certificateholder might be taxed on an amount of income
greater than the amount of interest received on the
94
<PAGE>
Certificateholder's Offered Certificate. In addition, partnership
characterization may have adverse state or local tax consequences for
Certificateholders. Finally, if the Trust were treated as a partnership not
taxable as a corporation, with the Series 1998-1 Class A Certificates treated as
debt of such partnership and the Series 1998-1 Class B Certificates treated as
equity interests in such partnership, a portion of the taxable income allocated
to any Series 1998-1 Class B Certificateholder that was a pension,
profit-sharing or employee benefit plan or other tax-exempt entity (including an
individual retirement account) would constitute "unrelated business taxable
income" generally taxable to such a Certificateholder under the Code.
If, alternatively, some or all of the Offered Certificates were treated as
equity interests in a publicly traded partnership taxable as a corporation, the
Trust (or other deemed entity) would be subject to United States federal income
taxes (and state and local taxes) at corporate tax rates on its income from the
Receivables. Distributions on the Offered Certificates, certificates of any
other Series issued by the Trust and the Transferor Certificate might not be
deductible in computing the Trust's (or other deemed entity's) taxable income,
and distributions to the Certificateholders would probably be treated as
dividends to the extent paid out of after-tax earnings. Such an entity-level tax
could result in reduced distributions to Certificateholders, or the
Certificateholders could be liable for a share of such tax.
Because the Transferor will treat the Offered Certificates as indebtedness
for federal income tax purposes, the Servicer and the Paying Agent (and
Participants and Indirect Participants) will not comply with the tax reporting
requirements applicable to the possible alternative characterizations of the
Offered Certificates discussed above.
Interest Income to Certificateholders
It is anticipated that the Offered Certificates will be issued at par
value (or at an insubstantial discount from par value) and that, except as
indicated, no original issue discount ("OID") will arise with respect to the
Offered Certificates. Under the OID regulations, a holder of an Offered
Certificate issued with more than a de minimis amount of OID must include such
OID in income on a pro rata basis, as principal payments are made on the Offered
Certificate. It is possible, however, that under regulations issued by the U.S.
Treasury, interest payable on the Offered Certificates, as well as any discount
from par value, will constitute OID because late payment or nonpayment of
interest would not be regarded as subject to penalties or to reasonable remedies
to compel payment. Were the Offered Certificates treated as being issued with
OID, the principal consequence would be that Certificateholders using the cash
basis method of accounting would be required to report interest income from the
Offered Certificates on an accrual basis. In any event, a purchaser who buys an
Offered Certificate for more or less than its issue price will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
Sale or Exchange of Offered Certificates
If an Offered Certificate is sold or exchanged, the seller will recognize
gain or loss equal to the difference between the amount realized upon the sale
or exchange and its adjusted basis in the Offered Certificate. The adjusted
basis of an Offered Certificate will equal its cost, increased by any unpaid OID
and market discount includable in income with respect to the Offered Certificate
prior to its sale, and reduced by any principal payments previously received
with respect to the Offered Certificate and any premium amortization previously
applied to offset interest income. The gain or loss recognized on the sale or
exchange of an Offered Certificate will generally be capital gain or loss if the
Offered Certificate was held as a capital asset and will be long-term or
mid-term capital gain or loss if the Offered Certificate was held by the
Certificateholder for the requisite holding periods at the time of the
disposition.
95
<PAGE>
Non-United States Investors
As described above, Counsel will render its opinion that the Offered
Certificates will properly be classified as debt for federal income tax
purposes. If the Offered Certificates are so treated:
(a) interest paid to a nonresident alien or foreign corporation or
partnership would be exempt from U.S. withholding taxes (including backup
withholding taxes), provided the holder complies with applicable
identification requirements (and does not actually or constructively own
10% or more of the voting stock of AIG and is not a controlled foreign
corporation with respect to AIG). Applicable identification requirements
will be satisfied if there is delivered to a securities clearing
organization (or bank or other financial institution that holds Offered
Certificates on behalf of the customer in the ordinary course of its trade
or business), (i) IRS Form W-8 signed under penalties of perjury by the
beneficial owner of the Offered Certificates stating that the holder is
not a U.S. person and providing such holder's name and address, (ii) IRS
Form 1001 signed by the beneficial owner of the Offered Certificates or
such owner's agent claiming exemption from withholding under an applicable
tax treaty or (iii) IRS Form 4224 signed by the beneficial owner of the
Offered Certificates or such owner's agent claiming exemption from
withholding of tax on income connected with the conduct of a trade or
business in the United States; provided that in any such case (x) the
applicable form is delivered pursuant to applicable procedures and is
properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the holder is a U.S. person or that any certification on
the form is false;
(b) a holder of an Offered Certificate who is a nonresident alien or
foreign corporation will not be subject to United States federal income
tax on gain realized on the sale, exchange or redemption of such Offered
Certificate, provided that (i) such gain is not effectively connected to a
trade or business carried on by the holder in the United States, (ii) in
the case of a holder that is an individual, such holder neither is present
in the United States for 183 days or more during the taxable year in which
such sale, exchange or redemption occurs, nor ceased being a U.S. citizen
or long-term resident for tax avoidance purposes and (iii) in the case of
gain representing accrued interest, the conditions described in clause (a)
are satisfied; and
(c) an Offered Certificate held by an individual who at the time of
death is a nonresident alien will not be subject to United States federal
estate tax as a result of such individual's death if, immediately before
his death, (i) the individual did not actually or constructively own 10%
or more of the voting stock of AIG and (ii) the holding of such Offered
Certificate was not effectively connected with the conduct by the decedent
of a trade or business in the United States and (iii) the individual did
not cease being a U.S. citizen or long-term resident for tax avoidance
purposes.
The Service recently issued final regulations (the "New Regulations")
which would provide alternative methods of satisfying the certification
requirement described above. The New Regulations are effective January 1, 1999,
although valid withholding certificates that are held on December 31, 1998
remain valid until the earlier of December 31, 1999 or the date of expiration of
the certificate under the rules as currently in effect. The New Regulations
would require, in the case of Offered Certificates held by a foreign
partnership, that (x) the certification described in clause (a) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Certificateholders should consult their
own tax advisors concerning the application of the certification requirements in
the New Regulations.
If the Service were to contend successfully that some or all of the
Offered Certificates were equity interests in a partnership (not taxable as a
corporation), a holder of such an Offered Certificate that is a nonresident
alien
96
<PAGE>
or foreign corporation might be required to file a U.S. individual or corporate
income tax return and pay tax on its share of partnership income at regular U.S.
rates, including in the case of a corporation the branch profits tax (and would
be subject to withholding tax on its share of partnership income). In addition,
if the Offered Certificates are equity interests in a partnership, an individual
holder that is a nonresident alien at death may be required to include the value
of the Offered Certificates in such holder's gross estate (unless otherwise
provided in an applicable treaty). If some or all of the Offered Certificates
are recharacterized as equity interests in a "publicly traded partnership"
taxable as a corporation, to the extent distributions on such Offered
Certificates were treated as dividends, a nonresident alien individual or
foreign corporation generally would be taxed on the gross amount of such
dividends (and subject to withholding) at the rate of 30% unless such rate were
reduced by an applicable treaty. In addition, an individual holder that is a
nonresident alien at death would be required to include the value of such
Offered Certificate in such holder's gross estate (unless otherwise provided in
an applicable treaty).
Information Reporting And Backup Withholding
Certain holders may be subject to backup withholding at a rate of 31% on
interest (including any original issue discount) on the Offered Certificates if
the holder fails to supply its taxpayer identification number (or if the
taxpayer identification number furnished by the holder is incorrect), fails to
report interest, dividends or other "reportable payments" (as defined in the
Code) properly, or, under certain circumstances, fails to provide a certified
statement, under penalties of perjury, that it is not subject to backup
withholding. Information returns will be sent annually to the Service and to the
holders of record setting forth the amount of interest paid or the original
issue discount accrued and the amount of tax withheld therefrom. It is
anticipated that Persons who hold Offered Certificates as nominees for
beneficial owners will report the required tax information to beneficial owners
on Service Form 1099. United States Aliens that are exempt from withholding
under the provisions described above generally will not be subject to
information reporting on Service Form 1099 and backup withholding on the
payments of interest on an Offered Certificate if the applicable certification
requirements are satisfied. However, interest on an Offered Certificate
beneficially owned by a United States Alien will be required to be reported
annually on Service Form 1042S.
Payment of the proceeds from the sale of an Offered Certificate to or
through a foreign office of a broker will not be subject to information
reporting or backup withholding, except that if the broker is a U.S. Person, a
controlled foreign corporation for United States tax purposes, a foreign person
50% or more of whose gross income is effectively connected with the conduct of a
trade or business within the United States for a specified three-year period or,
with respect to payments made after December 31, 1998, a foreign partnership
that, at any time during the taxable year, is 50% or more owned (measured by
either income or capital) by U.S. persons or engaged in a U.S. trade or
business, information reporting will apply to such payments unless such
custodian, nominee or other agent has documentary evidence in its files of the
owner's foreign status and has no actual knowledge to the contrary, or the owner
otherwise establishes an exemption. Payment of the proceeds from a sale of an
Offered Certificate to or through the United States office of a broker is
subject to information reporting and backup withholding unless the holder or
beneficial owner certifies as to its non-United States status or otherwise
establishes an exemption from information reporting and backup withholding. The
New Regulations change certain of the rules relating to certain presumptions
currently available relating to information reporting and backup withholding.
Non-U.S. Certificateholders are urged to contact their own tax advisors
regarding the application to them of backup withholding and information
reporting.
97
<PAGE>
CERTAIN STATE AND LOCAL TAX CONSEQUENCES
The following discussion of certain state and local tax consequences of
the ownership of Offered Certificates is a general summary and does not purport
to address all state or local tax considerations that may be relevant to
Certificateholders. (For purposes of the following discussion, a
"Certificateholder" will mean a beneficial owner of an Offered Certificate.)
Except as otherwise indicated, the following assumes that for federal income tax
purposes the Offered Certificates will be treated as indebtedness and, if the
Offered Certificates are so treated, the Trust will not be a taxable entity.
In General
The state and local tax consequences of each Certificateholder's ownership
of Offered Certificates will depend upon the provisions of the state and local
tax laws to which that Certificateholder is subject. Because such tax laws vary,
it is impossible to discuss the tax consequences of Certificateholder's
ownership of Offered Certificates in each state or local taxing jurisdiction in
which the Certificateholder is subject to tax.
New York And California
Although there is no directly relevant New York or California authority
and accordingly the matter is not free from doubt, if the Offered Certificates
are treated as debt for federal income tax purposes, for New York and California
state income and franchise tax purposes and for New York City personal income
and general corporation tax purposes, the Offered Certificates will be treated
as indebtedness secured by the Receivables and the Trust will not be treated as
a taxable entity. In addition, if the Offered Certificates are treated as debt,
Certificateholders not otherwise subject to New York and California state income
or franchise taxes or New York City personal income or general corporation taxes
will not become subject to such taxes solely as a result of their investment in
the Offered Certificates, but Certificateholders already subject to tax in New
York State or New York City or California may be required to pay additional
state or local taxes as a result of their ownership of the Offered Certificates.
Other States
The Trust will be created under the laws of New York and most activities
relating to the servicing and collection of the Receivables will take place in
New York and California. Nevertheless, there can be no assurance another state
will not claim that the Trust has engaged in activities in that state and is
consequently subject to tax therein. Were another state successfully to make
such a claim, it is possible that under such state's tax laws the Offered
Certificates would not be treated as debt, the Trust would be treated as an
entity subject to taxation by such state and Certificateholders not otherwise
subject to taxation by such state could be taxed by such state in respect of the
activities of the Trust therein.
Possible Recharacterizations
If all or a portion of the Offered Certificates were treated as interests
in a partnership or a "publicly traded partnership," the New York, California,
and other state and local tax consequences of owning Offered Certificates could
be materially different from and less favorable than those described above.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE OFFERED CERTIFICATES.
98
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Transferor, the Original
Transferors and Goldman, Sachs & Co. (the "Underwriters"), the Transferor has
agreed to sell to the Underwriters, and the Underwriters have agreed to
purchase, the Offered Certificates.
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Offered
Certificates if any of the Series 1998-1 Certificates are purchased.
The Underwriters propose initially to offer the Series 1998-1 Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of [____]% of
the principal amount of the Series 1998-1 Class A Certificates. The Underwriters
may allow, and such dealers may reallow, concessions not in excess of [____]% of
the principal amount of the Series 1998-1 Class A Certificates to certain
brokers and dealers. After the initial public offering, the public offering
price and other selling terms of the Series 1998-1 Class A Certificates may be
changed by the Underwriters.
The Underwriters propose initially to offer the Series 1998-1 Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of [___]% of the
principal amount of the Series 1998-1 Class B Certificates. The Underwriters may
allow, and such dealers may reallow, concessions not in excess of [____]% of the
principal amount of the Series 1998-1 Class B Certificates to certain brokers
and dealers. After the initial public offering, the public offering price and
other selling terms of the Series 1998-1 Class B Certificates may be changed by
the Underwriters.
Only offers and sales of the Offered Certificates in the United States, as
part of the initial distribution thereof or in connection with resales thereof
under circumstances where this Prospectus must be delivered, are made pursuant
to the Registration Statement of which this Prospectus is a part.
The Transferor will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
VALIDITY OF THE CERTIFICATES
The validity of the Series 1998-1 Certificates will be passed upon for the
Trust, the Original Transferors, the Transferor and the Servicer by Weil,
Gotshal & Manges LLP, New York, New York, and for the Underwriters by Cleary,
Gottlieb, Steen & Hamilton, New York, New York. Certain United States federal
income tax and other matters will be passed upon for the Trust by Weil, Gotshal
& Manges LLP, New York, New York. Certain legal matters relating to the Series
1998-1 Certificates will be passed upon for the Trust, the Original Transferors,
the Transferor and the Servicer by Kenneth V. Harkins, Associate General Counsel
of AIG and General Counsel of AIC.
99
<PAGE>
INDEX OF KEY TERMS FOR PROSPECTUS
---------------------------------
Term Page
- ---- ----
Accounts......................................................................66
Additional Interest...........................................................14
Additional Receivables.........................................................6
Aggregate Investor Percentage.................................................67
Agreement...................................................................1, 4
AIC........................................................................1, 38
AIC Letter Agreement..........................................................89
AIC Support Agreement.........................................................88
AICCO...................................................................1, 5, 38
AIG.....................................................................1, 5, 38
AIR.........................................................................1, 5
AIR Support Agreement.........................................................88
Bankruptcy Code...............................................................29
Cede...........................................................................3
Cedel.........................................................................51
Cedel Participants............................................................51
Certificate Owners.............................................................3
Certificateholder.........................................................93, 98
Cleanup Call..............................................................25, 81
Closing Date...................................................................2
Code..........................................................................93
Collection Account............................................................64
Collection Subaccount.........................................................64
Commission.....................................................................3
Cooperative...................................................................51
Counsel.......................................................................94
Credit Balance................................................................42
Cut-Off Date...............................................................6, 57
Default Amounts...............................................................72
Defaulted Loan................................................................72
Definitive Certificates.......................................................52
Depository....................................................................49
Determination Date............................................................72
Disclosure Document...........................................................23
Distribution Date..........................................................2, 14
DTC............................................................................3
EDGAR..........................................................................4
Eligible Additional Receivable................................................63
Eligible Receivable...........................................................62
Enhancement...................................................................36
ERISA.........................................................................26
ERISA Plans...................................................................26
Euroclear.....................................................................51
Euroclear Operator............................................................51
Euroclear Participants........................................................51
Excess Funding Account........................................................69
i
<PAGE>
Term Page
- ---- ----
Excess Receivables Amount.....................................................70
Exchange Act...................................................................3
Existing Receivables.......................................................5, 57
FDIC..........................................................................64
Finance Charge Account........................................................65
Finance Charge Receivables....................................................12
Financed Premium Percentage...................................................84
Future Receivables.........................................................5, 57
Holders.......................................................................52
Holders of Offered Certificates................................................7
Indirect Participants.........................................................49
Ineligible Receivable.........................................................61
Interest Period...............................................................15
Investor Exchange.........................................................23, 58
Investor Percentage...........................................................67
Letter Agreements.............................................................89
LIBOR......................................................................2, 10
LIBOR Determination Date......................................................54
Loan Portfolio................................................................42
Loans.......................................................................1, 6
Minimum Transferor Ownership Interest.........................................70
Monthly Certificateholders Statement..........................................90
Monthly Payment Rate..........................................................84
Monthly Period.................................................................9
Moody's...................................................................26, 64
Moody's Non-Investment Grade Insurer..........................................71
New Regulations...............................................................96
New Series Issuance.......................................................23, 58
Obligor.......................................................................28
Obligors...................................................................6, 38
Offered Certificates........................................................1, 4
OID...........................................................................95
Original Agreement.............................................................4
Original Series 1994-1 Supplement..............................................4
Original Transferors...........................................................1
Originator....................................................................62
Participants..................................................................49
Pay Out Event.................................................................82
Paying Agent..................................................................52
Permitted Investments.........................................................64
Pool Factor...................................................................90
Principal Account.............................................................65
Principal Receivables.........................................................12
Principal Shortfalls..........................................................71
Principal Terms...............................................................59
Prior Period Interest.........................................................15
Purchased Loans...............................................................40
Qualified Institution.........................................................64
Rating Agencies...............................................................33
Rating Agency.................................................................33
ii
<PAGE>
Term Page
- ---- ----
Receivables.............................................................1, 6, 42
Receivables Sale Agreement.....................................................5
Record Date...................................................................48
Reference Banks...............................................................54
Regulations...................................................................93
Removal Date..................................................................63
Removed Receivables.......................................................13, 63
S&P Non-AAA Insurer...........................................................71
S&P Non-Investment Grade Insurer..............................................71
Securities Act.................................................................4
Series........................................................................22
Series 1994-1 Certificateholders...............................................7
Series 1994-1 Certificates..................................................1, 5
Series 1994-1 Class A Certificates............................................36
Series 1994-1 Class B Certificates............................................36
Series 1994-1 Class C Certificates............................................12
Series 1994-1 Offered Certificates............................................12
Series 1998-1 91 Day Delinquency Amount.......................................69
Series 1998-1 Annualized Monthly Excess Spread Amount.........................84
Series 1998-1 Available Investor Principal Collections........................55
Series 1998-1 Available Yield Enhancement Amount..............................67
Series 1998-1 Certificateholders...............................................7
Series 1998-1 Certificateholders Ownership Interests..........................75
Series 1998-1 Certificates..................................................2, 4
Series 1998-1 Class A Additional Interest.....................................53
Series 1998-1 Class A Available Funds.........................................54
Series 1998-1 Class A Certificate Rate.................................2, 10, 54
Series 1998-1 Class A Certificateholders.......................................7
Series 1998-1 Class A Certificates..........................................1, 4
Series 1998-1 Class A Charge-Off..........................................21, 73
Series 1998-1 Class A Controlled Amortization Period..........................16
Series 1998-1 Class A Default Amount..........................................72
Series 1998-1 Class A Floating Allocation.....................................74
Series 1998-1 Class A Initial Ownership Interest..............................75
Series 1998-1 Class A Monthly Interest........................................79
Series 1998-1 Class A Monthly Principal.......................................80
Series 1998-1 Class A Ownership Interest......................................75
Series 1998-1 Class A Prior Period Interest...................................80
Series 1998-1 Class A Required Amount.........................................76
Series 1998-1 Class A Servicing Fee...........................................85
Series 1998-1 Class B Additional Interest.....................................53
Series 1998-1 Class B Available Funds.........................................54
Series 1998-1 Class B Certificate Rate.................................2, 10, 54
Series 1998-1 Class B Certificateholders.......................................7
Series 1998-1 Class B Certificates..........................................1, 4
Series 1998-1 Class B Charge-Off..........................................22, 73
Series 1998-1 Class B Controlled Amortization Period..........................16
Series 1998-1 Class B Default Amount..........................................72
Series 1998-1 Class B Floating Allocation.....................................74
Series 1998-1 Class B Initial Ownership Interest..............................75
iii
<PAGE>
Term Page
- ---- ----
Series 1998-1 Class B Monthly Interest........................................79
Series 1998-1 Class B Monthly Principal.......................................81
Series 1998-1 Class B Ownership Interest......................................75
Series 1998-1 Class B Principal Commencement Date.............................17
Series 1998-1 Class B Prior Period Interest...................................80
Series 1998-1 Class B Required Amount.........................................77
Series 1998-1 Class B Servicing Fee...........................................85
Series 1998-1 Class C Additional Interest.....................................53
Series 1998-1 Class C Available Funds.........................................80
Series 1998-1 Class C Certificateholders.......................................7
Series 1998-1 Class C Certificates..........................................2, 4
Series 1998-1 Class C Charge-Off..............................................74
Series 1998-1 Class C Controlled Amortization Period..........................16
Series 1998-1 Class C Default Amount..........................................72
Series 1998-1 Class C Floating Allocation.....................................75
Series 1998-1 Class C Initial Ownership Interest..............................75
Series 1998-1 Class C Monthly Interest........................................79
Series 1998-1 Class C Monthly Principal.......................................81
Series 1998-1 Class C Ownership Interest......................................75
Series 1998-1 Class C Principal Commencement Date.............................17
Series 1998-1 Class C Prior Period Interest...................................80
Series 1998-1 Class C Required Amount.........................................77
Series 1998-1 Class C Servicing Fee...........................................85
Series 1998-1 Controlled Amortization Amount..................................56
Series 1998-1 Controlled Amortization Period..................................16
Series 1998-1 Controlled Distribution Amount..................................56
Series 1998-1 Deficit Controlled Amortization Amount..........................56
Series 1998-1 Distribution Account............................................65
Series 1998-1 Excess Finance Charges..........................................66
Series 1998-1 Fixed Investor Percentage.......................................75
Series 1998-1 Floating Investor Percentage....................................74
Series 1998-1 Initial Certificateholders Ownership Interests..................81
Series 1998-1 Investor Default Amount.........................................72
Series 1998-1 Investor Servicing Fee..........................................85
Series 1998-1 Maximum Yield Enhancement Amount................................66
Series 1998-1 Net Servicing Fee Rate..........................................85
Series 1998-1 Rapid Amortization Period.......................................18
Series 1998-1 Reallocated Class A Principal Collections.......................77
Series 1998-1 Reallocated Class B Principal Collections.......................78
Series 1998-1 Reallocated Class C Principal Collections.......................78
Series 1998-1 Reallocated Principal Collections...............................78
Series 1998-1 Revolving Period................................................16
Series 1998-1 Termination Date............................................12, 82
Series 1998-1 Yield Enhancement Account...................................19, 66
Service.......................................................................93
Service Transfer..............................................................89
Servicer...................................................................1, 13
Servicer Default..............................................................89
Servicing Fee.................................................................13
Shared Principal Collections..............................................24, 71
iv
<PAGE>
Term Page
- ---- ----
Standard & Poor's.........................................................26, 64
Supplement....................................................................22
Support Agreements............................................................88
Terms and Conditions..........................................................51
Third Party Originators.......................................................40
Transfer Agent and Registrar..................................................53
Transferor.....................................................................1
Transferor Certificate....................................................22, 58
Transferor Ownership Interest..................................................2
Transferor Ownership Interest Reduction...................................23, 58
Trust..........................................................................1
Trustee....................................................................1, 25
U.S. Certificateholder........................................................93
Underwriters..................................................................99
Underwriting Agreement........................................................99
v
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by A.I. Receivables Corp. or the Underwriters. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein or
therein is correct as of any time subsequent to the date of such information.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction.
--------------
TABLE OF CONTENTS
PAGE
----
Reports to Holders of
Offered Certificates .................................... 3
Available Information .................................... 4
Prospectus Summary ....................................... 4
Special Considerations ................................... 28
Maturity Considerations .................................. 34
The Trust ................................................ 36
Business of A.I. Receivables
Corp., A.I. Credit Corp and AICCO, Inc. ................ 38
The Receivables .......................................... 42
Use of Proceeds .......................................... 48
Description of the Offered
Certificates ............................................ 48
Certain United States Federal
Income Tax Consequences ................................. 93
Certain State and Local Tax
Consequences .......................................... 97
Underwriting ............................................. 99
Validity of the Certificates ............................. 99
Index of Key Terms ....................................... 100
================================================================================
================================================================================
$[___________]
AIC PREMIUM FINANCE LOAN
MASTER TRUST
$[________] SERIES 1998-1
FLOATING RATE CLASS A
ASSET BACKED CERTIFICATES
$[_________] SERIES 1998-1
FLOATING RATE CLASS B
ASSET BACKED CERTIFICATES
A.I. RECEIVABLES CORP.
TRANSFEROR
[GRAPHIC OMITTED]
[LOGO]
--------------
PROSPECTUS
--------------
GOLDMAN, SACHS & CO.
DATED JANUARY [__], 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses Of Issuance And Distribution
The following table sets forth the estimated expenses in connection with
the offering described in this Registration Statement:
Registration...................................... $ 295
Printing and Engraving............................ *
Trustee's Fees.................................... *
Legal Fees and Expenses........................... *
Accountants' Fees and Expenses.................... *
Rating Agency Fees................................ *
Miscellaneous..................................... *
Total............................................. $ *
- ----------
* To be furnished by Amendment
Item 14 Indemnification Of Directors And Officers
The indemnification provisions contained in Article NINTH of the
Certificate of Incorporation of A.I. Receivables Corp. provide:
The Corporation shall indemnify, to the full extent permitted by
Section 145 of the General Corporation Law of Delaware, as amended from
time to time, all persons who it may indemnify pursuant thereto.
Section 145 of the General Corporation Law of Delaware provides as follows:
(a) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the
II-1
<PAGE>
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or
agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made, with respect to a person who is
a director or officer at the time of such determination, (1) by a majority
vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less
than a quorum, or (3) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and
II-2
<PAGE>
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses
or indemnification brought under this section or under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise.
The Court of Chancery may summarily determine a corporation's obligation to
advance expenses (including attorneys' fees).
The indemnification provisions contained in Article V of the By-Laws of
A.I. Receivables Corp. provide:
The Corporation, to the full extent permitted, and in the manner
required by the laws of the State of Delaware as in effect at the time of
the adoption of this Article V or as the same may be amended from time to
time, shall (i) indemnify any person (and the heirs and legal
representatives of such person) who is made or is threatened to be made a
party to any threatened, pending, or completed action, suit or proceeding,
whether in nature civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director, officer, employee
or agent of the Corporation or of any constituent Corporation absorbed into
the Corporation by consolidation or merger or served or served with another
Corporation, partnership, joint venture, trust or other enterprise at the
request of the Corporation or of any such constituent Corporation and (ii)
provide to any such person (and the heirs and legal representatives of such
person) advances for expenses incurred in defending any such action, suit
or proceeding, upon receipt of an undertaking by or on behalf of such
person (and the heirs and legal representatives of such person) to repay
such advances unless it is ultimately determined that he or she is entitled
to indemnification by the Corporation.
The Underwriting Agreement will also provide for indemnification in certain
instances by the Registrant of the Underwriters, their officers and controlled
persons.
Item 15. Recent Sales Of Unregistered Securities
None.
II-3
<PAGE>
Item 16. Exhibits And Financial Statement Schedules
(a) Exhibits
1.1 - Form of Underwriting Agreement with respect to the Series 1998-1
Class A Certificates and the Series 1998-1 Class B
Certificates. *
3.1 - Articles of Incorporation of A.I. Receivables Corp.
3.2 - By-Laws of A.I. Receivables Corp.
4.1 - Form of Master Amended & Restated Pooling and Servicing Agreement
between the Registrant, A.I. Credit Corp., AICCO, Inc. and the
Trustee.
4.2 - Form of Series Supplement (including forms of Series 1998-1 Class
A and Series 1998-1 Class B Certificates). *
5.1 - Form of Opinion of Weil, Gotshal & Manges LLP with respect to
legality.
8.1 - Opinion of Weil, Gotshal & Manges LLP with respect to tax
matters.
10.1 - Form of Receivables Sale Agreement among the Registrant, A.I.
Credit Corp. and AICCO, Inc.
10.2 - Form of Support Agreement between the Registrant and American
International Group, Inc.*
23.1 - Consent of Weil, Gotshal & Manges LLP (included in its opinions
filed as Exhibits 5.1 and 8.1).
- ----------
* To be filed by Amendment.
(b) Financial Statement Schedules
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
Item 17. Undertakings
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 21st day of January, 1998.
A.I. RECEIVABLES CORP.
By: /s/ Gerald V. Vitkauskas
------------------------
Gerald V. Vitkauskas
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gerald V. Vitkauskas President and Director January 21, 1998
- ------------------------
Gerald V. Vitkauskas (Principal executive officer)
/s/ Michael D. Vogen Treasurer and Director January 21, 1998
- ------------------------
Michael D. Vogen (Principal financial officer and
accounting officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGE
<S> <C>
1.1 - Form of Underwriting Agreement with respect to the Series 1998-1
Class A Certificates and the Series 1998-1 Class B Certificates. *
3.1 - Articles of Incorporation of A.I. Receivables Corp.
3.2 - By-Laws of A.I. Receivables Corp.
4.1 - Form of Master Amended & Restated Pooling and Servicing Agreement
between the Registrant, A.I. Credit Corp., AICCO, Inc. and the
Trustee.
4.2 - Form of Series Supplement (including forms of Series 1998-1 Class
A and Series 1998-1 Class B Certificates). *
5.1 - Form of Opinion of Weil, Gotshal & Manges LLP with respect to
legality.
8.1 - Opinion of Weil, Gotshal & Manges LLP with respect to tax matters.
10.1 - Form of Receivables Sale Agreement among the Registrant, A.I.
Credit Corp. and AICCO, Inc.
10.2 - Form of Support Agreement between the Registrant and American
International Group, Inc. *
23.1 - Consent of Weil, Gotshal & Manges LLP (included in its opinions
filed as Exhibits 5.1 and 8.1).
</TABLE>
- ----------
* To be filed by Amendment.
II-6
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
of
A.I. RECEIVABLES CORP.
THE UNDERSIGNED, being a natural person, for the purpose
of executing a Certificate of Incorporation of A.I. Receivables Corp. under the
General Corporation Law of the State of Delaware, hereby certifies that:
FIRST: The name of the corporation is A.I. Receivables Corp.
(the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1013 Centre Street, Wilmington, Delaware
19805, located in New Castle County. The name of the registered agent of the
Corporation in the State of Delaware at such address is Corporation Service
Company.
THIRD: The nature of the business and the purposes to be
conducted or promoted by the Corporation are to engage in only the following
activities:
A. to purchase, acquire, own and hold the entire
beneficial interest in certain finance loans funded from time to time
by either A.I. Credit Corp., a New Hampshire corporation ("AIC"), or
AICCO, Inc., a California corporation ("AICCO"), including all amounts
due and to become due and all collections and recoveries on such loans
and the proceeds of collateral security securing such loans (the
"Receivables");
B. to transfer, sell, assign, pledge and/or grant
security interests in the Receivables to one or more trusts (the
"Trusts") pursuant to one or more pooling and servicing agreements or
other agreements;
C. to borrow money to facilitate activities specifically
authorized by this Certificate of Incorporation;
D. to hold, loan, invest, dividend, transfer to
investors and otherwise take any action in respect of the proceeds
generated by the transfer, sale, assignment or pledge of the
Receivables;
<PAGE>
E. to authorize, offer, sell and deliver one or more
series and classes of certificates or bonds, notes, participation
interests or other evidences of indebtedness collateralized or secured
by one or more pools of the Receivables or by certificates of any
class, in each case issued by the Trusts; and
F. to engage in any activity, enter into any
agreement, undertaking, contract, indenture, assignment, sale
agreement, support agreement, security agreement or certificate,
appoint any agent or dealer with respect to the foregoing, and to
exercise any powers permitted to corporations under the corporate law
of the State of Delaware which are incidental to the foregoing or
necessary or appropriate to accomplish the foregoing.
FOURTH: The total number of shares of capital stock of all
classes which the Corporation shall have authority to issue is one thousand
(1,000) shares, all of which shall be common stock each having a par value of
one cent ($.01).
FIFTH: The name and mailing address of the sole incorporator
is Sylvie Durham, Esq., c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: For so long as any rated securities which the
Corporation has caused a Trust to issue are outstanding, at least one of the
directors and one of the executive officers of the Corporation (or one person
serving in both capacities) shall be an Independent Director and Independent
Officer, respectively. "Independent Director" or "Independent Officer" shall
mean a director or executive officer, respectively, of the Corporation who shall
at no time be, or have been for a period commencing 24 months prior to such
director's election to the board of directors of the Corporation (the "Board of
Directors") or such officer's appointment to officership, a director (other than
an Independent Director), officer (other than an Independent Officer), supplier
or direct customer of, an employee of, or holder of any beneficial interest in
(direct or indirect), the Corporation or any Affiliate, or a person who has
served as a trustee in bankruptcy for the Corporation or any Affiliate.
"Affiliate" shall mean any entity other than the Corporation (i) which owns
beneficially, directly or indirectly, 10% or more of the outstanding shares of
the common stock of the Corporation, (ii) which is in control of the
Corporation, as defined under Section 230.405 of the Rules and Regulations of
the Securities and Exchange Commission, 17 C.F.R. ss. 230.405, (iii) of which
2
<PAGE>
10% or more of the outstanding shares of its common stock is owned beneficially,
directly or indirectly, by any entity described in clause (i) or (ii) above, or
(iv) which is controlled by an entity described in clause (i) or (ii) above, as
defined under Section 230.405 of the Rules and Regulations of the Securities and
Exchange Commission, 17 C.F.R. ss. 230.405.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the by-laws of the Corporation; provided, however, that any
action in respect of the by-laws of the Corporation that bears upon whether the
separate corporate identity of the Corporation and its Affiliates (as defined in
Article Seventh hereof) will be respected and the assets of the Corporation not
consolidated with those of any Affiliate under applicable federal or state
bankruptcy or insolvency law, or that otherwise relates to Articles Twelfth,
Thirteenth or Fourteenth hereof, must receive the prior written consent of the
Independent Director and the Independent Officer (as defined in Article Seventh
hereof).
NINTH: The Corporation shall indemnify, to the full extent
permitted by Section 145 of the General Corporation Law of Delaware, as amended
from time to time, all persons who it may indemnify pursuant thereto.
TENTH: No director of the Corporation shall be personally
liable to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except for any matter in respect of which such
director shall be liable under Section 174 of Title 8 of the Delaware Code
(relating to the Delaware General Corporation Law) or any amendment thereto or
successor provision thereto or shall be liable by reason that, in addition to
any and all other requirements for such liability, such director (i) shall have
breached the duty of loyalty to the Corporation or its stockholders, (ii) shall
not have acted in good faith or, in failing to act, shall not have acted in good
faith, (iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law or (iv) shall
have derived an improper personal benefit. Neither the amendment nor the repeal
of this Article Tenth, nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this Article Tenth, shall eliminate or reduce
the effect of this Article Tenth in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article Tenth, would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ELEVENTH: Election of directors need not be by written
ballot.
3
<PAGE>
TWELFTH: The Corporation shall, with respect to each Trust,
abide by the terms of a bankruptcy-remoteness agreement between the
Corporation and the related trustee.
THIRTEENTH: For so long as any securities which the
Corporation has caused a Trust to issue are outstanding, all transactions
between the Corporation and any Affiliate (as defined in Article Seventh hereof)
must receive the prior written consent of the Independent Director and the
Independent Officer (as defined in Article Seventh hereof) and must be conducted
on an arms'-length basis (except with respect to any support agreement between
the Corporation and American International Group, Inc. relating to an amended
and restated pooling and servicing agreement among the Corporation, as
transferor, AIC and AICCO, as original transferors and servicers, and The First
National Bank of Chicago, as trustee, including all supplements and amendments
thereto).
FOURTEENTH: For so long as any securities which the
Corporation has caused a Trust to issue are outstanding, the Corporation shall
not, without the prior consent of the Independent Director and the Independent
Officer (as defined in Article Seventh hereof), (i) institute, or consent to the
institution of, proceedings seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or seek or consent to the appointment of
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Corporation or a substantial part of its property, or
make any assignment for the benefit of creditors, or, except as required by law,
admit in writing its inability to pay its debts as they become due, or take any
corporate action in furtherance of any such action or (ii) sell all or
substantially all of its assets, or merge or consolidate with another entity, or
take any corporate action in furtherance of any such action. In deciding whether
to consent to any action described in the foregoing sentence, the Independent
Director's and Independent Officer's fiduciary duty shall be to the Corporation
(including the senior creditors of the Corporation who are not Affiliates (as
defined in Article Seventh hereof)) and not to the stockholders and/or
subordinated creditors of the Corporation.
FIFTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereinafter prescribed by statute, and all rights conferred
by the stockholders herein are granted subject to this reservation; provided,
however, that any action in respect of this Certificate of Incorporation that
bears upon whether the separate corporate identity of the Corporation and its
Affiliates (as defined in Article Seventh hereof) will be
4
<PAGE>
respected and the assets of the Corporation not consolidated with those of any
Affiliate under applicable federal or state bankruptcy or insolvency law, or
that amends, alters changes or repeals Articles Third, Fourth, Seventh, Eighth,
Twelfth, Thirteenth or Fourteenth or this Article Fifteenth must receive the
prior consent of the Independent Director and the Independent Officer (as
defined in Article Seventh hereof). At all times prior to the payment in full of
all amounts outstanding under the PSA or any similar agreement relating to the
issuance of indebtedness secured by the Receivables, no material amendment to
this Certificate of Incorporation or to the Corporation's by-laws may be made
unless the Corporation confirms in writing that such material amendment will not
result in any rating agency reducing or withdrawing its then-existing rating of
any then outstanding certificates or other securities. Notwithstanding any other
provision of this Certificate of Incorporation and any provision of law that
otherwise so empowers the Corporation, the Corporation does not have the power
to cause a Trust to issue any additional securities unless the Rating Agency
which has rated any outstanding securities previously issued confirms in writing
that the issuance of the additional securities, in and of itself, will not (a)
cause the Rating Agency to lower or downgrade its rating on such outstanding
securities or (b) if any series or class of securities that has been re-assigned
a rating by such Rating Agency that is lower than the initial rating assigned to
such series or class by such Rating Agency, prevent such series or class from
being re-assigned such initial rating by such Rating Agency after such action
shall have occurred.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Incorporation this 20th day of January, 1998.
A.I. Receivables Corp.
By: /s/ Sylvie Durham
-------------------------------
Name: Sylvie Durham, Esq.
Title: Sole Incorporator
Attest:
By: /s/ Rodney L. Walker
-------------------------------------
Name: Rodney L. Walker
---------------------------------
Title:
--------------------------------
6
<PAGE>
Exhibit 3.2
BY-LAWS
of
A.I. RECEIVABLES CORP.
(a Delaware Corporation)
-----
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in
the Corporation shall be entitled to have a certificate signed by, or in the
name of, the Corporation by the Chairman or Vice-Chairman of the board of
directors of the Corporation (the "Board"), if any, or by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation certifying the number of shares
owned by him in the Corporation. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if such person were such officer, transfer agent, or
registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock and
whenever the Corporation shall issue any shares of its stock as partly paid
stock, the certificate representing shares of any such class or series or of any
such partly paid stock shall set forth thereon the statements prescribed by the
Delaware General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or series shall be
noted conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock in place
of any certificate theretofore issued by it, alleged to have been lost, stolen,
or destroyed, and the Board may require the owner of any lost, stolen, or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged
<PAGE>
loss, theft, or destruction of any such certificate or the issuance of any such
new certificate.
2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall
not be required to, issue fractions of a share. If the Corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered or bearer
form which shall entitle the holder to receive a certificate for a full share
upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
Corporation in the event of liquidation, in each case to the extent of such
fraction. The Board may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing full shares before a specified date, or subject to the conditions
that the shares for which scrip or warrants are exchangeable may be sold by the
Corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board may impose.
3. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the Corporation
shall be made only on the stock ledger of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the Corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of
determining the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty days nor less than 10 days
before the date of such meeting, nor more than sixty days prior to any other
action. If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held; the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action
2
<PAGE>
by the Board is necessary, shall be the day on which the first written consent
is expressed; and the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. A determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the Corporation has only one class of shares of stock
outstanding; and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the certificate of
incorporation of the Corporation (the "Certificate of Incorporation") confers
such rights where there are two or more classes or series of shares of stock or
upon which or upon whom the Delaware General Corporation Law confers such rights
notwithstanding that the Certificate of Incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder.
6. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date and at
the time fixed, from time to time, by the Board, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the Corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the Board.
(b) PLACE. Annual meetings and special meetings shall be held
at such place, within or without the State of Delaware, as the Board may, from
time to time, fix. Whenever the director shall fail to fix such place, the
meeting shall be held at the registered office of the Corporation in the State
of Delaware.
(c) CALL. Annual meetings and special meetings may be called
by the Board or by any officer instructed by the Board to call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date, and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholders of the Corporation may be examined. The notice of an annual meeting
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shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes of the meeting. The
notice of a special meeting shall in all instances state the purpose or purposes
for which the meeting is to be called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the Delaware General Corporation Law. Except as
otherwise provided by the Delaware General Corporation Law, a copy of the notice
of any meeting shall be given, personally or by mail, not less than ten days nor
more than sixty days before the date of the meeting, unless the lapse of the
prescribed period of time shall have been waived, and directed to each
stockholder at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the Corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the Board, after adjournment, fix a
new record date for the adjourned meeting. Notice need not be given to any
stockholder who submits a written waiver of notice signed by him before or after
the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose or purposes of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
(e) STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote at any meeting of
stockholders.
