AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1998
REGISTRATION NO. 333-44653
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED 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>
* 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 #
CAPTION IN PROSPECTUS NAME AND CAPTION IN FORM S-1
- --------------------- ----------------------------
<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; Risk Factors
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 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.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 19, 1998
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
----------------------
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 'RISK FACTORS' BEGINNING ON PAGE
26, WHICH DESCRIBES MATERIAL RISKS INVOLVED WITH AN INVESTMENT
IN THE OFFERED CERTIFICATES.
----------------------
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>
Per 1998-1 Class A Certificate..................... [ ]% [ ]% [ ]%
Per 1998-1 Class B Certificate..................... [ ]% [ ]% [ ]%
Total.............................................. $[ ] $[ ] $[ ]
</TABLE>
- ------------------
(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 March [ ], 1998,
through the facilities of The Depository Trust Company.
Goldman, Sachs & Co.
----------------------
<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 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
2
<PAGE>
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.
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.
3
<PAGE>
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 "Risk Factors." Certain capitalized terms used
herein are defined elsewhere in this Prospectus. A listing of the pages on which
such terms are defined is found in the "Index of Key Terms For Prospectus,"
beginning on page 94. 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 Series 1994-1
Supplement thereto, as amended 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
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
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
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
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 , funded by 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. 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
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
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
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
$[__________].
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
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
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
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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
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," and 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."
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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 uncollectible 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 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.
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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
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
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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
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
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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.
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. Moreover, prior to
any such permitted removal of Receivables, the Transferor will receive
confirmation from the appropriate rating agencies and an opinion of
counsel indicating, respectively, that 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.
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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
"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, AICCO 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 "Risk Factors-Risk of
Bankruptcy of the Transferor or the Original Transferors."
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
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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 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
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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
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, during the Series 1994-1 revolving period,
collections in respect of Principal Receivables otherwise allocable in respect of
one or more classes of the Series 1994-1 Certificates will, subject to certain
limitations set forth in the Agreement, be available to cover payments of interest
on the Series 1994-1 Certificates. Any remaining collections after such
application 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
1998-1 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. 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.
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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
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."
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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
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
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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 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 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) 2.25% 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
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Amortization Period and the Series 1998-1 Rapid Amortization Period, if any, the
product of (i) 2.25% 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 "Risk Factors-Premium Finance Loan Credit
and Related Risks," "Description of the Offered Certificates-Reallocation of Cash
Flows" and "-Defaulted Loans; Charge-Offs."
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
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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 the
Closing Date, and thereafter held by the Transferor. Such Transferor Certificate
will be transferable only 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
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(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.
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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
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.
Book-Entry Certificates......................... The Offered Certificates will initially be issued in book-entry form only
and will be represented by one or more 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. Under a book-entry system, Certificate Owners might experience some delay
in their receipt of payments, since such payments will initially be forwarded by
the Trustee to Cede, as nominee for DTC. Further, 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 DTC and its participating
organizations. See "Description of the Offered Certificates-Book-Entry
Registration" and "-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
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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
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
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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...................................... Counsel to the Transferor has issued its opinion, subject to the assumptions set
forth therein, that under existing law, as more fully discussed under "United
States Federal Income Tax Consequences" and "Certain State and Local Tax
Consequences," the Offered Certificates will be characterized as debt secured by
the Receivables for federal, California and New York State income tax purposes.
Under the Agreement, the 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 "United
States Federal Income Tax Consequences" and "Certain State and Local 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.
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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 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
"Risk Factors-Limitations on Certificate Rating; Risk of Downgrade."
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RISK FACTORS
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 Risks. 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 uncollectible 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."
Risk of Bankruptcy of the Transferor or the Original
Transferors. 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.
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
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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 comparable 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 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
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is due either to the bankruptcy of the Transferor or the appointment of a
bankruptcy trustee for the Transferor, the bankruptcy 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 , to prohibit the continued transfer of Additional
Receivables to the Trust and to cause the early retirement of the Offered
Certificates. If an early retirement of the Offered Certificates should occur,
Holders of Offered Certificates are likely to be repaid principal amounts
earlier than anticipated with respect to their Offered Certificates, which would
affect the anticipated average life of the Offered Certificates and could result
in reinvestment risk with respect to such earlier repayments.
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 bankruptcy 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.
Risk of 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 accept
reassignment of such Receivable. See "-Risk of Bankruptcy of the Transferor or
the Original Transferors" and "Description of the Offered
Certificates-Representations and Warranties."
Dependence on the Business of AIC and AICCO. 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
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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."
Geographic Concentration and Adverse Economic Factors.
Significant percentages of Loans underlying the Receivables were originated in
New York, California, Texas and New Jersey. After giving effect to the transfer
of Additional Receivables, the specific percentages may increase or decrease.
Economic factors, including the occurrence of a recession, the rate of
inflation, and relative interest rates, may have an adverse impact on the
performance of the Receivables and on the ability of AIC and AICCO to generate
Additional Receivables . In particular, negative economic developments in New
York, California, Texas or New Jersey could have an adverse impact on the timing
and amounts of payments made by borrowers in respect of Receivables and could
cause such borrowers to become bankrupt or insolvent. Such developments may
adversely affect the payments received by the Trust and could lead to a Pay Out
Event which would cause the early retirement of the Offered Certificates and
result in reinvestment risk. See "-Premium Finance Loan Credit and Related
Risks" and "Maturity Considerations."
Risk of 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 Related Risks" above.
Series of certificates issued in the future may share with the Offered
Certificates in the benefits of 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
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of the Offered Certificates-Subordination," "-Series 1998-1 Yield Enhancement
Account" and "-Excess Funding Account."
Other Series May Impact Payments. 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 different or additional pay out
events 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.
Risk of Decline in Quality of Additional Receivables . AIC
and AICCO will be obligated pursuant to the Receivables Sale Agreement to
transfer to the Transferor the Additional Receivables relating to Loans funded
by them that the Transferor elects or is obligated to transfer to the Trustee
for the benefit of the Trust pursuant to the Agreement. Such Additional
Receivables may include Receivables originated using criteria different from
those which were applied to the Existing Receivables because such Receivables
were 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."
Except for the criteria described thereunder, there are no required
characteristics of Additional Receivables. Following the transfer of Additional
Receivables to the Trust, the aggregate
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characteristics of the entire pool of Receivables included in the Trust may vary
from those of the Receivables included in the Trust on the Closing Date. See
"The Receivables."
Risk of Insufficiency of Additional Receivables. 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."
Limitations on Certificate Rating; Risk of Downgrade. 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 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."
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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
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 by AIC of its support obligations under the
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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 "Risk Factors-Risk of Insufficiency of Additional Receivables."
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 "Risk Factors-Risk of
Bankruptcy of the Transferor or the Original Transferors." 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
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
34
<PAGE>
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, on December 22,
1994 (the "Initial Closing Date"), 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.
1. Series 1994-1
Class A Certificates
Initial Ownership Interest $200,000,000
Certificate Rate One-month LIBOR + 0.23%, subject to
a cap of 16.00%, per annum
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
OtherEnhancement 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
35
<PAGE>
2. Series 1994-1 Class B Certificates
Initial Ownership Interest $7,600,000
Certificate Rate One-month LIBOR + 0.43%, subject to
a cap of 16.00%, per annum
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
36
<PAGE>
BUSINESS OF A.I. RECEIVABLES CORP., A.I. CREDIT CORP. AND AICCO, INC.
General
A.I. Receivables Corp. ("AIR") 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 one of the 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 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
37
<PAGE>
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.
None of AIR, AIC and AICCO is currently involved in any material
litigation.
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.
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.
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<PAGE>
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 Receivables sold to the
Transferor pursuant to the Receivables Sale Agreement relating to Purchased
Loans, as are made with respect to Receivables relating to Loans directly
originated by AIC.
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.
39
<PAGE>
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 first reviewed by a branch office and a determination is made
as to whether the loan may be approved by the branch office, or be subject to
further evaluation and approval by the corporate credit department of AIC's head
office. Such determination is based primarily upon the size of the premium (and
corresponding loan) to be financed and the associated risk related to the amount
of any unsecured credit exposure. A prospective loan with a risk assessment
exceeding a certain threshold receives a formal credit review performed by the
credit department of AIC's head office. Such risk threshold can vary depending
upon the amount of downpayment made by the prospective borrower, the amount of
unearned premium collateral, the related insurance carrier and the agent/broker
involved in the transaction. In making loan decisions, the corporate credit
department uses Dun & Bradstreet reports, financial statements, payment
histories, agent/broker and AIC local office input, and its extensive
experience. For prospective loans with risk assessments below an applicable
threshold, AIC relies primarily on the inherent diversification of risk, and
approval is granted by the branch office without additional action. 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 . In most cases AIC receives applications 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, domestic or foreign, 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 "Risk
Factors-Risk of 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 case a third party
may be appointed as its successor. See "Risk Factors-Risk of State
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<PAGE>
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 related Receivables for which were
included in the Trust (the "Loan Portfolio") as of the dates shown is set forth
below. AIC and AICCO have transferred to the Trust the Eligible Receivables
resulting from all Loans funded by them since the Initial Closing Date, and
expect hereafter to transfer the Eligible Receivables resulting from all Loans
funded by them to the Transferor pursuant to the Receivables Sale Agreement for
transfer to the Trust pursuant to the 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.
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<PAGE>
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, 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 in the Loan Portfolio 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 459
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 459 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."
42
<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.
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<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)
<TABLE>
<CAPTION>
% of Aggregate
Outstanding Outstanding
Loan Account Loan Account
Balance Balance
------- -------
<S> <C> <C>
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%
</TABLE>
(1) Significant percentages of the loans funded by AIC and AICCO are originated
in New York , California, Texas and New Jersey, 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.
44
<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...................................... 9,984 7,015 3,713
Net Loan Charge-Offs as Percentage
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.
45
<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.
<TABLE>
<CAPTION>
Number Of Days A Loan Remains Overdue After At December 31,
--------------------------------------
Cancellation Of The Related Insurance Policy: 1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
1-30 days..................................... 1.60% 1.90% 1.94%
31-60 days.................................... 0.78% 0.62% 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% 5.20% 4.63%
</TABLE>
(1) A loan is generally charged-off one year after cancellation of the related
insurance policy.
46
<PAGE>
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 . 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 . 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 , Shared Principal Collections and funds on
deposit in the Excess Funding Account, all as more fully described below. 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 , Shared Principal Collections and funds on deposit in the
Excess Funding Account, 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").
The Transferor will own the Transferor Certificate. The Transferor
Certificate represents the fractional undivided interest in the assets of the
Trust not represented by the certificates of any outstanding Series, including
any enhancement thereto, including the right to a percentage of all payments on
the Receivables in the Trust equal to 100% minus the sum of the
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<PAGE>
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, to
certain affiliates of the Transferor or to certain special-purpose vehicles, as
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.
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
48
<PAGE>
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 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.
49
<PAGE>
Transactions may be settled in Cedel in any of 37 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 33
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 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
50
<PAGE>
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 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
51
<PAGE>
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 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
52
<PAGE>
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 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
(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 the 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
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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 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.
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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.
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 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.
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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 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 and California of financing statements on Form UCC-1. See "Risk
Factors-Risk of Bankruptcy of the Transferor or the Original Transferors."
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
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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 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 and may
include pay out events that are different from or additional to those for other
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
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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 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
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given and are in full force and effect. In the event of a breach of any
representation and warranty set forth in this 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.
Upon the execution of each Supplement (including the Series 1998-1
Supplement), each Original Transferor and the Transferor with respect to (a)
below, and the Transferor with respect to (b) below, will make 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, and (b)
the transfer of Receivables to the Trust under the Agreement constitutes a valid
transfer to the Trust of the entire right, title and interest in and to the
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 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.
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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 allocable portion
of such reassignment deposit amount 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 AIC, AICCO and any Third Party 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 AIC, AICCO and any Third Party
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, none of AIC, AICCO and any Third Party
Originator has 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 the Obligor under the related Loan is not the
direct obligor under any Defaulted Loan (other than a Defaulted Loan resulting
solely from an event of bankruptcy of an entity 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 and, in the case of a Third Party
Originator, its transferees, 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 and, in the case of a Third Party Originator, its
transferees, to direct the insurance company to pay to such party any unearned
premium under the related insurance policy calculated as of the time of
cancellation of the insurance policy, if cancelable.
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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 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 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.
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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."
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)
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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 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."
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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."