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(f) CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting: the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, if any, or, if none of the
foregoing is in office and present and acting, by a Chairman to be chosen by the
stockholders. The Secretary of the Corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
(g) PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provided for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
(h) INSPECTORS. The Board, in advance of any meeting, may, but
need not, appoint one or more inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the Board in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
(i) QUORUM. The holders of a majority of the outstanding
shares of stock shall constitute a quorum at a meeting of stockholders for the
transaction of
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any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
(j) VOTING. Each share of stock shall entitle the holder
thereof to one vote. In the election of directors, a plurality of the votes cast
shall elect. Any other action shall be authorized by a majority of the votes
cast except where the Delaware General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the Certificate of
Incorporation or these By-Laws. In the election of directors, and for any other
action, voting need not be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by
the Delaware General Corporation Law to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any annual or
special meeting of stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
Corporation shall be managed by or under the direction of the Board. The Board
shall have the authority to fix the compensation of the members thereof. The use
of the phrase "whole Board" herein refers to the total number of directors which
the Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, or a citizen or resident of the United States or the State of
Delaware. The initial Board shall consist of three (3) persons. Except for the
initial Board, the number of directors may be fixed from time to time by action
of the stockholders or of the Board, or, if the number is not fixed, the number
shall be three (3). The number of directors may be increased or decreased by
action of the stockholders or of the Board.
3. INDEPENDENT DIRECTOR. At all times, at least one of the
directors of the Corporation shall be an Independent Director, as such term is
defined in Article SEVENTH of the Certificate of Incorporation.
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The same person may serve as Independent Director hereunder
and as the Independent Officer required by Article III hereof.
4. ELECTION AND TERM. The initial Board, unless the members
thereof shall have been named in the Certificate of Incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the Corporation. Directors who are elected at
an annual meeting of stockholders, and directors who are elected in the interim
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of stockholders or until their successors are elected and
qualified or until their earlier resignation or removal. In the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancies in that connection, newly created
directorships and any vacancies in the Board, including unfilled vacancies
resulting from the removal of directors for cause or without cause, may be
filled by the vote of a majority of the remaining directors then in office
although less than a quorum, or by the sole remaining director.
5. MEETINGS.
(a) TIME. Meetings shall be held at such time as the Board
shall fix, except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors may conveniently assemble.
(b) PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the Board.
(c) CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, or the President, or of a majority of the directors in office.
(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall
be required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time for the meeting stated herein. Attendance of any such
person at a meeting shall constitute a waiver of notice of such meeting, except
when he attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any
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business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors need be specified in any written waiver of notice.
(e) QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as otherwise provided
herein or in the Certificate of Incorporation and except as other-wise provided
by the Delaware General Corporation Law, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board. The quorum and voting provisions herein stated shall not be construed
as conflicting with any provisions of the Delaware General Corporation Law and
these By-Laws which govern a meeting of directors held to fill vacancies and
newly created director-ships in the Board or action of disinterested directors.
(f) CHAIRMAN OF THE MEETING. The Chairman of the Board, if any
and if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
6. REMOVAL OF DIRECTORS. Except as may otherwise be provided
by the Delaware General Corporation Law, any director or the entire Board may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
7. COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise the
powers and authority of the Board in the management of the business and affairs
of the Corporation with the exception of any authority the delegation of which
is prohibited by section 141 of the Delaware General Corporation Law, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it.
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8. WRITTEN ACTION. Any action required or permitted to be
taken at any meeting of the Board or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
9. ELECTRONIC COMMUNICATION. Any member or members of the
Board or of any committee designated by the Board, may participate in a meeting
of the Board, or any such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a President
and a Secretary, and may include, by election or appointment, one or more Vice
Presidents (any one or more of whom may be given an additional designation of
rank or function), a Treasurer and such Assistant Secretaries, such Assistant
Treasurers and such other officers with such titles as the resolution of the
Board choosing them shall designate. Except as may otherwise be provided in the
resolution of the Board choosing him, no officer other than the Chairman or
Vice-Chairman of the Board, if any, need be a director. Any number of offices
may be held by the same person.
At all times, at least one of the executive officers of the
Corporation shall be an Independent Officer, as such term is defined in Article
SEVENTH of the Certificate of Incorporation.
The same person may serve as Independent Officer hereunder and
as the Independent Director required by Section 3 of Article II hereof.
Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of the
Board following the next annual meeting of stockholders and until his successor
shall have been chosen and qualified. Any officer may be removed with or without
cause by the Board. Any vacancy in any office may be filled by the Board.
All officers of the Corporation shall have such authority and
perform such duties in the management and operation of the Corporation as may be
prescribed in the resolutions of the Board designating and choosing such
officers or prescribing the authority and duties of the various officers of the
Corporation, and as are customarily
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incident to their office, except to the extent that such resolutions may be
inconsistent therewith. The Secretary shall keep or cause to be kept in the
corporate minute books the minutes of the meetings of the stockholders, the
Board, and all committees created by the Board and shall have such other powers
and authority which ordinarily are inherent in such office in addition to those
which the Board may from time to time prescribe. The Treasurer shall have charge
and custody of, and be responsible for, all funds and securities of the
Corporation and shall have such other powers and authority which ordinarily are
inherent in such office in addition to those which the Board from time to time
may prescribe.
ARTICLE IV
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of account and
shall keep minutes of the proceedings of the shareholders, of the Board, and of
any committee which the Board may appoint. Any of the foregoing books, minutes
or records may be in written form within a reasonable time.
ARTICLE V
INDEMNIFICATION
The Corporation, to the full extent permitted, and in the
manner required by the laws of the State of Delaware as in effect at the time of
the adoption of this Article V or as the same may be amended from time to time,
shall (i) indemnify any person (and the heirs and legal representatives of such
person) who is made or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether in nature civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the Corporation or of any
constituent Corporation absorbed into the Corporation by consolidation or merger
or served or served with another Corporation, partnership, joint venture, trust
or other enterprise at the request of the Corporation or of any such constituent
Corporation and (ii) provide to any such person (and the heirs and legal
representatives of such person) advances for expenses incurred in defending any
such action, suit or proceeding, upon receipt of an undertaking by or on behalf
of such person (and the heirs and legal representatives of such person) to repay
such advances unless it is ultimately determined that he or she is entitled to
indemnification by the Corporation.
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ARTICLE VI
CORPORATE SEAL
The corporate seal shall be in such form as the Board shall
prescribe.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall
be subject to change, by the Board.
ARTICLE VIII
CONTROL OVER BY-LAWS
Subject to the provisions of the Certificate of Incorporation
and the provisions of the Delaware General Corporation Law, the power to amend,
alter or repeal these By-Laws and to adopt new By-Laws may be exercised by the
Board or by the stockholders.
END OF BY-LAWS
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Exhibit 4.1
================================================================================
A.I. RECEIVABLES CORP.
Transferor
A.I. CREDIT CORP.
Original Transferor and Servicer
AICCO, INC.
Original Transferor and Servicer
and
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
on behalf of the Certificateholders
of the AIC Premium Finance Loan Master Trust
-----------------------------------------------------------------------
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of February [___], 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01 Definitions................................................ 2
Section 1.02 Other Definitional Provisions.............................. 21
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES...................... 23
Section 2.01 Conveyance of Receivables.................................. 23
Section 2.02 Acceptance by Trustee...................................... 25
Section 2.03 Representations and Warranties of the Original
Transferors and the Transferor......................... 25
Section 2.04 Representations and Warranties of the Original
Transferors and the Transferor Relating to the
Agreement and the Receivables.......................... 28
Section 2.05 Covenants of the Transferor................................ 33
Section 2.06 Addition of Receivables.................................... 35
Section 2.07 Removal of Receivables..................................... 36
ARTICLE III
ADMINISTRATION AND SERVICING
OF TRUST ASSETS.......................... 39
Section 3.01 Acceptance of Appointment and Other Matters Relating
to the Servicer........................................ 39
Section 3.02 Servicing Compensation..................................... 41
Section 3.03 Representations and Warranties of the Servicer............. 41
Section 3.04 Reports and Records for the Trustee........................ 44
Section 3.05 Annual Servicer's Certificate.............................. 45
Section 3.06 Annual Independent Accountants' Servicing Report........... 45
Section 3.07 Tax Treatment.............................................. 46
Section 3.08 Notices to the Transferor.................................. 47
Section 3.09 Reports to the Commission.................................. 47
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ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS................... 48
Section 4.01 Rights of Certificateholders............................... 48
Section 4.02 Establishment of Accounts.................................. 48
Section 4.03 Collections and Allocations................................ 50
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL
BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES].................... 53
ARTICLE VI
THE CERTIFICATES.......................... 54
Section 6.01 The Certificates........................................... 54
Section 6.02 Execution and Authentication of Certificates............... 54
Section 6.03 Registration of Transfer and Exchange of Certificates...... 55
Section 6.04 Mutilated, Destroyed, Lost or Stolen Certificates.......... 58
Section 6.05 Persons Deemed Owners...................................... 58
Section 6.06 Appointment of Paying Agent................................ 59
Section 6.07 Access to List of Certificateholders' Names and
Addresses.............................................. 60
Section 6.08 Authenticating Agent....................................... 60
Section 6.09 Transfer of Transferor Certificate; New Series Issuances... 62
Section 6.10 Book-Entry Certificates.................................... 64
Section 6.11 Notices to Clearing Agency................................. 65
Section 6.12 Definitive Certificates.................................... 65
Section 6.13 Global Certificate; Euro-Certificate Exchange Date......... 66
Section 6.14 Meetings of Certificateholders............................. 66
ARTICLE VII
OTHER MATTERS RELATING TO THE ORIGINAL
TRANSFERORS AND THE TRANSFEROR................... 68
Section 7.01 Liability of the Original Transferors and the Transferor... 68
Section 7.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Original Transferors or the
Transferor............................................. 68
Section 7.03 Limitation on Liability.................................... 69
Section 7.04 Liabilities................................................ 70
Section 7.05 Indemnification of the Trust and the Trustee by the
Original Transferors and the Transferor................ 70
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Section 7.06 Support Agreement.......................................... 71
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER.......................... 72
Section 8.01 Liability of the Servicer.................................. 72
Section 8.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer........................... 72
Section 8.03 Limitation on Liability of the Servicer and Others......... 73
Section 8.04 Servicer Indemnification of the Trust and the Trustee...... 73
Section 8.05 The Servicer Not to Resign................................. 74
Section 8.06 Access to Certain Documentation and Information
Regarding the Trust Assets............................. 74
Section 8.07 Transfer of Duties......................................... 75
Section 8.08 The Servicer to Pay Rating Agency Fees..................... 75
ARTICLE IX
PAY OUT EVENTS........................... 76
Section 9.01 Pay Out Events............................................. 76
Section 9.02 Additional Rights Upon the Occurrence of Certain
Events................................................. 76
ARTICLE X
SERVICER DEFAULTS......................... 79
Section 10.01 Servicer Defaults......................................... 79
Section 10.02 Trustee to Act; Appointment of Successor.................. 82
Section 10.03 Notification to Certificateholders........................ 84
Section 10.04 Waiver of Past Defaults................................... 84
ARTICLE XI
THE TRUSTEE............................ 85
Section 11.01 Duties of Trustee......................................... 85
Section 11.02 Certain Matters Affecting the Trustee..................... 86
Section 11.03 Trustee Not Liable for Recitals in Certificates........... 88
Section 11.04 Trustee May Own Certificates.............................. 88
Section 11.05 The Servicer to Pay Trustee's Fees and Expenses........... 88
Section 11.06 Eligibility Requirements for Trustee...................... 89
Section 11.07 Resignation or Removal of Trustee......................... 89
Section 11.08 Successor Trustee......................................... 90
Section 11.09 Merger or Consolidation of Trustee........................ 90
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Section 11.10 Appointment of Co-Trustee or Separate Trustee............. 91
Section 11.11 Tax Returns............................................... 92
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates........................................... 92
Section 11.13 Suits for Enforcement..................................... 93
Section 11.14 Rights of Certificateholders to Direct Trustee............ 93
Section 11.15 Representations and Warranties of Trustee................. 93
Section 11.16 Maintenance of Office or Agency........................... 93
ARTICLE XII
TERMINATION............................ 95
Section 12.01 Termination of Trust...................................... 95
Section 12.02 Cleanup Call.............................................. 96
Section 12.03 Final Payment with Respect to Any Series.................. 97
Section 12.04 Termination Rights of Holders of Transferor Certificate... 98
ARTICLE XIII
MISCELLANEOUS PROVISIONS...................... 99
Section 13.01 Amendment................................................. 99
Section 13.02 Protection of Right, Title and Interest to Trust..........100
Section 13.03 Limitation on Rights of Certificateholders................101
Section 13.04 Governing Law.............................................102
Section 13.05 Notices...................................................102
Section 13.06 Severability of Provisions................................103
Section 13.07 Assignment................................................103
Section 13.08 Certificates Non-Assessable and Fully Paid................103
Section 13.09 Further Assurances........................................103
Section 13.10 No Waiver; Cumulative Remedies............................103
Section 13.11 Counterparts..............................................103
Section 13.12 Third-Party Beneficiaries.................................103
Section 13.13 Actions by Certificateholders.............................104
Section 13.14 Rule 144A Information.....................................104
Section 13.15 Merger and Integration....................................104
Section 13.16 Headings..................................................104
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AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT dated as
of February [___], 1998, by and among A.I. Receivables Corp., a Delaware
corporation ("AIR"), as transferor (the "Transferor"), A.I. Credit Corp., a New
Hampshire corporation ("AIC"), as an original transferor and a servicer, AICCO,
Inc., a California corporation ("AICCO") as an original transferor (together
with AIC, the "Original Transferors") and a servicer (together with AIC, the
"Servicer"), and The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, as trustee (the "Trustee").
WHEREAS, the AIC Premium Finance Loan Master Trust was
created pursuant to a Pooling and Servicing Agreement dated as of December 1,
1994 (the "Original Agreement"), by and among AIC and AICCO, as transferors and
servicers, and the Trustee, as trustee.
WHEREAS, the Trust issued the Series 1994-1 Certificates on
the Initial Closing Date pursuant to the Original Agreement and the original
Series 1994-1 Supplement dated as of December 1, 1994 by and among AIC, AICCO
and the Trustee (the "Original Series 1994-1 Supplement").
WHEREAS, Section 13.01(a) of the Original Agreement provides
that such agreement and any supplement thereto may be amended for certain
specified purposes in writing from time to time by the parties thereto, without
the consent of any of the Certificateholders (as defined herein), provided that
such action does not adversely affect in any material respect the interests of
any Investor Certificateholder (as defined herein).
WHEREAS, the parties to the Original Agreement, together with
the Transferor desire to amend and restate the Original Agreement (i) to
designate AIR as transferor under the Trust, replacing AIC and AICCO as
transferors, (ii) to permit the transfer into the Trust of Receivables for which
the related Loans were purchased by AIC or AICCO, and (iii) to provide for the
transfer of the Transferor Certificate (as defined herein) from the Original
Transferors to the Transferor.
WHEREAS, in connection with such amendment and restatement of
the Original Agreement, AIR, as purchaser, and AIC and AICCO, as sellers, will
enter into a receivables sale agreement providing for the transfer of
Receivables (as defined herein) to the Transferor.
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties and the
Certificateholders (as defined herein):
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement,
the following words and phrases shall have the following meanings:
"Account Information" shall have the meaning specified in
subsection 2.02(b).
"Accumulation Period" shall mean, with respect to any Series,
or any Class within a Series, a period following the Revolving Period, which
shall be the accumulation or other period in which Collections of Principal
Receivables are accumulated in an account for the benefit of the Investor
Certificateholders of such Series, or a Class within such Series, in each case
as defined with respect to such Series in the related Supplement.
"Addition Date" shall mean each date as of which Additional
Receivables will be included as Trust Assets pursuant to Section 2.06.
"Additional Receivables" shall have the meaning specified in
subsection 2.06(b).
"Affiliate" of any Person shall mean any other Person
controlling, controlled by or under common control with such Person.
"Aggregate Certificateholders Ownership Interests" shall
mean, as of any date of determination, the sum of the Certificateholders
Ownership Interests of all Series of Certificates issued and outstanding on such
date of determination.
"Aggregate Default Amount" shall have, with respect to any
Series of Certificates, the meaning stated in the related Supplement.
"Aggregate Investor Percentage" with respect to Principal
Receivables and Finance Charge Receivables, as the case may be, shall mean, as
of any date of determination, the sum of the applicable Investor Percentages of
all Series of Certificates issued and outstanding on such date of determination;
provided, however, that the Aggregate Investor Percentage shall not exceed 100%.
"Agreement" shall mean this Amended and Restated Pooling and
Servicing Agreement and all amendments hereof and supplements hereto, including
any Supplement.
"AIC" shall mean A.I. Credit Corp., a New Hampshire
corporation.
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"AIC Support Agreement" shall mean the agreement between AIG
and AIC dated as of December 1, 1994, substantially in the form of Exhibit G to
this Agreement, together with the letter agreement between AIG and the Trustee
dated as of December 1, 1994, substantially in the form of Exhibit H to this
Agreement.
"AICCO" shall mean AICCO, Inc., a California corporation.
"AIG" shall mean American International Group, Inc., a
Delaware corporation.
"AIR" shall mean A.I. Receivables Corp., a Delaware
corporation.
"AIR Support Agreement" shall mean the agreement between AIG
and AIR dated as of February [___], 1998, substantially in the form of Exhibit I
to this Agreement, together with the letter agreement between AIG and the
Trustee dated as of February [___], 1998, substantially in the form of Exhibit J
to this Agreement.
"Amortization Period" shall mean, with respect to any Series,
or any Class within a Series, a period following the Revolving Period during
which principal is distributed to Investor Certificateholders, which shall be
the controlled amortization period, the principal amortization period, the rapid
amortization period, or other amortization period, in each case as defined with
respect to such Series in the related Supplement.
"Applicants" shall have the meaning specified in Section
6.07.
"Appointment Day" shall have the meaning specified in
subsection 9.02(a).
"Assignment" shall have the meaning specified in subsection
2.06(d)(ii).
"Authorized Newspaper" shall mean a newspaper of general
circulation in the Borough of Manhattan, the City of New York printed in the
English language (or, with respect to any Series, any additional city specified
in the Supplement for such Series) and customarily published on each Business
Day, whether or not published on Saturdays, Sundays and holidays.
"Bearer Certificates" shall have the meaning specified in
Section 6.01.
"Bearer Rules" shall mean the provisions of the Internal
Revenue Code, in effect from time to time, governing the treatment of bearer
obligations, including without limitation sections 163(f), 165(j), 871, 881,
1287(a), 1441, 1442
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and 4701, and any regulations promulgated under the Internal Revenue Code
including, to the extent applicable to any Series, Proposed or Temporary
Regulations.
"Book-Entry Certificates" shall mean certificates evidencing
a beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 6.10; provided, that after the occurrence of a condition whereupon
book-entry registration and transfer are no longer authorized and Definitive
Certificates have been issued to the Certificate Owners, such certificates shall
no longer be "Book-Entry Certificates."
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in New York, New York, Los
Angeles, California or the city in which the Corporate Trust Office is located
(or, with respect to any Series, any additional city specified in the related
Supplement) are authorized or obligated by law or executive order to be closed.
"Cedel" shall mean Cedel Bank, societe anonyme.
"Certificate" shall mean any one of the Investor Certificates
of any Series or the Transferor Certificate.
"Certificate Interest" shall mean interest payable in respect
of the Investor Certificates of any Series pursuant to Article IV of the
Supplement for such Series.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as may be reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly or
as an indirect participant, in accordance with the rules of such Clearing
Agency).
"Certificate Principal" shall mean principal payable in
respect of the Investor Certificates of any Series pursuant to Article IV of
this Agreement.
"Certificate Rate" shall mean, with respect to any Series of
Certificates (or, for any Series with more than one Class, for each Class of
such Series), the percentage (or formula on the basis of which such rate shall
be determined) stated as such in the related Supplement.
"Certificate Register" shall mean the register maintained
pursuant to Section 6.03, providing for the registration of the Certificates and
transfers and exchanges thereof.
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"Certificateholder" or "Holder" shall mean the Person in
whose name a Certificate is registered in the Certificate Register and, if
applicable, the holder of any Bearer Certificate or Coupon, as the case may be,
or such other Person deemed to be a "Certificateholder" or "Holder" in any
related Supplement.
"Certificateholders Ownership Interests" shall have, with
respect to any Series of Certificates, the meaning stated in the related
Supplement.
"Class" shall mean, with respect to any Series, any one of
the classes of Certificates of that Series as specified in the related
Supplement.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended.
"Clearing Agency Participant" shall mean a broker, dealer,
bank, other financial institution or other Person for whom from time to time a
Clearing Agency or Foreign Clearing Agency effects book-entry transfers and
pledges of securities deposited with the Clearing Agency or Foreign Clearing
Agency.
"Closing Date" shall mean (i) the Initial Closing Date with
respect to the Series 1994-1 Certificates, (ii) the Series 1998-1 Closing Date
with respect to the Series 1998-1 Certificates, and (iii) with respect to any
other Series of Certificates, the date specified as such in the related
Supplement.
"Collateral Interest" shall have the meaning, with respect to
any Series, specified in the related Supplement.
"Collection Account" shall have the meaning specified in
subsection 4.02(a).
"Collections" shall mean all payments received by the
Servicer in respect of the Receivables, including without limitation Recoveries,
whether in the form of cash, checks, wire transfers, ATM transfers or other form
of payment in accordance with the applicable Premium Finance Agreement. If the
Servicer establishes any lock-box account for the receipt of payments, a payment
shall be deemed received by the Servicer on the date of deposit in such lock-box
account.
"Companion Series" shall mean (i) each Series which has been
paired with another Series (which Series may be prefunded or partially
prefunded), such that the reduction of the Certificateholders Ownership
Interests of such Series results in the increase of the Certificateholders
Ownership Interests of such other Series, as described in the related
Supplements, and (ii) such other Series.
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"Corporate Trust Office" shall mean the principal office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of the execution of this Agreement is
located at One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126,
Attention: Corporate Trust Services Division, except that for purposes of
Sections 6.03(d), 6.06, and 11.16, such term shall mean the office or agency of
the Trustee in the Borough of Manhattan, the City of New York, which office at
the date hereof is located at 14 Wall Street, Eighth Floor, New York, New York
10005.
"Coupon" shall have the meaning specified in Section 6.01.
"Credit Adjustment" shall have the meaning specified in
subsection 4.03(d).
"Credit Balance" shall mean, as of any date of determination,
(a) with respect to any Receivable arising under a Loan which is not a Defaulted
Loan, any Collections on such Loan in excess of the sum of (i) amounts due and
payable on such Loan during the month in which such date occurs and (ii) all
accrued and unpaid amounts, if any, on such Loan in respect of any month or
months prior to the month in which such date occurs or (b) with respect to any
Receivable arising under a Defaulted Loan, any Collections on such Defaulted
Loan in excess of all amounts due thereon.
"Credit Enhancement" shall mean, with respect to any Series,
the cash collateral account, letter of credit, surety bond, guaranteed rate
agreement, maturity guaranty facility, tax protection agreement, interest rate
swap or any other contract or agreement principally for the benefit of the
Certificateholders of such Series (or Certificateholders of a Class within such
Series) as designated in the applicable Supplement.
"Credit Enhancement Provider" shall mean, with respect to any
Series, the Person, if any, designated as such in the related Supplement.
"Cumulative Series Principal Shortfall" shall mean the sum of
the Series Principal Shortfalls (as such term is defined in the related Series
Supplement) for each Series.
"Cut-Off Date" shall mean (i) the Initial Cut-Off Date with
respect to the Series 1994-1 Certificates and (ii) the date, if any, specified
in the related Supplement with respect to any other Series of Certificates.
"Defaulted Loan" shall mean any Loan which (i) remains in
default as of the beginning of the month immediately following the first
anniversary of the cancellation of the related insurance policy, which
cancellation results from such
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<PAGE>
default, or (ii) is overdue and which the Servicer determines, in accordance
with the Guidelines, is incapable of collection. A Loan shall be considered to
be a Defaulted Loan upon the earlier to occur of (i) or (ii).
"Definitive Certificate" shall have the meaning specified in
Section 6.10.
"Depository" shall have the meaning specified in Section
6.10.
"Depository Agreement" shall mean, with respect to each
Series, the agreement among the Original Transferors or the Transferor, as
applicable, the Trustee and the Clearing Agency, or as otherwise provided in the
related Supplement.
"Determination Date" shall mean, unless otherwise specified
in the related Series Supplement, the fourth Business Day prior to each Transfer
Date.
"Distribution Account" shall have the meaning specified in
subsection 4.02(c).
"Distribution Date" shall mean, with respect to each Series,
the dates specified in the related Supplement.
"Dollars", "$" or "U.S. $" shall mean United States dollars.
"Eligible Receivable" shall mean (i) with respect to
Receivables conveyed to the Trust on any Closing Date, as of the related Cut-Off
Date, or, if any such Receivable is originated after the related Cut-Off Date
and prior to such Closing Date, as of the date of origination thereof, (ii) with
respect to Existing Receivables other than those conveyed to the Trust on the
Initial Closing Date, as of the relevant date of transfer to the Trust and (iii)
with respect to any Additional Receivable, as of the relevant Addition Date,
each Receivable:
(a) which has arisen from a Loan made to an Obligor that used all
the proceeds of such Loan to pay premiums on property or casualty
insurance policies, governed by the law of any State of the United
States or the District of Columbia, under which such Obligor is the
insured;
(b) which has arisen from a Loan, having a stated maturity, that
complies in all material respects with all Requirements of Law
applicable to AIC, AICCO, any Third Party Originator and the Servicer
and which, at the time of transfer of such Receivable to the Trust,
complies in all material respects with all Requirements of Law
applicable to AIC, AICCO, any Third Party Originator and the Servicer;
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<PAGE>
(c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with,
any Governmental Authority required to be obtained, effected or given
in connection with the creation of such Receivable or the execution,
delivery and performance by the related Originator of the Loan
relating to such Receivable, have been duly obtained, effected or
given and are in full force and effect as of the date of transfer of
such Receivable to the Trust;
(d) which, at the time of transfer of such Receivable to the
Trust, represents a beneficial interest in a Loan that has been
originated in accordance with the Guidelines and that has not been
waived or modified except for waivers or modifications that were made
by the Servicer in accordance with the Guidelines;
(e) as to which the related Loan is not subject to any right of
rescission, setoff, counterclaim, defense arising out of violations of
usury laws or any other defenses of any Obligor at the time of the
transfer of such Receivable to the Trust, other than defenses that may
arise after the time of transfer out of applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights in general and general equity
principles;
(f) as to which all obligations of the related Originator with
respect to such Receivable required to be fulfilled pursuant to the
Premium Finance Agreement and this Agreement, including the funding of
the related Loan, are satisfied;
(g) as to which, at the time of transfer of such Receivable to
the Trust, the related Originator has not taken any action which would
impair, or failed to take any action necessary to avoid impairing, the
rights of the Trust or the Certificateholders therein;
(h) with respect to which, in the case of Existing Receivables
transferred to the Trust after the Initial Closing Date and Additional
Receivables only, the Obligor under the related Loan is not the direct
obligor under any Defaulted Loan (other than under any Loan which is a
Defaulted Loan solely due to an event of bankruptcy with respect to an
obligor other than such direct obligor);
(i) which, in the case of Existing Receivables transferred to the
Trust after the Initial Closing Date and Additional Receivables only,
does not relate to a Defaulted Loan or a Loan which is overdue;
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<PAGE>
(j) as to which the related Loan and all amounts due thereon are
denominated and payable only in Dollars;
(k) which has arisen from a Loan whereby the related Premium
Finance Agreement provides the related Originator a limited power of
attorney allowing it to cancel the related insurance policy, if
cancelable, in accordance with state law, upon non-payment of an
installment under such Premium Finance Agreement by the Obligor
thereunder; and
(l) which has arisen from a Loan whereby the related Premium
Finance Agreement allows the related Originator to direct the related
insurance company to pay to such party any Unearned Premium calculated
as of the time of cancellation of the related insurance policy, if
such insurance policy is cancelable.
"Eligible Servicer" shall mean the Trustee, a wholly-owned
subsidiary of the Trustee, or an entity which, at the time of its appointment as
Servicer, (a) is servicing a portfolio of insurance premium finance receivables
or other receivables comparable to the Receivables, (b) is legally qualified and
has the capacity and all licenses required to service the Receivables, (c) is
qualified (or licensed) to use the software that the Servicer is then currently
using to service the Receivables or obtains the right to use, or has its own,
software which is adequate to perform its duties under this Agreement, (d) has,
in the reasonable judgment of the Trustee, demonstrated the ability to
professionally and competently service a portfolio of similar accounts in
accordance with customary standards of skill and care and (e) has a net worth of
at least $25,000,000 as of the end of its most recent fiscal quarter.
"Enhancement Invested Amount" shall have the meaning, with
respect to any Series, specified in the related Supplement.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company
of New York, Brussels, Belgium office, as operator of the Euroclear System.
"Excess Receivables Amount" shall have the meaning, with
respect to any Series, specified in the related Supplement.
"Existing Receivables" shall have the meaning specified in
Section 2.01.
"Extended Trust Termination Date" shall have the meaning
specified in subsection 12.01(a).
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"FDIC" shall mean the Federal Deposit Insurance Corporation
or any successor thereto.
"Finance Charge Account" shall have the meaning specified in
subsection 4.02(b).
"Finance Charge Receivables" shall mean Receivables created
in respect of the Periodic Finance Charges and Late Fees and similar fees and
charges allocable to the Trust, calculated as provided in subsection 1.02(f).
"Foreign Clearing Agency" shall mean Cedel and the Euroclear
Operator.
"Future Receivables" shall have the meaning specified in
Section 2.01.
"Global Certificate" shall have the meaning specified in
Section 6.13.
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guidelines" shall mean the written policies and procedures
of AIC and AICCO relating to the operation of their respective insurance premium
finance businesses, including, without limitation, the policies and procedures
for determining the creditworthiness of insureds, insurance agents, insurance
brokers and insurance companies, and for the extension of credit to prospective
insureds and relating to the maintenance and servicing of Premium Finance
Agreements and collection of receivables thereunder, as such policies and
procedures may be amended from time to time.
"Holder" or "Certificateholder" shall mean the Person in
whose name a Certificate is registered in the Certificate Register and, if
applicable, the holder of any Bearer Certificate or Coupon, as the case may be,
or such other Person deemed to be a "Holder" or "Certificateholder" in any
related Supplement.
"Ineligible Receivable" shall have the meaning specified in
subsection 2.04(e)(ii).
"Initial Certificateholders Ownership Interests" shall mean,
with respect to any Series of Certificates, the amount stated in the related
Supplement.
"Initial Closing Date" shall mean December 22, 1994.
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"Initial Cut-Off Date" shall mean November 30, 1994.
"Insolvency Event" shall have the meaning specified in
subsection 9.01(a).
"Interest Period" shall have, with respect to any Series of
Certificates, the meaning stated in the related Supplement.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Investor Account" shall mean each of the Finance Charge
Account, the Principal Account and each of the Distribution Accounts.
"Investor Certificate" shall mean any one of the certificates
(including, without limitation, the Bearer Certificates, the Registered
Certificates or the Global Certificates) issued by the Trust, executed and
authenticated by the Trustee substantially in the form (or forms in the case of
a Series with multiple classes) of the investor certificate attached to the
related Supplement or such other interest in the Trust deemed to be an "Investor
Certificate" in any related Supplement.
"Investor Certificateholder" shall mean the holder of record
of an Investor Certificate.
"Investor Exchange" shall have the meaning specified in
subsection 6.09(b).
"Investor Percentage" shall have, with respect to Principal
Receivables and Finance Charge Receivables and any Series of Certificates, the
meaning stated in the related Supplement.
"Investor Servicing Fee" shall have, with respect to each
Series, the meaning specified in Section 3.02.
"Late Fees" shall have the meaning specified in the Premium
Finance Agreement applicable to each Loan for late fees or similar terms.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, participation or equity interest, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement under
the UCC (other than any such
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<PAGE>
financing statement filed for informational purposes only) or comparable law of
any jurisdiction to evidence any of the foregoing; provided, however, that any
assignment pursuant to Section 7.02 shall not be deemed to constitute a Lien.
"Loan" shall mean each loan to an Obligor in the United
States made by an Originator in accordance with the Guidelines under a Premium
Finance Agreement.
"Minimum Transferor Ownership Interest" shall mean, unless
otherwise specified in a Supplement, as of any date of determination, an amount
equal to the sum of (a)(i) 107% of an amount equal to the sum of the Initial
Certificateholders Ownership Interests of each outstanding Series minus (ii) the
sum of the Certificateholders Ownership Interests of each outstanding Series as
of such date of determination and (b) the Excess Receivables Amount for such
date to the extent the related Supplement requires the [addition] of such amount
in the calculation of the Minimum Transferor Ownership Interest
"Monthly Certificateholders' Statement" shall mean, with
respect to any Series of Certificates, a statement substantially in the form
attached in the relevant Supplement, with such changes as the Servicer may
determine to be necessary or desirable; provided, however, that no such change
shall serve to exclude information required by this Agreement or any Supplement.
"Monthly Period" shall mean, unless otherwise defined in any
Supplement, the period from and including the first day of a calendar month to
and including the last day of a calendar month.
"Monthly Servicer Report" shall mean a report substantially
in the form attached as Exhibit C to this Agreement or in such other form as
shall be agreed between the Servicer and the Trustee; provided, however, that no
such other agreed form shall serve to exclude information required by this
Agreement or any Supplement.
"Moody's" shall mean Moody's Investors Service, Inc.
"New Series Issuance" shall mean any issuance of a new Series
of Certificates pursuant to Section 6.09 hereof.
"New Series Issuance Date" shall have the meaning, with
respect to any Series issued pursuant to a New Series Issuance, specified in
subsection 6.09(b).
"New Series Issuance Notice" shall have the meaning, with
respect to any Series issued pursuant to a New Series Issuance, specified in
subsection 6.09(b).
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"Notice Date" shall have the meaning specified in subsection
2.06(d)(i).
"Obligor" shall mean, with respect to any Loan under a
Premium Finance Agreement, the Person or Persons obligated to make payments with
respect to such loan, including any guarantor thereof.
"Officer's Certificate" shall mean a certificate signed by
any Vice President or more senior officer of the Transferor or the Servicer (of
both AIC and AICCO, if both are then acting as the Servicer), as the case may
be, and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel,
who may be counsel for or an employee of the Person providing the opinion, and
who shall be reasonably acceptable to the Trustee; provided, however, that any
Tax Opinion or other opinion relating to federal income tax matters shall be an
opinion of nationally recognized tax counsel.
"Original Agreement" shall have the meaning specified in the
recitals to this Agreement.
"Original Series 1994-1 Supplement" shall have the meaning
specified in the recitals to this Agreement.
"Original Transferor" shall mean AIC or AICCO, as the case
may be.
"Originator" shall mean AIC, AICCO or, in the case of a Loan
purchased by AIC or AICCO, the related Third Party Originator.
"Pay Out Commencement Date" shall mean, (a) with respect to
each Series, the date on which a Trust Pay Out Event is deemed to occur pursuant
to Section 9.01 or (b) with respect to any Series, the date on which a Series
Pay Out Event is deemed to occur pursuant to the Supplement for such Series.
"Pay Out Event" shall mean, with respect to each Series, a
Trust Pay Out Event or a Series Pay Out Event.
"Paying Agent" shall mean any paying agent appointed pursuant
to Section 6.06 and shall initially be the Trustee's Corporate Trust Office.
"Periodic Finance Charges" shall mean, with respect to each
Loan, the monthly finance charges payable under the related Premium Finance
Agreement by the related Obligor.
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"Permitted Investments" shall mean, unless otherwise provided
in the Supplement with respect to any Series (a) book-entry securities or
negotiable instruments or securities represented by instruments in bearer or
registered form which evidence (i) obligations of or fully guaranteed by the
United States of America; (ii) demand deposits, time deposits or certificates of
deposit of any depositary institution or trust company; provided, however, that
at the time of the Trust's investment or contractual commitment to invest
therein, either (A) the certificates of deposit of such depositary institution
or trust company shall have a credit rating from Moody's and Standard & Poor's
of P-1 and A-1+, respectively, and the long-term unsecured debt obligations of
such depositary institution or trust company shall have a credit rating from
Moody's and Standard & Poor's of Aa and AA, respectively or (B) such investment
is made with the corporate trust department of such depositary institution or
trust company and the certificates of deposit of such depositary institution or
trust company shall have a credit rating from Moody's and Standard & Poor's of
P-l and A-l, respectively, and the long-term debt obligations of such depositary
institution or trust company shall have a credit rating from Moody's and
Standard & Poor's of at least A and A, respectively; (iii) commercial paper
having, at the time of the Trust's investment or contractual commitment to
invest therein, a rating from Moody's and Standard & Poor's of P-l and A-l+,
respectively; (iv) bankers' acceptances issued by any depositary institution or
trust company described in clause (ii) above; (v) investments in money market
funds rated AAA-M or AAA-MG by Standard & Poor's or P-l by Moody's or otherwise
approved in writing by each Rating Agency; and (vi) demand deposits, time
deposits and certificates of deposit which are fully insured to the limits as
required by law and the FDIC; and (b) securities not represented by an
instrument that are registered in the name of the Trustee upon books maintained
for that purpose by or on behalf of the issuer thereof and identified on books
maintained for that purpose by the Trustee as held for the benefit of the Trust
or the Certificateholders, and consisting of shares of an open end diversified
investment company which is registered under the Investment Company Act of 1940,
as amended, and which (i) invests its assets exclusively in obligations of or
guaranteed by the United States of America or any instrumentality or agency
thereof having in each instance a final maturity date of less than one year from
their date of purchase or other Permitted Investments, (ii) seeks to maintain a
constant net asset value per share, (iii) has aggregate net assets of not less
than $100,000,000 on the date of purchase of such shares and (iv) each Rating
Agency designates in writing will not result in a withdrawal or downgrading of
its then current rating of any Series rated by it.
"Person" shall mean any legal person, including any
individual, corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental entity or other entity of similar nature.
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<PAGE>
"Premium Finance Agreement" shall mean a written agreement by
which an insured or prospective insured promises to pay to the applicable
Originator an amount advanced or to be advanced thereunder to an insurer (or to
an insurance broker or agent for payment to the insurer) in payment of premiums
on an insurance contract together with any Periodic Finance Charges and any
other incidental fees and charges.
"Principal Account" shall have the meaning specified in
subsection 4.02(b).
"Principal Receivable" shall mean each Receivable other than
(i) Finance Charge Receivables and (ii) Recoveries, calculated as provided in
subsection 1.02(f).
"Principal Terms" shall have the meaning, with respect to any
Series issued pursuant to a New Series Issuance, specified in subsection
6.09(c).
"Qualified Institution" shall mean a depositary institution,
which may include the Trustee, organized under the laws of the United States or
any one of the States thereof including the District of Columbia, the deposits
in which are insured by the FDIC and which at all times has (x) a certificate of
deposit rating of at least A-1+ by Standard & Poor 5 and P-l by Moody's or a
long-term debt rating of at least AA by Standard & Poor's and at least Aa by
Moody's or (y) if such deposits are held in the corporate trust department of
such depositary institution, a certificate of deposit rating of at least A-l by
Standard & Poor's and P-1 by Moody's or a long-term debt rating of at least A by
Standard & Poor's and at least A by Moody's.
"Rating Agency" shall mean, with respect to each Series, the
rating agency or agencies, if any, selected by the Transferor (or the Original
Transferors in the case of Series 1994-1) to rate all or a portion of the
Certificates, as specified in the related Supplement.
"Rating Agency Condition" shall mean, unless otherwise
provided in a Supplement, with respect to any action requiring rating agency
approval or consent, that each Rating Agency rating any Series shall have
notified the Transferor, the Servicer and the Trustee in writing that such
action will not result in a reduction or withdrawal of the then current rating
of any outstanding Series or Class thereof with respect to which it is a Rating
Agency. Satisfaction of the Rating Agency Condition shall be an expense of the
Trust unless otherwise provided herein or in any Supplement.
"Reassignment" shall have the meaning specified in subsection
2.07(b)(ii).
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"Reassignment Date" shall have the meaning specified in
subsection 2.04(e).
"Receivable" shall mean the entire beneficial interest in a
Loan, including all amounts due and to become due and all Collections on or in
respect of such Loan (including all Finance Charge Receivables, Principal
Receivables and Recoveries). The term "Receivable" shall be deemed to refer to
an Additional Receivable only from and after the Addition Date with respect
thereto, and the term "Receivable" shall be deemed to refer to any Removed
Receivable only prior to the Removal Date with respect thereto. The term
"Receivable" shall in no event include any Credit Balance.
"Record Date" shall mean, with respect to any Distribution
Date, the last Business Day of the preceding Monthly Period.
"Recoveries" shall mean all amounts, other than Credit
Balances, received by the Servicer from any Person (including the Obligor) with
respect to any Defaulted Loan, including, without limitation, any Unearned
Premium with respect thereto, and, if permitted by applicable law or regulation,
the right to receive dividends and loss payments on the related insurance
policy.
"Registered Certificates" shall have the meaning specified in
Section 6.01.
"Removal Date" shall mean any date on which designated
Removed Receivables will be reassigned by the Trustee to the Transferor.
"Removal Notice Date" shall have the meaning specified in
Section 2.07(a).
"Removed Receivables" shall have the meaning specified in
subsection 2.07(a).
"Requirements of Law" for any Person shall mean the
certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or Governmental Authority, in
each case applicable to or binding upon such Person or to which such Person is
subject, whether federal, state or local (including, without limitation, usury
laws and laws relating to truth in lending).
"Responsible Officer" shall mean any officer within the
Corporate Trust Office (or any successor group of the Trustee), including any
Vice President, any Assistant Secretary or any other officer of the Trustee
customarily performing
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functions similar to those performed by any person who at the time shall be an
above- designated officer and also, with respect to a particular matter, any
other officer to whom any corporate trust matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Restricted Period" shall have, with respect to any Series of
Certificates, the meaning designated as the "Restricted Period," if any, in the
related Supplement.
"Revolving Period" shall have, with respect to each Series,
the meaning specified in the related Supplement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series" shall mean any series of Investor Certificates,
which may include within any such Series multiple Classes of Investor
Certificates one or more of which may be subordinate to another such Class or
Classes of Investor Certificates.
"Series 1994-1 Supplement" shall have the meaning specified
in the recitals to this Agreement.
"Series 1998-1 Closing Date" shall have the meaning set forth
in the related Supplement.
"Series Account" shall mean any account or accounts
established pursuant to a Supplement for the benefit of the related Series.
"Series Pay Out Event" shall have, with respect to any
Series, the meaning specified pursuant to the related Supplement.
"Series Servicing Fee Percentage" shall mean, with respect to
any Series, the amount specified in the related Supplement.
"Series Temporary Regulation S Global Certificate" shall
mean, with respect to any Series of Certificates, the certificates designated as
such, if any, in the related Supplement.
"Series Termination Date" shall have, with respect to any
Series of Certificates, the meaning specified in the related Supplement.
"Servicer" shall mean initially AIC and AICCO and their
respective permitted successors and assigns and thereafter any Person appointed
as successor as herein provided to service the Receivables.
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"Servicer Default" shall have the meaning specified in
Section 10.01.
"Servicer's Compliance Certificate" shall have the meaning
specified in Section 3.06.
"Servicing Fee" shall have the meaning specified in Section
3.02.
"Servicing Officer" shall mean any officer of the Servicer
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing officers furnished to the
Trustee by the Servicer (by both AIC and AICCO, if both are then acting as the
Servicer), as such list may from time to time be amended.
"Shared Finance Charge Collections" shall mean, with respect
to any Transfer Date, the aggregate amount for all outstanding Series that the
related Supplements specify are to be treated as "Shared Finance Charge
Collections" for such Transfer Date.
"Shared Principal Collections" shall mean, with respect to
any Transfer Date, the aggregate amount for all outstanding Series that the
related Supplements specify are to be treated as "Shared Principal Collections"
for such Transfer Date.
"Standard & Poor's" shall mean Standard & Poor's Ratings
Group.
"Successor Servicer" shall have the meaning specified in
subsection 10.02(a).
"Supplement" or "Series Supplement" shall mean, (i) with
respect to Series 1994-1, the Series 1994-1 Supplement and (ii) with respect to
any other Series of Certificates, a supplement to this Agreement complying with
the terms of Section 6.09 of this Agreement, executed in conjunction with the
issuance of such Series of Certificates (or, in the case of the issuance of
Certificates on the Series 1998-1 Closing Date, the supplement executed in
connection with the issuance of such Certificates).
"Support Agreements" shall mean the AIC Support Agreement and
the AIR Support Agreement.
"Tax Opinion" shall mean with respect to any action or event,
an Opinion of Counsel to the effect that, for United States federal income tax
purposes and for income and/or franchise tax purposes of any state or locality
(if appropriate) in which the Servicer maintains its principal place of business
and any additional states or localities (as appropriate) in which the Servicer,
after the date hereof,
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conducts substantial servicing activities in respect of Receivables, (a) such
action or event will not adversely affect the tax characterization of Investor
Certificates of any outstanding Series or Class issued to investors as debt, (b)
following such action or event, the Trust will not be treated as a taxable
entity and (c) such action or event will not cause or constitute a taxable event
to any Investor Certificateholder or the Trust.
"Termination Notice" shall have, with respect to any Series,
the meaning specified in subsection 10.01(a).
"Third Party Lender" shall mean an originator other than AIC
or AICCO that has originated a Loan to an Obligor in the United States in
accordance with the Guidelines, which Loan is subsequently purchased by AIC or
AICCO and sold to the Transferor.
"Transfer Agent and Registrar" shall have the meaning
specified in Section 6.03 and shall initially be the Trustee's Corporate Trust
Office.
"Transfer Date" shall mean, unless otherwise specified in the
related Supplement, with respect to any Series, the Business Day immediately
prior to each Distribution Date.
"Transferor" shall mean AIR, and any successor or assignee
thereof permitted under Section 7.02.
"Transferor Certificate" shall mean the certificate or
certificates which represent the Transferor Ownership Interest, executed and
authenticated by the Trustee, substantially in the form of Exhibit A; provided
that at any time there shall be no more than two such certificates.
"Transferor Ownership Interest" shall mean, on any date of
determination, the aggregate amount of Principal Receivables then in the Trust
and as adjusted pursuant to subsection 4.03(d) and the principal amount on
deposit in any Principal Funding Account (as defined in any Supplement) at the
end of the day immediately prior to such date of determination, minus the
Aggregate Certificateholders Ownership Interests at the end of such day, minus
the aggregate Enhancement Invested Amounts, if any, for each Series outstanding
at the end of such day, minus the aggregate Collateral Interests not included in
the Aggregate Certificateholders Ownership Interests, if any, for each Series
outstanding at the end of such day.
"Transferor Ownership Interest Reduction" shall have the
meaning specified in subsection 6.09(b).
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"Transferor Percentage" shall mean, on any date of
determination, when used with respect to Principal Receivables and Finance
Charge Receivables, a percentage equal to 100% minus the Aggregate Investor
Percentage with respect to such categories of Receivables.
"Transferor Servicing Fee" shall have the meaning specified
in Section 3.02.
"Trust" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Trust Assets.
"Trust Assets" shall have the meaning specified in Section
2.01.
"Trust Extension" shall have the meaning specified in
subsection 12.01(a).
"Trust Pay Out Event" shall have, with respect to each
Series, the meaning specified in Section 9.01.
"Trust Termination Date" shall mean the earliest to occur of
(i) unless a Trust Extension shall have been delivered, the first Business Day
after the Distribution Date with respect to any Series following the day on
which funds shall have been deposited in the Distribution Accounts and any
applicable Series Account sufficient to pay in full (a) the Aggregate
Certificateholders Ownership Interests plus accrued Certificate Interest at the
applicable Certificate Rate through the applicable Interest Period prior to such
Distribution Date with respect to each such Series and (b) all amounts owed to
each Credit Enhancement Provider, (ii) if a Trust Extension shall have been
delivered, the Extended Trust Termination Date and (iii) the date of any
termination pursuant to Section 9.02(b).
"Trustee" shall mean The First National Bank of Chicago, and
its successors and any corporation resulting from or surviving any consolidation
or merger to which it or its successors may be a party and any successor trustee
appointed as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction (or, if no jurisdiction
is specified, as in effect in any applicable jurisdiction).
"Undivided Interest" shall mean the undivided interest in the
Trust evidenced by an Investor Certificate.
"Unearned Premium" shall mean, with respect to any Loan, the
portion, if any, of any insurance premium financed under the related Premium
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Finance Agreement that is considered unearned and is required under applicable
law and/or the terms of the related insurance policy to be returned by the
insurance company directly, or indirectly through an insurance broker or agent,
to the related Originator upon receipt by the related Obligor of notice of
cancellation of the related insurance policy, if such insurance policy is
cancelable.
Section 1.02 Other Definitional Provisions.
(a) All terms defined in any Supplement or this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.01, and accounting terms partially defined in Section 1.01 to the
extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms herein are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained herein shall
control.
(c) The agreements, representations and warranties of AIC in
this Agreement and in any Supplement in each of its capacities as an Original
Transferor and as a Servicer shall be deemed to be the agreements,
representations and warranties of AIC solely in each such capacity for so long
as AIC acts in each such capacity under this Agreement; provided, however, that
the representations and warranties made by AIC with respect to the Existing
Receivables shall survive AIC's replacement as transferor. The agreements,
representations and warranties of AICCO in this Agreement and in any Supplement
in each of its capacities as an Original Transferor and as a Servicer shall be
deemed to be the agreements, representations and warranties of AICCO solely in
each such capacity for so long as AICCO acts in each such capacity under this
Agreement; provided, however, that the representations and warranties made by
AICCO with respect to the Existing Receivables shall survive AICCO's replacement
as transferor.
(d) Unless the context otherwise requires, if more than one
Person is acting as Servicer under this Agreement and any Supplement, the
agreements, representations and warranties of the Servicer in this Agreement and
any Supplement shall be deemed to be the joint and several agreements,
representations and warranties of such Persons for so long as such Persons act
in such capacity under this Agreement.
(e) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Supplement shall refer to this
Agreement or such Supplement as a whole and not to any particular provision of
this
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Agreement or any Supplement; and Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement or any
Supplement unless otherwise specified.
(f) The amount of Principal Receivable with respect to any
Loan on any date of determination shall be calculated by deducting from the
gross funded receivable shown for such date on the Servicer's servicing system
the amount of any unearned income thereon as of such date. Any Receivables which
the Transferor is unable to transfer as provided in subsection 2.05(c) shall not
be included in calculating the aggregate amount of Principal Receivables. In
allocating Collections on Receivables received during any Monthly Period, the
Servicer shall be entitled to allocate to Finance Charge Receivables an amount
equal to the reduction for such Monthly Period in unearned income for each
Receivable shown on the servicing system of the Servicer together with any
Recoveries and to allocate to Principal Receivables the remaining amount or to
follow any other method of allocation that is in accordance with generally
accepted accounting principles.
[End of Article I]
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ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.01 Conveyance of Receivables. Pursuant to the
Original Agreement, the Original Transferors have transferred, assigned, and
otherwise conveyed to the Trust for the benefit of the Certificateholders,
without recourse, all of their respective right, title and interest in and to
the Receivables existing at any time after the Initial Cut-Off Date or
thereafter created up to (but excluding) the Series 1998-1 Closing Date,
including all Collections thereon, other than Credit Balances, received by the
Original Transferors after the Cut-Off Date (the "Existing Receivables"). The
Transferor hereby transfers, assigns, and otherwise conveys to the Trust for the
benefit of the Certificateholders, without recourse, all of its respective
right, title and interest in and to the Receivables (including Additional
Receivables) existing at any time on or after the Series 1998-1 Closing Date or
thereafter created, including all Collections thereon, other than Credit
Balances, received by the Transferor on or after the Series 1998-1 Closing Date
(the "Future Receivables") and required or permitted to be conveyed hereunder
pursuant to Section 2.05 hereof. Such property, together with all monies as from
time to time are deposited in the Collection Account, any Investor Account, any
Series Account and any other account maintained for the benefit of Holders of
any Series of Certificates, any Credit Enhancement and all monies available
under any Credit Enhancement to be provided for any Series for payment to the
Certificateholders of such Series, shall constitute the assets of the Trust
(collectively, the "Trust Assets").
In connection with such transfers, assignments and
conveyances (i) each Original Transferor (A) has recorded and filed, at its own
expense, a financing statement (including any continuation statements with
respect to such financing statement when applicable) with respect to the
Existing Receivables, for the transfer of general intangibles (as defined in
Section 9-106 of the UCC as in effect in the State of New York) ("general
intangibles") meeting the filing requirements of the laws of the States of New
York or California, as appropriate (each, an "Original Financing Statement") and
(B) has delivered a file-stamped copy of the related Original Financing
Statement or continuation statement or other evidence of such filing (which may,
for purposes of this Section 2.01, consist of telephone confirmation of such
filing) to the Trustee on or prior to the Initial Closing Date, and in the case
of any continuation statements filed pursuant to this Section 2.01, as soon as
practicable after receipt thereof by the Original Transferors, and (ii) the
Transferor agrees, at its own expense, (w) to amend the Original Financing
Statements, and/or to record and file a new financing statement (the "New
Financing Statement") with respect to the Receivables for the transfer of
"general intangibles" meeting the filing requirements of the States of New York,
Delaware and California, as appropriate, (x) to deliver a file-stamped copy of
the New Financing Statement or other evidence of such filing (which
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may, for purposes of this Section 2.01, consist of telephone confirmation of
such filing) to the Trustee on or prior to the Series 1998-1 Closing Date, (y)
to cause the Servicer pursuant to Section 13.02 to record and file any
continuation statements with respect to the New Financing Statement, and (z) to
cause the Servicer pursuant to Section 13.02 to deliver a file-stamped copy of
each such continuation statement or other evidence of each such filing (which
may, for purposes of this Section 2.01, consist of telephone confirmation of
such filing) to the Trustee as soon as practicable after receipt thereof by the
Transferor. The foregoing transfers, assignments and conveyances to the Trust
shall be (and, with respect to the Existing Receivables, have been) made to the
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfers, assignments and conveyances shall be construed accordingly.
In connection with such transfers, (i) each Original
Transferor has, at its own expense, (x) indicated in its computer files that the
Existing Receivables have been transferred to the Trust pursuant to the Original
Agreement for the benefit of the Certificateholders, and (y) delivered to the
Trustee a computer file or microfiche list containing a true and complete list
of all such Existing Receivables, identified by account number and setting forth
the Receivable balance as of the Series 1998-1 Closing Date, and (ii) the
Transferor agrees, on or prior to each Closing Date on which Receivables are
transferred to the trust, at its own expense, (x) to cause AIC and AICCO to
indicate in their computer files that Future Receivables (other than any
Additional Receivables) have been transferred to the Trust pursuant to this
Agreement for the benefit of the Certificateholders and (y) to cause AIC and
AICCO to deliver to the Trustee a computer file or microfiche list containing a
true and complete list of all such Future Receivables, identified by account
number and setting forth the Receivable balance as of the applicable Cut-Off
Date. Such files or lists shall be marked as Schedule 1 to this Agreement and
delivered to the Trustee as confidential and proprietary, and are hereby
incorporated into and made a part of this Agreement.
The parties intend that if, and to the extent that, such
transfers are not deemed to be sales, the Original Transferors and the
Transferor shall be deemed hereunder to have granted to the Trustee a first
priority perfected security interest in all of their right, title and interest
in, to and under the Trust Assets for the purpose of securing a loan in an
amount equal to the unpaid principal amount of the Investor Certificates issued
hereunder and pursuant to one or more Supplements and the interest accrued at
the related Certificate Rate and to secure all of the Original Transferors', the
Transferor's and, in the case of AIC and AICCO, pursuant to Section 2.05, the
Servicer's obligations hereunder including, without limitation, the Transferor's
obligation to sell or transfer Receivables hereafter created to the Trust, and
that this Agreement shall constitute a security agreement under applicable law.
Pursuant to requests of the Original Transferors and the
Transferor, the Trustee has caused and shall cause Certificates in authorized
denominations
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evidencing the entire interest in the Trust to be duly executed, authenticated
and delivered to or upon the orders of the Original Transferors pursuant to the
Original Agreement and the Transferor pursuant to Section 6.02.
Section 2.02 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its acceptance, on behalf
of the Trust, of all right, title and interest to the property now existing and
hereafter created, conveyed to the Trust pursuant to Section 2.01 hereof (or, in
the case of Existing Receivables, pursuant to section 2.01 of the Original
Agreement), and declares that it shall maintain such right, title and interest,
upon the trust herein set forth, for the benefit of all Certificateholders. The
Trustee further acknowledges that, prior to or simultaneously with the execution
and delivery of this Agreement, the Trustee has received the computer file or
microfiche list described in the third paragraph of Section 2.01.
(b) The Trustee hereby agrees not to disclose to any Person
any of the account numbers or other information contained in the computer files
or microfiche lists delivered to the Trustee by the Original Transferors or
caused to be delivered to the Trustee by the Transferor pursuant to Sections
2.01, 2.06 and 2.07 ("Account Information") except (i) as is required in
connection with the performance of its duties hereunder or in enforcing the
rights of the Certificateholders, (ii) to a Successor Servicer appointed
pursuant to Section 10.02, (iii) as mandated pursuant to any Requirement of Law
applicable to the Trustee or (iv) to the extent included in any financing
statement executed by the Original Transferors or the Transferor. The Trustee
agrees to take such measures as shall be reasonably requested by the Transferor
to protect and maintain the security and confidentiality of such information,
and, in connection therewith, shall allow the Transferor to inspect the
Trustee's security and confidentiality arrangements from time to time during
normal business hours. In the event that the Trustee is required by law to
disclose any Account Information, the Trustee shall provide the Transferor with
prompt written notice, unless such notice is prohibited by law, of any such
request or requirement so that the Transferor may request a protective order or
other appropriate remedy. The Trustee shall use its best efforts to provide the
Transferor with written notice no later than five days prior to any disclosure
pursuant to this subsection 2.02(b).
(c) The Trustee shall have no power to create, assume or
incur indebtedness or other liabilities in the name of the Certificateholders of
the Trust other than as contemplated in this Agreement.
Section 2.03 Representations and Warranties of the Original
Transferors and the Transferor. Each Original Transferor hereby represents and
warrants to the Trust, as of the date of the Original Agreement, the Initial
Closing Date, the date of this Agreement, and the Series 1998-1 Closing Date,
and the
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Transferor hereby represents and warrants to the Trust, as of the date of this
Agreement and the Series 1998-1 Closing Date, that:
(a) Organization and Good Standing. It is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full power, authority and legal right
to own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement.
(b) Due Qualification. It is duly qualified to do business
and is in good standing (or is exempt from such requirement) in any state
required in order to conduct business except where failure to so qualify or be
in good standing would not have a material adverse effect on its business, and
has obtained all necessary licenses and approvals with respect to it and the
conduct of its business required under federal, state and local laws except
where failure to obtain such licenses and approvals would not have a material
adverse effect on its business.
(c) Due Authorization. The execution and delivery of this
Agreement by it and the consummation of the transactions provided for in this
Agreement have been duly authorized by it by all necessary corporate action on
its part.
(d) No Conflict. The execution and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof by it will not conflict with, result in
any breach of, or constitute (with or without notice or lapse of time or both) a
default under, its charter or by-laws, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which it is a party or by which
it or any of its properties are bound.
(e) No Violation. The execution and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof by it will not conflict with or violate
any Requirements of Law applicable to it or any of its properties.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best of its knowledge, threatened against it
before any Governmental Authority (i) asserting the invalidity of this Agreement
or the Certificates, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement or
the Certificates, (iii) seeking any determination or ruling that, in its
reasonable judgment, would materially and adversely affect its performance of
its obligations under this Agreement, (iv) seeking any determination or ruling
that would materially and
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adversely affect the validity or enforceability of this Agreement or the
Certificates of (v) seeking to affect adversely the income tax attributes of the
Trust.
(g) Loans. As of the relevant Cut-Off Date, each Receivable
constituting part of the Trust Assets arose from a Loan.
(h) Accuracy of Information. All information heretofore
furnished by it in writing to the Trustee for purposes of or in connection with
this Agreement or any transactions contemplated hereby is, and all such
information hereafter furnished by it in writing to the Trustee will be, true
and accurate in every material respect.
(i) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official required in connection with the execution and delivery of this
Agreement and the Certificates, the performance of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof, have been obtained.
(j) Receivables Selection. The Receivables conveyed to the
Trust by it on the initial Closing Date represented all Eligible Receivables
owned by it as of the Cut-Off Date.
For the purposes of the representations and warranties
contained in this Section 2.03 and made by the Original Transferors on the
Initial Closing Date, "Certificates" shall mean the Certificates issued on the
Initial Closing Date and "Agreement" shall mean the Original Agreement. For the
purposes of the representatives and warranties contained in this Section 2.03
and made by the Original Transferors or the Transferor on the Series 1998-1
Closing Date, "Certificates" shall mean the Certificates issued on the Series
1998-1 Closing Date. The representations and warranties set forth in this
Section 2.03 shall survive the transfer and assignment of the Trust Assets to
the Trust, and termination of the rights and obligations of the Servicer
pursuant to Section 10.01. The Transferor hereby represents and warrants to the
Trust, with respect to any other Series of Certificates, as of its Closing Date,
unless otherwise stated in such Supplement, that its representations and
warranties set forth in this Section 2.03 are true and correct as of such date
(for the purposes of such representations and warranties, "Certificates" shall
mean the Certificates issued on the related Closing Date). Upon discovery by the
Transferor, the Servicer or the Trustee of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
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Section 2.04 Representations and Warranties of the Original
Transferors and the Transferor Relating to the Agreement and the Receivables.
(a) Binding Obligation; Valid Transfer and Assignment. The
Transferor hereby represents and warrants to the Trust that as of the Series
1998-1 Closing Date:
(i) This Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its
terms, except (A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general, and (B) as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity).
(ii) This Agreement constitutes a valid transfer,
assignment and conveyance to the Trust of all of its right, title and
interest in and to the Trust Assets, which will be held by the Trust
free and clear of any Lien of any Person claiming through or under it
or any of its Affiliates except for (x) Liens permitted under
subsection 2.05(b), (y) its interest as Holder of the Transferor
Certificate and (z) its right, if any, to interest accruing on, and
investment earnings, if any, in respect of the Finance Charge Account,
the Principal Account or any Series Account, as provided in this
Agreement or the related Supplement. Neither it nor any Person claiming
through or under it has or shall have any claim to or interest in the
Principal Account, the Finance Charge Account, the Distribution Account
or any Series Account, except for its rights to receive interest
accruing on, and investment earnings in respect of, the Finance Charge
Account and Principal Account as provided in this Agreement (or, if
applicable, any Series Account as provided in any Supplement) and, if
this Agreement constitutes the grant of a security interest in such
property, except for its interest in such property as a debtor for
purposes of the UCC as in effect in the State of New York or
California, as the case may be.
(b) Eligibility of Existing Receivables. The Original
Transferors hereby represent and warrant to the Trust with respect to the
Existing Receivables and as of the Initial Closing Date and as of each
subsequent date on which Existing Receivables were transferred to the Trust (or
other specified date set forth below), as the case may be, that:
(i) Each such Receivable is an Eligible Receivable as
of the Initial Closing Date or the date of transfer to the Trust, as
applicable.
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(ii) Each such Receivable then existing has been
conveyed to the Trust free and clear of any Lien of any Person claiming
through or under it or any of its Affiliates (other than Liens for
municipal or other local taxes if such taxes shall not at the time be
due and payable or if the applicable Original Transferor shall
currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto) and in compliance with all applicable
Requirements of Law.
(iii) With respect to each such Receivable then existing,
all material consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required
to be obtained, effected or given by it in connection with the
origination and servicing of the related Loan and the conveyance of
such Receivable to the Trust have been duly obtained, effected or given
and are in full force and effect.
(iv) With respect to such Receivables transferred to the
Trust after the Initial Closing Date only, (x) no selection procedures
believed by it to be materially adverse to the interests of the
Investor Certificateholders were utilized in selecting the Receivables
being conveyed by it, (y) as of the date of transfer to the Trust, it
is not insolvent and (z) as of the date of transfer to the Trust, it
has not received notice from any Rating Agency that an existing rating
of any Certificates will be reduced or withdrawn as a result of the
conveyance of the related Receivables.
(v) With respect to such Receivables transferred to the
Trust after the Initial Closing Date only, the Original Agreement and
the Assignment (as defined in the Original Agreement) constituted a
valid transfer, assignment and conveyance to the Trust, as of the date
of transfer to the Trust, of all rights, and beneficial interest of the
Original Transferors in and to the related Receivables, and such
Receivables are held by the Trust free and clear of any Lien of any
Person claiming through or under the Original Transferors or any of
their Affiliates except for Liens for municipal or other local taxes if
such taxes shall not at the time be due and payable or if the
applicable Original Transferor shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall
have set aside on its books adequate reserves with respect thereto and
(y) the Original Transferors' right, if any, to interest accruing on,
and investment earnings, if any, in respect of the Finance Charge
Account, the Principal Account or any Series Account, as provided in
this Agreement or the related Supplement.
(c) Eligibility of Future Receivables. The Transferor hereby
represents and warrants to the Trust with respect to the Future Receivables as
of the
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Series 1998-1 Closing Date and as of each Addition Date (or other specified date
set forth below), as the case may be, that:
(i) Each Receivable is an Eligible Receivable as of the
Series 1998-1 Closing Date or the Addition Date, as applicable.
(ii) Each Receivable has been conveyed to the Trust free
and clear of any Lien of any Person claiming through or under it or any
of its Affiliates (other than Liens permitted under subsection 2.05(b))
and in compliance with all applicable Requirements of Law.
(iii) With respect to each Receivable conveyed to the
Trust, all material consents, licenses, approvals or authorizations of
or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by an Originator in
connection with the origination and/or servicing of the related Loan
and the conveyance of such Receivable to the Trust have been duly
obtained, effected or given and are in full force and effect.
(iv) As of the Closing Date for a Series, and as of the
end of each Monthly Period during which one or more Addition Dates
shall have occurred with respect to Additional Receivables, the related
computer file or microfiche list referred to in Section 2.06(d), is an
accurate and complete listing in all material respects of all the
Receivables as of the applicable Cut-Off Date, or with respect to
Additional Receivables, as of the end of such Monthly Period, and the
information contained therein with respect to the identity of such
Receivables is true and correct in all material respects as of the end
of such Monthly Period.
(v) With respect to Additional Receivables only, (x) no
selection procedures materially adverse to the interests of the
Investor Certificateholders were utilized in selecting the Additional
Receivables being conveyed, (y) as of the Addition Date, it is not
insolvent and (z) as of the Addition Date, it has not received notice
from any Rating Agency that an existing rating of any Certificates will
be reduced or withdrawn as a result of the conveyance of the related
Additional Receivables.
(vi) With respect to Additional Receivables only, this
Agreement and the Assignment constituted a valid transfer, assignment
and conveyance to the Trust, as of the Addition Date, of all right,
title and interest in and to the Additional Receivables, and such
Additional Receivables are held by the Trust free and clear of any Lien
of any Person claiming through or under it or any of its Affiliates
except for (x) Liens permitted under subsection 2.05(b), (y) its
interest as Holder of the Transferor Certificate and (z) its right, if
any, to
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interest accruing on, and investment earnings, if any, in respect of
the Finance Charge Account, the Principal Account or any Series
Account, as provided in this Agreement or the related Supplement.
(d) Notice of Breach. The representations and warranties set
forth in this Section 2.04 shall survive the transfer and assignment of the
respective Trust Assets to the Trust. Upon discovery by an Original Transferor,
the Transferor, the Servicer or the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.04, the party
discovering such breach shall give prompt written notice to the other parties
mentioned above. The Original Transferors and the Transferor agree to cooperate
with the Servicer and the Trustee in attempting to cure any such breach.
(e) Transfer of Ineligible Receivables.
(i) Removal After Cure Period. In the event of a breach
with respect to a Receivable of any of the representations and
warranties set forth in subsection 2.04(b) and 2.04(c) and as a result
of such breach the Loan relating to such Receivable becomes a Defaulted
Loan, then, upon the expiration of 60 days (or such longer period as
may be agreed to by the Trustee in its sole discretion, but in no event
later than 120 days) from the earlier to occur of the discovery of any
such event and Defaulted Loan occurrence by the related Original
Transferor or the Transferor, as applicable, or receipt by the related
Original Transferor or the Transferor, as applicable, of written notice
of any such event and Defaulted Loan occurrence given by the Trustee,
such Receivable shall be removed from the Trust on the terms and
conditions set forth in subsection 2.04(e)(ii); provided, however, that
no such removal shall be required to be made if, on any day within such
applicable period, such representations and warranties with respect to
such Receivable shall then be true and correct in all respects as if
such Receivable had been created on such day.
(ii) Procedures for Removal. When the provisions of
subsection 2.04(e)(i) above require removal of a Receivable, the
related Original Transferor with respect to Existing Receivables or the
Transferor with respect to Future Receivables shall accept reassignment
of such Receivable (an "Ineligible Receivable") by (A) depositing into
the Collection Account an amount equal to the Finance Charge
Receivables due but not collected with respect to such Ineligible
Receivable; (B) the Transferor, with respect to Futures Receivables,
directing the Servicer to deduct the principal balance of each such
Ineligible Receivable from the Principal Receivables in the Trust used
to calculate the Transferor Ownership Interest; and (C) the Original
Transferors, with respect to Existing Receivables, depositing into the
Collection Account an amount equal to the principal balance of such
Ineligible
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Receivable. In the event that the exclusion of an Ineligible Receivable
from the calculation of the Transferor Ownership Interest would cause
the Transferor Ownership Interest to be reduced below the Minimum
Transferor Ownership Interest or would otherwise not be permitted by
law, the Transferor shall concurrently make a deposit in the Principal
Account (for allocation as a Principal Receivable) in immediately
available funds prior to the Transfer Date related to such Monthly
Period in which such event occurred in an amount equal to the amount by
which the Transferor Ownership Interest would be reduced below the
Minimum Transferor Ownership Interest. The portion of such deposit
allocated to the Investor Certificates of each Series shall be
distributed to the Investor Certificateholders of each Series in the
manner specified in Article IV, if applicable, on the Distribution Date
immediately following such Transfer Date. Upon the reassignment to the
related Original Transferor or the Transferor, as applicable, of an
Ineligible Receivable, the Trust shall automatically and without
further action be deemed to transfer, assign and otherwise convey to
the related Original Transferor or the Transferor, as applicable,
without recourse, representation or warranty, all the right, title and
interest of the Trust in and to such Ineligible Receivable, all monies
due or to become due with respect to such Ineligible Receivable and all
proceeds of such Ineligible Receivable. Such reassigned Ineligible
Receivable shall be treated by the Trust as collected in full as of the
date on which it was transferred. The Trustee shall execute such
documents and instruments of transfer or assignment and take other
actions as shall reasonably be requested by the related Original
Transferor or the Transferor, as applicable, to evidence the conveyance
of such Ineligible Receivable pursuant to this subsection 2.04(e)(ii).
The obligations of the Original Transferors and the Transferor set
forth in this subsection 2.04(e)(ii) shall constitute the sole remedy
respecting any breach of the representations and warranties set forth
in subsection 2.04(b) and 2.04(c) with respect to such Receivable
available to Certificateholders or the Trustee on behalf of
Certificateholders.
(f) Reassignment of Trust Portfolio. In the event of a breach
of any of the representations and warranties set forth in subsection 2.04(a)
having a material adverse effect on the Trust, the Trustee, by notice then given
in writing to the Transferor (and to the Trustee and the Servicer, if given by
the Investor Certificateholders), may direct the Transferor to accept
reassignment of all of the Receivables (whether Existing or Future) within 60
days of such notice (or within such longer period as may be specified in such
notice but in no event longer than 120 days), and the Transferor shall be
obligated to accept reassignment of such Receivables on a Distribution Date
specified by the Transferor (such Distribution Date, the "Reassignment Date")
occurring within such applicable period on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be made
if, at any time during such applicable period, with respect to a
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breach of the representation and warranty contained in subsection 2.04(a)(i),
such representation shall then be true and correct in all respects and, with
respect to a breach of the representation and warranty in subsection
2.04(a)(ii), such representation and warranty shall then be true and correct in
all material respects. The Transferor shall deposit on the Transfer Date (in New
York Clearing House next day funds) preceding the Reassignment Date an amount
for each Series equal to the reassignment deposit amount for such Receivables
for such Series in the related Distribution Account or the applicable Series
Account, as provided in the related Supplement, for distribution to the Investor
Certificateholders pursuant to Article XII. The reassignment deposit amount with
respect to each Series for such reassignment, unless otherwise stated in the
related Supplement, shall be equal to (i) the Certificateholders Ownership
Interests of such Series at the end of the day on the last day of the Monthly
Period preceding the Reassignment Date, less the amount, if any, previously
allocated for payment of principal to such Certificateholders on the related
Distribution Date in the Monthly Period in which the Reassignment Date occurs,
plus (ii) an amount equal to all interest accrued but unpaid on the Investor
Certificates of such Series at the applicable Certificate Rate for the related
Interest Period through the last day of such Interest Period, less the amount,
if any, previously allocated for payment of interest to the Certificateholders
of such Series on the related Distribution Date in the Monthly Period in which
the Reassignment Date occurs. Payment of the reassignment deposit amount with
respect to each Series, and all other amounts in the related Distribution
Account or the applicable Series Account in respect of the preceding Monthly
Period, shall be considered a prepayment in full of the Receivables represented
by the Investor Certificates. On the Distribution Date following the Transfer
Date on which such amount has been deposited in full into the related
Distribution Account or the applicable Series Account, the Receivables shall be
released to the Transferor after payment of all amounts otherwise due hereunder
on or prior to such dates and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty, as shall be prepared by and as are reasonably
requested by the Transferor to vest in the Transferor, or its designees or
assignees, all right, title and interest of the Trust in and to the Receivables.
If the Trustee or the Investor Certificateholders give notice directing the
Transferor to accept reassignment as provided above, the obligation of the
Transferor to accept reassignment of the Receivables and pay the reassignment
deposit amount pursuant to this subsection 2.04(e) shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
subsection 2.04(a) available to the Investor Certificateholders or the Trustee
on behalf of the Investor Certificateholders.
Section 2.05 Covenants of the Transferor. The Original
Transferors with respect to Existing Receivables and the Transferor with respect
to Future Receivables hereby covenant that:
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(a) Receivables to Be General Intangibles. It will take no
action to cause any Loan or Receivable to be evidenced by any instrument (as
defined in the UCC as in effect in the States of Delaware, New York and
California). Each Receivable shall be payable pursuant to a contract which does
not create a Lien on any goods purchased thereunder. It will take no action to
cause any Receivable to be anything other than a "general intangible" (as
defined in the UCC as in effect in the States of New York and California).
(b) Conveyances and Security Interests. Except for the
conveyances hereunder or under the Original Agreement, it will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien, on any of the Trust Assets, whether now existing or
hereafter created, or any interest therein or on the legal title to any Loan the
Receivable under which is part of the Trust Assets; it will immediately notify
the Trustee of the existence of any Lien on any of the Trust Assets or on the
legal title to any Loan the Receivable under which is part of the Trust Assets;
and it shall defend the right, title and interest of the Trust in, to and under
the Trust Assets, whether now existing or hereafter created, against all claims
of third parties claiming through or under it; provided, however, that nothing
in this subsection 2.05(b) shall prevent or be deemed to prohibit the Transferor
from suffering to exist upon any of the Trust Assets any Liens for municipal or
other local taxes if such taxes shall not at the time be due and payable or if
the Transferor shall currently be contesting the validity thereof in good faith
by appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto; provided, further, that it shall not be
prohibited hereby from conveying, assigning, selling, exchanging or otherwise
transferring Receivables and related Loans in connection with a transaction
complying with the provisions of Section 7.02.
(c) Receivables Allocations.
(i) In the event that the Transferor is unable for any
reason to transfer Receivables to the Trust in accordance with the
provisions of this Agreement (including, without limitation, by reason
of the application of the provisions of Section 9.02 or an order by any
federal or state governmental agency having regulatory authority over
it or any court of competent jurisdiction that the Transferor not
transfer any Receivables to the Trust) then, in any such event, (A) the
Transferor agrees to allocate and pay to the Trust, after the date of
such inability, all Collections with respect to Receivables, and all
amounts which would have constituted Collections with respect to
Receivables but for its inability to transfer such Receivables to the
Trust; (B) the Transferor agrees to have such amounts applied as
Collections in accordance with Article IV; and (C) for only so long as
all Collections and all amounts which would have constituted
Collections are allocated and applied in accordance with clauses (A)
and (B) above, Receivables (and all amounts
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which would have constituted Receivables but for its inability to
transfer such Receivables to the Trust) shall continue to be allocated
in accordance with Article IV, and all amounts that would have
constituted Receivables but for its inability to transfer Receivables
to the Trust shall be deemed to be Receivables for the purpose of
calculating (i) the applicable Investor Percentage with respect to any
Series and (ii) the Aggregate Investor Percentage thereunder but shall
not be taken into account in computing the Minimum Transferor Ownership
Interest.
(ii) In the event that, pursuant to subsection 2.04(e),
it accepts reassignment of an Ineligible Receivable as a result of a
breach of the representations and warranties in subsection 2.04(b) or
2.04(c), as applicable, relating to such Receivable, then, in any such
event, it agrees to account for payments received with respect to such
Ineligible Receivable separately from its accounting for Collections on
Receivables retained by the Trust. If payments received from or on
behalf of an Obligor are not specifically applicable either to an
Ineligible Receivable of such Obligor reassigned to the Transferor or
to the Receivables of such Obligor retained in the Trust, then it
agrees to allocate payments proportionately based on the total amount
of Receivables of such Obligor retained in the Trust and the total
amount owing by such Obligor on any Ineligible Receivables reassigned
to the Transferor, and the portion allocable to any Receivables
retained in the Trust shall be treated as Collections and deposited in
accordance with the provisions of Article IV.
(d) Delivery of Collections. It agrees to pay to the Servicer
all Collections received by it in respect of the Receivables as soon as
practicable after receipt thereof, but in no event later than the second
Business Day after such receipt.
(e) Requirement of Law. It agrees to comply in all respects
with all Requirements of Law applicable to it, the Premium Finance Agreements or
the Loans, the failure to comply with which would have a material adverse effect
on the Investor Certificateholders.
Section 2.06 Addition of Receivables.
(a) If on any Determination Date the Transferor Ownership
Interest on such date is less than the Minimum Transferor Ownership Interest as
of the end of the immediately preceding Monthly Period, the Transferor shall,
unless otherwise permitted under the Supplement pursuant to which the Minimum
Transferor Ownership Interest is calculated, designate additional Eligible
Receivables ("Additional Receivables") to be included as Trust Assets in a
sufficient amount such that the Transferor Ownership Interest is at least equal
to such Minimum Transferor
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Ownership Interest. Such Additional Receivables shall be transferred to the
Trust on or before the Transfer Date immediately following such Determination
Date.
(b) In addition to its obligation under subsection 2.06(a),
the Transferor may, but shall not be obligated to, designate on any date
Additional Receivables to be included as Trust Assets.
(c) On each Addition Date, the Transferor will be deemed to
have made the representations and warranties in subsection 2.04(c) as of such
date with respect to the related Additional Receivables and the related
Assignment.
(d) The Transferor agrees that any such transfer of
Additional Receivables by it under subsection 2.06(a) or (b) shall satisfy the
following conditions (to the extent provided below):
(i) on or before the third Business Day prior to the
Addition Date with respect to additions pursuant to subsection 2.06(a)
(the "Notice Date"), it shall give the Trustee and the Servicer written
notice that such Additional Receivables will be included, which notice
shall specify the approximate aggregate amount of the Receivables to be
transferred; and
(ii) on the Determination Date immediately following
each Monthly Period during which one or more Addition Dates shall have
occurred, the Transferor shall (A) have caused AIC and AICCO to
indicate in their computer files that the Additional Receivables have
been transferred to the Trust as of the related Addition Date, (B)
cause AIC and AICCO to deliver to the Trustee a computer file or
microfiche list containing a true and complete list of all Receivables
(including Additional Receivables conveyed to the Trust during such
Monthly Period), identified by account number and the aggregate amount
of the related Receivables, as of the end of such Monthly Period, which
computer file or microfiche list shall be incorporated into and made a
part of this Agreement as of the end of such Monthly Period and (C)
deliver to the Trustee a written confirmation of assignment (including
a confirmation of acceptance by the Trustee on behalf of the Trust for
the benefit of the Investor Certificateholders) of the Additional
Receivables conveyed to the Trust during such Monthly Period in
substantially the form of Exhibit B (the "Assignment").
Section 2.07 Removal of Receivables.
(a) Subject to the conditions set forth below, on each
Determination Date on which the Transferor Ownership Interest exceeds the
Minimum Transferor Ownership Interest on such Determination Date, the Transferor
may, but shall not be obligated to, designate Receivables for deletion and
removal ("Removed
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Receivables") from the Trust; provided, however, that the Transferor shall not
make more than one such designation in any Monthly Period. On or before the
fifth Business Day (the "Removal Notice Date") prior to the date on which the
designated Removed Receivables will be reassigned by the Trustee to the
Transferor (the "Removal Date"), the Transferor shall give the Trustee and the
Servicer written notice that such Removed Receivables are to be reassigned to
the Transferor.
(b) The Transferor shall be permitted to designate and
require reassignment to it of Removed Receivables only upon satisfaction of the
following conditions:
(i) the removal of any Removed Receivables on any
Removal Date shall not, in the reasonable belief of the Transferor, (a)
cause a Pay Out Event to occur; provided, however, that for the
purposes of this subsection 2.07(b)(i), the Removed Receivables shall
be considered to have been removed as of the Removal Date, (b) cause
the Transferor Ownership Interest on such Removal Date to be less than
the Minimum Transferor Ownership Interest on such Removal Date or (c)
result in the failure to make any payment specified in the related
Supplement with respect to any Series;
(ii) on or prior to the Removal Date, the Transferor
shall have delivered to the Trustee for execution a written assignment
in substantially the form of Exhibit E (the "Reassignment") and, within
five Business Days thereafter, the Transferor shall have delivered to
the Trustee a computer file or microfiche list containing a true and
complete list of all Removed Receivables identified by account number
and the aggregate amount of such Removed Receivables as of the Removal
Date, which computer file or microfiche list shall as of the Removal
Date modify and amend and be made a part of this Agreement;
(iii) the Transferor shall represent and warrant that no
selection procedures believed by the Transferor to be materially
adverse to the interests of the Certificateholders were utilized in
selecting the Removed Receivables to be removed from the Trust;
(iv) on or before the tenth Business Day prior to the
Removal Date, each Rating Agency shall have received notice of such
proposed removal of the Receivables and the Transferor shall have
received notice prior to the Removal Date from such Rating Agency that
such proposed removal will not result in a downgrade or withdrawal of
its then current rating of any outstanding Series of the Investor
Certificates;
(v) the Transferor shall have delivered to the Trustee
an Officer's Certificate confirming the items set forth in clauses (i)
through (iv) above.