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) 2.25% 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) 2.25% 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 then applicable Investor Percentages of
all Series of certificates issued and outstanding on such date of determination,
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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 in the Loan Portfolio 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 459 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
459 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 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
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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 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 will 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 "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
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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.
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
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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 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
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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 or 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.
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 a specified
percentage 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
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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.
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
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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."
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 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
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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 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
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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 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
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Ownership Interest and the Series 1998-1 Class C Ownership Interest have both
been reduced to zero, the Series 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 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
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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;
(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:
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(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 [March __, 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 [March __, 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 [March __, 1998.]
"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.
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"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.
"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.
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"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 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
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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 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;
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(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 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,
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) 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
either to the bankruptcy of AIC, AICCO or the Transferor or the appointment of a
bankruptcy trustee for AIC, AICCO or the Transferor, the bankruptcy 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
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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.
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
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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
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 or assignment and transfer, as applicable, 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 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.
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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
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
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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 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 Transferors, the Transferor
or the 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
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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 Agreements by assuming the obligations of AIC and AICCO, or
AIR, as the case may be, under the Agreement. 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
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to do so under the Agreement (or within the applicable grace period, which
shall not exceed five business days);
(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 information relating to the Series 1998-1 Class A Certificate Rate,
the Series 1998-1 Class B Certificate Rate and
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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 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
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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.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion, insofar as it constitutes statements of law or
legal conclusions, represents the opinion of Weil, Gotshal & Manges LLP
("Counsel"), special counsel to the Transferor, and is subject to the
qualifications set forth herein. The discussion summarizes the material federal
income tax consequences of the ownership and disposition of the Offered
Certificates and 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"), all 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
(i) assumes that 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), describes the
consequences of Offered Certificates that are properly characterized as debt for
federal income tax purposes. Except under
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"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 urged to consult their own tax
advisors with regard to the United States federal income tax consequences of
purchasing, 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"
means 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 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 an analysis of such factors, it is the opinion of
Counsel that, under current law, assuming due execution of and compliance with
the Agreement, and subject to the assumptions set forth herein 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 when issued 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
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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 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.
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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.
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
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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 are urged to 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 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.
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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.
CERTAIN STATE AND LOCAL TAX CONSEQUENCES
The following discussion, to the extent it contains statements of law or
legal conclusions, represents the opinion of Counsel, and is subject to the
qualifications set forth herein. The discussion of the 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" means 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 that, if
the Offered Certificates are so treated, the Trust will not be a taxable entity.
See "United States Federal Income Tax Consequences-Treatment of the Certificates
as Indebtedness."
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, Counsel is of the opinion
that if the Offered Certificates are treated as debt for federal income tax
purposes, the Offered Certificates will also be treated as debt for New York and
California State income and franchise tax purposes and for New York City
personal income and general corporation tax purposes, and, accordingly, the
Trust will not be treated as a taxable entity. In addition, if the Offered
Certificates are treated as debt, Certificateholders who are 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
and/or California may be required to pay additional state or local taxes as a
result of their ownership of the Offered Certificates.
Other States
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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/or 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 as described above under the caption "United States Federal Income Tax
Consequences-Possible Alternative Characterization" 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 STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE OFFERED CERTIFICATES.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Transferor 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
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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.
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INDEX OF KEY TERMS FOR PROSPECTUS
Term Page
- ---- ----
Accounts..................................................................... 62
Additional Interest.......................................................... 13
Additional Receivables.........................................................6
Aggregate Investor Percentage................................................ 63
Agreement...................................................................1, 4
AIC........................................................................1, 36
AIC Letter Agreement......................................................... 84
AIC Support Agreement........................................................ 83
AICCO...................................................................1, 5, 36
AIG.....................................................................1, 5, 36
AIR.....................................................................1, 5, 36
AIR Support Agreement........................................................ 83
Bankruptcy Code.............................................................. 26
Cede...........................................................................3
Cedel........................................................................ 48
Cedel Participants........................................................... 48
Certificate Owners.............................................................3
Certificateholder........................................................ 88, 92
Cleanup Call............................................................. 23, 77
Closing Date...................................................................2
Code......................................................................... 87
Collection Account........................................................... 61
Collection Subaccount........................................................ 61
Commission.....................................................................3
Cooperative.................................................................. 49
Counsel...................................................................... 88
Credit Balance............................................................... 40
Cut-Off Date..............................................................6, 54
Default Amounts.............................................................. 68
Defaulted Loan............................................................... 68
Definitive Certificates...................................................... 50
Depository................................................................... 47
Determination Date........................................................... 68
Disclosure Document.......................................................... 21
Distribution Date.........................................................2, 13
DTC............................................................................3
EDGAR......................................................................... 3
Eligible Additional Receivable............................................... 60
Eligible Receivable.......................................................... 59
Enhancement.................................................................. 33
ERISA........................................................................ 24
ERISA Plans.................................................................. 24
Euroclear.................................................................... 49
Euroclear Operator........................................................... 49
Euroclear Participants....................................................... 49
Excess Funding Account....................................................... 65
Excess Receivables Amount.................................................... 66
Exchange Act...................................................................3
96
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Term Page
- ---- ----
Existing Receivables.................................................... 4, 55
FDIC....................................................................... 61
Finance Charge Account..................................................... 62
Finance Charge Receivables................................................. 11
Financed Premium Percentage................................................ 79
Future Receivables......................................................5, 54