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The Trustee may conclusively rely on such Officer's Certificates, shall
have no duty to make inquiries with regard to the matters set forth
therein and shall incur no liability in so relying;
(vi) the Transferor, the Trustee and each Rating Agency
shall have received an Opinion of Counsel that the proposed removal
will not adversely affect the United States federal income tax
characterization of the Trust; and
(vii) the proposed removal of Receivables shall not
violate any provisions of the Financial Accounting Standard Board's
Statement of Financial Accounting Standards 125 or any directives or
pronouncements promulgated thereunder, as evidenced by an Officer's
Certificate from the Transferor to such effect.
Upon satisfaction of the above conditions, the Trustee shall
execute and deliver the Reassignment to the Transferor, the Removed Receivables
shall no longer constitute a part of the Trust and the Transferor Ownership
Interest shall be decreased by the amount of the Principal Receivable with
respect to each such Removed Receivable.
[End of Article II]
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ARTICLE III
ADMINISTRATION AND SERVICING
OF TRUST ASSETS
Section 3.01 Acceptance of Appointment and Other Matters
Relating to the Servicer.
(a) AIC shall act as the Servicer under this Agreement with
respect to all Loans under Premium Finance Agreements originated by it or
purchased by it from Third Party Lenders and AICCO shall act as the Servicer
with respect to all Loans under Premium Finance Agreements originated by it or
purchased by it from Third Party Lenders.
(b) The Servicer shall service and administer the Loans
giving rise to Receivables and shall collect payments due thereunder or in
connection therewith in accordance with its customary and usual servicing
procedures for servicing loans giving rise to receivables comparable to the
Receivables and in accordance with the Guidelines. The Servicer shall have full
power and authority, acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing and subject to Section 10.01, the Servicer is hereby
authorized and empowered (i) to make withdrawals from the Collection Account as
set forth in this Agreement, (ii) unless such power and authority is revoked by
the Trustee on account of the occurrence of a Servicer Default pursuant to
Section 10.01, to instruct the Trustee to make withdrawals and payments from the
Finance Charge Account, the Principal Account and any Series Account, in
accordance with such instructions as set forth in this Agreement or any
applicable Supplement, (iii) unless such power and authority is revoked by the
Trustee on account of the occurrence of a Servicer Default pursuant to Section
10.01, to instruct the Trustee in writing, as set forth in this Agreement, (iv)
to execute and deliver, on behalf of the Trust for the benefit of the
Certificateholders, 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, the related Loans and other Trust Assets and,
after any delinquency in payment relating to any Receivable, to the extent
permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect thereto (including cancellation of
the related insurance policy) and (v) to make any filings, reports, notices,
applications, registrations with, and to seek any consents or authorizations
from, the Securities and Exchange Commission and any state securities authority
on behalf of the Trust as may be necessary or advisable to comply with any
federal or state securities or reporting requirements. The Trustee agrees that
it shall promptly follow the instructions of the Servicer to withdraw funds from
the Principal Account, the Finance Charge Account or any Series Account and to
take any action required under any Credit Enhancement at such time as required
under this
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Agreement or any applicable Supplement. The Trustee shall execute at the
Servicer's written request such documents prepared by the Transferor and
acceptable to the Trustee as may be necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder.
(c) In the event that the Transferor is unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 9.02 or the order of any federal or state or governmental
agency having regulatory authority over the Transferor or any court of competent
jurisdiction that the Transferor not transfer any Receivables to the Trust)
then, in any such event, (A) the Servicer agrees to allocate, after such date,
all Collections with respect to Receivables, and all amounts which would have
constituted Collections with respect to Receivables but for the Transferor's
inability to transfer such Receivables, in accordance with subsection 2.05(c);
(B) the Servicer agrees to apply such amounts as Collections in accordance with
Article IV; and (C) for only so long as all Collections and all amounts which
would have constituted Collections are allocated and applied in accordance with
clauses (A) and (B) above, Receivables and all amounts which would have
constituted Receivables but for the Transferor's inability to transfer
Receivables to the Trust shall continue to be allocated in accordance with
Article IV and all amounts which would have constituted Receivables but for the
Transferor's inability to transfer Receivables to the Trust shall be deemed to
be Receivables for the purpose of calculating (i) the applicable Investor
Percentage with respect to any Series and (ii) the Aggregate Investor Percentage
thereunder but shall not be taken into account in computing the Minimum
Transferor Ownership Interest.
(d) In the event that pursuant to subsection 2.04(e), an
Original Transferor or the Transferor accepts reassignment of an Ineligible
Receivable as a result of a breach of the representations and warranties in
subsection 2.04(b) or subsection 2.04(c), respectively, relating to such
Receivable, or the Servicer accepts reassignment of a Receivable pursuant to
Section 3.03, then, in any such event, the Servicer agrees to account for
payments received with respect to such Receivable separately from its accounting
for Collections on Receivables retained by the Trust. If payments received from
or on behalf of an Obligor are not specifically applicable either to an
Ineligible Receivable of such Obligor reassigned to the Transferor, to a
Receivable of such Obligor reassigned to the Servicer or to Receivables of such
Obligor retained in the Trust, then the Servicer agrees to allocate payments
proportionately based on the total amount of Receivables of such Obligor
retained in the Trust, the total amount owing by such Obligor on any Ineligible
Receivables purchased by the Transferor and the total amount owing by such
Obligor on any Receivables purchased by the Servicer, and the portion allocable
to any Receivables retained in the Trust shall be treated as Collections and
deposited in accordance with the provisions of Article IV.
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(e) The Servicer shall not be obligated to use separate
servicing procedures, offices, employees or accounts for servicing the
Receivables from the procedures, offices, employees and accounts used by the
Servicer in connection with servicing other receivables.
(f) At any time during which the AIC Support Agreement is not
in effect with respect to the Servicer, the Servicer shall maintain fidelity
bond coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the servicing of Trust Assets covering such
actions and in such amounts as the Servicer believes to be reasonable from time
to time.
(g) The Servicer shall, with respect to any Receivable and
the related Loan, where the related Premium Finance Agreement and applicable law
so permits, act expeditiously in exercising its right to cancel the related
insurance policy and, upon cancellation of the related insurance policy, take
such action in accordance with the Guidelines as shall be appropriate in order
to collect any Unearned Premiums or any other amounts payable by the insurer
following cancellation of such insurance policy.
Section 3.02 Servicing Compensation. As compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph, the Servicer shall be entitled to
receive a servicing fee (the "Servicing Fee") prior to the termination of the
Trust pursuant to Section 12.01. The Servicing Fee shall be payable, with
respect to each Series, at the times and in the amounts set forth in the related
Supplement. The Servicing Fee shall be allocated between the Investor
Certificates (the "Investor Servicing Fee") and the Holder of the Transferor
Certificate (the "Transferor Servicing Fee").
The Servicer's expenses include the amounts due to the
Trustee pursuant to Section 11.05, the fees and expenses of the Paying Agent,
Transfer Agent and Registrar, the fees and disbursements of independent public
accountants and all other expenses incurred by the Servicer in connection with
its activities hereunder; provided, that the Servicer in its capacity as such
shall not be liable for any liabilities, costs or expenses of the Trust, the
Investor Certificateholders or the Certificate Owners arising under any tax law,
including without limitation any federal, state or local income or franchise
taxes or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith)
except to the extent that such liabilities, taxes or expenses arose as a result
of the breach by the Servicer of its obligations under Section 11.11 herein. The
Servicer shall be required to pay such expenses for its own account and shall
not be entitled to any payment therefor other than the Servicing Fee.
Section 3.03 Representations and Warranties of the Servicer.
Each of AIC and AICCO, as initial Servicer, hereby represents, warrants and
covenants to and
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for the benefit of the Trust as of the date of this Agreement and as of each
Closing Date:
(a) Organization and Good Standing. The Servicer is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has full
corporate power, authority and legal right to own its properties and
conduct its business as such properties are presently owned and as such
business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement.
(b) Due Qualification. The Servicer is not required to
qualify nor register as a foreign corporation in any state in order to
service the Trust Assets as required by this Agreement and has obtained
all licenses and approvals necessary in order to so service the Trust
Assets as required under federal, state and local law.
(c) Due Authorization. The execution, delivery, and
performance of this Agreement have been duly authorized by the Servicer
by all necessary corporate action on the part of the Servicer.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereinafter in effect, affecting the enforcement of
creditors' rights in general.
(e) No Violation. The execution and delivery of this
Agreement by the Servicer, and the performance of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
applicable to the Servicer, will not conflict with, violate, result in
any breach of, or constitute (with or without notice or lapse of time
or both) a default under, its charter or by-laws, any Requirement of
Law applicable to the Servicer or any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it or any of its properties is bound.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Servicer
threatened, against the Servicer before any Governmental Authority
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement, seeking any
determination or ruling that, in the reasonable judgment of the
Servicer,
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would materially and adversely affect the performance by the Servicer
of its obligations under this Agreement, or seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of this Agreement.
(g) Compliance with Requirement of Law. The Servicer shall
duly satisfy all obligations on its part to be fulfilled under or in
connection with each Receivable and the related Loan, will maintain in
effect all qualifications and licenses in order to service each
Receivable and the related Loan, the failure to comply with which would
have a material adverse effect on the Certificateholders and will
comply with all other Requirements of Law in connection with servicing
each Receivable and the related Loan the failure to comply with which
would have a material adverse effect on the Certificateholders.
(h) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental
Authority or official required in connection with the execution and
delivery of this Agreement, the performance of the transactions
contemplated by this Agreement and the fulfillment of the terms thereof
by the Servicer have been obtained where the failure to obtain any such
approval, authorization, consent, order or other action would have a
material adverse effect on the Certificateholders.
(i) No Rescission or Cancellation. The Servicer shall not
permit any rescission or cancellation of any Premium Finance Agreement
or the related Loan except in accordance with its customary and usual
servicing procedures and the Guidelines or as ordered by a court of
competent jurisdiction or other Governmental Authority.
(j) Protection of Certificateholders' Rights. The Servicer
shall take no action which, nor omit to take any action the omission of
which, would materially impair the rights of Certificateholders in any
Receivable or the related Premium Finance Agreement or the related
Loan, nor shall it reschedule, revise or defer payments due except in
accordance with its customary and usual servicing procedures and the
Guidelines.
(k) Loans Not to Be Evidenced by Promissory Notes. The
Servicer will take no action to cause any Loan to be evidenced by any
instrument (as defined in the UCC as in effect in the State of New York
or California, as the case may be).
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(l) Accuracy of Information. All information heretofore
furnished by the Servicer in writing to the Trustee for purposes of or
in connection with this Agreement or any transaction contemplated
hereby is, and all such information hereafter furnished by it in
writing to the Trustee will be, true and accurate in every material
respect.
In the event of noncompliance by the Servicer with its covenants set forth in
subsections (g), (i) or (j) above and such noncompliance has a material adverse
effect on the Certificateholders' interest in a Receivable, then, upon the
expiration of 60 days from the discovery of any such noncompliance by the
Servicer or receipt by the Servicer of written notice of any such noncompliance
given by the Trustee, such Receivable shall be removed from the Trust on the
terms and conditions set forth in the following paragraph; provided, however,
that no such removal shall be required to be made if, on any day within such
applicable period, such noncompliance shall have been cured in all material
respects by the Servicer.
When the provisions of the preceding paragraph require removal of a
Receivable, the Servicer shall accept reassignment of such Receivable by
depositing an amount equal to the amount of such Receivable in the Collection
Account on the date of reassignment. Upon the reassignment to the Servicer of
such Receivable, the Trust shall automatically and without further action be
deemed to transfer, assign and otherwise convey to the Servicer, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to such Receivable. Such reassigned Receivable shall be treated by
the Trust as collected in full as of the date on which it was transferred. The
Trustee shall execute such documents and instruments of transfer or assignment
and take other actions as shall reasonably be requested by the Servicer to
evidence the conveyance of such Receivable pursuant to this paragraph. Except as
provided in subsection 10.01(b), the obligation of the Servicer set forth in
this paragraph shall constitute the sole remedy respecting any noncompliance
with a covenant set forth in subsections (g), (i) or (j) above with respect to a
Receivable available to Certificateholders or the Trustee on behalf of
Certificateholders.
Section 3.04 Reports and Records for the Trustee.
(a) Daily Reports. The Servicer shall, upon reasonable prior
notice, prepare and make available at the office of the Servicer for inspection
by the Trustee on any Business Day during normal business hours a record setting
forth (i) the aggregate amount of Collections processed by the Servicer on the
preceding Business Day and (ii) the aggregate amount of Receivables included in
the Trust as of the close of business on the preceding Business Day.
(b) Monthly Servicer Report. Unless otherwise stated in the
related Supplement with respect to any Series, on each Determination Date the
Servicer shall
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forward to the Trustee and each Rating Agency a Monthly Servicer Report prepared
by the Servicer.
Section 3.05 Annual Servicer's Certificate. On or before
April 30 of each calendar year, beginning with April 30, 1996, the Servicer has
delivered or will deliver, as the case may be, as provided in Section 13.05, to
the Trustee, a statement signed by an officer substantially in the form of
Exhibit D stating that (a) a review of the activities of the Servicer during the
twelve-month period ending on December 31 of the preceding calendar year, or for
the initial period, from the Initial Closing Date until December 31, 1995, and
of its performance under this Agreement was made under the supervision of the
officer signing such statement and (b) to the best of such officer's knowledge,
based on such review, the Servicer has fully performed all its obligations under
this Agreement in all material respects throughout such period, or, if there has
been a default in the performance of any such obligation, specifying each such
default known to such officer and the nature and status thereof. A copy of such
certificate may be obtained by any Investor Certificateholder by a request in
writing to the Trustee addressed to the Corporate Trust Office.
Section 3.06 Annual Independent Accountants' Servicing
Report.
(a) On or before April 30 of each calendar year, beginning
with April 30, 1996, the Servicer has caused or shall cause, as the case may be,
a firm of nationally recognized independent accountants (who may also render
other services to the Servicer or the Transferor) to furnish, as provided in
Section 13.05, a report to the Trustee, the Servicer, any Credit Enhancement
Provider and each Rating Agency to the effect provided in the following sentence
and a Servicing Officer shall deliver to such firm, in advance of the date by
which such firm is to deliver its report (as may be reasonably requested by such
firm) a certificate that the Servicer has, during the calendar year preceding
the date of such firm's report, complied in all material respects with the terms
and conditions set forth in Article III and Article IV, in each case as
supplemented by each Supplement, subclause (i) of the third paragraph of Section
2.01 hereof and subclause (ii)(A) of subsection 2.06(d) hereof (the "Servicer's
Compliance Certificate"). Such report shall provide that such firm has examined
the Servicer's Compliance Certificate for the related calendar year, including a
review of certain documents and records relating to the servicing of Receivables
under this Agreement and each Supplement, and compared the information contained
in the Monthly Servicer Reports forwarded by the Servicer pursuant to subsection
3.04(b) during the period covered by such firm's report (which shall be the
period from and including January 1 of the preceding calendar year to and
including December 31 of the preceding calendar year, or, for the initial
period, from the Initial Closing Date until December 31, 1995) with such
documents and records and that, on the basis of such examination, such firm is
of the opinion that the Servicer's Compliance Certificate has been fairly stated
in all material respects, except for such exceptions as such firm shall believe
to be immaterial and such other exceptions as shall be set forth in such report.
Unless otherwise
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provided with respect to any Series in the related Supplement, a copy of such
report may be obtained by any Investor Certificateholder by a request in writing
to the Trustee addressed to the Corporate Trust Office.
(b) On or before April 30 of each calendar year, beginning
with April 30, 1996, the Servicer has caused or shall cause, as the case may be,
a firm of nationally recognized independent certified public accountants (who
may also render other services to the Servicer or the Transferor) to furnish, as
provided in Section 13.05, a report to the Trustee, the Servicer, any Credit
Enhancement Provider and each Rating Agency, to the effect that they have
compared the mathematical calculations of each amount set forth in the Monthly
Servicer Reports forwarded by the Servicer pursuant to subsection 3.04(b) during
the period covered by such report (which shall be the period from and including
January 1 of the preceding calendar year to and including December 31 of the
preceding calendar year, or, for the initial period, from the Initial Closing
Date until December 31, 1995) with the Servicer's computer reports which were
the source of such amounts and that on the basis of such comparison, such firm
is of the opinion that such amounts are in agreement, except for such exceptions
as it believes to be immaterial and such other exceptions as shall be set forth
in such report. A copy of such report may be obtained by any Investor
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
Section 3.07 Tax Treatment. The Original Transferors and the
Transferor have structured this Agreement, the Investor Certificates and any
Collateral Interest with the intention that the Investor Certificates and any
Collateral Interest will qualify under applicable United States federal, state,
local and foreign tax law as indebtedness of the Transferor secured by the
Receivables. The Original Transferors, the Transferor, the Servicer, the Holder
of the Transferor Certificate, each Investor Certificateholder, each Certificate
Owner and each owner of any Collateral Interest or interest therein agree to
treat and to take no action inconsistent with the treatment of the Investor
Certificates and any Collateral Interest (or beneficial interest therein) as
such indebtedness for purposes of United States federal, state, local and
foreign income or franchise taxes and any other tax imposed on or measured by
income. Each Investor Certificateholder and the Holder of the Transferor
Certificate, by acceptance of its Certificate, each Certificate Owner, by
acquisition of a beneficial interest in a Certificate, and any owner of any
Collateral Interest or interest therein, by acquisition of such interest
therein, agree to be bound by the provisions of this Section 3.07. Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it, and each owner of any Collateral Interest
or any interest therein agrees that it will cause any Person acquiring any such
interest, to comply with this Agreement as to treatment as indebtedness under
applicable tax law, as described in this Section 3.07. Notwithstanding this
Section 3.07, if the treatment of any Investor Certificate or Collateral
Interest or interest therein as indebtedness is challenged by any governmental
authority, the Holder of the Transferor Certificate and any owner of such
interest do not intend to be foreclosed from adopting as a secondary tax
position that
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such interest constitutes equity in a partnership and that such partnership is
not a "publicly traded partnership" taxable as an association for United States
tax purposes.
Section 3.08 Notices to the Transferor. In the event that
either of AIC or AICCO is no longer acting as Servicer, any Successor Servicer
appointed pursuant to Section 10.02 shall deliver or make available to the
Transferor each certificate and report required to be prepared, forwarded or
delivered thereafter pursuant to Sections 3.04, 3.05 and 3.06.
Section 3.09 Reports to the Commission. The Trustee shall, on
behalf of the Trust, cause to be filed with the Securities and Exchange
Commission any periodic reports required to be filed under the provisions of the
Securities Exchange Act of 1934 and the rules and regulations of the Securities
and Exchange Commission thereunder, which report shall include such information
necessary to comply with such Act or rules and regulations. The Transferor, if
either AIC or AICCO is not a Servicer, shall, at the expense of the Servicer,
cooperate in any reasonable request of the Servicer in connection with such
filings.
[End of Article III]
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ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.01 Rights of Certificateholders. Each Series of
Investor Certificates shall represent Undivided Interests in the Trust,
including the benefits of any Credit Enhancement issued with respect to such
Series and the right to receive the Collections and other amounts at the times
and in the amounts specified in this Article IV to be deposited in the Investor
Accounts and any other Series Account (if so specified in the related
Supplement) or to be paid to the Investor Certificateholders of such Series;
provided, however, that the aggregate interest represented by such Certificates
at any time in the Principal Receivables shall not exceed an amount equal to the
Certificateholders Ownership Interests at such time. The Transferor Certificate
shall represent the remaining undivided interest in the Trust not allocated to
the Investor Certificates and the other interests issued by the Trust, including
the right to receive the Collections and other amounts at the times and in the
amounts specified in this Article IV to be paid to the Holder of the Transferor
Certificate; provided, however, that the aggregate interest represented by such
Transferor Certificate at any time in the Principal Receivables shall not exceed
the Transferor Ownership Interest at such time and such Certificate shall not
represent any interest in the Investor Accounts, except as provided in this
Agreement, or the benefits of any Credit Enhancement issued with respect to any
Series.
Section 4.02 Establishment of Accounts.
(a) The Collection Account. The Servicer, for the benefit of
the Certificateholders, shall establish and maintain in the State of New York or
in the city in which the Corporate Trust Office is located, with a Qualified
Institution in the name of the Trustee, on behalf of the Trust, a non-interest
bearing segregated account (the "Collection Account") bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Certificateholders. Pursuant to authority granted to it pursuant
to subsection 3.01(b), the Servicer shall have the revocable power to withdraw
funds from the Collection Account for the purposes of carrying out its duties
hereunder.
(b) The Finance Charge and Principal Accounts. The Trustee,
for the benefit of the Investor Certificateholders, shall establish and maintain
in the State of New York or in the city in which the Corporate Trust Office is
located, with a Qualified Institution, in the name of the Trust two non-interest
bearing segregated trust accounts (the "Finance Charge Account" and the
"Principal Account," respectively), each bearing a designation clearly
indicating that the funds therein are held for the benefit of the Investor
Certificateholders. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Finance Charge Account and
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the Principal Account and in all proceeds thereof. The Finance Charge Account
and the Principal Account shall be under the sole dominion and control of the
Trustee for the benefit of the Investor Certificateholders. Pursuant to
authority granted to it hereunder, the Servicer shall have the revocable power
to instruct the Trustee to withdraw funds from the Finance Charge Account and
Principal Account for the purpose of carrying out the Servicer's duties
hereunder. The Trustee at all times shall maintain accurate records reflecting
each transaction in the Principal Account and the Finance Charge Account and
that funds held therein shall at all times be held in trust for the benefit of
the Investor Certificateholders.
(c) The Distribution Accounts.
The Trustee, for the benefit of the Investor
Certificateholders, shall establish and maintain in the State of New
York or in the city in which the Corporate Trust Office is located,
with one or more Qualified Institutions, in the name of the Trust, a
non-interest bearing segregated trust account for each Series (each, a
"Distribution Account" and collectively, the "Distribution Accounts")
bearing a designation clearly indicating that the funds deposited
therein are held in trust for the benefit of the Investor
Certificateholders of such Series. The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the
Distribution Accounts and in all proceeds thereof. The Distribution
Accounts shall be under the sole dominion and control of the Trustee
for the benefit of the Investor Certificateholders.
(d) Series Accounts.
If so provided in the related Supplement, the Trustee
or the Servicer, for the benefit of the Investor Certificateholders,
shall cause to be established and maintained in the name of the Trust,
one or more Series Accounts. Each such Series Account shall bear a
designation clearly indicating that the funds deposited therein are
held for the benefit of the Investor Certificateholders of such Series.
Each such Series Account will be a trust account, if so provided in the
related Supplement, and will have the other features and be applied as
set forth in the related Supplement.
(e) Administration of the Finance Charge and Principal
Accounts. Funds on deposit in the Principal Account and the Finance Charge
Account that are not both deposited and to be withdrawn on the same date shall
be invested in Permitted Investments. Any such investment shall mature and such
funds shall be available for withdrawal on or prior to the Transfer Date related
to the Monthly Period in which such funds were received or deposited, or if so
specified in the related Supplement, immediately preceding a Distribution Date.
The Trustee shall maintain for the benefit of the Investor Certificateholders
possession of the negotiable instruments or securities evidencing the Permitted
Investments described in clause (a) of the definition thereof
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from the time of purchase thereof until the time of sale or maturity; provided,
that no such investment shall be disposed of prior to its maturity date. At the
end of each month, all interest and earnings (net of losses and investment
expenses) on funds on deposit in the Principal Account and the Finance Charge
Account shall be paid to the Holder of the Transferor Certificate. If at the end
of a month losses and investment expenses on funds on deposit in either of the
Principal Account and the Finance Charge Account exceed interest and earnings on
such funds during such month, losses and expenses to the extent of such excess
will be allocated, with respect to any Series, among the Investor
Certificateholders of such Series and the Holder of the Transferor Certificate
as provided in the related Supplement. Subject to the restrictions set forth
above, the Holder of the Transferor Certificate, or a Person designated in
writing by the Holder of the Transferor Certificate, of which the Trustee shall
have received written notification thereof, shall have the authority to instruct
the Trustee with respect to the investment of funds on deposit in the Principal
Account and the Finance Charge Account. For purposes of determining the
availability of funds or the balances in the Finance Charge Account and the
Principal Account for any reason under this Agreement, all investment earnings
on such funds shall be deemed not to be available or on deposit.
(f) Qualified Institution. If, at any time, the institution
holding any account established pursuant to this Section 4.02 ceases to be a
Qualified Institution, the Trustee shall notify each Rating Agency and within 10
Business Days establish a new account or accounts, as the case may be, meeting
the conditions specified above with a Qualified Institution, and shall transfer
any cash or any investments to such new account or accounts, as the case may be.
Section 4.03 Collections and Allocations.
(a) Collections. Except as provided below, the Servicer shall
deposit all Collections in the Collection Account as promptly as possible after
the date of receipt of such Collections, but in no event later than the second
Business Day following such date of receipt.
The Servicer shall allocate such amounts to each Series of
Investor Certificates and to the Holder of the Transferor Certificate in
accordance with this Article IV and shall withdraw the required amounts from the
Collection Account or pay such amounts to the Holder of the Transferor
Certificate in accordance with this Article IV, in both cases as modified by any
Supplement. The Servicer shall make such deposits or payments on the date
indicated therein by wire transfer or as otherwise provided in the Supplement
for any Series of Certificates with respect to such Series.
Notwithstanding anything in this Agreement to the contrary,
for so long as, and only so long as, AIC shall remain the Servicer hereunder,
and (a) the AIC Support Agreement as in effect on the Initial Closing Date
remains in effect with
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respect to the Servicer and is not terminated, modified or amended other than in
accordance with its terms, and AIG has and maintains a long-term rating from
Moody's and Standard & Poor's of at least Aa and AA, respectively, or (b) AIC
has and maintains a commercial paper rating from Moody's and Standard & Poor's
of P-l and A-l, respectively, the Servicer need not deposit Collections to the
Collection Account in the manner provided in this Article IV or, with respect to
any Series, make daily payments from the Collection Account and daily deposits
into the Finance Charge Account, the Principal Account or any Series Account as
provided in any applicable Supplement prior to the close of business on the day
any Collections are deposited in the Collection Account as provided in this
Article IV, but may make such deposits on the Transfer Date immediately
preceding the related Distribution Date in an amount equal to the lesser of (A)
Collections received in the immediately preceding Monthly Period allocable to
the Aggregate Certificateholders Ownership Interests and (B) the amount required
to be deposited in the Finance Charge Account, the Principal Account or any
Series Account or, without duplication, distributed on or prior to the related
Distribution Date to the Investor Certificateholders.
Notwithstanding anything else in this Agreement to the
contrary, with respect to any Monthly Period, whether the Servicer is required
to make monthly or daily deposits from the Collection Account into the Finance
Charge Account, the Principal Account or any Series Account, as provided in any
Supplement, (i) the Servicer will only be required to deposit Collections from
the Collection Account into the Finance Charge Account, the Principal Account or
any Series Account up to the required amount to be deposited into any such
deposit account or, without duplication, distributed on or prior to the related
Distribution Date to Investor Certificateholders or to any Credit Enhancement
Provider pursuant to the terms of any Supplement or agreement relating to such
Credit Enhancement, (ii) if at any time prior to such Distribution Date the
amount of Collections deposited in the Collection Account exceeds the amount
required to be deposited pursuant to clause (i) above, the Servicer may allocate
such excess amount to the Transferor Certificate and pay such amount to the
Holder of the Transferor Certificate in accordance with subsection 4.03(c) and
(iii) the Servicer will transfer to, or at the direction of, the Transferor any
amounts representing Credit Balances promptly after the date of receipt of such
amounts.
(b) Allocation of Collections Between Finance Charge
Receivables and Principal Receivables. At all times and for all purposes of this
Agreement, the Servicer shall allocate Collections received in respect of any
Loan for any Monthly Period to Finance Charge Receivables and to Principal
Receivables in the manner specified in subsection 1.02(f).
(c) Allocations for the Transferor Certificate. Throughout
the existence of the Trust, unless otherwise stated in any Supplement, the
Servicer shall allocate to the Holder of the Transferor Certificate an amount
equal to the product of (A) the Transferor Percentage and (B) the aggregate
amount of Collections allocated to
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Principal Receivables and Finance Charge Receivables, respectively, in respect
of each Monthly Period. Notwithstanding anything in this Agreement to the
contrary, unless otherwise stated in any Supplement, the Servicer need not
deposit this amount or any other amounts so allocated to the Transferor
Certificate pursuant to any Supplement into the Collection Account and shall
pay, or be deemed to pay, such amounts as collected to the Holder of the
Transferor Certificate.
(d) Adjustments to Transferor Ownership Interest. The
Servicer shall be obligated on or prior to each Determination Date to deduct on
a net basis for each Monthly Period from the aggregate amount of Principal
Receivables used to calculate the Transferor Ownership Interest as provided in
this paragraph of subsection 4.03(d) (a "Credit Adjustment") the portion of each
Principal Receivable which is reduced by the Servicer by any rebate, refund,
charge-back or adjustment (including due to Servicer errors) made in accordance
with the Guidelines.
[THE REMAINDER OF ARTICLE IV IS RESERVED AND SHALL BE
SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]
[End of Article IV]
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ARTICLE V
[ARTICLE V IS RESERVED AND SHALL
BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
[End of Article V]
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ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates. Subject to Sections 6.10 and
6.13, the Investor Certificates of each Series and any Class thereof may be
issued in bearer form (the "Bearer Certificates") with attached interest coupons
and a special coupon (collectively, the "Coupons") or in fully registered form
(the "Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached to the related Supplement; provided,
however, that Bearer Certificates shall be issued only in conformity with
applicable laws and regulations, including without limitation the applicable
Bearer Rules. The Transferor Certificate shall be substantially in the form of
Exhibit A. The Investor Certificates and the Transferor Certificate shall, upon
issue pursuant to this Section 6.01, Section 6.09 or Section 6.10, be executed
and authenticated on behalf of the Trust by the Trustee, not personally but
solely as Trustee hereunder. Any Investor Certificate shall be issuable in a
minimum denomination of $1,000 Undivided Interest and integral multiples
thereof, unless otherwise specified in any Supplement. If specified in the
related Supplement for any Series, the Investor Certificates shall be issued
upon initial issuance as a single certificate in an original principal amount
equal to the Initial Certificateholders Ownership Interests as described in
Section 6.10. The Transferor Certificate shall not be represented by more than
two certificates. Each Certificate shall be executed by manual or facsimile
signature on behalf of the Trust by any authorized officer of the Trustee.
Certificates bearing the manual or facsimile signature of the individual who
was, at the time when such signature was affixed, authorized to sign on behalf
of the Trustee shall not be rendered invalid, notwithstanding that such
individual has ceased to be so authorized prior to the authentication and
delivery of such Certificates or does not hold such office at the date of such
Certificates. Unless otherwise provided in the related Supplement, no
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein, executed by or on
behalf of the Trustee by the manual signature of a duly authorized signatory,
and such certificate upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication
except Bearer Certificates which shall be dated the applicable issuance date as
provided in the related Supplement.
Section 6.02 Execution and Authentication of Certificates.
Contemporaneously with the initial assignment and transfer of the Trust Assets
(as defined in the Original Agreement) to the Trust, the Trustee executed,
authenticated and delivered the initial Series of Investor Certificates, having
the terms specified in the Original Series 1994-1 Supplement, upon the written
order of the Original Transferors, to the underwriters for sale or to the
Original Transferors for initial retention by them. Upon receipt of such assets
and the issuance of such Investor Certificates, such Investor
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Certificates became fully paid and non-assessable. The Trustee executed,
authenticated and delivered the Transferor Certificate to the Original
Transferors simultaneously with its delivery to the Original Transferors of the
initial Series of Investor Certificates.
Pursuant to Section 6.09 hereof, the Trustee shall execute,
authenticate and deliver a Series of Investor Certificates having the terms
specified in the related Supplement, upon the written order of the Transferor,
to the underwriters for sale or to the Transferor for initial retention by it.
Upon receipt of such Trust Assets and the issuance of the Investor Certificates,
such Investor Certificates shall be fully paid and non-assessable.
Simultaneously with such delivery to the Transferor of such Series of Investor
Certificates by the Trustee, the Transferor Certificate shall be transferred
from the Original Transferors to the Transferor. Upon a New Series Issuance as
provided in Section 6.09 and the satisfaction of certain other conditions
specified therein, the Trustee shall execute, authenticate and deliver the
Investor Certificates of additional Series (with the designation provided in the
related Supplement), upon the order of the Transferor, to the Persons designated
in such Supplement. Upon the order of the Transferor, the Certificates of any
Series shall be duly executed and authenticated by or on behalf of the Trustee,
in authorized denominations. If specified in the related Supplement for any
Series, the Trustee shall execute, authenticate and deliver the Global
Certificate that is issued upon original issuance thereof, upon the written
order of the Transferor, to the Depository against payment of the purchase price
therefor. If specified in the related Supplement for any Series, the Trustee
shall execute and authenticate Book-Entry Certificates that are issued upon
original issuance thereof, upon the written order of the Transferor, to a
Clearing Agency or its nominee as provided in Section 6.10 against payment of
the purchase price thereof.
Section 6.03 Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at the office or
agency to be maintained by a transfer agent and registrar (the "Transfer Agent
and Registrar"), in accordance with the provisions of Section 6.03(d), a
register (the "Certificate Register") in which, subject to such reasonable
regulations as it may prescribe, the Transfer Agent and Registrar shall provide
for the registration of the Investor Certificates of each Series (unless
otherwise provided in the related Supplement) and of transfers and exchanges of
the Investor Certificates as herein provided. The Trustee is hereby initially
appointed Transfer Agent and Registrar for the purposes of registering the
Investor Certificates and transfers and exchanges of the Investor Certificates
as herein provided. If any form of Investor Certificate is issued as a Global
Certificate, the Trustee may, or if and so long as any Series of Investor
Certificates are listed on the Luxembourg Stock Exchange, and such exchange
shall so require, the Trustee shall appoint a co-transfer agent and co-registrar
in Luxembourg or another European city. Any reference in this Agreement to the
Transfer Agent and Registrar shall include any co-transfer agent and
co-registrar unless the context otherwise requires. The Trustee shall be
permitted to resign as Transfer Agent and Registrar upon 30 days' written notice
to the Servicer. In
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the event that the Trustee shall no longer be the Transfer Agent and Registrar,
the Trustee shall appoint a successor Transfer Agent and Registrar.
Upon surrender for registration of transfer of any
Certificate at any office or agency of the Transfer Agent and Registrar, the
Trustee shall execute, subject to the provisions of subsection 6.03(c), and
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate Undivided Interests; provided, that the provisions of this paragraph
shall not apply to Bearer Certificates.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same Series
in authorized denominations of like aggregate Undivided Interests, upon
surrender of the Investor Certificates to be exchanged at any such office or
agency. At the option of any Holder of Registered Certificates, Registered
Certificates may be exchanged for other Registered Certificates of the same
Series in authorized denominations of like aggregate Undivided Interests in the
Trust, upon surrender of the Registered Certificates to be exchanged at any
office or agency of the Transfer Agent and Registrar maintained for such
purpose. Registered Certificates may not be exchanged for Bearer Certificates.
At the option of any Holder of Bearer Certificates, subject to applicable laws
and regulations (including without limitation, the Bearer Rules), Bearer
Certificates may be exchanged for other Bearer Certificates or Registered
Certificates of the same Series in authorized denominations of like aggregate
Undivided Interests in the Trust, in the manner specified in the Supplement for
such Series, upon surrender of the Bearer Certificates to be exchanged at an
office or agency of the Transfer Agent and Registrar located outside the United
States. Each Bearer Certificate surrendered pursuant to this Section 6.03 shall
have attached thereto (or be accompanied by) all unmatured Coupons, provided
that any Bearer Certificate so surrendered after the close of business on the
Record Date preceding the relevant Distribution Date after the related Series
Termination Date need not have attached the Coupons relating to such
Distribution Date.
Whenever any Investor Certificates of any Series are so
surrendered for exchange, the Trustee shall execute and authenticate and (unless
the Transfer Agent and Registrar is different than the Trustee, in which case
the Transfer Agent and Registrar shall) deliver, the Investor Certificates of
such Series which the Certificateholder making the exchange is entitled to
receive. Every Investor Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
a form satisfactory to the Trustee and the Transfer Agent and Registrar duly
executed by the Certificateholder thereof or his attorney-in-fact duly
authorized in writing.
The preceding provisions of this Section 6.03
notwithstanding, the Trustee or the Transfer Agent and Registrar, as the case
may be, shall not be required
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to register the transfer of or exchange any Investor Certificate of any Series
for a period of five Business Days preceding the due date for any payment with
respect to the Investor Certificates of such Series.
Unless otherwise provided in the related Supplement, no
service charge shall be made for any registration of transfer or exchange of
Certificates, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
All Investor Certificates (together with any Coupons attached
to Bearer Certificates) surrendered for registration of transfer and exchange
shall be canceled by the Transfer Agent and Registrar and disposed of in a
manner satisfactory to the Trustee. The Trustee shall cancel and destroy the
Global Certificates upon its exchange in full for Definitive Certificates and
shall deliver a certificate of destruction to the Transferor. Such certificate
shall also state that a certificate or certificates of each Foreign Clearing
Agency to the effect referred to in Section 6.12 was received with respect to
each portion of the Global Certificate exchanged for Definitive Certificates.
The Transferor shall deliver to the Trustee or the Transfer
Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.
(b) Except as provided in Section 6.09 or 7.02 or in any
Supplement, in no event shall the Transferor Certificate or any interest therein
be transferred, sold or pledged hereunder, in whole or in part.
(c) Unless otherwise provided in the related Supplement,
registration of transfer of Registered Certificates containing a legend relating
to the restrictions on transfer of such Registered Certificates (which legend
shall be set forth in the Supplement relating to such Investor Certificates)
shall be effected only if the conditions set forth in such related Supplement
are satisfied.
Whenever a Registered Certificate containing the legend set
forth in the related Supplement is presented to the Transfer Agent and Registrar
for registration of transfer, the Transfer Agent and Registrar shall promptly
seek instructions from the Servicer regarding such transfer. The Transfer Agent
and Registrar and the Trustee shall be entitled to receive written instructions
signed by a Servicing Officer prior to registering any such transfer or
authenticating new Registered Certificates, as the case may be. The Servicer
hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and
to hold each of them harmless against any loss, liability or expense incurred
without negligence or bad faith on their part arising out of or in connection
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with actions taken or omitted by them in reliance on any such written
instructions furnished pursuant to this subsection 6.03(c).
(d) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, the City of New York (and subject to this
Section 6.03, if specified in the related Supplement for any Series, any other
city designated in such Supplement) an office or offices or an agency or
agencies where Investor Certificates of such Series may be surrendered for
registration of transfer or exchange (except that Bearer Certificates may not be
surrendered for exchange at any such office or agency in the United States, but
may be surrendered for exchange at such office or agency outside the United
States as shall be specified in the related Supplement). For purposes of this
Section 6.03(d), "United States" includes Puerto Rico, the U.S. Virgin Islands,
the Northern Mariana Islands, Guam, Wake Island and American Samoa.
Section 6.04 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate (together, in the case of Bearer
Certificates, with all unmatured Coupons, if any, appertaining thereto) is
surrendered to the Transfer Agent and Registrar, or the Transfer Agent and
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and (b) there is delivered to the Transfer Agent and
Registrar and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Trustee
that such Certificate has been acquired by a bona fide purchaser, the Trustee
shall execute and authenticate and (unless the Transfer Agent and Registrar is
different from the Trustee, in which case the Transfer Agent and Registrar
shall) deliver (in compliance with applicable law), in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like tenor and aggregate Undivided Interest. In connection with the issuance
of any new Certificate under this Section 6.04, the Trustee or the Transfer
Agent and Registrar may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee and the Transfer
Agent and Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.04 shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.05 Persons Deemed Owners. Prior to due presentation
of a Certificate for registration of transfer, the Trustee, the Paying Agent,
the Transfer Agent and Registrar and any agent of any of them may treat a
Certificateholder as the owner of the related Certificate for the purpose of
receiving distributions and for all other purposes whatsoever, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any
of them shall be affected by any notice to the contrary; provided, however, that
in determining whether the holders of Investor Certificates evidencing the
requisite Undivided Interests have given any request, demand, authorization,
direction, notice, consent or waiver hereunder (including under
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any Supplement), Investor Certificates owned by either of the Original
Transferors, the Transferor, the Servicer or any Affiliate thereof shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Investor Certificates
which a Responsible Officer in the Corporate Trust Office of the Trustee knows
to be so owned shall be so disregarded.
In the case of a Bearer Certificate, the Trustee, the Paying
Agent, the Transfer Agent and Registrar and any agent of any of them may treat
the holder of a Bearer Certificate or Coupon as the owner of such Bearer
Certificate or Coupon for the purpose of receiving distributions and for all
other purposes whatsoever, and neither the Trustee, the Paying Agent, the
Transfer Agent and Registrar nor any agent of any of them shall be affected by
any notice to the contrary.
Section 6.06 Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Investor
Certificateholders from the appropriate account or accounts maintained for the
benefit of Certificateholders as specified in this Agreement or the related
Supplement for any Series pursuant to Articles IV and V hereof. Any Paying Agent
shall have the revocable power to withdraw funds from such appropriate account
or accounts for the purpose of making distributions referred to above. The
Trustee (or the Servicer if the Trustee is the Paying Agent) may revoke such
power and remove the Paying Agent, if the Trustee (or the Servicer if the
Trustee is the Paying Agent) determines in its sole discretion that the Paying
Agent shall have failed to perform its obligations under this Agreement in any
material respect or for other good cause. The Trustee (or the Servicer if the
Trustee is the Paying Agent) shall notify Moody's and Standard & Poor's of the
removal of any Paying Agent. The Paying Agent, unless the Supplement with
respect to any Series states otherwise, shall initially be the Trustee's
Corporate Trust Office. The Trustee shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Servicer. In the event that the Trustee
shall no longer be the Paying Agent, the Trustee shall appoint a successor to
act as Paying Agent (which shall be a bank or trust company).
If specified in the related Supplement for any Series, so
long as the Investor Certificates of such Series are outstanding, the Transferor
shall maintain a co-paying agent in New York City (for Registered Certificates
only) or any other city designated in such Supplement which, if and so long as
any Series of Investor Certificates is listed on the Luxembourg Stock Exchange
or other stock exchange and such exchange so requires, shall be in Luxembourg or
the location required by such other stock exchange. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise. For so long as any Bearer Certificates are
outstanding, the Transferor shall maintain a Paying Agent and a Transfer Agent
and Registrar outside the United States (as defined in Section 6.03(d)).
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(b) The Trustee shall cause each Paying Agent (other than
itself) to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee that such Paying Agent will hold all sums, if
any, held by it for payment to the Certificateholders in trust for the benefit
of the Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree, and if the Trustee is the Paying Agent it
hereby agrees, that it shall comply with all requirements of the Internal
Revenue Code regarding the withholding of payments in respect of federal income
taxes due from Certificate Owners.
Section 6.07 Access to List of Certificateholders' Names and
Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent, within five Business
Days after receipt by the Trustee of a request there for from the Servicer or
the Paying Agent, respectively, in writing, a list in such form as the Servicer
or the Paying Agent may reasonably require of the names and addresses of the
Investor Certificateholders as of the most recent Record Date for payment of
distributions to Investor Certificateholders. Unless otherwise provided in the
related Supplement, if holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 20% of the Certificateholders Ownership
Interests of the Investor Certificates of any Series (the "Applicants") apply in
writing to the Trustee, and if such application states that the Applicants
desire to communicate with other Investor Certificateholders of any Series with
respect to their rights under this Agreement or under the Investor Certificates
and is accompanied by a copy of the communication which such Applicants propose
to transmit, then the Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford such Applicants access during normal business
hours to the most recent list of Certificateholders held by the Trustee and
shall give the Servicer notice that such request has been made within five
Business Days after the receipt of such application. Such list shall be as of a
date no more than 45 days prior to the date of receipt of such Applicants'
request. Every Certificateholder, by receiving and holding a Certificate, agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor
any of their respective agents shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was obtained.
Section 6.08 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents
with respect to the Certificates which shall be authorized to act on behalf of
the Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication
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executed on behalf of the Trustee by an authenticating agent. Each
authenticating agent must be acceptable to the Transferor.
(b) Any institution succeeding to the corporate agency
business of an authenticating agent shall continue to be an authenticating agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Transferor. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Transferor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time an authenticating agent shall cease to be acceptable to the Trustee or
the Transferor, the Trustee promptly may appoint a successor authenticating
agent. Any successor authenticating agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent shall be appointed
unless acceptable to the Trustee and the Transferor.
(d) The Trustee agrees to pay each authenticating agent from
time to time reasonable compensation for its services under this Section 6.08,
and the Trustee shall be entitled to be reimbursed and the Servicer shall
reimburse the Trustee for such reasonable payments actually made, subject to the
provisions of Section 11.05.
(e) Pursuant to an appointment made under this Section 6.08,
the Certificates may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternate certificate of authentication in substantially
the following form:
This is one of the certificates described in the Pooling and
Servicing Agreement.
-----------------------------------
as Authenticating Agent
for the Trustee,
By:
--------------------------------
Authorized Officer
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Section 6.09 Transfer of Transferor Certificate; New Series
Issuances.
(a) The Transferor Certificate shall be transferred by the
Original Transferors to the Transferor concurrently with the execution of this
Agreement. Upon any New Series Issuance, the Trustee shall issue to the Holder
of the Transferor Certificate under Section 6.01, for redelivery to the Trustee
for execution and authentication under Section 6.02, one or more new Series of
Investor Certificates. Any such Series of Investor Certificates shall be
substantially in the form specified in the related Supplement and shall bear,
upon its face, the designation for such Series to which it belongs, as selected
by the Transferor. Except as specified in any Supplement for a related Series,
all Investor Certificates of any Series shall rank pari passu and be equally and
ratably entitled as provided herein to the benefits hereof (except that the
Credit Enhancement provided for any Series shall not be available for any other
Series) without preference, priority or distinction on account of the actual
time or times of authentication and delivery, all in accordance with the terms
and provisions of this Agreement and the related Supplement.
(b) The Holder of the Transferor Certificate may reduce the
Transferor Ownership Interest to effectuate the issuance of one or more new
Series of Investor Certificates or, in connection with a Companion Series,
interests in such Series (a "Transferor Ownership Interest Reduction"). In
addition, to the extent permitted for any Series of Investor Certificates as
specified in the related Supplement, the Investor Certificateholders of such
Series may tender their Investor Certificates and the Holder of the Transferor
Certificate may reduce the Transferor Ownership Interest pursuant to the terms
and conditions set forth in such Supplement to effectuate the issuance of one or
more new Series of Investor Certificates (an "Investor Exchange"). Each of a
Transferor Ownership Interest Reduction and an Investor Exchange is sometimes
referred to herein as a "New Series Issuance." The Holder of the Transferor
Certificate may effect a New Series Issuance by notifying the Trustee in writing
at least three days in advance (a "New Series Issuance Notice") of the date upon
which the New Series Issuance is to occur (a "New Series Issuance Date"). Any
New Series Issuance Notice shall state the designation of any Series (and Class
thereof, if applicable) to be issued on the New Series Issuance Date and, with
respect to each such Series: (a) its Initial Certificateholders Ownership
Interests (or the method for calculating such Initial Certificateholders
Ownership Interests), which, at any time, may not be greater than the current
aggregate principal amount of the Transferor Certificate at such time (or in the
case of an Investor Exchange, the sum of the Certificateholders Ownership
Interests of the Series of Investor Certificates to be exchanged plus the
current aggregate principal amount of the Transferor Certificate), (b) its
Certificate Rate (or the method for calculating such rate) and the method for
allocating interest payments or other cash flows to such Series, if any, and (c)
the Credit Enhancement Provider, if any, with respect to such Series. On the New
Series Issuance Date, the Trustee shall execute, authenticate and deliver any
such Series of Investor Certificates only upon delivery to it of the following:
(a) a fully executed Supplement in form satisfactory to the Trustee
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specifying the Principal Terms of such Series, (b) the applicable Credit
Enhancement, if any, (c) the agreement, if any, executed by the Transferor and
the Credit Enhancement Provider pursuant to which the Credit Enhancement
Provider agrees to provide the Credit Enhancement, if any, (d) a Tax Opinion
with respect to the issuance of such Series, (e) written confirmation from each
Rating Agency that the New Series Issuance will not result in such Rating
Agency's reducing or withdrawing its rating on any then outstanding Series as to
which it is a Rating Agency, (f) an Officer's Certificate of the Transferor that
on the New Series Issuance Date (A) the Transferor, after giving effect to the
New Series Issuance, would not be required to add Additional Receivables
pursuant to subsection 2.06(a) and (B) after giving effect to such New Series
Issuance, the Transferor Ownership Interest would be at least equal to the
Minimum Transferor Ownership Interest, and (g) in the case of an Investor
Exchange, the applicable Investor Certificates. Upon satisfaction of such
conditions, the Trustee shall issue, as provided above, such Series of Investor
Certificates, dated the New Series Issuance Date, and, in the case of an
Investor Exchange, cancel the applicable Investor Certificates, and a
corresponding reduction in the Transfer Ownership Interest will result. There is
no limit to the number of New Series Issuances that may be performed under the
Agreement.
(c) In conjunction with a New Series Issuance, the parties
hereto shall execute a Supplement, which shall specify the relevant terms with
respect to any newly issued Series of Investor Certificates, which may include
without limitation: (i) its name or designation, (ii) the Initial
Certificateholders Ownership Interests or a method for calculating the Initial
Certificateholders Ownership Interests and a method for determining any adjusted
Certificateholders Ownership Interests, if applicable, (iii) the Receivables to
be allocated with respect to such Series and the provisions governing the
allocations of any such Receivables, (iv) the Certificate Rate (or formula for
the determination thereof), (v) the Closing Date, (vi) each rating agency, if
any, rating such Series, (vii) the name of the Clearing Agency, if any, (viii)
the rights of the Holder of the Transferor Certificate that have been
transferred to the Holders of such Series pursuant to such New Series Issuance
(including any rights to allocations of Collections of Finance Charge
Receivables, Principal Receivables and Recoveries), (ix) the Interest Periods,
the interest payment date or dates, and the date or dates from which interest
shall accrue including the interest accrual period, (x) the periods during which
or dates on which principal will be paid or accrued, (xi) the method of
allocating Collections with respect to Principal Receivables for such Series
and, if applicable, with respect to other Series and the method by which the
principal amount of Investor Certificates of such Series shall amortize or
accrete and the method for allocating Collections with respect to Finance Charge
Receivables and Recoveries, (xii) any other Collections with respect to
Receivables or other amounts available to be paid with respect to such Series,
(xiii) the names of any accounts to be used by such Series and the terms
governing the operation of any such account and use of moneys therein, (xiv) the
Series Servicing Fee and the Series Servicing Fee Percentage, (xv) the Minimum
Transferor Ownership Interest and the Series Termination Date, (xvi) the terms
of any Credit Enhancement
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with respect to such Series and the Credit Enhancement Provider, if applicable,
(xvii) the base rate, if any, applicable to such Series, (xviii) the terms on
which the Certificates of such Series may be repurchased by the Transferor or
remarketed to other investors, (xix) any deposit into any account provided for
such Series, (xx) the number of Classes of such Series, and if more than one
Class, the rights and priorities of each such Class, (xxi) the extent to which
the Investor Certificates will be issuable in temporary or permanent global
form, and in such case, the depositary for such global certificate or
certificates, the terms and conditions, if any upon which such global
certificate may be exchanged in whole or in part for Definitive Certificates,
and the manner in which any interest or principal payable on a temporary or
global certificate will be paid, (xxii) whether the Certificates may be issued
in bearer form and any limitations imposed thereon, (xxiii) the priority of any
Series with respect to any other Series, (xxiv) whether such Series will or may
be a Companion Series and the Series with which it will be paired, if
applicable, and (xxv) any other relevant terms of such Series (all such terms,
the "Principal Terms" of such Series). The terms of such Supplement may modify
or amend the terms of this Agreement solely as applied to such new Series. If on
the date of the issuance of such Series there is issued and outstanding one or
more Series of Investor Certificates and no Series of Investor Certificates is
currently rated by a Rating Agency, then as a condition to such New Series
Issuance a nationally recognized investment banking firm or commercial bank
shall also deliver to the Trustee an officer's certificate stating, in
substance, that the New Series Issuance will not have an adverse effect on the
timing or distribution of payments to such other Series of Investor Certificates
then issued and outstanding.
Section 6.10 Book-Entry Certificates. Unless otherwise
provided in any related Supplement, the Investor Certificates, upon original
issuance, shall be issued in the form of typewritten Certificates representing
the Book-Entry Certificates, to be delivered to the depository specified in such
Supplement (the "Depository") which shall be the Clearing Agency or Foreign
Clearing Agency, by or on behalf of such Series. The Investor Certificates of
each Series shall, unless otherwise provided in the related Supplement,
initially be registered on the Certificate Register in the name of the nominee
of the Clearing Agency or Foreign Clearing Agency. Unless otherwise provided in
a related Supplement, no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the related Series of Investor
Certificates, except as provided in Section 6.12. Unless and until definitive,
fully registered Investor Certificates of any Series or any Class thereof
("Definitive Certificates") have been issued to Certificate Owners pursuant to
Section 6.12 or as provided in the applicable Supplement:
(i) the provisions of this Section 6.10 shall be in
full force and effect with respect to each such Series;
(ii) the Transferor, the Servicer, the Paying Agent, the
Transfer Agent and Registrar and the Trustee may deal with the Clearing
Agency and the
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Clearing Agency Participants for all purposes (including the making of
distributions on the Investor Certificates of each such Series) as the
authorized representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section
6.10 conflict with any other provisions of this Agreement, the
provisions of this Section 6.10 shall control with respect to each such
Series; and
(iv) the rights of Certificate Owners of each such
Series shall be exercised only through the Clearing Agency or Foreign
Clearing Agency and the applicable Clearing Agency Participants and
shall be limited to those established by law and agreements between
such Certificate Owners and the Clearing Agency or Foreign Clearing
Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement applicable to a Series, unless and until
Definitive Certificates of such Series are issued pursuant to Section
6.12, the initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit distributions
of principal and interest on the Investor Certificates to such Clearing
Agency Participants.
Section 6.11 Notices to Clearing Agency. Whenever notice or
other communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 6.12, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Investor
Certificates to the Clearing Agency or Foreign Clearing Agency for distribution
to Holders of Investor Certificates.
Section 6.12 Definitive Certificates. If (i) (A) the
Transferor advises the Trustee in writing that the Clearing Agency or Foreign
Clearing Agency is no longer willing or able to discharge properly its
responsibilities under the applicable Depository Agreement, and (B) neither the
Trustee nor the Transferor is able to locate a qualified successor, (ii) the
Transferor, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or Foreign Clearing
Agency with respect to any Series of Certificates or (iii) after the occurrence
of a Servicer Default, Certificate Owners of a Class representing beneficial
interests aggregating not less than 50% of the portion of the Certificateholders
Ownership Interests represented by such Class advise the Trustee and the
applicable Clearing Agency or Foreign Clearing Agency through the applicable
Clearing Agency Participants in writing that the continuation of a book-entry
system through the applicable Clearing Agency or Foreign Clearing Agency is no
longer in the best interests of the Certificate Owners, the Trustee shall notify
all Certificate Owners of such Series, through the applicable Clearing Agency
Participants, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners of such Series requesting the
same. Upon surrender to the Trustee of the Investor
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Certificates of such Series by the applicable Clearing Agency or Foreign
Clearing Agency, accompanied by registration instructions from the applicable
Clearing Agency or Foreign Clearing Agency for registration, the Trustee shall
issue the Definitive Certificates of such Series. Neither the Transferor nor the
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates of such Series and upon the
issuance of any Series of Investor Certificates or any Class thereof in
definitive form in accordance with the related Supplement, all references herein
to obligations imposed upon or to be performed by the applicable Clearing Agency
or Foreign Clearing Agency shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates, and the Trustee shall recognize the Holders of the Definitive
Certificates of such Series or Classes as Certificateholders of such Series or
Classes hereunder. Notwithstanding anything in this Agreement to the contrary,
Definitive Certificates shall not be issued in respect of any Series Temporary
Regulation S Global Certificate unless the applicable Restricted Period has
expired and then only upon receipt by the Trustee from the Holder thereof of any
certifications required by the relevant Supplement.
Section 6.13 Global Certificate; Euro-Certificate Exchange
Date. If specified in the related Supplement for any Series, (i) the Investor
Certificates may be initially issued in the form of a single temporary global
certificate (the "Global Certificate") in registered or bearer form, without
interest coupons, in the denomination of the Initial Certificateholders
Ownership Interests and (ii) a Class of Investor Certificates may be issued in
the form of a single temporary global certificate in registered or bearer form,
in the denomination of the portion of the Certificateholders Ownership Interests
represented by such Class, each substantially in the form attached to the
related Supplement. Unless otherwise specified in the related Supplement, the
provisions of this Section 6.13 shall apply to such Global Certificate. The
Global Certificate will be authenticated by the Trustee upon the same
conditions, in substantially the same manner and with the same effect as the
Definitive Certificates. The Global Certificate may be exchanged in the manner
described in the related Supplement for Registered or Bearer Certificates in
definitive form.
Section 6.14 Meetings of Certificateholders.
To the extent provided by the Supplement for any Series
issued in whole or in part in Bearer Certificates, the Servicer or the Trustee
may at any time call a meeting of the Certificateholders of such Series, to be
held at such time and at such place as the Servicer or the Trustee, as the case
may be, shall determine, for the purpose of approving a modification of or
amendment to, or obtaining a waiver of, any covenant or condition set forth in
this Agreement with respect to such Series or in the Certificates of such
Series, subject to Section 13.01 of this Agreement.
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[End of Article VI]
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ARTICLE VII
OTHER MATTERS RELATING TO THE ORIGINAL
TRANSFERORS AND THE TRANSFEROR
Section 7.01 Liability of the Original Transferors and the
Transferor. Each of the Original Transferors and the Transferor shall be liable
in accordance herewith to the extent of the obligations specifically undertaken
by it.
Section 7.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Original Transferors or the Transferor.
(a) Neither any Original Transferor nor the Transferor shall
consolidate with or merge into any other corporation or convey or transfer its
properties and assets substantially as an entirety to any Person, unless:
(i) if such Original Transferor or the Transferor, as
the case may be, is not the surviving entity, the corporation formed by
such consolidation or into which such Original Transferor or the
Transferor, as the case may be, is merged or the Person which acquires
by conveyance or transfer the properties and assets of such Original
Transferor or the Transferor, as the case may be, substantially as an
entirety shall be organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, in form and substance satisfactory to the
Trustee, the performance of every covenant and obligation of such
Original Transferor or the Transferor, as the case may be, as
applicable hereunder and shall benefit from all the rights granted to
such Original Transferor or the Transferor, as the case may be, as
applicable hereunder;
(ii) if such Original Transferor or the Transferor, as
the case may be, is not the surviving entity, such Person certifies in
writing to the Trustee that all of the representations and warranties
set forth in Section 2.03 (other than subsections 2.03(g) and (j)) are
true and correct in all respects with respect to such Person as of the
date of consolidation, merger or transfer, as the case may be;
(iii) such Original Transferor or the Transferor, as the
case may be, has delivered to the Trustee an Officer's Certificate
stating that such consolidation, merger, conveyance or transfer and
such supplemental agreement, if any, comply with this Section 7.02 and
that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel, in form
and substance satisfactory to the
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Trustee, that such supplemental agreement, if any, is the legal, valid,
binding and enforceable obligation of the parties thereto;
(iv) the Trustee shall have been advised in writing by
each Rating Agency for each outstanding Series of Certificates that the
rating of the related Class(es) of Investor Certificates will not be
lowered or withdrawn as a result of such transaction;
(v) if such Original Transferor or the Transferor, as
the case may be, is not the surviving entity, the related Support
Agreement remains in effect with respect to the successor entity; and
(vi) such Original Transferor or the Transferor, as the case
may be, shall have delivered to the Trustee a Tax Opinion, dated the
date of such merger, conveyance or transfer, with respect thereto.
(b) The respective obligations of the Original Transferors
and the Transferor hereunder shall not be assignable nor shall any Person
succeed to the respective obligations of the Original Transferors and the
Transferor hereunder except for mergers, consolidations, assumptions or
transfers in accordance with the provisions of the foregoing paragraph.
Section 7.03 Limitation on Liability. The respective
directors, officers, employees or agents of each Original Transferor and the
Transferor shall not be under any liability to the Trust, the Trustee, the
Certificateholders, any Credit Enhancement Provider or any other Person
hereunder or pursuant to any document delivered hereunder for any action taken
or for refraining from the taking of any action, it being expressly understood
that all such liability is expressly waived and released as a condition of, and
as consideration for, the execution of this Agreement and any Supplement and the
issuance of the Certificates; provided, however, that this provision shall not
protect the officers, directors, employees, or agents of the Original
Transferors or the Transferor against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Except as provided in Section 7.04, the Original Transferors
and the Transferor shall not be under any liability to the Trust, the Trustee,
the Certificateholders, any Credit Enhancement Provider or any other Person for
any action taken or for refraining from the taking of any action in its capacity
as an Original Transferor or the Transferor pursuant to this Agreement or any
Supplement whether arising from express or implied duties under this Agreement
or any Supplement; provided, however, that this provision shall not protect the
Original Transferors or the Transferor against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Original Transferors and the Transferor
and any of their respective
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directors, officers, employees or agents may rely in good faith on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising hereunder.
Section 7.04 Liabilities. Notwithstanding Section 7.03 or any
other provision of this Agreement, the Transferor agrees to be liable directly
to the injured party, for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by an Investor Certificateholder in the
capacity of an investor in the Investor Certificates) arising out of or based on
the arrangement created by this Agreement (to the extent any property of the
Trust that is remaining after the Investor Certificateholders have been paid in
full is insufficient to pay such losses, claims, damages or liabilities) and the
actions of the Servicer taken pursuant hereto as though this Agreement created a
partnership under the New York Uniform Partnership Law in which the Transferor
was a general partner. The Transferor shall pay, indemnify and hold harmless
each Certificateholder against and from such losses, claims or liabilities
except to the extent that they arise from any action by such Certificateholder.
The rights of the injured party provided by this Section 7.04 shall run directly
to and be enforceable by such party subject to the limitations hereof. In the
event of the appointment of a Successor Servicer (other than the Trustee), the
Successor Servicer will (from its own assets and not from the assets of the
Trust) indemnify and hold harmless the Transferor from and against any losses,
claims, damages and liabilities of the Transferor as described in this Section
arising from the actions or omissions of such Successor Servicer.
Section 7.05 Indemnification of the Trust and the Trustee by
the Original Transferors and the Transferor. The Original Transferors with
respect to Existing Receivables and the Transferor with respect to Future
Receivables shall indemnify and hold harmless the Trust and the Trustee, its
officers, directors, employees and agents, from and against any loss, liability,
damage or injury suffered or sustained by reason of any violation by the Trust,
Trustee or Servicer of any state premium finance licensing laws with respect to
any Receivable, including, but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other reasonable costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that the Original Transferors and the Transferor shall
not indemnify the Trustee if such loss, liability, expense, damage or injury is
imposed by or results from fraud, negligence or willful misconduct by the
Trustee in the performance of its duties under this Agreement; provided,
further, that the Original Transferors and the Transferor shall not indemnify
the Trust, the Investor Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of the Trust with respect to any action taken by
the Trustee at the request of the Investor Certificateholders. Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this indemnity shall survive the termination of this Agreement and
the Trust or the resignation or removal of the
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Trustee and shall run directly to and be enforceable by an injured party subject
to the limitations of this Section 7.05.
Section 7.06 Support Agreements.
(a) AIC shall not terminate the AIC Support Agreement or
amend or modify it other than in accordance with its terms.
(b) AIC shall (i) at all times be the ultimate beneficial
owner of 100% of the voting capital stock of AICCO now or hereafter issued and
outstanding that is not beneficially owned by AIG, (ii) at all times cause AICCO
to maintain a net worth of at least U.S. $1 as determined in accordance with
generally accepted accounting principles and (iii) provide funds to AICCO either
as equity or as a loan in a manner sufficiently timely for AICCO to (A) pay its
obligations when due (except for any such obligations which are the subject of a
bona fide dispute) the nonpayment of which could constitute a basis for the
filing of an involuntary case against AICCO under the United States Bankruptcy
Code, as now or hereafter in effect or (B) meet any of AICCO's obligations as
Original Transferor or Servicer hereunder; provided, however, any such loan
shall be subordinated in all respects to any and all debt of AICCO whether or
not such debt is outstanding at the time of such loan and to all financial
obligations of AICCO hereunder, whether or not such loan has such express
subordination provisions therein and notwithstanding anything to the contrary in
such loan or herein. Notwithstanding the foregoing, the provisions of this
subsection 7.06(b) shall no longer apply in the event AICCO shall at any time
merge or otherwise be liquidated into AIC.
(c) AIR shall not terminate the AIR Support Agreement or
amend or modify it other than in accordance with its terms.
[End Of Article VII]
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ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.01 Liability of the Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. (a) The Servicer shall not consolidate with or
merge into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) if the Servicer is not the surviving entity, the
corporation formed by such consolidation or into which the Servicer is
merged or the Person which acquires by conveyance or transfer the
properties and assets of the Servicer substantially as an entirety
shall be a corporation organized and existing under the laws of the
United States of America or any State or the District of Columbia, and
shall expressly assume, by an agreement supplemental hereto, executed
and delivered to the Trustee in form and substance satisfactory to the
Trustee, the performance of every covenant and obligation of the
Servicer hereunder;
(ii) if the Servicer is not the surviving entity, such
Person certifies in writing to the Trustee it is an Eligible Servicer
and that all of the representations and warranties set forth in Section
3.03 are true and correct in all respects with respect to such Person,
in each case as of the date of consolidation, merger or transfer, as
the case may be;
(iii) the Servicer has delivered to the Trustee an
Officer's Certificate stating that such consolidation, merger,
conveyance or transfer and such supplemental agreement, if any, comply
with this Section 8.02 and that all conditions precedent herein
provided for relating to such transaction have been complied with and
an Opinion of Counsel, in form and substance satisfactory to the
Trustee, that such supplemental agreement, if any, is the legal, valid,
binding and enforceable obligation of the parties thereto; and
(iv) the Trustee shall have been advised in writing by
the Rating Agency for each outstanding Series of Certificates that the
rating of the related Class(es) of Investor Certificates will not be
lowered or withdrawn as a result of such transaction.
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(b) The obligations and duties of the Servicer hereunder
shall not be assignable nor shall any Person succeed to the obligations of the
Servicer hereunder except in accordance with the provisions of subsection
8.02(a), Section 8.07 or as a result of the appointment of a Successor Servicer
pursuant to Section 10.02.
Section 8.03 Limitation on Liability of the Servicer and
Others. The directors, officers, employees or agents of the Servicer shall not
be under any liability to the Trust, the Trustee, the Certificateholders, any
Credit Enhancement Provider or any other Person hereunder or pursuant to any
document delivered hereunder for any action taken or for refraining from the
taking of any action, it being expressly understood that all such liability is
expressly waived and released as a condition of, and as consideration for, the
execution of this Agreement and any Supplement and the issuance of the
Certificates; provided, however, that this provision shall not protect the
directors, officers, employees and agents of the Servicer against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. Except as provided in Section 8.04 with
respect to the Trust and the Trustee, its officers, directors, employees and
agents, the Servicer shall not be under any liability to the Trust, the Trustee,
its officers, directors, employees and agents, the Certificateholders or any
other Person for any action taken or for refraining from the taking of any
action in its capacity as Servicer pursuant to this Agreement or any Supplement;
provided, however, that this provision shall not protect the Servicer against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of its
reckless disregard of its obligations and duties hereunder or under any
Supplement. The Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties to
service the Trust Assets in accordance with this Agreement which in its
reasonable opinion may involve it in any expense or liability.
Section 8.04 Servicer Indemnification of the Trust and the
Trustee. The Servicer shall (jointly and severally if more than one Person is
acting as Servicer) indemnify and hold harmless the Trust and the Trustee, its
officers, directors, employees and agents, from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts or
omissions or alleged acts or omissions of the Servicer with respect to
activities of the Trust or the Trustee pursuant to this Agreement or any
Supplement, including, but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other reasonable costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that the Servicer shall not indemnify the Trustee if
such acts, omissions or alleged acts or omissions constitute or are caused by
fraud, negligence, breach of fiduciary duty or willful misconduct by the Trustee
in the performance of its
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duties under this Agreement; provided further, that the Servicer shall not
indemnify the Trust, the Investor Certificateholders or the Certificate Owners
for any liabilities, costs or expenses of the Trust with respect to any action
taken by the Trustee at the request of the Investor Certificateholders; provided
further, that the Servicer shall not indemnify the Trust, the Investor
Certificateholders or the Certificate Owners as to any losses, claims, damages
or liabilities incurred by any of them in their capacities as investors as a
result of Defaulted Loans; and provided further, that the Servicer shall not
indemnify the Trust, the Investor Certificateholders or the Certificate Owners
for any liabilities, costs or expenses of the Trust, the Investor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation, any federal, state, local or foreign income or
franchise taxes or any other tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by the Trust, the Investor Certificateholders or
the Certificate Owners in connection herewith to any taxing authority (except to
the extent that such liabilities, taxes or expenses arose as a result of the
breach by the Servicer of its obligations under Section 11.11). Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this indemnity shall survive the termination of this Agreement and
the Trust or the resignation or removal of the Trustee and shall run directly to
and be enforceable by an injured party subject to the limitations of this
Section 8.04.
Section 8.05 The Servicer Not to Resign. The Servicer shall
not resign from the obligations and duties hereby imposed on it except upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
Opinion of Counsel and as to clause (ii) by an Officer's Certificate, each to
such effect delivered, and satisfactory in form and substance, to the Trustee.
No such resignation shall become effective until the Trustee or a Successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
in accordance with Section 10.02 hereof. If the Trustee is unable within 120
days of the date of such determination to appoint a Successor Servicer, the
Trustee shall serve as Successor Servicer hereunder.
Section 8.06 Access to Certain Documentation and Information
Regarding the Trust Assets. The Servicer shall provide to the Trustee access to
the documentation regarding the Trust Assets in such cases where the Trustee is
required, in connection with the enforcement of the rights of the Investor
Certificateholders or by applicable statutes or regulations, to review such
documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and (iv) at offices
designated by the Servicer. Nothing in this Section 8.06 shall derogate from the
obligation of the Transferor, the Trustee or 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 8.06 as a result of such obligations shall not constitute a breach of
this Section 8.06.
Section 8.07 Transfer of Duties. It is understood and agreed
by the parties hereto that the Servicer may transfer its servicing duties
hereunder to (i) any of its Affiliates which is an Eligible Servicer or (ii) to
any other Person which is an Eligible Servicer if, in either case, each Rating
Agency for each outstanding Series of Certificates has advised the Trustee in
writing that the rating of the related Class(es) of Investor Certificates will
not be lowered or withdrawn as a result of such transfer; provided that, in
either case, the AIC Support Agreement shall remain in effect with respect to
such Affiliate or Person. No such transfer shall become effective until such
Affiliate or Person shall have assumed the responsibilities and obligations of
the Servicer in accordance with Section 10.02 hereof.
Section 8.08 The Servicer to Pay Rating Agency Fees. The
Servicer covenants and agrees to pay to each Rating Agency from time to time the
fees of such Rating Agency for all services rendered by it in connection with
the Trust or any Series or any Class within a Series.
[End of Article VIII]
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ARTICLE IX
PAY OUT EVENTS
Section 9.01 Pay Out Events. If any one of the following
events (each, a "Trust Pay Out Event") shall occur:
(a) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or other similar law
for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against either of the Original Transferors or the Transferor
and such decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; or either of the Original Transferors or the Transferor
shall consent to the appointment of a conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets and liabilities,
voluntary liquidation or similar proceedings of or relating to such entity or of
or relating to all or substantially all of such entity's property; or either of
the Original Transferors or the Transferor shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its obligations
or take any corporate action in furtherance of any of the foregoing (any such
event, an "Insolvency Event");
(b) the Transferor shall become unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of this
Agreement; or
(c) AIG shall fail to meet its obligations under either of
the Support Agreements in any respect or AIC shall fail to meet its obligations
under subsection 7.06(b) in any respect, or the provisions of subsection 7.06
shall have been modified, amended or terminated except as otherwise expressly
permitted by the terms of this Agreement or any Supplement, or either of the
Support Agreements shall have been modified, amended or terminated except as
otherwise expressly permitted by the terms thereof; then a Pay Out Event with
respect to all Series of Certificates shall occur without any notice or other
action on the part of the Trustee or the Investor Certificateholders immediately
upon the occurrence of such event.
Section 9.02 Additional Rights Upon the Occurrence of
Certain Events.
(a) If an Insolvency Event occurs with respect to the
Transferor violates Section 6.03(b) for any reason, the Transferor shall on the
day of such Insolvency Event or violation (the "Appointment Day") immediately
cease to transfer
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Principal Receivables to the Trust and shall promptly give notice to the Trustee
thereof. Notwithstanding any cessation of the transfer to the Trust of
additional Principal Receivables, Principal Receivables transferred to the Trust
prior to the occurrence of such Insolvency Event or violation and Collections in
respect of such Principal Receivables, Finance Charge Receivables, whenever
created, accrued in respect of such Principal Receivables, and Recoveries with
respect to such Principal Receivables and Finance Charge Receivables shall
continue to be a part of the Trust, and shall continue to be allocated and paid
in accordance with Article IV. Within 15 days of the Appointment Day, the
Trustee shall (i) publish a notice in an Authorized Newspaper that an Insolvency
Event or violation has occurred and that the Trustee intends to sell, dispose of
or otherwise liquidate the Trust Assets on commercially reasonable terms and in
a commercially reasonable manner and (ii) send written notice to the Investor
Certificateholders describing the provisions of this Section 9.02 and requesting
instructions from such Holders. Unless within 90 days from the day notice
pursuant to clause (i) above is first published the Trustee shall have received
written instructions from Holders of Investor Certificates (including for
purposes of this Section 9.02 any Investor Certificates owned by either of the
Original Transferors or the Transferor as to which no Insolvency Event has
occurred) evidencing more than 50% of the Certificateholders Ownership Interests
of each Series issued and outstanding (or, if any such Series has two or more
Classes of Investor Certificates, each such Class) and written instructions from
the Holder of the Transferor Certificate (if no Insolvency Event has occurred as
to it) to the effect that such Holders disapprove of the liquidation of the
Trust Assets and wish to continue having Principal Receivables transferred to
the Trust as before such Insolvency Event or violation, the Trustee shall sell,
dispose of or otherwise liquidate the Trust Assets in a commercially reasonable
manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids. The Trustee may obtain a prior determination
from any such conservator, receiver or liquidator that the terms and manner of
any proposed sale, disposition or liquidation are commercially reasonable. The
provisions of Sections 9.01 and 9.02 shall not be deemed to be mutually
exclusive.
(b) The proceeds from the sale, disposition or liquidation of
the Trust Assets pursuant to subsection (a) above shall be treated as
Collections on the Receivables and shall be allocated and deposited in
accordance with the provisions of Article IV; provided, that the Trustee shall
determine conclusively in its sole discretion the amount of such proceeds which
are allocable to Finance Charge Receivables, the amount of such proceeds
allocable to Recoveries and the amount of such proceeds which are allocable to
Principal Receivables. Unless the Trustee receives written instructions from
Investor Certificateholders as provided in subsection 9.02(a) above, on the day
following the last Distribution Date in the Monthly Period during which such
proceeds are distributed to the Investor Certificateholders of each Series, the
Trust shall terminate.
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(c) The Trustee may appoint an agent or agents to assist with
its responsibilities pursuant to this Article IX with respect to competitive
bids.
[End of Article IX]
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ARTICLE X
SERVICER DEFAULTS
Section 10.01 Servicer Defaults. If any one of the
following events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer
or deposit (other than with respect to any Credit Balances) or to give
instructions or notice to the Trustee pursuant to Article IV or to instruct the
Trustee to make any required drawing, withdrawal, or payment under any Credit
Enhancement on or before the date occurring five Business Days after the date
such payment, transfer, deposit, withdrawal or drawing or such instruction or
notice is required to be made or given, as the case may be, under the terms of
this Agreement;
(b) failure on the part of the Servicer duly to observe or
perform in any respect any other covenants or agreements of the Servicer set
forth in this Agreement (other than those set forth in subsections 3.03(g), (i)
and (j)), which has a material adverse effect on the Investor Certificateholders
of any Series (which determination shall be made without regard to the
availability of any Credit Enhancement or similar credit support device) and
which continues unremedied for a period of 60 days after the date on which
written notice of such failure, stating that such notice is a "Notice of
Servicer Default" hereunder and requiring the same to be remedied, shall have
been given to the Servicer by the Trustee, or to the Servicer and the Trustee by
the Holders of Investor Certificates evidencing Undivided Interests aggregating
not less than 50% of the Certificateholders Ownership Interests of any Series
adversely affected thereby and continues to materially adversely affect such
Investor Certificateholders for such period; or the Servicer shall delegate or
assign its duties under this Agreement, except as permitted by Section 8.02 or
8.07; provided, however, that failure on the part of the Servicer duly to
observe or perform in any respect any covenants or agreements of the Servicer
set forth in subsections 3.03(g), (i) or (j) of this Agreement, which has a
material adverse effect on the Investor Certificateholders of any Series (which
determination shall be made without regard to the availability of any Credit
Enhancement or similar credit support device) and which continues after, and
notwithstanding, the removal by the Servicer of the related Receivable in
accordance with the last paragraph of Section 3.03, shall be a Servicer Default
unless the Servicer shall have, within 60 days after the date (following such
removal) on which written notice of such continuing material adverse effect
shall have been given to the Servicer by the Trustee or to the Servicer and the
Trustee by the Holders of Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of the Certificateholders Ownership Interests of
any Series adversely affected thereby, remedied such failure;
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(c) any representation, warranty or certification made by the
Servicer in this Agreement or any Supplement or in any certificate (including
without limitation any Monthly Servicer Report) delivered pursuant to this
Agreement or any Supplement shall prove to have been incorrect when made, which
has a material adverse effect on the Investor Certificateholders of any Series
(which determination shall be made without regard to the availability of any
Credit Enhancement or similar credit support device) and which continues to be
incorrect in any material respect for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by the Holders of Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of the Certificateholders Ownership Interests of
any Series adversely affected thereby; or
(d) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or other similar law
for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or the
Servicer shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities, voluntary liquidation or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property; or the
Servicer shall admit in writing its inability to pay its debts as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations or take any corporate action in
furtherance of any of the foregoing;
then, so long as such Servicer Default shall not have been remedied, either the
Trustee, or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Certificateholders Ownership
Interests, by notice then given in writing to the Servicer (and to the Trustee
if given by the Investor Certificateholders) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer as Servicer (and
which termination shall apply to each person acting as Servicer if more than one
Person is acting as Servicer) under this Agreement and in and to the
Receivables. Any determination that an inaccuracy or other event, which with
notice and/or the passage of time would constitute a Servicer Default, would
have a material adverse effect on Holders of one or more Series of Certificates
shall be made without regard to the availability of any Credit Enhancement or
similar credit support device with respect to such Series. After receipt by the
Servicer of such Termination Notice, and on the date that a Successor Servicer
shall have been appointed by the Trustee pursuant to Section 10.02, all
authority and power of the Servicer under this Agreement shall pass to and be
vested in the Successor Servicer; and, without limitation, the
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Trustee is hereby authorized and empowered (upon the failure of the Servicer to
cooperate) to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments, and
to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights and obligations. The Servicer
agrees to cooperate with the Trustee and such Successor Servicer in effecting
the termination of the responsibilities and rights of the Servicer to conduct
servicing hereunder including, without limitation, the transfer to such
Successor Servicer of all authority of the Servicer to service the Trust Assets
provided for under this Agreement, including, without limitation, all authority
over all Collections which shall on the date of transfer be held by the Servicer
for deposit, or which have been deposited by the Servicer, in the Collection
Account, the Finance Charge Account, the Principal Account, and any Series
Account, or which shall thereafter be received with respect to the Trust Assets,
and in assisting the Successor Servicer and in enforcing all rights to
Recoveries allocable to the Trust. The Servicer shall promptly transfer its
electronic records or electronic copies thereof relating to the Trust Assets to
the Successor Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor Servicer all
other records, correspondence and documents necessary for the continued
servicing of the Trust Assets in the manner and at such times as the Successor
Servicer shall reasonably request. To the extent that compliance with this
Section 10.01 shall require the Servicer to disclose to the Successor Servicer
information of any kind which the Servicer reasonably deems to be confidential,
the Successor Servicer shall be required to enter into such customary licensing
and confidentiality agreements as the Servicer shall deem reasonably necessary
to protect its interests. Subject to the immediately preceding sentence, the
Servicer agrees to grant to the Successor Servicer an exclusive,
non-transferable, non-assignable license to utilize the software which is owned
by the Servicer and which is used by the Servicer in connection with the
servicing of the Loans and the related Receivables; provided, however, that such
software shall be used by the Successor Servicer solely for the purposes of
servicing the Trust Assets. The Servicer shall, on the date of any servicing
transfer, transfer all of its rights and obligations under the Credit
Enhancement with respect to any Series to the Successor Servicer.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in subsection 10.01(a) for a period of 10 Business Days
or under subsection 10.01(b) or (c) for a period of 60 Business Days, shall not
constitute a Servicer Default if such delay or failure could not be prevented by
the exercise of reasonable diligence by the Servicer and such delay or failure
was caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion, riot or sabotage, epidemics, landslides,
lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or
meltdowns, floods, power outages or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement and the
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Servicer shall provide the Trustee, any Credit Enhancement Provider, the
Transferor and the Holders of Investor Certificates with an Officer's
Certificate giving prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts so to perform
its obligations.