Holders.................................................................... 50
Holders of Offered Certificates............................................. 6
Indirect Participants...................................................... 47
Ineligible Receivable...................................................... 58
Initial Closing Date........................................................34
Interest Period............................................................ 14
Investor Exchange...................................................... 21, 55
Investor Percentage........................................................ 64
Letter Agreements.......................................................... 84
LIBOR....................................................................2, 9
LIBOR Determination Date................................................... 51
Loan Portfolio............................................................. 40
Loans....................................................................1, 5
Minimum Transferor Ownership Interest...................................... 66
Monthly Certificateholders Statement....................................... 85
Monthly Payment Rate....................................................... 80
Monthly Period.............................................................. 8
Moody's................................................................ 24, 61
Moody's Non-Investment Grade Insurer....................................... 67
New Regulations............................................................ 91
New Series Issuance.................................................... 21, 55
Obligor.................................................................... 26
Obligors................................................................ 5, 36
Offered Certificates......................................................1, 4
OID........................................................................ 89
Original Agreement...........................................................4
Original Series 1994-1 Supplement............................................4
Original Transferors.........................................................1
Originator................................................................. 59
Participants............................................................... 47
Pay Out Event.............................................................. 77
Paying Agent............................................................... 50
Permitted Investments...................................................... 61
Pool Factor................................................................ 85
Principal Account.......................................................... 62
Principal Receivables...................................................... 11
Principal Shortfalls....................................................... 68
Principal Terms............................................................ 56
Prior Period Interest...................................................... 13
Purchased Loans............................................................ 38
Qualified Institution...................................................... 61
Rating Agencies............................................................ 31
Rating Agency.............................................................. 31
Receivables..........................................................1, 5, 40
Receivables Sale Agreement.................................................. 4
Record Date................................................................ 46
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Term Page
- ---- ----
Reference Banks.......................................................... 52
Regulations.............................................................. 87
Removal Date............................................................. 60
Removed Receivables.................................................. 12, 60
S&P Non-AAA Insurer...................................................... 67
S&P Non-Investment Grade Insurer......................................... 67
Securities Act............................................................ 3
Series................................................................... 21
Series 1994-1 Certificateholders...........................................7
Series 1994-1 Certificates.............................................1, 4
Series 1994-1 Class A Certificates....................................... 34
Series 1994-1 Class B Certificates....................................... 34
Series 1994-1 Class C Certificates....................................... 11
Series 1994-1 Offered Certificates....................................... 11
Series 1998-1 91 Day Delinquency Amount.................................. 65
Series 1998-1 Annualized Monthly Excess Spread Amount.................... 79
Series 1998-1 Available Investor Principal Collections................... 53
Series 1998-1 Available Yield Enhancement Amount......................... 63
Series 1998-1 Certificateholders.......................................... 6
Series 1998-1 Certificateholders Ownership Interests..................... 71
Series 1998-1 Certificates..............................................2, 4
Series 1998-1 Class A Additional Interest................................ 51
Series 1998-1 Class A Available Funds.................................... 51
Series 1998-1 Class A Certificate Rate.............................2, 9, 51
Series 1998-1 Class A Certificateholders.................................. 6
Series 1998-1 Class A Certificates......................................1, 4
Series 1998-1 Class A Charge-Off..................................... 20, 69
Series 1998-1 Class A Controlled Amortization Period..................... 15
Series 1998-1 Class A Default Amount..................................... 69
Series 1998-1 Class A Floating Allocation................................ 70
Series 1998-1 Class A Initial Ownership Interest......................... 71
Series 1998-1 Class A Monthly Interest................................... 75
Series 1998-1 Class A Monthly Principal.................................. 76
Series 1998-1 Class A Ownership Interest................................. 71
Series 1998-1 Class A Prior Period Interest.............................. 75
Series 1998-1 Class A Required Amount.................................... 72
Series 1998-1 Class A Servicing Fee...................................... 80
Series 1998-1 Class B Additional Interest................................ 51
Series 1998-1 Class B Available Funds.................................... 51
Series 1998-1 Class B Certificate Rate.............................2, 9, 51
Series 1998-1 Class B Certificateholders.................................. 6
Series 1998-1 Class B Certificates......................................1, 4
Series 1998-1 Class B Charge-Off..................................... 20, 69
Series 1998-1 Class B Controlled Amortization Period..................... 15
Series 1998-1 Class B Default Amount..................................... 69
Series 1998-1 Class B Floating Allocation................................ 71
Series 1998-1 Class B Initial Ownership Interest......................... 71
Series 1998-1 Class B Monthly Interest................................... 75
Series 1998-1 Class B Monthly Principal.................................. 76
Series 1998-1 Class B Ownership Interest................................. 71
Series 1998-1 Class B Principal Commencement Date........................ 16
Series 1998-1 Class B Prior Period Interest.............................. 75
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Term Page
- ---- ----
Series 1998-1 Class B Required Amount........................................ 72
Series 1998-1 Class B Servicing Fee.......................................... 80
Series 1998-1 Class C Additional Interest.................................... 51
Series 1998-1 Class C Available Funds........................................ 76
Series 1998-1 Class C Certificateholders...................................... 6
Series 1998-1 Class C Certificates..........................................2, 4
Series 1998-1 Class C Charge-Off............................................. 70
Series 1998-1 Class C Controlled Amortization Period......................... 15
Series 1998-1 Class C Default Amount......................................... 69
Series 1998-1 Class C Floating Allocation.................................... 71
Series 1998-1 Class C Initial Ownership Interest............................. 71
Series 1998-1 Class C Monthly Interest....................................... 75
Series 1998-1 Class C Monthly Principal...................................... 76
Series 1998-1 Class C Ownership Interest..................................... 71
Series 1998-1 Class C Principal Commencement Date............................ 16
Series 1998-1 Class C Prior Period Interest.................................. 76
Series 1998-1 Class C Required Amount........................................ 73
Series 1998-1 Class C Servicing Fee.......................................... 80
Series 1998-1 Controlled Amortization Amount................................. 53
Series 1998-1 Controlled Amortization Period................................. 15
Series 1998-1 Controlled Distribution Amount................................. 53
Series 1998-1 Deficit Controlled Amortization Amount......................... 53
Series 1998-1 Distribution Account........................................... 62
Series 1998-1 Excess Finance Charges......................................... 63
Series 1998-1 Fixed Investor Percentage...................................... 71
Series 1998-1 Floating Investor Percentage................................... 70
Series 1998-1 Initial Certificateholders Ownership Interests................. 77
Series 1998-1 Investor Default Amount........................................ 68
Series 1998-1 Investor Servicing Fee......................................... 80
Series 1998-1 Maximum Yield Enhancement Amount............................... 63
Series 1998-1 Net Servicing Fee Rate......................................... 80
Series 1998-1 Rapid Amortization Period...................................... 17
Series 1998-1 Reallocated Class A Principal Collections...................... 73
Series 1998-1 Reallocated Class B Principal Collections...................... 73
Series 1998-1 Reallocated Class C Principal Collections...................... 74
Series 1998-1 Reallocated Principal Collections.............................. 74
Series 1998-1 Revolving Period............................................... 14
Series 1998-1 Termination Date........................................... 11, 77
Series 1998-1 Yield Enhancement Account.................................. 18, 63
Service...................................................................... 87
Service Transfer............................................................. 84
Servicer..................................................................1, 12
Servicer Default............................................................. 84
Servicing Fee................................................................ 12
Shared Principal Collections............................................. 23, 68
Standard & Poor's........................................................ 24, 61
Supplement................................................................... 21
Support Agreements........................................................... 83
Terms and Conditions......................................................... 49
Third Party Originators...................................................... 38
Transfer Agent and Registrar................................................. 50
Transferor.....................................................................1
99
<PAGE>
Term Page
- ---- ----
Transferor Certificate................................................ 21, 55
Transferor Ownership Interest...............................................2
Transferor Ownership Interest Reduction............................... 21, 55
Trust.......................................................................1
Trustee................................................................1, 24
U.S. Certificateholder.................................................... 87
Underwriters.............................................................. 93
Underwriting Agreement.................................................... 93
100
<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 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports to Holders of Offered Certificates.......... 3
Available Information............................... 3
Prospectus Summary.................................. 4
Risk Factors........................................ 26
Maturity Considerations............................. 31
The Trust........................................... 33
Business of A.I. Receivables Corp., A.I. Credit Corp
and AICCO, Inc.................................... 36
The Receivables..................................... 40
Use of Proceeds..................................... 46
Description of the Offered Certificates............. 46
United States Federal Income Tax Consequences....... 87
Certain State and Local Tax Consequences............ 92
Underwriting........................................ 93
Validity of the Certificates........................ 93
Index of Key Terms.................................. 94
</TABLE>
$[ ]
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 MARCH [ ], 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............................. 50,000
Trustee's Fees..................................... 10,000
Legal Fees and Expenses............................ 250,000
Accountants' Fees and Expenses..................... 25,000
Rating Agency Fees................................. 132,000
Miscellaneous...................................... 5,000
Total.............................................. $ 472,295
- ----------
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 Undewriting 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).