Section 10.02 Trustee to Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.01, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Trustee in writing or, if no
such date is specified in such Termination Notice, or otherwise specified by the
Trustee, until a date mutually agreed upon by the Servicer and Trustee. The
Trustee shall notify each Rating Agency of such removal of the Servicer. The
Trustee shall, as promptly as possible after the giving of a Termination Notice
appoint a successor servicer (the "Successor Servicer"), and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Trustee. The Trustee may obtain bids from any potential
successor servicer. If the Trustee is unable to obtain any bids from any
potential successor servicer and the Servicer delivers an Officer's Certificate
to the effect that they cannot in good faith cure the Servicer Default which
gave rise to a Termination Notice, and if the Trustee is legally unable to act
as Successor Servicer, then the Trustee shall notify each Credit Enhancement
Provider of the proposed sale of the Receivables and shall provide each such
Credit Enhancement Provider an opportunity to bid on the Receivables and shall
offer the Transferor the right of first refusal to purchase the Receivables on
terms equivalent to the best purchase offer as determined by the Trustee (which
shall be the average bid quoted by two recognized dealers for similar securities
rated in comparable rating categories by each Rating Agency and having a
remaining maturity approximately equal to the remaining maturity of each
Series), but in no event less than an amount equal to the Aggregate
Certificateholders Ownership Interests on the date of such purchase plus all
interest accrued but unpaid on all of the outstanding Investor Certificates at
the applicable Certificate Rate through the date of such purchase; provided,
however, that if (i) the AIR Support Agreement is not in effect at the time of
such purchase and (ii) the short-term unsecured debt obligations or long-term
unsecured debt obligations of the Transferor (or any Affiliate of the Transferor
that may agree at such time to guarantee payment of such purchase price) are not
rated at the time of such purchase at least P-3 or Baa3, respectively, by
Moody's, no such purchase by the Transferor shall occur unless the Transferor
shall deliver an Opinion of Counsel reasonably acceptable to the Trustee and, if
Moody's is a Rating Agency with respect to any Series of Certificates
outstanding, to Moody's, that such purchase would not constitute a fraudulent
conveyance of the Transferor. The proceeds of such sale shall be deposited in
the Distribution Accounts or any Series Account, as provided in the related
Supplement, for distribution to the Investor Certificateholders of each
outstanding Series pursuant to Section 12.03 of this Agreement. In the event
that a Successor Servicer has not been appointed and has not accepted its
appointment at the
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time when the Servicer ceases to act as Servicer, the Trustee without further
action shall automatically be appointed the Successor Servicer. Notwithstanding
the above, the Trustee shall, if it is legally unable so to act, petition a
court of competent jurisdiction to appoint any established financial institution
having, in the case of an entity that is subject to risk-based capital adequacy
requirements, risk-based capital of at least $50,000,000 or, in the case of an
entity that is not subject to risk-based capital requirements, having a net
worth of not less than $50,000,000 and whose regular business includes the
servicing of receivables comparable to the Receivables as the Successor Servicer
hereunder.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, shall be deemed to have made the representations and
warranties set forth in Section 3.03 as of the date of succession and all
references in this Agreement to the Servicer shall be deemed to refer to the
Successor Servicer. Any Successor Servicer, by its acceptance of its
appointment, will automatically agree to be bound by the terms and provisions of
each Credit Enhancement. Notwithstanding the above, the Trustee, if it becomes
Successor Servicer pursuant to this Section, shall have no responsibility or
obligation (i) for the duties and obligations of the predecessor Servicers in
their capacities as Original Transferors under this Agreement, to repurchase or
substitute any Trust Asset, (ii) to cure losses on Permitted Investments
directed by a predecessor Servicer, (iii) for any representation or warranty of
the predecessor Servicer pursuant to Section 3.03, and (iv) for any act of any
predecessor Servicer prior to the date the Trustee assumes the capacity of
Servicer pursuant to this Section.
(c) In connection with such appointment and assumption, the
Trustee shall be entitled to such compensation, or may make such arrangements
for the compensation of the Successor Servicer out of Collections, as it and
such Successor Servicer shall agree; provided, however, that no such
compensation shall be in excess of the Servicing Fee permitted to the Servicer
pursuant to Section 3.02. The Transferor agrees that if the Servicer is
terminated hereunder, it will deposit with the Trustee a portion of the
Collections in respect of Finance Charge Receivables that it is entitled to
receive pursuant to Article IV to pay its share of the compensation of the
Successor Servicer.
(d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.01 and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor
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Servicer agrees to cooperate with the Transferor in effecting the termination of
the responsibilities and rights of the Successor Servicer to conduct servicing
on the Trust Assets. The outgoing Servicer shall be responsible for all costs
and expenses of the transfer of servicing to a Successor Servicer, including the
Trustee if it is acting in such capacity. The Successor Servicer shall transfer
its electronic records relating to the Trust Assets to the Transferor in such
electronic form as the Transferor may reasonably request and shall transfer all
other records, correspondence and documents to the Transferor in the manner and
at such times as the Transferor shall reasonably request. To the extent that
compliance with this Section 10.02 shall require the Successor Servicer to
disclose to the Transferor information of any kind which the Successor Servicer
deems to be confidential, the Transferor shall be required to enter into such
customary licensing and confidentiality agreements as the Successor Servicer
shall deem reasonably necessary to protect its interests.
Section 10.03 Notification to Certificateholders. Within two
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give prompt written notice thereof to the Trustee, Standard &
Poor's, Moody's and any Credit Enhancement Provider and the Trustee shall give
notice to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register. Upon any termination or appointment of a
Successor Servicer pursuant to this Article X, the Trustee shall give prompt
written notice thereof to Investor Certificateholders at their respective
addresses appearing in the Certificate Register.
Section 10.04 Waiver of Past Defaults. The Holders of
Investor Certificates evidencing Undivided Interests aggregating not less than
66-2/3% of the Certificateholders Ownership Interests of each Series adversely
affected by any default by the Servicer, the Transferor or the Original
Transferors may, on behalf of all Certificateholders of such Series, waive any
default by the Servicer, the Transferor or the Original Transferors in the
performance of their respective obligations hereunder and its consequences,
except a default in the failure to make any required deposits or payments of
interest or principal relating to such Series pursuant to Article IV which
default does not result from the failure of the Paying Agent to perform its
obligations to make any required deposits or payments of interest and principal
in accordance with Article IV. Upon any such waiver of a past default, such
default shall cease to exist, and any default 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
except to the extent expressly so waived.
[End of Article X]
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ARTICLE XI
THE TRUSTEE
Section 11.01 Duties of Trustee.
(a) The Trustee, prior to the occurrence of any Servicer
Default and after the curing or waiver of all Servicer Defaults which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement and no additional duties shall be
implied into this Agreement against the Trustee. If a Responsible Officer has
received written notice that a Servicer Default has occurred (which has not been
cured or waived) and if the Trustee has not appointed a successor Servicer
pursuant to Section 10.02, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and skill
in its exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they substantially conform to the requirements of this
Agreement.
(c) Subject to subsection 11.01(a), no provision of this
Agreement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own misconduct;
provided, however, that:
(i) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50%
of the Certificateholders Ownership Interests of any Series or of any
Credit Enhancement Provider with respect to such Series relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee in relation to such Series, under this Agreement; and
(iii) the Trustee shall not be charged with knowledge of
any failure by the Servicer referred to in clauses (a), (b) or (c) of
Section 10.01 unless a
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Responsible Officer of the Trustee obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from the
Credit Enhancement Provider, the Servicer or any Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than
10% of the Certificateholders Ownership Interests of any Series
adversely affected thereby.
(d) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Servicer in accordance with
the terms of this Agreement.
(e) Except for actions expressly authorized by this
Agreement, the Trustee shall take no action reasonably likely to impair the
interests of the Trust in any Trust Assets now existing or hereafter created or
to impair the value of any Trust Assets now existing or hereafter created.
(f) Except as provided in this subsection 11.01(f), the
Trustee shall have no power to vary the corpus of the Trust including, without
limitation, the power to (i) accept any substitute obligation for a Trust Asset
initially assigned to the Trust under Section 2.01 or 2.06 hereof, (ii) add any
other investment, obligation or security to the Trust, except for an addition
permitted under Section 2.06 or (iii) withdraw from the Trust any Trust Assets,
except for a withdrawal permitted under Sections 2.07, 9.02, 12.01 or 12.02 or
subsections 2.04(d), 2.04(e) or Article IV.
(g) Subject to subsection 11.01(d) above, in the event that
the Paying Agent or the Transfer Agent and Registrar (if other than the Trustee)
shall fail to perform any obligation, duty or agreement in the manner or on the
day required to be performed by the Paying Agent or the Transfer Agent and
Registrar, as the case may be, under this Agreement, the Trustee shall be
obligated promptly to perform such obligation, duty or agreement in the manner
so required.
(h) No provision of this Agreement shall be construed to
require the Trustee to perform, or accept any responsibility for the performance
of, the obligations of the Servicer hereunder until it shall have assumed such
obligations in accordance with Section 10.02.
Section 11.02 Certain Matters Affecting the Trustee. Except
as otherwise provided in Section 11.01:
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(a) the Trustee may conclusively rely on and shall be
protected in acting on, or in refraining from acting in accord with, without any
duty to verify the contents or recompute any calculations therein, any
assignment of Additional Receivables, the initial report, the Monthly Servicer
Report, the annual Servicer's certificate, the monthly payment instructions and
notification to the Trustee, the monthly Certificateholders' statement, any
resolution, Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be genuine
and to have been signed or presented to it pursuant to this Agreement by the
proper party or parties;
(b) the Trustee may consult with counsel, and any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement or any Credit
Enhancement, or to institute, conduct or defend any litigation hereunder or in
relation hereto, at the request, order or direction of any of the
Certificateholders or any Credit Enhancement Provider, pursuant to the
provisions of this Agreement, unless such Certificateholders or Credit
Enhancement Provider shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve the Trustee
of the obligations, upon the occurrence of any Servicer Default (which has not
been cured or waived), to exercise such of the rights and powers vested in it by
this Agreement and any Credit Enhancement and to use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(e) the Trustee shall not be bound to make any investigation
into the facts of matters stated in any assignment of Additional Receivables,
the initial report, the monthly Servicer's certificate, the annual Servicer's
certificate, the monthly payment instructions and notification to the Trustee,
the monthly Certificateholders' statement, any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document, unless requested in writing so to do
by any Credit Enhancement Provider or by Holders of Investor Certificates
evidencing Undivided Interests aggregating more than 50% of the
Certificateholders Ownership Interests of any Series;
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(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian, and the Trustee shall not be responsible for
any misconduct or negligence on the part of any such agent, attorney or
custodian appointed with due care by it hereunder; and
(g) except as may be required by subsection 11.01(a), the
Trustee shall not be required to make any initial or periodic examination of any
documents or records related to the Trust Assets for the purpose of establishing
the presence or absence of defects, the compliance by the Transferor [, the
Original Transferors] or the Servicer with their respective representations and
warranties or for any other purpose.
Section 11.03 Trustee Not Liable for Recitals in
Certificates. The Trustee assumes no responsibility for the correctness of the
recitals contained in this Agreement and in the Certificates (other than the
signature and authentication of the Trustee on the Certificates). Except as set
forth in Section 11.15, the Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any Trust
Asset or related document. The Trustee shall not be accountable for the use or
application by the Transferor or the Original Transferors of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Transferor or the Original Transferors or
to the Holder of the Transferor Certificate in respect of the Trust Assets or
deposited in or withdrawn from the Collection Account, the Principal Account,
the Finance Charge Account or any Series Account by the Servicer.
Section 11.04 Trustee May Own Certificates. The Trustee in
its individual or any other capacity may become the owner or pledgee of Investor
Certificates with the same rights as it would have if it were not the Trustee.
Section 11.05 The Servicer to Pay Trustee's Fees and
Expenses. The Servicer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to receive, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the Trust hereby created and in the exercise and performance
of any of the powers and duties hereunder of the Trustee, and, subject to
Section 8.04, the Servicer will pay or reimburse the Trustee (without
reimbursement from any Investor Account, any Series Account or otherwise) upon
its request for all reasonable expenses, disbursements and advances (including
legal fees and costs and costs of persons not regularly employed by the Trustee)
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement except any such expense, disbursement or advance as may arise from its
own negligence or bad faith and except as provided in the following sentence. If
the Trustee is appointed Successor Servicer pursuant to Section 10.02, the
provisions of this Section 11.05 shall not apply
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to expenses, disbursements and advances made or incurred by the Trustee in its
capacity as Successor Servicer.
The obligations of the Servicer under this Section 11.05
shall survive the termination of the Trust and the resignation or removal of the
Trustee.
Section 11.06 Eligibility Requirements for Trustee. The
Trustee hereunder shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State thereof
authorized under such laws to exercise corporate trust powers, having a
long-term unsecured debt rating of at least Baa3 by Moody's and BBB- by Standard
& Poor's having, in the case of an entity that is subject to risk-based capital
adequacy requirements, risk-based capital of at least $50,000,000 or, in the
case of an entity that is not subject to risk-based capital adequacy
requirements, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 11.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 11.06, the Trustee shall resign immediately in the manner and with the
effect specified in Section 11.07.
Section 11.07 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign and be discharged from
the Trust hereby created by giving written notice thereof to the Servicer. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.06 hereof and shall fail to resign
after written request therefor by the Transferor, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
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(c) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 11.07
shall not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.08 hereof and any liability of the Trustee
arising hereunder shall survive such appointment of a successor trustee.
Section 11.08 Successor Trustee.
(a) Any successor trustee appointed as provided in Section
11.07 hereof shall execute, acknowledge and deliver to the Transferor and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee all documents and statements held by it hereunder, and the Transferor
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor trustee all such rights, powers, duties and
obligations.
(b) No successor trustee shall accept appointment as provided
in this Section 11.08 unless at the time of such acceptance such successor
trustee shall be eligible under the provisions of Section 11.06 hereof and shall
be an Eligible Servicer, and, if Standard & Poor's is then a Rating Agency,
unless Standard & Poor's shall have consented to such appointment.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.08, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
Section 11.09 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.06 hereof, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
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Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement,
at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 11.10, such powers, duties, obligations,
rights and trusts as the Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 11.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 11.08 hereof.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any laws
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or cotrustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation
of or remove any separate trustee or cotrustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either
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jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect to this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 Tax Returns. In the event the Trust shall be
required to file tax returns, the Trustee, as soon as practicable after it is
made aware of such requirement, shall prepare or cause to be prepared any tax
returns required to be filed by the Trust and, to the extent possible, shall
file such returns in accordance with Section 3.07 of this Agreement at least
five days before such returns are due to be filed. The Trustee is hereby
authorized to sign any such return on behalf of the Trust. The Servicer shall
prepare or shall cause to be prepared all tax information required by law to be
distributed to Certificateholders and shall deliver such information to the
Trustee at least five days prior to the date it is required by law to be
distributed to Certificateholders. The Servicer, upon request, will furnish the
Trustee with all such information known to the Servicer as may be reasonably
required in connection with the preparation of all tax returns of the Trust.
Except to the extent the Trustee or Servicer breaches its obligations or
covenants contained in this Section 11.11 or in Section 6.06(b) of this
Agreement, in no event shall the Trustee or the Servicer be liable for any
liabilities, costs or expenses of the Trust, the Investor Certificateholders or
the Certificate Owners arising under any tax law, including without limitation
federal, state, local or foreign income or excise taxes or any other tax imposed
on or measured by income (or any interest or penalty with respect thereto or
arising from a failure to comply therewith).
Section 11.12 Trustee May Enforce Claims Without Possession
of Certificates. All rights of action and claims under this Agreement or any
Series of Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of any Series of Certificateholders in respect of which such
judgment has been obtained.
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Section 11.13 Suits for Enforcement. If a Servicer Default
shall occur and be continuing, the Trustee, in its discretion may, subject to
the provisions of Sections 10.01 and 11.14, proceed to protect and enforce its
rights and the rights of any Series of Certificateholders under this Agreement
by a suit, action or proceeding in equity or at law or otherwise, whether for
the specific performance of any covenant or agreement contained in this
Agreement or in aid of the execution of any power granted in this Agreement or
for the enforcement of any other legal, equitable or other remedy as the
Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or any Series of Certificateholders.
Section 11.14 Rights of Certificateholders to Direct Trustee.
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Aggregate Certificateholders Ownership Interests (or, with
respect to any remedy, trust or power that does not relate to all Series, 50% of
the aggregate Certificateholders Ownership Interests of the Investor
Certificates of all Series to which such remedy, trust or power relates) shall
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that, subject to Section
11.01, the Trustee shall have the right to decline to follow any such direction
if the Trustee being advised by counsel determines that the action so directed
may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer or Responsible Officers of the Trustee, determine that the
proceedings so directed would be illegal or involve it in personal liability or
be unduly prejudicial to the rights of Certificateholders not parties to such
direction; and provided further, that nothing in this Agreement shall impair the
right of the Trustee to take any action deemed proper by the Trustee and which
is not inconsistent with such direction of such Holders of Investor
Certificates.
Section 11.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(i) the Trustee is a national banking association duly
organized, existing and authorized to engage in the business of banking
under the laws of the United States of America;
(ii) the Trustee has full power, authority and right to
execute, deliver and perform this Agreement, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Agreement; and
(iii) this Agreement has been duly executed and delivered
by the Trustee.
Section 11.16 Maintenance of Office or Agency. The Trustee
will maintain at its expense in the Borough of Manhattan, the City of New York
an office or
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offices, or agency or agencies, where notices and demands to or upon the Trustee
in respect of the Certificates and this Agreement may be served. The Trustee
initially appoints its Corporate Trust Office as its office for such purposes in
New York. The Trustee will give prompt written notice to the Servicer and to
Certificateholders (or in the case of Holders of Bearer Certificates, in the
manner provided for in the related Supplement) of any change in the location of
the Certificate Register or any such office or agency.
[End of Article XI]
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ARTICLE XII
TERMINATION
Section 12.01 Termination of Trust.
(a) The respective obligations and responsibilities of the
Original Transferors, the Transferor, the Servicer and the Trustee created
hereby (other than the obligation of the Trustee to make payments to
Certificateholders as hereafter set forth) shall terminate, except with respect
to the duties described in Section 11.05, subsections 2.04(d) and 12.03(b) and
the indemnity obligations described in subsection 6.03(c) and Sections 7.04,
7.05 and 8.04, on the Trust Termination Date; provided, however, that the Trust
shall not terminate on the date specified in clause (i) of the definition of
"Trust Termination Date" if each of the Servicer and the Holder of the
Transferor Certificate notify the Trustee in writing, not later than five
Business Days preceding such date, that they desire that the Trust not terminate
on such date, which notice (such notice, a "Trust Extension") shall specify the
date on which the Trust shall terminate (such date, the "Extended Trust
Termination Date"); provided, however, that the Extended Trust Termination Date
shall be not later than the earlier of December 31, 2034 and the expiration of
21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the father of the late President of the United States, living on the
date of this Agreement. The Servicer and the Holder of the Transferor
Certificate may, on any date following the date on which a Trust Extension is
given, so long as no Series of Certificates is outstanding, deliver a notice in
writing to the Trustee changing the Extended Trust Termination Date (subject to
the second proviso in the preceding sentence).
(b) All principal or interest with respect to any Series of
Investor Certificates shall be due and payable no later than the Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Certificateholders Ownership Interests of any
Series of Certificates is expected to be greater than zero on its Series
Termination Date (after giving effect to all transfers, withdrawals, deposits
and drawings to occur on such date and the payment of principal to be made on
such Series on such date), the Trustee will, prior to such date, sell or cause
to be sold, and pay the proceeds first, to all Certificateholders of such Series
pro rata and in accordance with the priority for each Class within such Series
as provided in the related Supplement, in final payment of all principal of and
accrued interest on such Series of Certificates, and second, as provided in the
related Supplement, an amount of Principal Receivables and the related Finance
Charge Receivables (or interests therein) up to 110% of the sum of the
Certificateholders Ownership Interests of such Series plus the Enhancement
Invested Amount or the Collateral Interest (if not included in the
Certificateholders Ownership Interests) of such Series, if any, at the close of
business on such date (but not more than the applicable Investor Percentage of
Principal Receivables and the related Finance Charge Receivables on such date
for such Series).
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The Trustee shall notify each Credit Enhancement Provider of the proposed sale
of such Receivables and shall provide each Credit Enhancement Provider with an
opportunity to bid on such Receivables. The Transferor shall be permitted to
purchase such Receivables in such case and shall have a right of first refusal
with respect thereto. Any proceeds of such sale in excess of such principal and
interest paid and such other amounts paid pursuant to the related Supplement
shall be paid to the Holder of the Transferor Certificate but only if the
Transferor Ownership Interest as of such date is greater than the Minimum
Transferor Ownership Interest as of the end of the immediately preceding Monthly
Period and otherwise shall be deposited in the Collection Account. Upon such
Series Termination Date with respect to the applicable Series of Certificates,
final payment of all amounts allocable to any Investor Certificates of such
Series shall be made in the manner provided in Section 12.03.
Section 12.02 Cleanup Call. (a) If so provided in any
Supplement, the Transferor may, but shall not be obligated to, cause a final
distribution to be made in respect of the related Series of Certificates on any
Distribution Date on or after the Distribution Date on which the
Certificateholders Ownership Interest in such Series is less than or equal to
10% of the Certificateholders Ownership Interest on the Closing Date for such
Series. Such distribution shall be made by depositing into the applicable
Distribution Account or the applicable Series Account, not later than the
Transfer Date preceding such Distribution Date, for application in accordance
with Section 12.03, the amount specified in such Supplement; provided, however,
that if (i) the AIR Support Agreement is not in effect at the time of such
purchase and (ii) the short term unsecured debt obligations or long term
unsecured debt obligations of the Transferor (or of any Affiliate of the
Transferor that may agree at such time to guarantee the payment of such purchase
price) are not rated at the time of such purchase of Receivables at least P-3 or
Baa3, respectively, by Moody's, no such event shall occur unless the Transferor
shall deliver an Opinion of Counsel reasonably acceptable to the Trustee and, if
Moody's is a Rating Agency with respect to any Series of Certificates
outstanding, to Moody's, that such deposit into the applicable Distribution
Account or any Series Account as provided in the related Supplement would not
constitute a fraudulent conveyance of the Transferor.
(b) The amount deposited pursuant to subsection 12.02(a)
shall be paid to the Investor Certificateholders of the related Series pursuant
to Section 12.03 on the related Distribution Date following the date of such
deposit. All Certificates of a Series which are purchased pursuant to subsection
12.02(a) shall be delivered by the Transferor upon such purchase to, and be
canceled by, the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor. The Certificateholders Ownership
Interests of each Series which is purchased pursuant to subsection 12.02(a)
shall, for the purposes of the definition of "Transferor Ownership Interest," be
deemed to be equal to zero on the Distribution Date following the making of the
deposit, and the Transferor Ownership Interest shall thereupon be
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deemed to have been increased by the Certificateholders Ownership Interests of
such Series.
Section 12.03 Final Payment with Respect to Any Series.
(a) Written notice of any termination, specifying the
Distribution Date upon which the Investor Certificateholders of any Series may
surrender their Certificates for payment of the final distribution with respect
to such Series and cancellation, shall be given (subject to at least two
Business Days' prior notice from the Servicer to the Trustee) by the Trustee to
Investor Certificateholders of such Series mailed not later than the fifth day
of the month of such final distribution (or in the manner provided by the
Supplement relating to such Series) specifying (i) the Distribution Date (which
shall be the Distribution Date in the month (x) in which the deposit is made
pursuant to subsection 2.04(e), 9.02(b), or subsection 12.02(a) of the Agreement
or such other section as may be specified in the related Supplement, or (y) in
which the related Series Termination Date occurs) upon which final payment of
such Investor Certificates will be made upon presentation and surrender of such
Investor Certificates at the office or offices therein designated (which, in the
case of Bearer Certificates, shall be outside the United States), (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officer's Certificate
setting forth the information specified in Article V of this Agreement covering
the period during the then current calendar year through the date of such notice
and setting forth the date of such final distribution. The Trustee shall give
such notice to the Transfer Agent and the Paying Agent at the time such notice
is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 12.01(a) or the occurrence of the Series Termination Date with
respect to any Series, all funds then on deposit in the Finance Charge Account,
the Principal Account, the Distribution Account or any Series Account applicable
to the related Series shall continue to be held in trust for the benefit of the
Certificateholders of the related Series and the Paying Agent or the Trustee
shall pay such funds to the Certificateholders of the related Series upon
surrender of their Certificates (which surrenders and payments, in the case of
Bearer Certificates, shall be made only outside the United States). In the event
that all of the Investor Certificateholders of any Series shall not surrender
their Certificates for cancellation within six months after the date specified
in the above- mentioned written notice, the Trustee shall give second written
notice (or, in the case of Bearer Certificates, publication notice) to the
remaining Investor Certificateholders of such Series upon receipt of the
appropriate records from the Transfer Agent and Registrar to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one and one-half years after
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the second notice with respect to a Series, all the Investor Certificates of
such Series shall not have been surrendered for cancellation, the Trustee may
take appropriate steps or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders of such Series concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds in the Distribution Account or any Series Account held for the benefit of
such Investor Certificateholders. The Trustee and the Paying Agent shall pay to
the Transferor upon request any monies held by them for the payment of principal
or interest which remains unclaimed for two years. After such payment to the
Transferor, Investor Certificateholders entitled to the money must look to the
Transferor for payment as general creditors unless an applicable abandoned
property law designates another Person.
(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor.
Section 12.04 Termination Rights of Holders of Transferor
Certificate. Upon the termination of the Trust pursuant to Section 12.01, and
after payment of all amounts due hereunder on or prior to such termination and
the surrender of the Transferor Certificate, the Trustee shall execute a written
reconveyance substantially in the form of Exhibit F pursuant to which it shall
reconvey to the Holder of the Transferor Certificate (without recourse,
representation or warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, all moneys due or to
become due with respect to such Receivables (including all accrued interest
theretofore posted as Finance Charge Receivables) and all proceeds of such
Receivables, except for amounts held by the Trustee or any Paying Agent pursuant
to subsection 12.03(b). The Trustee shall execute and deliver such instruments
of transfer and assignment, in each case without recourse, as shall be
reasonably requested by the Holder of the Transferor Certificate to vest in such
Holders all right, title and interest which the Trust had in the Receivables.
[End of Article XII]
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Amendment.
(a) This Agreement or any Supplement may be amended in
writing from time to time by the Servicer, the Transferor, the Original
Transferors and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein, to
add any other provisions with respect to matters or questions arising under this
Agreement or any Supplement which shall not be inconsistent with the provisions
of this Agreement or any Supplement; provided, that such action shall not, as
evidenced by an Opinion of Counsel for the Transferor addressed and delivered to
the Trustee, adversely affect in any material respect the interests of any
Investor Certificateholder.
(b) This Agreement or any Supplement may also be amended in
writing from time to time by the Servicer, the Transferor, the Original
Transferors and the Trustee with the consent of the Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Certificateholders Ownership Interests of each outstanding Series adversely
affected by such amendment for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
any Supplement or modifying in any manner the rights of Investor
Certificateholders of any Series then issued and outstanding; provided, however,
that no such amendment shall (i) reduce in any manner the amount of, or delay
the timing of, distributions which are required to be made on any Investor
Certificates of such Series without the consent of each Holder of Investor
Certificates of such Series, (ii) change the definition of or the manner of
calculating the Certificateholders Ownership Interests, the Investor Percentage
or the Aggregate Default Amount of such Series without the consent of each
Holder of Investor Certificates of such Series, (iii) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of
each Holder of Investor Certificates of all Series adversely affected or (iv)
terminate, modify or amend Section 7.06 without the written consent of each
Holder of Investor Certificates of all Series and written confirmation from each
Rating Agency to the Transferor, the Servicer and the Trustee that such action
will not result in a reduction or withdrawal of the then ratings of any
outstanding Certificates for which it is a Rating Agency. The Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Trustee's rights, duties or immunities under this Agreement or otherwise.
(c) Notwithstanding anything in this Section 13.01 to the
contrary, the Supplement with respect to any Series may be amended with respect
to the items and in accordance with the procedures provided in such Supplement.
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(d) Promptly after the execution of any such amendment, the
Trustee shall furnish notification of the substance of such amendment to each
Investor Certificateholder of each Series affected thereby, to any related
Credit Enhancement Provider and to each Rating Agency providing a rating for
such Series.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Investor Certificateholders shall
be subject to such reasonable requirements as the Trustee may prescribe.
(f) Any Supplement executed and delivered pursuant to Section
6.09 and any amendments deemed made in connection with the addition to or
removal of Receivables from the Trust as provided in Sections 2.06 and 2.07,
executed in accordance with the provisions hereof, shall not be considered
amendments to this Agreement for the purpose of subsections 13.01(a) and (b).
(g) In connection with any amendment, the Trustee may request
an Opinion of Counsel from the Transferor or the Servicer to the effect that the
amendment complies with all requirements of this Agreement.
Section 13.02 Protection of Right, Title and Interest to
Trust.
(a) The Servicer shall cause this Agreement, all amendments
hereto and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders and the Trustee's right,
title and interest to the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders or the Trustee, as the case
may be, hereunder to all property comprising the Trust. The Servicer shall
deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Transferor and the
Original Transferors shall cooperate fully with the Servicer in connection with
the obligations set forth above and will execute any and all documents
reasonably required to fulfill the intent of this subsection 13.02(a).
(b) Within 30 days after the Transferor or either of the
Original Transferors makes any change in its name, identity or corporate
structure which would make any financing statement or continuation statement
filed in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC as in effect in the State of New York or
California, such entity shall give the Trustee notice of any such change and
shall file such financing statements or
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amendments as may be necessary to continue the Trust's security interest in the
Trust Assets and the proceeds thereof.
(c) Each of the Transferor, the Original Transferors and the
Servicer will give the Trustee prompt written notice of any relocation of any
office from which it services Trust Assets or keeps records concerning the Trust
Assets or of its principal executive office and whether, 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 and shall file such financing statements or amendments
as may be necessary to continue the Trust's security interest in the Trust
Assets and the proceeds thereof. The Transferor, the Original Transferors and
the Servicer will at all times maintain each office from which it services Trust
Assets and its principal executive office within the United States of America.
Section 13.03 Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Certificateholder shall
not operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except
with respect to the Investor Certificateholders as specifically provided
elsewhere herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Certificates, except
to the extent provided in Sections 3.07 and 7.04, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder in its capacity as such be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of
any provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given written notice to the Trustee and
unless the Holders of Certificates evidencing Undivided Interests aggregating
more than 50% of the Certificateholders Ownership Interests of any Series (or,
if applicable, any Class within a Series) which may be adversely affected but
for the institution of such suit, action or proceeding, shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and
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liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have the right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Holders of any other of the
Certificates of such Series (or, if applicable, any Class within a Series), or
to obtain or seek to obtain priority over or preference to any other such
Certificateholder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders of such Series (or, if applicable, any Class within a
Series). For the protection and enforcement of the provisions of this Section
13.03, each and every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 13.04 Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.05 Notices. All demands, notices and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at, sent by facsimile to, sent by courier at
or mailed by registered mail, return receipt requested, to (a) in the case of
AIR, AIC and AICCO, to 160 Water Street, New York, New York 10038-4922,
Attention: Senior Vice President, (b) in the case of the Trustee, to the
Corporate Trust Office, (c) in the case of the Credit Enhancement Provider for a
particular Series, the address, if any, specified in the Supplement relating to
such Series and (d) in the case of the Rating Agency for a particular Series,
the address, if any, specified in the Supplement relating to such Series; or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party. Unless otherwise provided with respect to
any Series in the related Supplement, any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register, or with respect to any notice required or permitted to be made to the
Holders of Bearer Certificates, by publication in the manner provided in the
related Supplement. If and so long as any Series or Class is listed on the
Luxembourg Stock Exchange and such exchange shall so require, any notice to
Investor Certificateholders shall be published in an authorized newspaper of
general circulation in Luxembourg within the time period prescribed in this
Agreement. Any notice so mailed or published, as the case may be, within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
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Section 13.06 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be 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
Certificates or rights of the Holders thereof.
Section 13.07 Assignment. Except as provided in Section 8.02
or 8.07, this Agreement may not be assigned by the Servicer.
Section 13.08 Certificates Non-Assessable and Fully Paid.
Except to the extent otherwise provided in Section 7.04, it is the intention of
the parties to this Agreement that the Certificateholders shall not be
personally liable for obligations of the Trust, that the Undivided Interests
represented by the Certificates shall be non-assessable for any losses or
expenses of the Trust or for any reason whatsoever, and that Certificates upon
execution and authentication thereof by the Trustee pursuant to Sections 2.01
and 6.02 are and shall be deemed fully paid.
Section 13.09 Further Assurances. The Transferor, the
Original Transferors and the Servicer agree to do and perform, from time to
time, any and all acts and to execute any and all further instruments required
or reasonably requested by the Trustee more fully to effect the purposes of this
Agreement, including, without limitation, the execution of any financing
statements or continuation statements relating to all or any portion of the
Trust Assets for filing under the provisions of the UCC of any applicable
jurisdiction.
Section 13.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee, any Credit
Enhancement Provider or the Investor Certificateholders, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
Section 13.11 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Certificateholders and, to the extent provided in the related Supplement, to the
Credit Enhancement Provider named therein, and their respective successors and
permitted assigns. Except as otherwise
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provided in this Article XIII and Sections 7.04, 7.05, 7.06 and 8.04 hereof, no
other Person will have any right or obligation hereunder.
Section 13.13 Actions by Certificateholders.
(a) Wherever in this Agreement a provision is made that an
action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder, unless such provision requires a specific
percentage of Investor Certificateholders. Notwithstanding anything in this
Agreement to the contrary, none of the Original Transferors, the Transferor, the
Servicer or any Affiliate thereof shall have any right to vote with respect to
any Investor Certificate except as specifically provided in Section 9.02(a).
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind such
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee or the Servicer
in reliance thereon, whether or not notation of such action is made upon such
Certificate.
Section 13.14 Rule 144A Information. For so long as any of
the Investor Certificates of any Series or any Class are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Transferor,
the Servicer, the Trustee and the Credit Enhancement Provider for such Series
agree to cooperate with each other to provide to any Investor Certificateholders
of such Series or Class and to any prospective purchaser of Certificates
designated by such an Investor Certificateholder upon the request of such
Investor Certificateholder or prospective purchaser, any information required to
be provided to such holder or prospective purchaser to satisfy the condition set
forth in Rule 144A(d)(4) under the Securities Act.
Section 13.15 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement.
Section 13.16 Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
[End of Article XIII]
104
<PAGE>
IN WITNESS WHEREOF, the Transferor, the Original Transferors,
the Servicer and the Trustee have caused this Agreement to be duly executed by
their respective officers as of the day and year first above written.
A.I. RECEIVABLES CORP., as
Transferor
By:
-----------------------------------
Name:
Title
A.I. CREDIT CORP., as Original
Transferor and Servicer
By:
-----------------------------------
Name:
Title
AICCO, INC., as Original
Transferor and Servicer
By:
-----------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
-----------------------------------
Name:
Title:
105
<PAGE>
EXHIBIT A
TRANSFEROR CERTIFICATE
No. 1 One Unit
AIC PREMIUM FINANCE LOAN MASTER TRUST
ASSET BACKED CERTIFICATE
THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY BE SOLD ONLY PURSUANT TO
A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACT OR AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION, THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING AGREEMENT WILL
BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN
REQUEST.
This Certificate does not represent an obligation of, or any
interest in, the Transferor or the Servicer referred to below, or any of their
affiliates, and neither the Transferor Certificate, the Receivables nor the
related Loans are insured or guaranteed by any governmental agency or
instrumentality or any other Person. The Transferor Certificate are limited in
right of payment to certain collections respecting the Receivables, all as more
specifically set forth hereinbelow and in the Pooling and Servicing Agreement
referred to below.
This certifies that A.I. Receivables Corp. ("AIR") (the
"Transferor") is the registered owner of an undivided interest in a trust (the
"Trust"), the corpus of which consists of the entire right, title and interest
in and to the Receivables (including Additional Receivables) existing at any
time after the Initial Cut-Off Date or thereafter created, including all
Collections thereon, other than Credit Balances, received by the Transferor
after the Cut-Off Date, together with other assets and interests constituting
the Trust pursuant to an Amended and Restated Pooling and Servicing Agreement
dated as of February [___], 1998, by and among A.I. Receivables Corp., as
Transferor, A.I. Credit Corp. and AICCO, Inc., as Original Transferors and
Servicer, and The First National Bank of Chicago, as Trustee, as supplemented by
any Supplement relating to a Series of Certificates (the "Pooling and Servicing
Agreement"), a summary of certain of the pertinent Provisions of which is set
forth hereinbelow. The assets of the Trust will also include all monies on
deposit in the Collection Account, any Investor Account, any Series Account and
any other account maintained for the benefit of Certificateholders of any Series
of Certificates, any Credit Enhancement and all monies available under any
Credit Enhancement to be provided for any Series for payment to the
Certificateholders of such Series.
<PAGE>
To the extent not defined herein, the capitalized terms used
herein have the meanings assigned to them in the Pooling and Servicing
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement, to which
Pooling and Servicing Agreement, as amended from time to time, the Transferor by
virtue of the acceptance hereof assents and by which the Transferor is bound.
This Certificate has not been registered or qualified under
the Securities Act of 1933, as amended, or any state securities law. No sale,
transfer, pledge or other disposition of this Certificate shall be permitted
other than in accordance with the provisions of Section 6.09 or 7.02 of the
Pooling and Servicing Agreement.
This Certificate is an Transferor Certificate, which
represents an undivided interest in the Trust, including the right to receive
the collections and other amounts at the times, in the amounts and subject to
the limitations specified in-the Pooling and Servicing Agreement to be paid to
the Holder of the Transferor Certificate. Unless otherwise stated in any
Supplement, throughout the existence of the Trust, the Holder of the Transferor
Certificate will be allocated by the Servicer an amount equal to the product of
(A) the Transferor Percentage and (B) the aggregate amount of Collections
allocated to Principal Receivables and Finance Charge Receivables, respectively,
in respect of each Monthly Period. The aggregate interest represented by the
Transferor Certificate in the Receivables in the Trust shall not at any time
exceed the Transferor Ownership Interest at such time. In addition to this
Certificate, Series of Investor Certificates will be issued to investors
pursuant to the Pooling and Servicing Agreement, each of which will represent an
undivided interest in the Trust. This Certificate shall not represent any
interest in any Investor Certificate, any Series or any Credit Enhancement,
except to the extent provided in the Pooling and Servicing Agreement. The
Transferor Ownership Interest shall be determined as provided in the Pooling and
Servicing Agreement.
The Servicer is entitled to receive as servicing compensation
a servicing fee, which fee shall be payable, with respect to each Series, at the
times and in the amounts set forth in the Pooling and Servicing Agreement. The
portion of the servicing fee which will be allocable to the Holder of the
Transferor Certificate pursuant to the Pooling and Servicing Agreement will be
payable out of the cash flows of the Trust otherwise allocable to the Holder of
the Transferor Certificate and neither the Trust nor the Trustee nor the
Investor Certificateholders will have any obligations to pay such portion of the
servicing fee.
Upon the termination of the Trust pursuant to Section 12.01
of the Pooling and Servicing Agreement, and after payment of all amounts due
under the Pooling and Servicing Agreement on or prior to such termination and
the surrender of the Transferor Certificate, the Pooling and Servicing Agreement
provides that the Trustee shall assign and convey to the Holder of the
Transferor Certificate (without recourse, representation or warranty) all right,
title and interest of the Trust in the Receivables, whether then existing or
thereafter created, all monies due or to become due with respect to such
Receivables (including all accrued interest theretofore posted as Finance Charge
Receivables) and all proceeds of such Receivables, except for amounts held by
the Trustee or any Paying Agent pursuant to Section 12.03(b) of the Pooling and
Servicing Agreement.
A-2
<PAGE>
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
IN WITNESS WHEREOF the Trustee has caused this Certificate to
be duly executed under its official seal.
Date:
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By: _____________________________
Authorized Officer
[SEAL]
Attested to:
By:_____________________________
Cashier
A-3
<PAGE>
Trustee's Certificate of Authentication
CERTIFICATE OF AUTHENTICATION
This is an Transferor Certificate referred to in the
within-mentioned Pooling and Servicing Agreement.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By: _________________________
Authorized Officer
A-4
<PAGE>
EXHIBIT B
FORM OF CONFIRMATION OF ASSIGNMENT OF ADDITIONAL RECEIVABLES
CONFIRMATION OF ASSIGNMENT No. _____ OF ADDITIONAL
RECEIVABLES, dated as of ______________, ____________ by A.I. Receivables Corp.
(the "Transferor"), to The First National Bank of Chicago, a banking association
organized and existing under the laws of the United States of America (the
"Trustee") pursuant to the Pooling and Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement, dated as of January [___],
1998 (hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement");
WHEREAS, the Transferor has, pursuant to the Pooling and
Servicing Agreement, conveyed Additional Receivables to the Trust as of the
Addition Dates therefor and the Trustee has accepted such conveyance; and
WHEREAS, the Transferor is required, pursuant to the Pooling
and Servicing Agreement, to deliver this Confirmation of Assignment to the
Trustee;
NOW, THEREFORE, the Transferor and the Trustee hereby agree
as follows:
1. Defined Terms. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein; provided, that the "preceding Monthly
Period" shall mean the Monthly Period immediately preceding the calendar month
in which this Confirmation of Assignment is delivered to the Trustee.
2. Description of Receivables. The Transferor shall deliver
to the Trustee herewith a computer file or microfiche list containing a true and
complete list of all Receivables (including Additional Receivables), identifying
each by account number and the aggregate amount of the related Receivables as of
the end of the preceding Monthly Period. Such list shall be marked as Schedule 1
to this Confirmation of Assignment and, as of the end of the preceding Monthly
Period, shall be incorporated into and made a part of this Confirmation of
Assignment and the Pooling and Servicing Agreement.
3. Confirmation of Conveyance of Receivables.
(a) The Transferor does hereby confirm its transfer,
assignment and conveyance under the Pooling and Servicing Agreement to the Trust
for the benefit of the Certificateholders, without recourse, all of its right,
title and interest in and to the Receivables (including Additional
<PAGE>
Receivables as of the Addition Dates therefor), including all Collections
thereon, other than Credit Balances, received by the Transferor after the
Cut-Off Date (or, with respect to Additional Receivables, after the Addition
Dates therefor).
(b) In connection with such transfer, the Transferor agrees,
at its own expense, on or prior to the date of this Confirmation of Assignment,
to cause AIC and/or AICCO to indicate in their computer files that the
Additional Receivables, from Loans under Premium Finance Agreements, have been
transferred to the Trust Pursuant to the Pooling and Servicing Agreement for the
benefit of the Certificateholders.
4. Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Trust for the benefit of the Certificateholders of
all right, title and interest previously held by the Transferor in and to the
Receivables (including Additional Receivables) and confirms that it shall
maintain such right, title and interest, upon the trust set forth in the Pooling
and Servicing Agreement, for the benefit of all Certificateholders.
5. Representations and Warranties of the Transferor. The
representations and warranties of the Transferor contained in subsection 2.04(c)
of the Pooling and Servicing Agreement are true and correct as of the date
hereof and each Addition Date.