- ----------
* Previously filed.
(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 Amendment #1 to the 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 19th day of March, 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 March 19, 1998
- ------------------------
Gerald V. Vitkauskas (Principal executive officer)
/s/ Michael D. Vogen Treasurer and Director March 19, 1998
- ------------------------
Michael D. Vogen (Principal financial officer and
accounting officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
1.1 - Form of Undewriting 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).
- ----------
* Previously filed.
Exhibit 1.1
$[ ]
AIC PREMIUM FINANCE LOAN MASTER TRUST
$[ ] Series 1998-1 Class A Floating Rate Asset Backed Certificates
$[ ] Series 1998-1 Class B Floating Rate Asset Backed Certificates
------------------------------
Underwriting Agreement
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
February [ ], 1998
Ladies and Gentlemen:
A.I. Receivables Corp. ("AIR" or the "Transferor"), a Delaware
corporation, 50% of the outstanding stock of which is owned by each of A.I.
Credit Corp. ("AIC"), a New Hampshire corporation, and AICCO, Inc. ("AICCO"), a
California corporation and a wholly-owned subsidiary of AIC (AIC, together with
AICCO, being referred to herein collectively as the "Original Transferors"),
proposes, subject to the terms and conditions stated in this underwriting
agreement ("this Agreement" or the "Underwriting Agreement"), to sell to
Goldman, Sachs & Co. (the "Underwriters"), an aggregate of $[ ] principal amount
of Series 1998-1 Class A Floating Rate Asset Backed Certificates and an
aggregate of $[ ] principal amount of Series 1998-1 Class B Floating Rate Asset
Backed Certificates (together, the "Offered Certificates").
Each Offered Certificate, together with each Series 1998-1 Class
C Floating Rate Asset Backed Certificate (collectively with the Offered
Certificates, the "Certificates") will represent an undivided interest in the
assets of AIC Premium Finance Loan Master Trust (the "Trust") established
pursuant to a Pooling and Servicing Agreement, dated as of December 1, 1994 (the
"Original P&S Agreement"), as amended and restated as of February [ ], 1998,
among AIR, as Transferor, AIC and AICCO, as Original Transferors and Servicer,
and The First National Bank of Chicago, as trustee (the "Trustee") (the "P&S
Agreement"). The Certificates will be issued pursuant to the Series 1998-1
Supplement among AIR, as Transferor, AIC and AICCO, as Original Transferors and
Servicer, and the Trustee, dated as of February [ ], 1998, and the P&S Agreement
(collectively, together with the Series 1994-1 Supplement to the P&S Agreement
dated as of December 1, 1994, as amended and restated as of February [ ], 1998,
among AIR, as Transferor, AIC and AICCO, as Original Transferors and Servicer,
and the Trustee, the "Pooling and Servicing Agreement"). To the extent not
defined herein, capitalized terms used herein have the meanings assigned in the
Pooling and Servicing Agreement.
<PAGE>
1. The Transferor represents and warrants to, and agrees with,
the Underwriters that:
(a) A registration statement in respect of the Certificates has
been filed with the Securities and Exchange Commission ("the Commission"); such
registration statement and any post-effective amendment thereto, each in the
form heretofore delivered to the Underwriters, has been declared effective by
the Commission in such form; no other document with respect to such registration
statement has heretofore been filed with the Commission; no stop order
suspending the effectiveness of such registration statement has been issued and
no proceeding for that purpose has been initiated or, to their best knowledge,
threatened by the Commission (any preliminary prospectus included in such
registration statement or filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the Commission under the Securities Act of 1933, as
amended (the "Act"), being hereinafter called a "Preliminary Prospectus"; the
various parts of such registration statement, including all exhibits thereto and
including the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the
registration statement at the time it was declared effective, each as amended at
the time such part of the registration statement became effective, being
hereinafter called the "Registration Statement"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, being hereinafter
called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and the Preliminary Prospectus
dated February [ ], 1998 and filed with Amendment No. [ ] to the Registration
Statement ("Preliminary Prospectus No. 1"), at the time of filing thereof,
conformed in all material respects to the requirements of the Act and to the
rules and regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished in
writing to the Transferor by the Underwriters expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and to the rules and regulations of the Commission thereunder and do not and
will not, as of the applicable effective date as to the Registration Statement
and any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with information furnished
in writing to the Transferor by the Underwriters expressly for use therein;
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (i) there has not been any
material adverse change, or any development known to the Transferor or either of
the Original Transferors that could reasonably be expected to result in a
material adverse change, in or affecting the business, management, financial
position, stockholders' equity or results of operations of the Transferor or the
Original Transferors taken as a whole and (ii) none of the Transferor and the
Original Transferors has entered into any
2
<PAGE>
transaction or agreement (whether or not in the ordinary course of business)
material to the Transferor or either of the Original Transferors that, in the
case of either such clause (i) or (ii), would reasonably be expected to have a
materially adverse effect on the interests of the Certificateholders;
(e) Each of AIR, AIC and AICCO has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, the State of New Hampshire and the State of California,
respectively, with power and authority (corporate and other) to own its
respective properties and conduct its respective businesses as described in the
Prospectus, and to enter into and perform its obligations under this Agreement,
the Pooling and Servicing Agreement, the Receivables Sale Agreement, dated as of
February [ ], 1998, between AIC and AICCO, as sellers, and AIR, as purchaser
(the "Sale Agreement"), and, in the case of AIR only, the Support Agreement
dated as of February [ ], 1998 between American International Group, Inc.
("AIG") and AIR (the "AIR Support Agreement"). Each of AIC and AICCO has power
and authority (corporate and other) to perform its obligations under the Support
Agreement dated as of December 1, 1994 between AIG, AIC and AICCO (the "AIC
Support Agreement" and, together with the AIR Support Agreement, the "Support
Agreements"). Each of AIC and AICCO had, at the relevant time, power and
authority (corporate and other) to enter into the AIC Support Agreement. AIC
owns 100% of the outstanding stock of AICCO. Each of AIC and AICCO, as of the
date hereof, owns 50% of the outstanding stock of AIR. AIC has no material
subsidiaries other than AICCO, AIR, A.I. Credit [Consumer] Discount Company, AIG
Credit Corp. of Canada and AIG Credit (UK) Limited. AICCO has no subsidiaries
other than AIR. AIR has no subsidiaries. Each Original Transferor has had at all
relevant times, and now has, the power, authority and legal right to originate,
purchase and service Loans, and each of the Transferor and the Original
Transferors has had at all relevant times, and now has, the power, authority and
legal right to acquire (in the case of the Transferor), own and sell the
Receivables, and is duly qualified to do business and is in good standing as a
foreign corporation (or is exempt from such requirements) and has obtained all
necessary licenses and approvals in each jurisdiction in which failure to
qualify or to obtain such licenses or approvals (i) would render any Loan
unenforceable by it or any Receivable unenforceable by it or the Trust or (ii)
would have a material adverse effect on the Certificateholders, or on its
business or on its ability to perform its obligations under this Agreement, the
Pooling and Servicing Agreement, the Sale Agreement, (in the case of the
Transferor) the AIR Support Agreement or (in the case of the Original
Transferors) the AIC Support Agreement;
(f) AIG has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and to conduct its
business as described in the Prospectus and to enter into the AIR Support
Agreement and the AIR Letter Agreement (as defined below). AIG had, in each case
at the relevant time, power and authority (corporate and other) to enter into
the AIC Support Agreement and the AIC Letter Agreement (as defined below). AIG
owns 100% of the outstanding stock of AIC;
(g) The Certificates have been duly authorized, and, when duly
executed and authenticated by the Trustee and issued pursuant to the Pooling and
Servicing Agreement, will have been duly and validly executed, authenticated,
issued and delivered and will be entitled to the benefits provided by the
Pooling and Servicing Agreement; the Pooling and Servicing Agreement has been
duly authorized by AIR, AIC and AICCO and, when executed and delivered by AIR,
AIC, AICCO and the Trustee, will constitute a valid and legally binding
agreement of each of AIR, AIC
3
<PAGE>
and AICCO, enforceable in accordance with its terms, subject as to enforcement
to the effect of any applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and other similar laws affecting creditors' rights
generally and to the effect of general principles of equity (regardless of
whether considered in a proceeding in equity or at law); the Sale Agreement has
been duly authorized by AIC, AICCO and AIR and, when executed and delivered by
AIC, AICCO and AIR, will constitute a valid and legally binding agreement of
each of AIC, AICCO and AIR, enforceable in accordance with its terms, subject as
to enforcement to the effect of any applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and other similar laws
affecting creditors' rights generally and to the effect of general principles of
equity (regardless of whether considered in a proceeding in equity or at law);
the AIC Support Agreement has been duly authorized, executed and delivered by
AIG, AIC and AICCO and constitutes a valid and legally binding agreement of each
of AIG, AIC and AICCO, enforceable in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and other similar laws affecting creditors' rights
generally and to the effect of general principles of equity (regardless of
whether considered in a proceeding in equity or at law); the Letter Agreement
dated as of December 1, 1994 between AIG and the Trustee (the "AIC Letter
Agreement") has been duly authorized, executed and delivered by AIG and has been
executed and delivered by the Trustee, and constitutes a valid and legally
binding agreement of AIG, enforceable in accordance with its terms, subject as
to enforcement to the effect of any applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and other similar laws
affecting creditors' rights generally and to the effect of general principles of
equity (regardless of whether considered in a proceeding in equity or at law);
the AIR Support Agreement has been duly authorized by AIG and AIR and, when
executed and delivered by AIG and AIR, will constitute a valid and legally
binding agreement of each of AIG and AIR, enforceable in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and other similar laws
affecting creditors' rights generally and to the effect of general principles of
equity (regardless of whether considered in a proceeding in equity or at law);
the Letter Agreement dated as of February [ ], 1998 between AIG and the Trustee
(the "AIR Letter Agreement" and, together with the AIC Letter Agreement, the
"Letter Agreements") has been duly authorized by AIG and when executed and
delivered by AIG and the Trustee, will constitute a valid and legally binding
agreement of AIG, enforceable in accordance with its terms, subject as to
enforcement to the effect of any applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and other similar laws affecting
creditors' rights generally and to the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at law); and the
Certificates, the Transferor Certificate, the Pooling and Servicing Agreement,
the Sale Agreement, the Support Agreements and the Letter Agreements will
conform to the descriptions thereof in the Prospectus in all material respects;
(h) The issue and sale of the Certificates, the compliance by
the Transferor and the Original Transferors with all of the provisions of the
Certificates, the Pooling and Servicing Agreement, the Sale Agreement and this
Agreement, the compliance by AIG, AIC and AICCO with all of the provisions of
the AIC Support Agreement, the compliance by AIG and AIR with all of the
provisions of the AIR Support Agreement and the compliance by AIG with the
Letter Agreements and the consummation of the transactions herein and therein
contemplated will not conflict with, or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, or result in the
creation of any lien, mortgage, pledge, charge, security interest or encumbrance
(collectively, "Liens") upon any property or assets of the Transferor or the
Original Transferors pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument
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to which AIG, the Transferor or either of the Original Transferors is a party or
by which any of them is bound or to which any of the property or assets of AIG,