6. Additional Representations and Warranties of the
Transferor. The Transferor hereby further represents and warrants to the Trust
that (a) the execution and delivery of this Confirmation of Assignment by it and
the consummation of the transactions provided for or referred to in this
Confirmation of Assignment have been duly authorized by it by all necessary
corporate action on its part, do not require any approval, authorization,
consent, order or other action of any Person or of any governmental body or
official, do not and will not conflict with or violate any Requirements of Law
applicable to it or any of its properties, and do not and will not conflict
with, result in any breach of, or constitute (with or without notice or lapse of
time or both) a default under any indenture, contract, agreement, mortgage, deed
of trust or other instrument to which it is a party or by which it or any of its
properties are bound and (b) this Confirmation of Assignment constitutes, as of
the date hereof, a legal, valid and binding obligation of the Transferor
enforceable against it in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general, and (ii) except as
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
7. Amendment of the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement is hereby amended to provide that all references
therein to the "Amended and Restated Pooling and Servicing Agreement," to "this
Agreement," "herein," "hereof" and "hereunder" shall be deemed from and after
the date hereof to be a dual reference to the Pooling and Servicing Agreement as
supplemented by this Confirmation of Assignment. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants and conditions
to the Pooling and Servicing Agreement shall remain unamended and shall continue
to be, and shall remain, in full force and effect in accordance with its terms
and except as expressly provided herein shall not constitute or be deemed
B-2
<PAGE>
to constitute a waiver of compliance with or a consent to noncompliance with any
term or provision of the Pooling and Servicing Agreement.
8. Counterparts. This Confirmation of Assignment may be
executed in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument.
9. Governing Law. THIS CONFIRMATION OF ASSIGNMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
B-3
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Confirmation of Assignment of Additional Receivables to be duly executed and
delivered by their respective duly authorized officers on the day and year first
above written.
A.I. RECEIVABLES CORP.,
as Transferor
By:_______________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:_______________________
Name:
Title:
B-4
<PAGE>
Schedule 1 to
Confirmation of Assignment
of Additional Receivables
LIST OF RECEIVABLES (INCLUDING ADDITIONAL RECEIVABLES)
[Deemed Incorporated]
B-5
<PAGE>
EXHIBIT C
FORM OF MONTHLY SERVICER REPORT
AIC PREMIUM FINANCE LOAN MASTER TRUST SERIES [____]*
MONTHLY PERIOD ENDING ___________________________
Capitalized terms used in this notice have their respective meanings set forth
in the Pooling and Servicing Agreement or the Series [____]* Supplement, as
applicable. References herein to certain sections and subsections are references
to the respective sections and subsections of the Pooling and Servicing
Agreement, as supplemented by the Series [____]* Supplement (the "Agreement").
This report is delivered pursuant to Section 3.04(b) of the Agreement.
A) A.I. Credit Corp. ("AIC") and AICCO, Inc. ("AICCO") are the
Servicers under the Agreement.
B) The undersigned is a Servicing Officer.
C) The date of this notice is a Determination Date under the Agreement.
I. GENERAL INFORMATION (as of the Transfer Date referred to below or such
other date as may be specified in the Agreement)
A. Class A Available Funds $_________
B. Class B Available Funds $_________
C. Class C Available Funds $_________
D. Available Investor Principal
Collections for Series [____]*
1. Investor Principal Collections
for the related Monthly Period $_________
Less
2. Reallocated Principal Collections
required to fund Class A Required
Amount and Class B Required Amount $_________
Plus
3. Shared Principal Collections
- --------
*Specify Series designation.
<PAGE>
allocated to Series [____]* $_________
Net $_____
E. Default Amount
1. Class A Default Amount $_________
2. Class B Default Amount $_________
3. Class C Default Amount $_________
Total $_____
F. Transferor Ownership Interest
1. Principal Receivables $_________
Less
2. Outstanding Certificate-
holders Ownership Interests $_________
Net $_____
G. Minimum Transferor Ownership Interest
as of end of Monthly Period**
1. 107% of Initial Certificateholders
Ownership Interests $__________
2. Outstanding Certificateholders
Ownership Interests $__________
3. Excess Receivables Amount $__________
Net $_____
H. Reallocated Principal Collections
- --------
** If this information has not been completed then the Servicer certifies
that the Transferor Ownership Interest as of the date of this report is
not less than 50% of Trust assets as of the close of business on the
last day of the above referenced Monthly Period and that such
Transferor Ownership Interest exceeds the Minimum Transferor Ownership
Interest as of end of such Monthly Period.
C-2
<PAGE>
1. Reallocated Class A Principal
Collections $__________
2. Reallocated Class B Principal
Collections $__________
3. Reallocated Class C Principal
Collections $__________
Total $_____
I. [____]* Yield Enhancement Account Deposit
1. Available Yield Enhancement Amount $__________
2. Maximum Yield Enhancement Amount $__________
3. Amount being applied towards
Maximum Yield Enhancement Amount $__________
4. Excess Finance Charges $__________
II. INSTRUCTION TO MAKE A WITHDRAWAL
Pursuant to Section 4.09, the Servicer does hereby instruct the Trustee (i) to
make withdrawals from the Finance Charge Account, the Principal Account and the
Excess Funding Account on ____ ___, ____ which date is a Transfer Date under the
Pooling and Servicing Agreement, in the following amounts and (ii) to apply the
proceeds of such withdrawals in accordance with the specified subsection of
Section 4.09:
A. Pursuant to subsection 4.09(a)(i):
1. Class A Monthly Interest $_________
2. Class A Additional Interest $_________
B. Pursuant to subsection 4.09(a)(ii):
1. Class A Prior Period Interest $_________
C. Pursuant to subsection 4.09(a)(iii):
1. Class A Servicing Fee $_________
C-3
<PAGE>
2. Accrued and unpaid Class A
Servicing Fee $_________
D. Pursuant to subsection 4.09(a)(iv):
1. Class A Default Amount $_________
E. Pursuant to subsection 4.09(b)(i):
1. Class B Monthly Interest $_________
2. Class B Additional Interest $_________
F. Pursuant to subsection 4.09(b)(ii):
1. Class B Prior Period Interest $_________
G. Pursuant to subsection 4.09(b)(iii):
1. Class B Servicing Fee $_________
2. Accrued and unpaid Class B
Servicing Fee $_________
H. Pursuant to subsection 4.09(iv):
1. Class B Default Amount $_________
I. Pursuant to subsection 4.09(c)(i):
1. Class C Monthly Interest $_________
2. Class C Additional Interest $_________
J. Pursuant to subsection 4.09(c)(ii):
1. Class C Prior Period Interest $_________
K. Pursuant to subsection 4.09(c)(iii):
1. Class C Servicing Fee $_________
2. Accrued and unpaid Class C
Servicing Fee $_________
C-4
<PAGE>
L. Pursuant to subsection 4.09(c)(iv):
1. Class C Default Amount $_________
Total of A through L $_____
M. Pursuant to subsection 4.09(d)(i):
1. Amount to be treated as Shared
Principal Collections for other Series $_________
N. Pursuant to subsection 4.09(d)(ii):
1. Amount to be paid to the Holder of the Transferor
Certificate (Transferor Ownership Interest greater
than Minimum Transferor Ownership Interest) $_________
2. Amount to be deposited into Excess
Funding Account (Transferor Ownership
Interest not greater than Minimum
Transferor Ownership Interest) $_________
Total of M and N $_____
O. Pursuant to subsection 4.09(e)(i):
1. Class A Monthly Principal $_________
P. Pursuant to subsection 4.09(e)(ii):
1. Class B Monthly Principal $_________
Q. Pursuant to subsection 4.09(e)(iii)
1. Class C Monthly Principal $_________
R. Pursuant to subsection 4.09(e)(iv):
1. Amount to be treated as Shared
Principal Collections for other Series $_________
S. Pursuant to subsection 4.09(e)(v):
1. Amount to be paid to the Holder
of the Transferor
C-5
<PAGE>
Certificate (Transferor Ownership
Interest greater than Minimum
Transferor Ownership Interest) $_________
2. Amount to be deposited into Excess
Funding Account (Transferor Ownership
Interest not greater than Minimum
Transferor Ownership Interest) $_________
Total of O through S $_____
T. Pursuant to subsection 4.09(f):
1. Amount to be deposited from the
Excess Funding Account into the
Principal Account $_________
U. Pursuant to subsection 4.09(g) (Revolving
Period only):
1. Amount to be distributed to Class A
Certificateholders
(A) Class A Monthly Interest $_________
(B) Class A Additional Interest $_________
(C) Class A Prior Period Interest $_________
2. Amount to be distributed to Class
B Certificateholders
(A) Class B Monthly Interest $_________
(B) Class B Additional Interest $_________
(C) Class B Prior Period Interest $_________
3. Amount to be distributed to
Class C Certificateholders
(A) Class C Monthly Interest $_________
(B) Class C Additional Interest $_________
C-6
<PAGE>
(C) Class C Prior Period Interest $_________
V. Pursuant to subsection 4.09(h) (Controlled
or Rapid Authorization Period only):
1. Amount to be distributed to
Class A Certificateholders
(A) Class A Monthly Interest $_________
(B) Class A Additional Interest $_________
(C) Class A Prior Period Interest $_________
(D) Class A Monthly Principal $_________
2. Amount to be distributed to
Class B Certificateholders
(A) Class B Monthly Interest $_________
(B) Class B Additional Interest $_________
(C) Class B Prior Period Interest $_________
(D) Class B Monthly Principal $_________
3. Amount to be distributed to
Class C Certificateholders
(A) Class C Monthly Interest $_________
(B) Class C Additional Interest $_________
(C) Class C Prior Period Interest $_________
(D) Class C Monthly Principal $_________
Pursuant to Section 4.11, the Servicer does hereby instruct the Trustee (i) to
make withdrawals of funds on deposit in the Yield Enhancement Account with
respect to the related Monthly Period in the following amounts and (ii) to apply
the proceeds of such withdrawals in accordance with the specified subsections of
Section 4.11:
C-7
<PAGE>
A. Pursuant to subsection 4.11(a):
1. Class A Required Amount $_________
B. Pursuant to subsection 4.11(b):
1. Class B Required Amount $_________
C. Pursuant to subsection 4.11(c):
1. Aggregate unreimbursed Class A
Ownership Interest reductions $_________
D. Pursuant to subsection 4.11(d):
1. Aggregate unreimbursed Class B
Ownership Interest reductions $_________
E. Pursuant to subsection 4.11(e):
1. Class C Required Amount $_________
F. Pursuant to subsection 4.11(f):
1. Aggregate unreimbursed Class C
Ownership Interest reductions $_________
G. Pursuant to subsection 4.11(g):
1. Amount to be paid to Holder of
Transferor Certificate
(Transferor Ownership Interest greater
than Minimum Transferor Ownership
Interest and no Pay Out Event) $_________
2. Amount to be deposited into Excess
Funding Account (Transferor Ownership
Interest not greater than Minimum
Transferor Ownership Interest and no Pay
Out Event) $_________
3. 91 Day Delinquency Amount (to be retained
in Yield Enhancement Account) $_________
4. Other amounts to be retained in Yield
C-8
<PAGE>
Enhancement Account (Pay Out Event has
occurred) $_________
III. ACCRUED AND/OR UNPAID AMOUNTS
After giving effect to the withdrawals and transfers to be made in accordance
with this notice and the distributions to be made on the related Distribution
Date pursuant to Section 5.01, the following amounts will be accrued and/or
unpaid as of such Distribution Date:
A. Subsections 4.09(a)(i), (b)(i) and (c)(i):
1. The aggregate Class A Additional Interest $________
2. The aggregate Class B Additional Interest $________
3. The aggregate Class C Additional Interest $________
B. Subsections 4.09(a)(ii), (b)(ii) and (c)(ii):
1. Class A Prior Period Interest $________
2. Class B Prior Period Interest $________
3. Class C Prior Period Interest $________
C. Subsections 4.09(a)(iii), (b)(iii) and (c) (iii):
1. Accrued unpaid Class A Servicing Fee $________
2. Accrued unpaid Class B Servicing Fee $________
3. Accrued unpaid Class C Servicing Fee $________
D. Section 4.10:
1. Aggregate unreimbursed Class A
Charge-Offs and writedowns $________
2. Aggregate unreimbursed Class B
Charge-Offs and writedowns $________
3. Aggregate unreimbursed Class C
Charge-Offs and writedowns $________
C-9
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this report this ___ day
of _____________, ____.
A.I. CREDIT CORP.,
AICCO, INC., Servicer
By:____________________________
Name:
Title:
By:________________________
Name:
Title:
C-10
<PAGE>
EXHIBIT D
FORM OF ANNUAL SERVICER'S CERTIFICATE
A.I. CREDIT CORP., AICCO, INC.
--------------------
AIC PREMIUM FINANCE LOAN MASTER TRUST
--------------------
The undersigned, duly authorized representatives of A.I.
Credit Corp. ("AIC") and AICCO, Inc. ("AICCO"), as Servicers pursuant to the
Amended and Restated Pooling and Servicing Agreement dated as of February [___],
1998 (the "Pooling and Servicing Agreement") by and among A.I. Receivables
Corp., AIC, AICCO and The First National Bank of Chicago, as trustee (the
"Trustee"), do hereby certify that:
1. AIC and AICCO are the sole Servicers under the Pooling and
Servicing Agreement (together, herein referred to as the "Servicer").
2. The undersigned are duly authorized pursuant to the
Pooling and Servicing Agreement to execute and deliver this Certificate
to the Trustee.
3. This Certificate is delivered pursuant to Section 3.05 of
the Pooling and Servicing Agreement.
4. A review of the activities of the Servicer during [the
period from the Initial Closing Date until December 31, 1995] [the
twelve-month period ended December 31 of the calendar year immediately
preceding the year in which this certificate is delivered] and of its
performance under the Pooling and Servicing Agreement, including any
Supplement, was conducted under the supervision of the undersigned.
5. Based on such review, the Servicer has, to the best of the
knowledge of the undersigned, fully performed all its obligations under
the Pooling and Servicing Agreement, including any Supplement,
throughout such period and no default in the performance of such
obligations has occurred or is continuing except as set forth in
paragraph 6 below.
6. The following is a description of each default in the
performance of the Servicer's obligations under the provisions of the
Pooling and Servicing Agreement, including any Supplement, known to the
undersigned to have been made during such period which sets forth in
detail (i) the nature of each such default, (ii) the action taken by
the Servicer, if any, to remedy each such default and (iii) the current
status of each such default:
[If applicable, insert "None."]
C-11
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate this ____ day of _____________, ____.
A.I. Credit Corp.
By:________________________________
Name:
Title:
AICCO, Inc.
By:______________________________
Name:
Title:
C-12
<PAGE>
EXHIBIT E
FORM OF REASSIGNMENT OF RECEIVABLES
REASSIGNMENT NO. ______ OF RECEIVABLES, dated as of
____________ ____, by and among A.I. RECEIVABLES CORP. (the "Transferor") and
The First National Bank of Chicago, a banking association organized under the
laws of the United States of America, as trustee (the "Trustee") pursuant to the
Pooling and Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement, dated as of February
[___], 1998 (hereinafter as such agreement may have been, or may from time to
time be, amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement");
WHEREAS, pursuant to Section 2.07 of the Pooling and
Servicing Agreement, the Transferor wishes to remove certain Receivables from
the Trust (the "Removed Receivables") and to cause the Trustee to reconvey such
Removed Receivables from the Trust to the Transferor (as each such term is
defined in the Pooling and Servicing Agreement); and
WHEREAS, the Trustee is willing to accept such designation
and to reconvey the Removed Receivables subject to the terms and conditions
hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree
as follows:
1. Defined Terms. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein.
"Removal Date" shall mean, with respect to the Removed
Receivables designated hereby, ___________ __________.
"Removal Notice Date" shall mean, with respect to the Removed
Receivables designated hereby , _____________, _____ (which shall be a date on
or before the fifth Business Day prior to the Removal Date).
2. Designation of Removed Receivables. The Transferor shall
deliver to the Trustee, not later than five Business Days after the Removal
Date, a computer file or microfiche list containing a true and complete list of
each Receivable which as of the Removal Date shall be deemed to be a Removed
Receivable, such Receivables being identified by account number and the
aggregate amount thereof as of the Removal Date. Such list shall be marked as
Schedule 1 to this Reassignment and shall be incorporated into and made a part
of this Reassignment and the Pooling and Servicing Agreement as of the Removal
Date.
<PAGE>
3. Conveyance of Receivables. The Trust does hereby reconvey
to the Transferor, without recourse, representation or warranty, on and after
the Removal Date, all right, title and interest of the Trust in and to the
Removed Receivables designated hereby, including all Collections thereon
received by the Trust after the Removal Date therefor.
4. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trust as of the Removal Date:
(a) Legal Valid and Binding Obligation. This Reassignment
constitutes a legal, valid and binding obligation of the Transferor enforceable
against the Transferor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(b) Selection Procedures. No selection procedures believed by
the Transferor to be materially adverse to the interests of the Investor
Certificateholders were utilized in selecting the Removed Receivables designated
hereby.
5. Conditions Precedent. The amendment of the Pooling and
Servicing Agreement set forth in Section 6 hereof is subject to the
satisfaction, on or prior to the Removal Date, of each of the conditions set
forth in Section 2.07 of the Pooling and Servicing Agreement.
6. Amendment of the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement is hereby amended to provide that all references
therein to the "Pooling and Servicing Agreement," to "this Agreement," "herein,"
"hereof" and "hereby" shall be deemed from and after the Removal Date to be a
dual reference to the Pooling and Servicing Agreement as supplemented by this
Reassignment. Except as expressly amended hereby, all of the representations,
warranties, terms, covenants and conditions to the Pooling and Servicing
Agreement shall remain unamended and shall continue to be, and shall remain, in
full force and effect in accordance with its terms and except as expressly
provided herein shall not constitute or be deemed to constitute a waiver of
compliance with or a consent to non-compliance with any term or provision of the
Pooling and Servicing Agreement.
7. Counterparts. This Reassignment may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of Which together shall constitute one and
the same instrument.
8. Governing Law. THIS REASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
E-2
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Reassignment of Receivables to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.
A.I. RECEIVABLES CORP.,
as Transferor
By:_________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO,
as Trustee
By:__________________________________
Name:
Title:
E-3
<PAGE>
Schedule 1
to Reassignment
of Receivables
---------------
REMOVED RECEIVABLES
Removed Receivable Removal Date
- ------------------ ------------
E-4
<PAGE>
Schedule 2
to the Reassignment
of Receivables
A.I. RECEIVABLES CORP.
AIC PREMIUM FINANCE LOAN MASTER TRUST
Officer's Certificate
The undersigned, a duly authorized officer of A.I.
Receivables Corp. ("AIR"), hereby certifies and acknowledges on behalf of AIR
that to the best of the knowledge of the undersigned the following statements
are true on ______________, _____, (the "Removal Date"), and acknowledges on
behalf of AIR that this Officer's Certificate will be relied upon by The First
National Bank of Chicago, as trustee (the "Trustee") of the AIC Premium Finance
Loan Master Trust in connection with the Trustee entering into Reassignment No.
_____ of Removed Receivables, dated as of the Removal Date (the "Reassignment"),
by and among AIR and the Trustee, in connection with the Amended and Restated
Pooling and Servicing Agreement, dated as of February [___], 1998, as heretofore
supplemented and amended (the "Pooling and Servicing Agreement"), pursuant to
which AIR, as Transferor, AICCO, Inc. and A.I. Credit Corp., as Original
Transferors and Servicer, and the Trustee are parties. The undersigned hereby
certifies and acknowledges on behalf of AIR that:
(a) Delivery of Reassignment and List of Removed Receivables.
On or prior to the Removal Date, the Transferor has delivered to the Trustee the
Reassignment and within five Business Days after the Removal Date the Transferor
shall deliver to the Trustee a computer file or microfiche list containing a
true and complete list of all Removed Receivables identified by account number
and aggregate amount of such Removed Receivables as of the Removal Date.
(b) Selection Procedures. No selection procedures believed by
the Transferor to be materially adverse to the interests of the
Certificateholders were utilized in selecting the Removed Receivables to be
removed from the Trust.
(c) Consequences of Removal. In the reasonable belief of the
Transferor, the removal of the Removed Receivables on the Removal Date shall
not: (i) cause a Pay Out Event to occur (provided that the Removed Receivables
shall be considered to be removed as of the Removal Date for purposes of this
subclause (i)); (ii) cause the Transferor Ownership Interest to be less than the
Minimum Transferor Ownership Interest on such Removal Date; or (iii) result in
the failure to make any payment specified in any Series Supplement.
(d) Ratings. Each Rating Agency was notified of the proposed
removal of the Removed Receivables on or before the tenth Business Day prior to
the Removal Date and the Transferor has received notice prior to the Removal
Date from each Rating Agency that the proposed
E-5
<PAGE>
removal will not result in a downgrade or withdrawal of its current rating of
any outstanding Series of Investor Certificates.
Capitalized terms used herein and not otherwise defined are
used as defined in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day
of ________________, ____.
A.I. RECEIVABLES CORP.,
as Transferor
By:_________________________________
Name:
Title:
E-6
<PAGE>
EXHIBIT F
FORM OF RECONVEYANCE OF RECEIVABLES
RECONVEYANCE OF RECEIVABLES, dated as of ____________ ___,
____, by and among A.I. Receivables Corp. (the "Transferor") and The First
National Bank of Chicago, a banking association organized and existing under the
laws of the United States of America (the "Trustee") pursuant to the Pooling and
Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement dated as of February [___],
1998 (hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement");
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to cause the Trustee to reconvey all of the Receivables and
proceeds thereof from the Trust to the Holder of the Transferor Certificate
pursuant to the terms of Section 12.04 of the Pooling and Servicing Agreement
upon termination of the Trust pursuant to Section 12.01 of the Pooling and
Servicing Agreement and after payment of all amounts due under the Pooling and
Servicing Agreement on or prior to such termination and the surrender of the
Transferor Certificate;
WHEREAS, the Trustee is willing to reconvey Receivables
subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree
as follows:
1. Defined Terms. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein.
"Reconveyance Date" shall mean _____________.
2. Return of Lists of Receivables. The Trustee shall deliver
to the Transferor, not later than five Business Days after the Reconveyance
Date, each and every computer file or microfiche list of Receivables delivered
to the Trustee pursuant to the terms of the Pooling and Servicing Agreement.
3. Conveyance of Receivables. (a) The Trustee does hereby
reconvey to the Transferor, without recourse, representation or warranty, on and
after the Reconveyance Date, all right, title and interest of the Trust in and
to each and every Receivable, whether then existing or thereafter created, all
monies due or to become due with respect thereto (including all accrued interest
theretofore posted as Finance Charge Receivables) and all proceeds of such
Receivables, except for amounts, if
<PAGE>
any, held by the Trustee or any Paying Agent pursuant to subsection 12.03(b) of
the Pooling and Servicing Agreement.
(b) In connection with such transfer, the Trustee agrees to
execute and deliver to the Transferor, on or prior to the Reconveyance Date,
such UCC termination statements as the Holder of the Transferor Certificate may
reasonably request, evidencing the release by the Trust of its lien on the
Receivables.
4. Counterparts. This Reconveyance may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
5. Governing Law. THIS RECONVEYANCE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
F-2
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Reconveyance of Receivables to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.
A.I. RECEIVABLES CORP.,
as Transferor
By:___________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO,
as Trustee
By:___________________________
Name:
Title:
F-3
<PAGE>
EXHIBIT G
FORM OF AIC SUPPORT AGREEMENT
G-1
<PAGE>
SCHEDULE 1
LIST OF EXISTING RECEIVABLES
Delivered to Trustee only
[Deemed Incorporated]
<PAGE>
EXHIBIT H
FORM OF AIC LETTER AGREEMENT
H-1
<PAGE>
EXHIBIT I
FORM OF AIR SUPPORT AGREEMENT
I-1
<PAGE>
EXHIBIT J
FORM OF AIR LETTER AGREEMENT
J-1
<PAGE>
Exhibit 5.1
[Form of Legality Opinion]
February ___, 1998
A.I. Receivables Corp.
160 Water Street
New York, New York 10038
Ladies and Gentlemen:
We have acted as special counsel to A.I. Receivables Corp., a
Delaware corporation (the "Company"), A.I. Credit Corp., a New Hampshire
corporation ("AIC"), and AICCO, Inc., a California corporation ("AICCO"), in
connection with the preparation and filing of the Registration Statement of the
Company on Form S-1 under the Securities Act of 1933, as amended (the
"Registration Statement"). Capitalized terms defined in the Registration
Statement and used but not otherwise defined herein are used herein as so
defined.
In so acting, we have examined an original or a copy,
certified or otherwise identified to our satisfaction, of the Amended and
Restated Pooling and Servicing Agreement, dated as of February [___], 1998 (the
"Pooling and Servicing Agreement") among the Company, AIC, AICCO and The First
National Bank of Chicago, as trustee (the "Trustee") and the Series 1998-1
Supplement to the Pooling and Servicing Agreement, dated as of February [___],
1998 (the "Supplement" and, collectively with the Pooling and Servicing
Agreement and any other supplements thereto, the "PSA").
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents
<PAGE>
February __, 1998
Page 2
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company and upon the representations and warranties of
the Company contained in the PSA.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:
1. The Certificates of the AIC Premium Finance Loan Master Trust to be
issued and sold by the Company have been duly authorized by the Company and,
when issued and sold as contemplated by the PSA will be validly issued, fully
paid and non-assessable.
The opinions expressed herein are limited to the laws of the
State of New York, the corporate laws of the State of Delaware and the federal
laws of the United States, and we express no opinion as to the effect on the
matters covered by this letter on the laws of any other jurisdiction.
We hereby consent to be named in the Prospectus as the
attorneys who have passed upon the legality of the securities being offered
thereby and to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
<PAGE>
Exhibit 8.1
Weil, Gotshal & Manges LLP
767 Fifth Avenue, New York, NY 10153-0119
(212) 310-8000
FAX: (212) 310-8007
January 21, 1998
A. I. Receivables Corp.
160 Water Street
New York, New York 10038
Re: AIC Premium Finance Loan Master Trust
-------------------------------------
Ladies and Gentlemen:
We have acted as counsel to A. I. Receivables Corp. (the
"Transferor") in connection with the preparation of the Registration Statement
on Form S-1 filed on the date hereof with the Securities and Exchange Commission
(the "Prospectus"). All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Prospectus.
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Prospectus, the Original
Agreement, the AIC Support Agreement, drafts of the Agreement, the Receivables
Sale Agreement and the AIR Support Agreement, and such corporate records,
agreements, documents and other instruments (the aforementioned documents
together, the "Documents"), and have made such inquiries of such officers and
representatives of the Trust and such other persons, as we have deemed relevant
and necessary as a basis for the opinion hereinafter set forth. In such
examination, we have assumed the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies, the authenticity of the originals of such
latter documents, the genuineness of all signatures, and the correctness of all
representations made therein. (The terms of the Documents are incorporated
herein by reference.) We have further assumed that the final executed Documents
will be substantially the same as those which we have reviewed and that there
are no agreements or understandings between
<PAGE>
A. I. Receivables Corp.
Page 2
or among the parties to the Documents with respect to the transactions
contemplated therein other than those contained in the Documents.
Based on the foregoing, subject to the next succeeding
paragraph, and assuming full compliance with all the terms of the Documents, it
is our opinion that the statements contained in the Prospectus under the caption
"Certain United States Federal Income Tax Consequences," insofar as such
statements constitute matters of law or legal conclusions and except to the
extent qualified therein, are correct in all material respects.
The foregoing opinion is based on current provisions of the
Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. Further,
you should be aware that opinions of counsel are not binding on the Internal
Revenue Service or the courts. We express no opinion either as to any matters
not specifically covered by the foregoing opinion or as to the effect on the
matters covered by this opinion of the laws of any other jurisdictions.
Additionally, we undertake no obligation to update this opinion in the event
there is either a change in the legal authorities, in the facts, including the
taking of any action by any party to any of the transactions described in the
Documents pursuant to an opinion of counsel as required by any of the Documents
relating to such transactions, or in the Documents on which this opinion is
based, or an inaccuracy in any of the representations or warranties upon which
we have relied in rendering this opinion.
We consent to the references in the Prospectus under the
caption "Certain United States Federal Income Tax Consequences" to our firm.
This opinion may not be used for any other purpose and may not otherwise be
relied upon by, or disclosed, quoted or referred to, any other person.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE>
Exhibit 10.1
A.I. CREDIT CORP.
as Seller,
AICCO, INC.
as Seller
and
A.I. RECEIVABLES CORP.
as Purchaser
RECEIVABLES SALE AGREEMENT
Dated as of February [__], 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I.
DEFINITIONS................................... 1
Section 1.1. Definitions........................................................ 1
Section 1.2. Other Definitional Provisions...................................... 3
ARTICLE II.
PURCHASE AND CONVEYANCE OF RECEIVABLES...................... 4
Section 2.1. Purchase........................................................... 4
Section 2.2. Addition of Additional Receivables................................. 6
ARTICLE III.
CONSIDERATION AND PAYMENT............................ 7
Section 3.1. Purchase Price..................................................... 7
Section 3.2. Settlement and Ongoing Payment of Purchase Price................... 7
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.......................... 8
Section 4.1 Representations and Warranties of the Sellers
Relating to the Sellers' Power and Authority....................... 8
Section 4.2. Representations and Warranties of the Sellers
Relating to the Agreement and the Receivables...................... 10
Section 4.3. Representations and Warranties of Purchaser........................ 12
ARTICLE V.
COVENANTS.................................... 13
Section 5.1. Seller Covenants................................................... 13
ARTICLE VI.
REPURCHASE OBLIGATION.............................. 15
Section 6.1. Reassignment of Ineligible Receivables............................. 15
Section 6.2. Conveyance of Reassigned Receivables............................... 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VII.
CONDITIONS PRECEDENT............................... 16
Section 7.1. Conditions to Purchaser's Obligations Regarding
Additional Receivables............................................. 16
Section 7.2. Conditions Precedent to Obligations of the Sellers................. 16
ARTICLE VIII.
TERM AND PURCHASE TERMINATION.......................... 17
Section 8.1. Term............................................................... 17
Section 8.2. Purchase Termination............................................... 17
ARTICLE IX.
MISCELLANEOUS PROVISIONS............................. 18
Section 9.1. Amendment.......................................................... 18
Section 9.2. GOVERNING LAW...................................................... 18
Section 9.3. Notices............................................................ 18
Section 9.4. Severability of Provisions......................................... 19
Section 9.5. Assignment, Sale of Receivables.................................... 19
Section 9.6. Acknowledgement and Agreement of Sellers........................... 19
Section 9.7. Further Assurances................................................. 19
Section 9.8. No Waiver; Cumulative Remedies..................................... 19
Section 9.9. Counterparts....................................................... 20
Section 9.10. Binding; Third-Party Beneficiaries................................. 20
Section 9.11. Merger and Integration............................................. 20
Section 9.12. Headings........................................................... 20
Section 9.13. Schedules and Exhibits............................................. 20
Section 9.14. Survival of Representations and Warranties......................... 20
<CAPTION>
<S> <C>
EXHIBIT A
FORM OF ADDITIONAL CONVEYANCE.............................................. A-1
EXHIBIT B
FORM OF SUBORDINATED REVOLVING NOTE........................................ B-1
SCHEDULE I
LIST OF RECEIVABLES
(Deemed Incorporated By Reference)......................................... I-1
</TABLE>
ii
<PAGE>
RECEIVABLES SALE AGREEMENT, dated as of February [__], 1998,
by and among A.I. Credit Corp., a New Hampshire corporation ("AIC"), as a seller
(a "Seller"), AICCO, Inc., a California corporation ("AICCO"), as a seller (a
"Seller" and, together with AIC, the "Sellers") and A.I. Receivables Corp., a
Delaware corporation, as purchaser ("Purchaser").
W I T N E S S E T H:
WHEREAS, Purchaser desires to purchase, from time to time,
certain Receivables arising from certain Loans to be financed by the Sellers
after the Closing Date;
WHEREAS, the Sellers desire to sell from time to time and
assign such Receivables to Purchaser upon the terms and conditions hereinafter
set forth;
WHEREAS, it is contemplated that the Receivables purchased
hereunder will be transferred by Purchaser to the Trust in connection with the
issuance of certain Certificates; and
WHEREAS, AIC agrees that all covenants and agreements made by
AIC herein with respect to the Receivables shall also be for the benefit of the
Trustee and all Certificateholders.
NOW, THEREFORE, it is hereby agreed by and between the Sellers
and Purchaser as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. Each capitalized term used herein or
in any certificate, document, or Conveyance Paper made or delivered pursuant
hereto, and not defined herein or therein, shall have the meaning specified in
the Pooling and Servicing Agreement. In addition, the following words and
phrases shall have the following meanings:
"Additional Conveyance" shall have the meaning set forth in
Section 2.2.
"Addition Cut-Off Date" shall mean the date as of which any
Additional Receivables are designated by the Transferor for inclusion in the
Trust, as specified in the related Assignment.
1
<PAGE>
"Addition Date" shall mean any date on which Additional
Receivables are conveyed by a Seller to Purchaser pursuant to Section 2.2 of
this Agreement.
"Additional Receivables" shall have the meaning specified in
the Pooling and Servicing Agreement.
"Agreement" shall mean this Receivables Sale Agreement and all
amendments hereof and supplements hereto.
"AIC" shall have the meaning specified in the Preamble.
"Closing Date" shall mean February [__], 1998.
"Conveyance" shall have the meaning specified in Section
2.1(a).
"Conveyance Papers" shall have the meaning specified in
Section 4.1(c).
"Debtor Relief Laws" shall mean (i) the Bankruptcy Code of the
United States of America and (ii) all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, readjustment of debt,
marshalling of assets or similar debtor relief laws of the United States, any
state or any foreign country from time to time in effect affecting the rights of
creditors generally.
"Insolvency Event" shall have the meaning specified in Section
8.2.
"Pooling and Servicing Agreement" shall mean the Amended and
Restated Pooling and Servicing Agreement, dated as of the Closing Date, among
the Purchaser, as Transferor, AIC and AICCO, Inc., as Original Transferors and
Servicer, and the Trustee, and all amendments and supplements thereto.
"Purchase Price" shall have the meaning specified in Section
3.1.
"Purchased Assets" shall have the meaning specified in
subsection 2.1(a).
"Purchaser" shall have the meaning specified in the Preamble.
2
<PAGE>
"Reassignment Deposit Price" shall mean the portion of the
amount payable by the Transferor to the Trustee pursuant to Section 2.4(f) of
the Pooling and Servicing Agreement with respect to Receivables previously sold
pursuant to this Agreement.
"Receivable" shall mean the entire beneficial interest in a
Loan, including all amounts due and to become due and all Collections on or in
respect of such Loan (including all Finance Charge Receivables, Principal
Receivables and Recoveries). The term "Receivable" shall be deemed to refer to
an Additional Receivable only from and after the Addition Date with respect
thereto, and the term "Receivable" shall be deemed to refer to any Removed
Receivable only prior to the Removal Date with respect thereto. The term
"Receivable" shall in no event include any Credit Balance.
"Removal Date" shall mean the date for removal of the
Removed Receivables.
"Removed Receivables" shall mean those Receivables which are
designated for deletion and removal by the Transferor, and reassigned by the
Trustee to the Transferor, pursuant to Section 2.7 of the Pooling and Servicing
Agreement.
"Settlement Statement" shall have the meaning specified in
Section 3.2 of this Agreement.
"Subordinated Note" shall mean each of the subordinated
revolving promissory notes from Purchaser to each Seller, each substantially in
the form of Exhibit B hereto.
"Supplement" shall have the meaning specified in the Pooling
and Servicing Agreement.
"Trust" shall mean the trust created by the Pooling and
Servicing Agreement.
"Trustee" shall mean The First National Bank of Chicago, a
national banking association, as, and acting in the capacity of, Trustee under
the Pooling and Servicing Agreement, or its successor-in-interest, or any
successor trustee appointed in accordance with the Pooling and Servicing
Agreement.
Section 1.2. Other Definitional Provisions. (a) Each
capitalized term defined in this Agreement shall have the defined meaning when
used in any certificate, other document, or Conveyance Paper made or delivered
pursuant hereto unless otherwise defined therein.
3
<PAGE>
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Conveyance Paper shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Subsection, Schedule and Exhibit references contained in
this Agreement are references to Sections, Subsections, Schedules and Exhibits
in or to this Agreement unless otherwise specified.
(c) All determinations of the Principal Receivables or Finance
Charge Receivables, and of any Collections in respect thereof, shall be made in
accordance with the Pooling and Servicing Agreement and all applicable
Supplements thereto.
(d) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(e) Any reference to each Rating Agency shall apply to any
specific rating agency only if such rating agency is then rating any outstanding
Series.
(f) Unless otherwise specified, references to any amount as on
deposit or outstanding on any particular date shall mean such amount at the
close of business on such day.
ARTICLE II.
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase. (a) By execution of this Agreement, the
Sellers do hereby transfer, assign, and otherwise convey to Purchaser
(collectively, the "Conveyance"), without recourse, all of their respective
right, title and interest in and to the Additional Receivables, including all
Collections thereon, other than Credit Balances, received by the Sellers (the
"Purchased Assets").
(b) In connection with such Conveyance, each Seller agrees (i)
to record and file, at its own expense, any financing statements (continuation
4
<PAGE>
statements with respect to such financing statements when applicable) and to
take such other action with respect to the Additional Receivables meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect, and maintain perfection of, the Conveyance of such
Purchased Assets from such Seller to Purchaser after the Closing Date (and the
Purchaser to the Trust, as assignee, if Purchaser so directs), (ii) that such
financing statements shall name AIC or AICCO, as applicable, as seller, and
Purchaser, as purchaser of the Receivables (or Purchaser as seller and Trust as
purchaser if Purchaser so directs) and (ii) to deliver a file-stamped copy of
such financing statements or other evidence of such filings (excluding
continuation statements, which shall be delivered as filed) to Purchaser (or to
the Trustee, if Purchaser so directs) as soon as is practicable after filing.
(c) In connection with such Conveyance, each Seller further
agrees that it will, at its own expense, (i) on each Addition Date, indicate in
its computer files or microfiche lists that the Additional Receivables have been
(A) sold to Purchaser pursuant to this Agreement and (B) transferred by
Purchaser to the Trustee pursuant to the Pooling and Servicing Agreement for the
benefit of the Certificateholders, by including in such computer files or
microfiche lists a code or other notation identifying such Additional
Receivables, (ii) on each Removal Date, indicate in its computer files or
microfiche lists that the Removed Receivables have been reassigned to it by
deleting in such computer files or microfiche lists the code or other notation
identifying such Removed Receivables, (iii) deliver to the Purchaser on each
Addition Date or Removal Date, a computer file, microfiche or printed list
containing a true and complete list of all such Additional or Removed
Receivables, specifying for each such Receivable, as of the applicable Addition
Cut-Off Date or the Removal Date, as applicable, (A) its account number, (B) the
aggregate amount outstanding in such Receivable and (C) the aggregate amount of
Principal Receivables in such Receivable. Such computer files or microfiche
lists, as supplemented from time to time to reflect Additional Receivables and
Removed Receivables, shall be marked as Schedule I to this Agreement, shall be
delivered to Purchaser (or to the Trustee, if so directed by Purchaser) and
marked as proprietary and confidential, and are hereby incorporated into and
made a part of this Agreement. Each Seller further agrees not to alter the code
or other notation referenced in clauses (i) and (ii) of this paragraph with
respect to any Receivable during the term of this Agreement unless and until (x)
such Receivable becomes a Removed Receivable, or (y) such Seller shall have
delivered to Purchaser and the Trustee at least 30 days prior written notice of
its intention to do so and has taken such action as is necessary or advisable to
cause the respective interests of Purchaser and the Trustee in the Receivables
to continue to be perfected with the priority required by this Agreement and the
Pooling and Servicing Agreement, respectively.
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(d) It is the intention of the parties hereto that the
conveyance of the Receivables hereunder by the Sellers to Purchaser as provided
in this Section 2.1 be, and be construed as, an absolute sale, without recourse,
of such Receivables by the Sellers to Purchaser. Furthermore, it is not intended
that such conveyance be deemed a pledge of such Receivables by the Sellers to
Purchaser to secure a debt or other obligation of the Sellers. If, however,
notwithstanding the intention of the parties, the conveyance provided for in
this Section 2.1 is determined to be a transfer for security, then this
Agreement shall also be deemed to be a security agreement within the meaning of
Article 9 of the UCC and the Sellers hereby grant to Purchaser a "security
interest" within the meaning of Article 9 of the UCC in all of the Sellers'
right, title and interest in and to such Receivables and all amounts payable to
the holders of such Receivables after the Closing Date in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, to secure
the payment of all amounts due and to become due in respect of such Receivables
and any other amounts owed to Purchaser hereunder.
Section 2.2. Addition of Additional Receivables. If, from time
to time, Purchaser becomes obligated to designate Additional Receivables
pursuant to Section 2.6(a) of the Pooling and Servicing Agreement, then
Purchaser shall give the Sellers written notice thereof on or before the fourth
Business Day prior to the Addition Date therefor, and the Sellers shall on or
before the Addition Date, designate sufficient Additional Receivables to be sold
to Purchaser under this Agreement so that, after the inclusion thereof as Trust
Assets, Purchaser will be in compliance with the requirements of Section 2.6(a)
of the Pooling and Servicing Agreement; provided, however, that the failure of
the Sellers to transfer Receivables to Purchaser as provided in this paragraph
solely as a result of the unavailability of a sufficient amount of Eligible
Receivables shall not constitute a breach of this Agreement. Additionally,
pursuant to Section 2.6(b) of the Pooling and Servicing Agreement, Receivables
may, from time to time, be designated to be included as Additional Receivables
upon the mutual agreement of the Sellers and Purchaser. In either event, the
Sellers shall have sole responsibility for selecting such Additional
Receivables, subject to the provisions hereof, including without limitation the
representations and warranties set forth in Section 4.2(a). The Sellers shall on
or prior to the Addition Date therefor execute and deliver to Purchaser a
written assignment from the Sellers to Purchaser in substantially the form of
Exhibit A (the "Additional Conveyance"). Upon such designation, such Additional
Receivables shall be deemed to be Receivables hereunder.
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ARTICLE III.
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price. (a) The purchase price for the
Additional Receivables to be conveyed to the Purchaser under this Agreement (the
"Purchase Price") shall be payable on the date of conveyance in an amount equal
to 100% of the Principal Receivables represented thereby.
(b) The Purchase Price to be paid by Purchaser with respect to
the Additional Receivables on each Addition Date shall be paid (i) in cash, (ii)
with the consent of the related Seller, by issuance to the related Seller of a
Subordinated Note or by increase in the principal amount outstanding thereunder,
or (iii) any combination of the foregoing, in each case in accordance with
Section 3.2.
(c) To the extent that Purchaser shall not have paid before,
or shall not have available to it, cash in U.S. dollars in same day funds
sufficient to pay (or cause to be paid) to the Sellers the Purchase Price for
Receivables that have been designated for sale pursuant hereto during a Monthly
Period, the remainder of the Purchase Price shall be paid on each Distribution
Date by increasing the principal amount of the related Subordinated Note by an
amount equal to such insufficiency.
Section 3.2. Settlement and Ongoing Payment of Purchase Price.
On each Distribution Date under the Pooling and Servicing Agreement, each Seller
shall deliver a settlement statement (each, a "Settlement Statement") to
Purchaser, showing (a) the aggregate Purchase Price of Receivables conveyed to
Purchaser during the prior Monthly Period, the portion thereof paid in cash and
the portion represented by an increase in the related Subordinated Note and (b)
any adjustment to the Purchase Price of Receivables with respect to such Monthly
Period pursuant to Section 6.1 hereof. Any cash balance due from Purchaser to a
Seller shall be paid in cash in immediately available funds to such Seller or
the outstanding balance of the related Subordinated Note shall be increased to
reflect such unpaid balance, or a combination of the foregoing shall occur, and
any balance due from a Seller to Purchaser shall be paid in immediately
available funds to Purchaser. To the extent that either Seller has received an
amount greater than the Purchase Price of such Receivables, such Seller shall
first apply such amount to the payment of the unpaid principal of the related
Subordinated Note, if any. If, after giving effect to any such payment in
respect of the Subordinated Note, such Seller has received an amount greater
than the Purchase Price, such Seller shall retain such amounts and, at the
option of Purchaser (A) issue its note to Purchaser with
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terms substantially similar to the terms of the related Subordinated Note or (B)
subject to applicable legal restrictions, elect to treat such amounts as a
dividend.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Sellers
Relating to the Sellers' Power and Authority. Each Seller hereby represents and
warrants to, and agrees with, Purchaser as of the date of this Agreement and
each Addition Date, that:
(a) Organization and Good Standing. It is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full power, authority and legal right
to own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement.
(b) Due Qualification. It is duly qualified to do business and
is in good standing (or is exempt from such requirement) in any state required
in order to conduct business except where failure to so qualify or be in good
standing would not have a material adverse effect on its business, and has
obtained all necessary licenses and approvals with respect to it and the conduct
of its business required under federal, state and local laws except where
failure to obtain such licenses and approvals would not have a material adverse
effect on its business.
(c) Due Authorization. The execution and delivery and
performance of this Agreement and any other document or instrument delivered
pursuant hereto (such other documents and instruments, collectively, the
"Conveyance Papers") by it and the consummation of the transactions provided for
in this Agreement have been duly authorized by it by all necessary corporate
action on its part.
(d) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers, the performance of the transactions contemplated by
this Agreement and the Conveyance Papers, and the fulfillment of the terms
hereof and thereof by it will not conflict with, result in any breach of, or
constitute (with or without notice or lapse of time or both) a default under,
its articles of incorporation or by-laws, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which it is a party or by which
it or any of its properties are bound.
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(e) No Violation. The execution and delivery of this Agreement
and the Conveyance Papers, the performance of the transactions contemplated by
this Agreement and the Conveyance Papers, and the fulfillment of the terms
hereof and thereof by it will not conflict with or violate its articles of
incorporation or by-laws or any Requirements of Law applicable to it or any of
its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best of its knowledge, threatened against it before any
Governmental Authority (i) asserting the invalidity of this Agreement or any of
the Conveyance Papers, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Conveyance Papers,
(iii) seeking any determination or ruling that, in its reasonable judgment,
would materially and adversely affect its performance of its obligations under
this Agreement, (iv) seeking any determination or ruling that would materially
and adversely affect the validity or enforceability of this Agreement or any of
the Conveyance Papers, or (v) seeking to affect adversely the income tax
attributes of the Trust.
(g) Accuracy of Information. All information heretofore
furnished by it in writing to the Purchaser for purposes of or in connection
with this Agreement or any transactions contemplated hereby is, and all such
information hereafter furnished by it in writing to the Purchaser will be, true
and accurate in every material respect.
(h) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official required in connection with the execution and delivery of this
Agreement and any of the Conveyance Papers, the performance of the transactions
contemplated by this Agreement or any of the Conveyance Papers, and the
fulfillment of the terms hereof, have been duly obtained, effectuated or given
and are in full force and effect.
(i) Insolvency. It is not insolvent and no Insolvency Event
with respect to it has occurred, and the transfer of Receivables by it to
Purchaser contemplated hereby has not been made in contemplation of such
insolvency or Insolvency Event.
The representations and warranties set forth in this Section
4.1 shall survive the transfer and assignment of the Receivables to Purchaser.
Upon discovery by either Seller or Purchaser of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties. The Sellers agree to cooperate with
Purchaser and the Trustee in attempting to cure any such breach.
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Section 4.2. Representations and Warranties of the Sellers
Relating to the Agreement and the Receivables.
(a) Binding Obligation. Each Seller hereby represents and
warrants to Purchaser as of the date of this Agreement that:
(i) This Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with
its terms, except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general, and (B) as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(ii) This Agreement constitutes a valid transfer,
assignment and conveyance to the Purchaser of all of its
right, title and interest in and to the Additional
Receivables, which will be held by the Purchaser free and
clear of any Lien of any Person claiming through or under it
or any of its Affiliates except for Liens for municipal or
other local taxes if such taxes shall not at the time be due
and payable or if it shall currently be contesting the
validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with
respect thereto.
(b) Eligibility of Additional Receivables. Each Seller hereby
represents and warrants to the Purchaser, with respect to Receivables under
Loans funded by it, as of the related Addition Date that:
(i) Each such Receivable is an Eligible
Receivable.
(ii) Each such Receivable has been conveyed to
the Purchaser free and clear of any Lien of any Person
claiming through or under it or any of its Affiliates (other
than Liens for municipal or other local taxes if such taxes
shall not at the time be due and payable or if it shall
currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto) and in compliance with
all applicable Requirements of Law.
(iii) With respect to each such Receivable, all
material consents, licenses, approvals or authorizations of or
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registrations or declarations with any Governmental Authority
required to be obtained, effected or given by it in connection
with the origination and servicing of the related Loan and the
conveyance of such Receivable to the Purchaser have been duly
obtained, effected or given and are in full force and effect.
(iv) As of the end of each Monthly Period
during which one or more Addition Dates shall have occurred
with respect to Additional Receivables, the related computer
file or microfiche list referred to in Section 2.6(d) of the
Pooling and Servicing Agreement, is an accurate and complete
listing in all material respects of all the Receivables as of
the end of such Monthly Period, and the information contained
therein with respect to the identity of such Receivables is
true and correct in all material respects as of the end of
such Monthly Period.
(v) (x) no selection procedures believed by it
to be materially adverse to the interests of the Investor
Certificateholders were utilized in selecting the Additional
Receivables being conveyed by it, (y) as of the Addition Date,
it is not insolvent and (z) as of the Addition Date, it has
not received notice from any Rating Agency that an existing
rating of any Certificates will be reduced or withdrawn as a
result of the conveyance of the related Additional
Receivables.
(vi) This Agreement and the Conveyance Papers
constitute a valid transfer, assignment and conveyance to the
Purchaser, as of the Addition Date, of all right, title and
interest of it in and to the Additional Receivables, and such
Additional Receivables are held by the Purchaser free and
clear of any Lien of any Person claiming through or under it
or any of its Affiliates except for Liens for municipal or
other local taxes if such taxes shall not at the time be due
and payable or if it shall currently be contesting the
validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with
respect thereto.
(c) Notice of Breach. The representations and warranties set
forth in this Section 4.2 shall survive the transfer and assignment of the
relevant Receivables to Purchaser. Upon discovery by either Seller or by
Purchaser of a breach of any of the representations and warranties set forth in
this Section 4.2, the party discovering such breach shall give prompt written
notice to the other parties. Each Seller hereby acknowledges that Purchaser
intends to rely on the representations and warranties made hereunder in
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connection with representations and warranties made by Purchaser to secured
parties, assignees or subsequent transferees including but not limited to
transfers made by Purchaser to the Trustee pursuant to the Pooling and Servicing
Agreement. Each Seller agrees to cooperate with Purchaser and the Trustee in
attempting to cure any such breach.
Section 4.3. Representations and Warranties of Purchaser. As
of the Closing Date, Purchaser hereby represents and warrants to, and agrees
with, each Seller that:
(a) Organization and Good Standing. Purchaser is a corporation
validly existing in good standing under the laws of the State of Delaware and
has full power and authority to own its properties and conduct its business as
such properties are presently owned and such business is presently conducted and
to execute, deliver and perform its obligations under this Agreement and the
Conveyance Papers.
(b) Due Authorization. The execution and delivery of this
Agreement and the Conveyance Papers and the consummation of the transactions
provided for in this Agreement and the Conveyance Papers have been duly
authorized by Purchaser by all necessary corporate action on the part of
Purchaser.
(c) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers, the performance of the transactions contemplated by
this Agreement and the Conveyance Papers, and the fulfillment of the terms
hereof and thereof, will not conflict with, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or lapse
of time or both) a material default under, any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which Purchaser is a party or by
which it or any of its properties are bound.
(d) No Violation. The execution, delivery and performance of
this Agreement and the Conveyance Papers by Purchaser and the fulfillment of the
terms contemplated herein and therein applicable to Purchaser will not conflict
with or violate Purchaser's charter or by-laws or any Requirements of Law
applicable to Purchaser.
(e) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of Purchaser, threatened against Purchaser,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the Conveyance Papers, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or any
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of the Conveyance Papers, (iii) seeking any determination or ruling that, in the
reasonable judgment of Purchaser, would materially and adversely affect the
performance by Purchaser of its obligations under this Agreement or any of the
Conveyance Papers or (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this Agreement
or any of the Conveyance Papers.
(f) All Consents Required. All authorizations, consents,
orders or approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by Purchaser in connection
with the execution and delivery by Purchaser of this Agreement and the
Conveyance Papers and the performance of the transactions contemplated by this
Agreement and the Conveyance Papers or the fulfillment of the terms of this
Agreement and the Conveyance Papers by Purchaser have been duly obtained,
effected or given and are in full force and effect.
The representations and warranties set forth in this Section
4.3 shall survive the Conveyance of the Receivables to Purchaser and the
termination of the rights and obligations of the Sellers and Purchaser under
this Agreement. Upon discovery by a Seller or Purchaser of a breach of any of
the representations and warranties set forth in this Section 4.3, the party
discovering such breach shall give prompt written notice to the other parties.
ARTICLE V.
COVENANTS
Section 5.1. Seller Covenants. Each Seller hereby covenants
and agrees with Purchaser as follows:
(a) Receivables to Be General Intangibles. It will not take
any action to cause any Loan or Receivable to be evidenced by any instrument (as
defined in the UCC as in effect in the States of New York, Delaware and
California). Each Receivable shall be payable pursuant to a contract which does
not create a Lien on any goods purchased thereunder. It will not take any action
to cause any Receivable to be anything other than a "general intangible" (as
defined in the UCC as in effect in the States of New York, Delaware and
California).
(b) Conveyances and Security Interests. Except for the
conveyances hereunder, it will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien, on any of
the Trust Assets, whether now existing or hereafter created, or any interest
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therein or on the legal title to any Loan the Receivable under which is part of
the Trust Assets; it will immediately notify the Purchaser of the existence of
any Lien on any of the Trust Assets or on the legal title to any Loan the
Receivable under which is part of the Trust Assets; and it shall defend the
right, title and interest of the Trust in, to and under the Trust Assets,
whether now existing or hereafter created, against all claims of third parties
claiming through or under it; provided, however, that nothing in this subsection
5.1(a) shall prevent or be deemed to prohibit it from suffering to exist upon
any of the Trust Assets any Liens for municipal or other local taxes if such
taxes shall not at the time be due and payable or if it shall currently be
contesting the validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with respect thereto;
provided, further, that it shall not be prohibited hereby from conveying,
assigning, selling, exchanging or otherwise transferring Receivables and related
Loans in connection with a transaction complying with the provisions of Section
7.2 of the Pooling and Servicing Agreement.
(c) Receivables Allocations. In the event that it is unable
for any reason to transfer Receivables to the Purchaser in accordance with the
provisions of this Agreement (including, without limitation, by reason of an
order by any federal or state governmental agency having regulatory authority
over it or any court of competent jurisdiction that it not transfer any
Receivables to the Purchaser) then, in any such event, it agrees to allocate and
pay to the Purchaser, after the date of such inability, all Collections with
respect to Receivables, and all amounts which would have constituted Collections
with respect to Receivables but for its inability to transfer such Receivables
to the Purchaser.
(d) Delivery of Collections. If it receives Collections, it
agrees to pay to Purchaser (or its designee if Purchaser so directs) all such
Collections as soon as practicable after receipt thereof but in no event later
than two Business Days after receipt thereof; provided, however, that for so
long as it is acting as a Servicer pursuant to the Pooling and Servicing
Agreement, it shall apply Collections received by it in accordance with the
Pooling and Servicing Agreement.
(e) Notice of Liens. It shall notify Purchaser promptly after
becoming aware of any Lien on any Receivable other than the conveyances
hereunder or any Lien for municipal or other local taxes if such taxes shall not
at the time be due and payable or if it shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
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(f) Documentation of Transfer. It shall cause to be executed
and delivered to Purchaser any documents (including financing statements and/or
continuation statements under the UCC) that would be necessary to fully preserve
and protect the Purchaser's (or its designee's) right, title and interest to the
Receivables.
(g) Sale. It agrees to treat the Conveyance, for financial
accounting purposes, as a sale on all financial statements and other applicable
documents.
(h) Continuous Perfection. It shall not change its name,
identity or structure in any manner that might cause any financing or
continuation statement filed pursuant to this Agreement to be misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless it shall have delivered to Purchaser or its
designees at least 30 days prior written notice thereof and, no later than 30
days after making such change, shall have taken all action necessary or
advisable to amend such financing statement or continuation statement so that it
is not misleading. It shall not change its chief executive office or change the
location of its principal records concerning the Receivables or the Collections
unless it has delivered to Purchaser or its designees at least 30 days prior
written notice of its intention to do so and has taken such action as is
necessary or advisable to cause the interest of Purchaser or its designees in
the Receivables to continue to be perfected with the priority required by this
Agreement.
ARTICLE VI.
REPURCHASE OBLIGATION
Section 6.1. Reassignment of Ineligible Receivables. In the
event that with respect to a receivable (x) any representation or warranty under
Section 4.2(b) is breached, and (y) as a result of such breach, the Loan
relating to such Receivable becomes a Defaulted Loan under the terms of the
Pooling and Servicing Agreement, the related Seller shall pay upon the
expiration of 60 days (or such longer period of time as may be agreed to by the
Trustee in its sole discretion, but in no event later than 120 days) from the
earlier to occur of the discovery of such event and Defaulted Loan occurrence by
the related Seller or receipt by the related Seller of written notice of any
such event and Defaulted Loan occurrence given by the Purchaser, to Purchaser an
amount in cash equal to the Purchase Price, adjusted for any Collections
received, paid for any such Ineligible Receivable by Purchaser to such related
Seller; provided, however, that no such payment shall be required to be made if,
on any day within such applicable period, such representations and warranties
with respect
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to such Receivable shall then be true and correct in all respects as if such
Receivable has been created on such day. The obligation of each Seller set forth
in this Section shall constitute the sole remedy respecting any breach of the
representations and warranties set forth in the above-referenced subsection
available to Purchaser.
Section 6.2. Conveyance of Reassigned Receivables. Upon the
request of either Seller, Purchaser shall execute and deliver to such Seller a
reconveyance substantially in such form and upon such terms as shall be
acceptable to such Seller, pursuant to which Purchaser evidences the conveyance
to such Seller of all of Purchaser's right, title, and interest in any
Receivables reconveyed to such Seller pursuant to Section 6.1 and [Section 6.2.]
Purchaser shall execute (and shall cause the Trustee to execute) such other
documents or instruments of conveyance or take such other actions as the Sellers
may reasonably require to effect any repurchase of Receivables pursuant to this
Article VI.
ARTICLE VII.
CONDITIONS PRECEDENT
Section 7.1. Conditions to Purchaser's Obligations Regarding
Additional Receivables. The obligation of Purchaser to purchase any Receivables
created after the Closing Date, shall be subject to the satisfaction of the
following conditions:
(a) All representations and warranties of the Sellers
contained in this Agreement shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on the date of such purchase; and
(b) All information (concerning any Loan to which such
Receivables relate) provided or to be provided to Purchaser shall be true and
correct in all material respects on the date of such purchase.
Section 7.2. Conditions Precedent to Obligations of the
Sellers. The obligations of any Seller to sell on any date Receivables shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on the
date of such sale;
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(b) Payment or provision for payment of the Purchase Price in
accordance with the provisions of Sections 3.1 and 3.2 hereof shall have been
made; and
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Sellers, and the Sellers shall have
received from Purchaser copies of all documents (including, without limitation,
records of corporate proceedings) relevant to the transactions herein
contemplated as the Sellers may reasonably have requested.
ARTICLE VIII.
TERM AND PURCHASE TERMINATION
Section 8.1. Term. This Agreement shall commence as of the
date of execution and delivery hereof and shall continue until the termination
of the Trust as provided in Article XII of the Pooling and Servicing Agreement.
Section 8.2. Purchase Termination. If an Insolvency Event
occurs with respect to either Seller, or the Purchaser violates subsection
6.3(b) of the Pooling and Servicing Agreement for any reason, then the Sellers
shall on the day of such Insolvency Event or violation immediately cease to
transfer Principal Receivables to Purchaser and shall promptly give notice to
Purchaser and the Trustee of such Insolvency Event. Notwithstanding any
cessation of the Transfer to Purchaser of Principal Receivables, Principal
Receivables transferred to Purchaser prior to the occurrence of such Insolvency
Event or violation and Collections in respect of such Principal Receivables,
Finance Charge Receivables, whenever created, accrued in respect of such
Principal Receivables and Recoveries with respect to such Principal Receivables
and Finance Charge Receivables shall continue to be property of Purchaser
transferable by Purchaser to the Trust pursuant to the Pooling and Servicing
Agreement.
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ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment. This Agreement and any Conveyance
Papers and the rights and obligations of the parties hereunder may not be
changed orally, but only by an instrument in writing signed by the Sellers and
Purchaser in accordance with this Section 9.1. This Agreement and any Conveyance
Papers may be amended from time to time by the Sellers and Purchaser (i) to cure
any ambiguity, (ii) to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein or in any such other Conveyance
Papers, (iii) to add any other provisions with respect to matters or questions
arising under this Agreement or any Conveyance Papers that shall not be
inconsistent with the provisions of this Agreement or any Conveyance Papers,
(iv) to change or modify the Purchase Price, and (v) to change, modify, delete
or add any other obligation of the Sellers or Purchaser; provided, however, that
such action shall not (as evidenced by an Opinion of Counsel delivered to the
Trustee) adversely affect in any material respect the interests of the Trustee
or any Investor Certificateholder. Any reconveyance executed in accordance with
the provisions hereof shall not be considered to be an amendment to this
Agreement].
Section 9.2. GOVERNING LAW. THIS AGREEMENT AND THE CONVEYANCE
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 9.3. Notices. All demands, notices, instructions,
directions and communications (collectively, "Notices") under this Agreement
shall be in writing and shall be deemed to have been duly given if personally
delivered at, mailed by registered mail, return receipt requested, or sent by
facsimile transmission to (i) in the case of either Seller, to 160 Water Street,
New York, New York 10038-4922, Attention: Senior Vice President (facsimile no.
(212) 428-5515), (ii) in the case of Purchaser, to 160 Water Street, New York,
New York 10038-4922, Attention: Vice President (facsimile no. (212) 428-5515),
and (iii) in the case of the Trustee, to One First National Plaza, Suite 0126,
Chicago, Illinois 60670-0126, Attention: Corporate Trust Services Division
(facsimile no. (312) 407-4656), and (iv) in the case of any Rating Agency, at
the address or telecopy number provided in the related Supplement.
18
<PAGE>
Section 9.4. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement or any
Conveyance Paper shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions, or terms shall be deemed severable from the
remaining covenants, agreements, provisions, and terms of this Agreement or any
Conveyance Paper and shall in no way affect the validity or enforceability of
the other provisions of this Agreement or of any Conveyance Paper.
Section 9.5. Assignment, Sale of Receivables. Notwithstanding
anything to the contrary contained herein, other than Purchaser's assignment of
its right, title, and interest in, to, and under this Agreement to the Trustee
for the benefit of the Holders of Certificates as contemplated by the Pooling
and Servicing Agreement and Section 9.6 hereof, this Agreement and all other
Conveyance Papers may not be assigned by the parties hereto.
Section 9.6. Acknowledgement and Agreement of Sellers. By
execution below, each Seller expressly acknowledges and agrees that all of such
Seller's right, title, and interest in, to, and under this Agreement, including,
without limitation, all of Purchaser's right, title, and interest in and to the
Receivables purchased pursuant to this Agreement, will be assigned by Purchaser
to the Trustee for the benefit of the Certificateholders, and each Seller
consents to such assignment. Additionally, each Seller agrees for the benefit of
the Trustee that any amounts payable by such Seller to Purchaser hereunder which
are to be paid by Purchaser to the Trustee for the benefit of the
Certificateholders shall be paid by such Seller, on behalf of Purchaser,
directly to the Trustee. Any payment required to be made on or before a
specified date in same-day funds may be made on the prior Business Day in
next-day funds.
Section 9.7. Further Assurances. The Sellers and Purchaser
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by any other party
more fully to effect the purposes of this Agreement and the Conveyance Papers,
including, without limitation, the execution of any UCC financing statements or
continuation statements or equivalent documents relating to the Receivables for
filing under the provisions of the UCC or other law of any applicable
jurisdiction.
Section 9.8. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of AIC or Purchaser, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
19
<PAGE>
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
Section 9.9. Counterparts. This Agreement and all Conveyance
Papers may be executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
Section 9.10. Binding; Third-Party Beneficiaries. This
Agreement and the Conveyance Papers will inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
The parties hereto intend that the Trustee shall be third-party beneficiaries of
this Agreement.
Section 9.11. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the Conveyance Papers set forth the
entire understanding of the parties relating to the subject matter hereof, and
all prior understandings, written or oral, are superseded by this Agreement and
the Conveyance Papers. This Agreement and the Conveyance Papers may not be
modified, amended, waived or supplemented except as provided herein.
Section 9.12. Headings. The headings set forth herein are
for purposes of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
Section 9.13. Schedules and Exhibits. The schedules and
exhibits attached hereto and referred to herein shall constitute a part of this
Agreement and are incorporated into this Agreement for all purposes.
Section 9.14. Survival of Representations and Warranties. All
representations, warranties and agreements contained in this Agreement or
contained in any Conveyance Paper, shall remain operative and in full force and
effect and shall survive conveyance of the Receivables by Purchaser to the
Trustee pursuant to the Pooling and Servicing Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the Sellers and Purchaser have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
A.I. CREDIT CORP.,
as Seller
By:
----------------------------------
Name:
Title:
AICCO, Inc.,
as Seller
By:
----------------------------------
Name:
Title:
A.I. RECEIVABLES CORP.,
as Purchaser
By:
----------------------------------
Name:
Title:
21
<PAGE>
EXHIBIT A
FORM OF ADDITIONAL CONVEYANCE
(As required by Section 2.2 of
the Receivables Sale Agreement)
ADDITIONAL CONVEYANCE NO. __________ dated as of
____________, ______, by and between A.I. Credit Corp., a New Hampshire
corporation ("AIC"), as a seller (a "Seller"), AICCO, Inc., a California
corporation ("AICCO"), as a Seller (a "Seller"), and A.I. Receivables Corp., a
Delaware corporation, as purchaser ("Purchaser"), pursuant to the Receivables
Sale Agreement referred to below.
WITNESSETH:
WHEREAS, the Sellers and Purchaser are parties to a
Receivables Sale Agreement, dated as of February [___], 1998 (hereinafter as
such agreement may have been, or may from time to time be, amended, supplemented
or otherwise modified, the "Receivables Sale Agreement");
WHEREAS, pursuant to the Receivables Sale Agreement, the
Sellers desire and/or are required to convey the Additional Receivables to
Purchaser (as each such term is defined in the Receivables Sale Agreement); and
WHEREAS, Purchaser is willing to accept such designation and
conveyance subject to the terms and conditions hereof.
NOW, THEREFORE, the Sellers and Purchaser hereby agree as
follows:
1. Defined Terms. Each capitalized term used herein shall have
the meaning specified in the Receivables Sale Agreement (and if not defined
therein, in the Pooling and Servicing Agreement) unless otherwise defined
herein.
"Addition Date" shall mean, with respect to the Additional
Receivables designated hereby, ________________, _______.
A-1
<PAGE>
2. Designation of Additional Receivables. The Sellers deliver
herewith a computer file or microfiche list containing a true and complete
schedule identifying all such Additional Receivables and specifying for each
such related Loan, as of the Additional Cut-Off Date, the aggregate outstanding
amount of such Loan and the aggregate amount of Principal Receivables of such
Loan. Such computer file or microfiche list shall be, as of the date of this
Additional Conveyance, incorporated into and made part of this Additional
Conveyance and is marked as Schedule I to this Additional Conveyance.
3. Conveyance of Receivables.
(a) The Sellers do hereby sell, transfer, assign,
set over and otherwise convey to Purchaser (collectively, the "Conveyance"),
without recourse, all of their right, title and interest in, to and under such
Additional Receivables, including all Recoveries allocable to such Additional
Receivables and all monies due or to become due thereunder and all amounts
received with respect thereto and all proceeds (including, without limitation,
"proceeds" as defined in Article 9 of the UCC) thereof. The foregoing sale,
transfer, assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by Purchaser of any obligation
of the Servicer, any Seller or any other Person in connection with the
Receivables or under any agreement or instrument relating thereto.
(b) In connection with the Conveyance, each Seller
agrees to record and file, at its own expense, one or more UCC financing
statements (and continuation statements with respect to such financing
statements when applicable) with respect to the Additional Receivables meeting
the requirements of applicable state law in such manner and in such
jurisdictions as may be necessary or advisable to perfect or evidence the sale
and assignment of the Receivables to Purchaser (or to the Trustee for the
benefit of the Certificateholders, if Purchaser so directs), and to deliver a
file-stamped copy of such financing statement or other evidence of such filing
to Purchaser (or to the Trustee for the benefit of the Certificateholders, if
Purchaser so directs).
(c) In connection with such sale, the Sellers further
agree, at their own expense, on or prior to the date of this Additional
Conveyance, to indicate in the appropriate computer files or microfiche lists
that all the Additional Receivables designated hereby have been conveyed to
Purchaser pursuant to this Additional Conveyance.
A-2
<PAGE>
4. Acceptance by Purchaser. Subject to the satisfaction of the
conditions set forth in Section 6 of this Additional Conveyance, Purchaser
hereby acknowledges its acceptance of all right, title and interest to the
property, now existing and hereafter created, conveyed to Purchaser pursuant to
Section 3(a) of this Additional Conveyance, and declares that it shall maintain
such right, title and interest. Purchaser further acknowledges that, prior to or
simultaneously with the execution and delivery of this Additional Conveyance,
AIC delivered to Purchaser (or to the Trustee if Purchaser has so directed) the
computer file or microfiche list described in Section 2 of this Additional
Conveyance.
5. Representations and Warranties of the Seller. Each Seller
hereby represents and warrants to Purchaser as of the date of this Additional
Conveyance and as of the Addition Date that:
(a) Legal, Valid and Binding Obligation. This
Additional Conveyance constitutes a legal, valid and binding obligation of it
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally from time to time in effect and except as such enforceability may be
limited by general principles of equity;
(b) Eligibility of Receivables. Each Additional
Receivable designated hereby is an Eligible Receivable;
(c) Selection Procedures. No selection procedure was
utilized by it which would result in a selection of Additional Receivables that
would have a result that would be materially less favorable to the interests of
Purchaser or the Investor Certificateholders of any Series as of the Addition
Date than a random selection;
(d) Insolvency. It is not insolvent and, after giving
effect to the conveyance set forth in Section 3 of this Additional Conveyance,
will not be insolvent;
(e) Sale of Receivables. This Additional Conveyance
constitutes a valid sale, transfer and assignment to Purchaser of all right,
title and interest of it in the Receivables, all monies due or to become due and
all amounts received with respect thereto and the "Proceeds" (as defined in the
UCC) thereof, relating thereto;
A-3
<PAGE>
(f) No Conflict. The execution and delivery of this
Additional Conveyance, the performance of the transactions contemplated by this
Additional Conveyance and the fulfillment of the terms hereof, will not conflict
with, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material default
under, any indenture, contract, agreement, mortgage, deed of trust or other
instrument to which it is a party or by which it or its properties are bound;
(g) No Violation. The execution and delivery of
this Additional Conveyance by it, the performance of the transactions
contemplated by this Additional Conveyance and the fulfillment of the terms
hereof applicable to it will not conflict with or violate it articles of
incorporation or by-laws or any Requirements of Law applicable to it;
(h) No Proceedings. There are no proceedings or
investigations, pending or, to the best knowledge of it, threatened against it
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (i) asserting the invalidity of the Receivables
Sale Agreement or this Additional Conveyance, (ii) seeking to prevent the
consummation of any of the transactions contemplated by the Receivables Sale
Agreement or this Additional Conveyance, (iii) seeking any determination or
ruling that, in the reasonable judgment of it, would materially and adversely
affect the performance of it of its obligations under the Receivables Sale
Agreement or this Additional Conveyance or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or enforceability
of this Additional Conveyance; and
(i) All Consents. All authorizations, consents,
orders or approvals of any court or other governmental authority required to be
obtained by it in connection with the execution and delivery of this Additional
Conveyance by it and the performance of the transactions contemplated by this
Additional Conveyance by it, have been obtained.
6. Conditions Precedent. The acceptance by Purchaser of the
Additional Receivables conveyed hereunder, as set forth in Section 4 of this
Additional Conveyance is subject to the satisfaction, on or prior to the
Addition Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by each Seller in Section 5 of this
A-4
<PAGE>
Additional Conveyance shall be true and correct in all material respects as of
the date of this Additional Conveyance and as of the Addition Date;
(b) Officer's Certificate. Each Seller shall have
delivered to Purchaser an Officer's Certificate confirming that (i) the
Additional Receivables shall be Eligible Receivables or specify which, if any,
of such Receivables are not Eligible Receivables and (ii) (A) no selection
procedure was utilized by it which would result in a selection of Additional
Receivables that would have a result that would be materially less favorable to
the interests of the Investor Certificateholders of any Series as of the
Addition Date than a random selection; and (B) the list of Additional
Receivables, as of the Additional Cut-Off Date, is a true and complete schedule
identifying all such Additional Receivables and specifies for each such related
Loan, as of the Additional Cut-Off Date, its account number, the aggregate
outstanding amount of such Loan and the aggregate amount of Principal
Receivables of such Loan; and
(c) Additional Information. Each Seller shall have
delivered to Purchaser such information as was reasonably requested by Purchaser
to satisfy itself as to the accuracy of the representation and warranty set
forth in Section 5(d) of this Additional Conveyance.
7. Ratification of the Receivables Sale Agreement. The
Receivables Sale Agreement is hereby ratified, and all references to the
"Receivables Sale Agreement," to "this Agreement" and "herein" shall be deemed
from and after the Addition Date to be a reference to the Receivables Sale
Agreement as supplemented by this Additional Conveyance. Except as expressly
amended hereby, all the representations, warranties, terms, covenants and
conditions of the Receivables Sale Agreement shall remain unamended and shall
continue to be, and shall, remain, in full force and effect in accordance with
its terms and except as expressly provided herein shall not constitute or be
deemed to constitute a waiver of compliance with or consent to non-compliance
with any term or provision of the Receivables Sale Agreement.
8. Counterparts. This Additional Conveyance may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument.
A-5
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Additional Conveyance to be duly executed and delivered by their respective duly
authorized officers on the day and the year first above written.
A.I. CREDIT CORP.,
as Seller
By:
---------------------------------
Name:
Title:
AICCO, INC.,
as Seller
By:
--------------------------------
Name:
Title:
A.I. RECEIVABLES CORP.,
as Purchaser
By:
--------------------------------
Name:
Title:
A-6
<PAGE>
Schedule I to Additional Conveyance
Additional Receivables
<PAGE>
EXHIBIT B
FORM OF SUBORDINATED REVOLVING NOTE
SUBORDINATED REVOLVING NOTE
This Revolving Note, dated as of , , by A.I. Receivables Corp., a
Delaware corporation (the "Borrower") to [A.I. Credit Corp., a New Hampshire
corporation] [AICCO, Inc., a California corporation] (the "Lender").
The Lender, [AICCO, Inc.][ [A.I. Credit Corp.] and the Borrower have
entered into a Receivables Sale Agreement (the "Receivables Sale Agreement")
dated as of February [__], 1998 providing for the purchase from time to time by
the Borrower of certain receivables arising from commercial premium finance
loans financed from time to time (the "Receivables"). Except as otherwise
expressly provided herein or unless the context otherwise requires, capitalized
terms not otherwise defined herein shall have the meanings assigned to such
terms in the Receivables Sale Agreement (and if not defined therein, in the
Pooling and Servicing Agreement defined therein).
1. The Note. For value received, the Borrower hereby
promises to pay to the order of the Lender at its offices at
, the principal amount of $ (the "Initial Loan") or so much of the
aggregate principal amount of all Loans (as hereinafter defined) made by the
Lender to the Borrower under the terms of this Note as remains unpaid, as shown
in the schedule attached hereto and any continuations thereof, on the day which
is one year and a day after the payment in full of the Transferor Ownership
Interest and all Initial Certificateholders Ownership Interests pursuant to the
Pooling and Servicing Agreement and each Supplement thereto (the "Maturity
Date"). The Borrower shall pay interest on the unpaid principal amount of the
Loans as provided herein.
2. The Loans. (a) From time to time between the date of this
Note and the Maturity Date, and subject to the restrictions on lending under
this Note contained in the Receivables Sale Agreement, the Lender may lend to
the Borrower additional sums (each a "Loan" and, together with the Initial Loan,
the "Loans"), as provided herein.
B-1
<PAGE>
(b) The obligation of the Borrower to repay the
aggregate unpaid principal amount of the Loans outstanding shall be evidenced by
this Note and the schedule attached hereto. The Lender is hereby authorized to
endorse on the schedule or on a continuation of such schedule, appropriate
notations regarding each Loan evidenced by this Note; provided, however, that
the failure to make, or error in making, any notation shall not limit or
otherwise affect the obligation of the Borrower hereunder.
(c) When the Borrower requests a Loan in
connection with the acquisition of any Receivables, the Borrower shall notify
the Lender by telephone specifying the amount and the date on which such Loan is
requested. Unless otherwise specified, the maturity of each such Loan shall be
the Maturity Date.
[(d) The Lender agrees that the portion of the
Purchase Price paid with this Revolving Note shall not cause (i) the sum of (A)
the principal amount of this Revolving Note and (B) the outstanding principal
amount of all certificates issued by the Trust that are or may be classified as
debt for federal income tax purposes to exceed (ii) 80% of (A) the aggregate
amount of Principal Receivables and amounts on deposit in the Excess Funding
Account minus (B) the aggregate principal amount of all outstanding Supplemental
Certificates and the aggregate principal amount of all other interests in the
Trust not attributable to the Investor Certificates or the Transferor
Certificate.]
3. Interest. Each Loan shall bear interest which shall be
calculated as the arithmetic mean of the beginning and ending principal balances
for such month, from the date hereof until this Revolving Note is fully paid, at
a monthly rate equal to one-twelfth of the Federal Funds rate near closing bid
as published in the Wall Street Journal on the fifteenth of that month, or the
next Business Day if the fifteenth is not a Business Day. Interest shall be due
and payable semi-annually on the last day of April and October of each year
(each, an "Interest Payment Date"), commencing on April 30, 1998. Interest is
based on twelve 30-day months.
4. Payment. Subject to the limitations on payment set forth in
Section 5 hereof, the Lender shall be entitled to and may require the Borrower
to, make a principal or interest payment of the Loans, in whole or in part, on
any day upon providing one Business Day's written notice to the Borrower.
5. Subordination of Obligations. The Lender irrevocably agrees
that the obligations of the Borrower under this Note with respect to the
B-2
<PAGE>
payment of principal and interest are and shall be fully and irrevocably
subordinate in right of payment and subject to the prior payment or provision
for payment in full of all Senior Indebtedness, that such obligations may only
be satisfied to the extent of cash or other assets of the Borrower then
available for such purpose after giving effect to all required payments in
respect of Senior Indebtedness, and that such obligations shall not constitute a
claim against the Borrower at any time that, and for so long as, cash or such
other assets available therefor are insufficient. "Senior Indebtedness" means
the principal of and interest, including post-default interest, on any
indebtedness of or guaranteed by the Borrower, whether outstanding or guaranteed
on the date hereof or thereafter created, incurred, assumed or guaranteed for
money borrowed or for the deferred purchase price of property purchased by any
person including, for this purpose, all obligations of the Borrower under
capitalized leases or purchase money mortgages, and, in each such case, all
renewals, extensions and refundings thereof including, without limitation, all
obligations of the Borrower arising under or in respect of the Pooling and
Servicing Agreement; provided, however, that Senior Indebtedness shall not
include any obligation of or guarantee by the Borrower, whether outstanding or
guaranteed on the date hereof or thereafter created, incurred, assumed or
guaranteed that by agreement, operation of law or by its terms is subordinate in
right of payment to this Note. In the event of the appointment of a receiver or
trustee of the Borrower or in the event of its insolvency, bankruptcy,
assignment for the benefit of creditors or reorganization, whether or not
pursuant to the bankruptcy laws, or any other marshalling of the assets and
liabilities of the Borrower, the Lender shall not be entitled to participate or
share, ratably or otherwise, in the distribution of the assets of the Borrower
until all claims of all other present and future creditors of the Borrower,
whose claims are senior hereto, have been fully satisfied, or provisions have
been made therefor.
6. Acceleration Upon Certain Events. The Borrower's obligation
to pay the unpaid principal amount hereof shall forthwith mature, together with
interest accrued thereon, in the event of any receivership, insolvency,
liquidation, bankruptcy, assignment for the benefit of creditors, reorganization
whether or not pursuant to bankruptcy laws, or any other marshalling of the
assets and liabilities of the Borrower, but payment of the same shall remain
subordinate as hereinabove set forth.
7. Effect of Default. Default in any payment hereunder,
including the payment of interest, shall not accelerate the maturity hereof
except as herein specifically provided, and the obligation to make payments
shall remain subordinated as hereinabove set forth.
B-3
<PAGE>
8. GOVERNING LAW. THIS NOTE SHALL BE DEEMED TO HAVE BEEN
MADE UNDER, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK IN ALL
RESPECTS.
9. Cancellation. This Note shall not be subject to
cancellation by either party.
10. No Security. The Lender agrees that it is not taking and
will not take or assert as security for the payment of this Note any security
interest in or lien upon, whether created by contract, statute or otherwise, any
property of the Borrower or any property in which the Borrower may have an
interest, which is or at any time may be in possession or subject to the control
of the Lender. The Lender hereby waives, and further agrees that it will not
seek to obtain payment of this Note in whole or in any part by exercising any
right of set-off it may assert or possess whether created by contract, statute
or otherwise. Any agreement between the Borrower and the Lender (whether in the
nature of a general loan and collateral agreement, a security or pledge
agreement or otherwise), shall be deemed amended hereby to the extent necessary
so as not to be inconsistent with the provisions of this Note.
11. Assignment. This Note shall inure to the benefit of and be
binding upon the parties hereto and each of their respective successors and
assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Lender.
12. No Bankruptcy Petition Against the Borrower. The Lender
(in its capacity as Lender, but in no other capacity), by its acceptance of this
Note, hereby covenants and agrees that, prior to the date which is one year and
one day after the payment in full of all [Invested Amounts] of all Series issued
pursuant to the Pooling and Servicing Agreement, it will not institute against
or join any other Person in instituting against the Borrower any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
B-4
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officers or employees thereunto duly authorized and directed by
appropriate corporate authority.
A.I. RECEIVABLES CORP.
By:________________________
Name:______________________
Title:_____________________
THE TERMS AND CONDITIONS
HEREOF ARE HEREBY ACKNOWLEDGED
AND ACCEPTED:
[A.I. CREDIT CORP.]
[AICCO, INC.]
By:_____________________________
Name:___________________________
Title:__________________________
B-5
<PAGE>
Schedule I
LIST OF RECEIVABLES
DEEMED INCORPORATED BY REFERENCE