AIC, AICCO or AIR is subject, nor will such action result in any violation of
the provisions of the certificate of incorporation or by-laws of AIG, the
Transferor or either of the Original Transferors or any statute or any order,
rule, decree or regulation of any court or governmental agency or body or
regulatory body having jurisdiction over AIG, AIC, AICCO or AIR or any of their
respective properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body or regulatory body is required for the issue and sale of the
Certificates, the consummation by the Transferor and the Original Transferors of
the transactions contemplated by this Agreement, the Sale Agreement and the
Pooling and Servicing Agreement, the consummation by AIG, AIC and AICCO of the
transactions contemplated in the AIC Support Agreement, the consummation by AIG
and AIR of the transactions contemplated in the AIR Support Agreement or the
consummation by AIG of the transactions contemplated by the Letter Agreements,
except the filing of Uniform Commercial Code financing statements with respect
to the Receivables, the registration under the Act of the Offered Certificates,
and such consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Offered Certificates by the Underwriters; none
of AIG, AIC, AICCO and AIR is in breach or violation of any indenture or other
agreement or instrument to which it is a party or by which it is bound, or in
violation of any applicable statute or regulation or any order of any court,
regulatory body, administrative agency or governmental body having jurisdiction
over it, which would have a material and adverse effect on its ability to
perform its obligations, in the case of AIG, under the Support Agreements and
the Letter Agreements, in the case of AIC, under the AIC Support Agreement, the
Sale Agreement and the Pooling and Servicing Agreement, in the case of AICCO,
under the AIC Support Agreement, the Sale Agreement and the Pooling and
Servicing Agreement, and in the case of AIR, under the AIR Support Agreement,
this Agreement, the Sale Agreement and the Pooling and Servicing Agreement;
(i) There are no proceedings or investigations pending to which
AIC, AICCO, AIR or AIG is a party or of which any property of AIC, AICCO, AIR or
AIG is the subject which is reasonably likely, individually or in the aggregate,
to result in a material adverse effect on the financial position, stockholders'
equity or results of operations of AIG or the Original Transferors and the
Transferor taken as a whole or which, individually or in the aggregate, might
interfere with or adversely affect the issue and sale of the Certificates or the
consummation of the transactions contemplated herein or in the Pooling and
Servicing Agreement, the Sale Agreement, either of the Support Agreements or
either of the Letter Agreements; and, to the best of the Transferor's knowledge
(including based on inquiry to the Original Transferors), no such proceedings
are threatened or contemplated by governmental or regulatory authorities or
threatened by others;
(j) To the best knowledge of AIR (including based on inquiry to
the Original Transferors), Coopers & Lybrand are independent public accountants
as required by the Act and the rules and regulations of the Commission
thereunder;
(k) At the Time of Delivery (as specified in Section 4 hereof):
(i) the representations and warranties of the Transferor made in Section 2.03 of
the P&S Agreement shall be true and correct, (ii) the representations and
warranties of the Original Transferors and of the Servicer made in Sections 2.03
and 3.03, respectively, of the P&S Agreement shall be true and correct in all
material respects, (iii) the representations and warranties of the Transferor
and the Original Transferors relating to the P&S Agreement and the Future
Receivables or Existing Receivables, as
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the case may be, made in Section 2.04 of the P&S Agreement shall be true and
correct; provided, however, that the breach of any such representations and
warranties in Section 2.04 of the P&S Agreement shall not be deemed to be a
breach hereunder unless, after opportunity for cure in accordance with Section
2.04(e) of the P&S Agreement, such breach materially adversely affects the
interests of the Certificateholders, and (iv) the representations and warranties
of AIC, AICCO and AIR in the Sale Agreement shall be true and correct;
(l) At the Time of Delivery (i) the Receivables being
transferred to the Trust will be owned by the Transferor free and clear of any
Liens (other than as contemplated in the Pooling and Servicing Agreement); (ii)
none of the Transferor and the Original Transferors will have assigned to any
Person any of its rights, title or interests in the Receivables or related Loans
(other than as contemplated in the Pooling and Servicing Agreement and the Sale
Agreement), the Pooling and Servicing Agreement, the Certificates being issued
pursuant thereto or the Sale Agreement; (iii) the Original Transferors will have
the power and authority to transfer the Future Receivables to the Transferor;
and (iv) the Transferor will have the power and authority to transfer the Future
Receivables to the Trust and to transfer the Offered Certificates to the
Underwriters, and, upon execution and delivery to the Trustee of the Pooling and
Servicing Agreement and upon execution, authentication and delivery to the
Underwriters of the Offered Certificates, the Trust will have all of the
Transferor's and the Original Transferors' right, title and interest to the
Receivables free and clear of any Liens (other than Liens contemplated in
Section 2.05(b) of the P&S Agreement) and the Underwriters will have good and
marketable title to the Offered Certificates, free and clear of any Liens (other
than Liens created by the Underwriters);
(m) Any taxes, fees and other governmental charges imposed upon
the Transferor or either of the Original Transferors or on the assets of the
Trust in connection with (i) the execution and delivery by the Transferor and
the Original Transferors of this Agreement, the Sale Agreement and the Pooling
and Servicing Agreement, the transfer of the Trust Assets to the Transferor or
to the Trust and the execution, delivery and issuance of the Certificates, (ii)
the execution and delivery of the AIR Support Agreement by the parties thereto
and (iii) the execution and delivery of the AIR Letter Agreement by AIG, and
which are due at or prior to the Time of Delivery have been or will have been
paid by the Transferor and the Original Transferors at or prior to the Time of
Delivery;
(n) The Receivables conveyed by the Original Transferors to the
Trust under the Original P&S Agreement have an aggregate outstanding principal
balance (determined as of the close of business on February [ ], 1998) of not
less than $800,000,000;
(o) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the Trust is
not required to be registered as an "investment company" under the Investment
Company Act of 1940, as amended; and
(p) This Agreement has been duly authorized, executed and
delivered by the Transferor.
2. Subject to the terms and conditions herein set forth, the
Transferor agrees to sell and deliver to the Underwriters, and the Underwriters
agree to purchase from the Transferor, (i) at a purchase price of [ ]% of the
principal amount thereof, $[ ] principal amount of the Series 1998-1 Class A
Floating Rate Asset Backed Certificates; and (ii) at a purchase price of [ ]% of
the principal amount thereof, $[ ] principal amount of the Series 1998-1 Class B
Floating Rate Asset Backed Certificates.
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3. [RESERVED]
4. The Offered Certificates to be purchased by the Underwriters
hereunder, in book-entry form and in such authorized denominations and
registered in such names as the Underwriters may request upon at least
forty-eight hours' prior notice to the Transferor, shall be delivered by or on
behalf of the Transferor to the Underwriters against payment by the Underwriters
or on their behalf of the purchase price therefor, in immediately available
funds, drawn to the order of the Transferor, at the offices of Weil, Gotshal &
Manges, 767 5th Avenue, New York, New York 10153, on February [ ], 1998, or at
such other place and time and date as the Underwriters and the Transferor may
agree upon in writing; such time and date being herein called the "Time of
Delivery" for such Offered Certificates. Such Offered Certificates will be made
available for checking at least twenty-four hours prior to the Time of Delivery
at the offices of Weil, Gotshal & Manges described above.
5. The Transferor agrees with the Underwriters:
(a) To advise the Underwriters promptly of any proposal to amend
or supplement the Registration Statement as filed, or the Prospectus,
and not to effect any such amendment or supplement without the
Underwriters' consent; to prepare the Prospectus in a form approved by
the Underwriters and to file such Prospectus pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by
Rule 430A(a)(3) under the Act; to advise the Underwriters, promptly
after the Transferor receives notice thereof, of the time when the
Registration Statement, or any amendment thereto, has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Underwriters with copies
thereof; to advise the Underwriters, promptly after the Transferor
receives notice thereof, of: (i) the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus; (ii) the suspension of the
qualification of the Offered Certificates for offering or sale in any
jurisdiction or the initiation or threatening of any proceeding for any
such purpose; or (iii) any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or any order preventing or suspending the use of any Preliminary
Prospectus or Prospectus or suspending any such qualification, promptly
to use their reasonable best efforts to obtain the withdrawal of such
order;
(b) Promptly from time to time, to take such action as the
Underwriters may reasonably request to qualify the Offered Certificates
for offering and sale under the securities laws of such jurisdictions as
the Underwriters may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Offered Certificates; provided that, in connection
therewith, the Transferor shall not be required to qualify as a foreign
corporation or dealer in securities or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus,
as amended or supplemented, in such quantities as the Underwriters may
from time to time reasonably request and, if the delivery of a
prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the
offering or sale of the Offered Certificates and if at such time any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material
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<PAGE>
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus
in order to comply with the Act, to notify the Underwriters and to
prepare and file with the Commission and furnish without charge to the
Underwriters and to any dealer in securities as many copies as the
Underwriters may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance; and in case the
Underwriters are required to deliver a prospectus in connection with the
sale of any of the Offered Certificates at any time nine months or more
after the date of issue of the Prospectus, upon the Underwriters'
request and at their expense, to prepare and deliver to the Underwriters
as many copies as the Underwriters may reasonably request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) During the period beginning from the date hereof and
continuing to and including the later of (i) the termination of trading
restrictions on the Offered Certificates, as notified to the Transferor
by the Underwriters, and (ii) the Time of Delivery, not to offer, sell,
contract to sell or otherwise dispose of any securities which mature
more than one year after the Time of Delivery and which are
substantially similar to the Offered Certificates, without the
Underwriters' prior written consent;
(e) So long as any Offered Certificates are outstanding, to
furnish to the Underwriters copies of all reports or other written
communications (financial or other) furnished to holders of the
Certificates, and to deliver or cause to be delivered to the
Underwriters, as soon as they are available, copies of any reports and
financial statements furnished to or filed by the Transferor or either
of the Original Transferors or the Trustee with the Commission, or with
any national securities exchange on which the Offered Certificates or
any class of securities of the Transferor or either of the Original
Transferors are listed; and
(f) So long as any Offered Certificates are outstanding, to
furnish to the Underwriters copies of all such additional information
concerning the business and financial condition of the Trust as the
Underwriters may from time to time reasonably request.
6. The Transferor covenants and agrees with the Underwriters
that the Transferor will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the counsel and accountants of the Transferor and
the Original Transferors in connection with the registration of the Offered
Certificates under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus, the Prospectus and amendments and supplements thereto and the
mailing and delivery of copies thereof to the Underwriters and dealers; (ii) the
cost of printing or producing this Agreement, the Pooling and Servicing
Agreement, the Sale Agreement, the AIR Support Agreement, the AIR Letter
Agreement, the Blue Sky and legal investment memoranda and any other documents
in connection with the offering, purchase, sale and delivery of the Offered
Certificates; (iii) all expenses in connection with the qualification of the
Offered Certificates for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with the Blue Sky and legal investment surveys; (iv) any fees charged by
securities rating services for rating the Offered Certificates; (v) any cost of
preparing the Certificates; (vi) the fees and expenses of the Trustee and any
agent of the Trustee and the fees and disbursements of counsel for the Trustee
in connection with the Pooling and Servicing Agreement and the Certificates; and
(vii) all other costs and expenses incident to the performance of the
obligations of
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<PAGE>
the Transferor hereunder which are not otherwise specifically provided for in
this Section 6. It is understood, however, that, except as provided in this
Section 6, Section 8 and Section 10 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, transfer
taxes on resale of any of the Offered Certificates by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be
subject, in their discretion, to the condition that all representations and
warranties and other statements of the Transferor herein are, at and as of the
Time of Delivery, true and correct, the condition that the Transferor shall have
performed all of its obligations in all material respects hereunder theretofore
to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations of the Commission under the Act
and in accordance with Section 5(a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or, to the knowledge of the Transferor, the Original
Transferors or the Underwriters, threatened by the Commission; and all
requests for additional information on the part of the Commission shall
have been complied with to the Underwriters' reasonable satisfaction;
(b) Since the respective dates as of which information is given
in the Prospectus, there shall not have been any material adverse
change, or any development known to the Transferor or either of the
Original Transferors that could reasonably be expected to result in a
material adverse change, in or affecting the business, management,
financial position, stockholders' equity or results of operations of the
Transferor or the Original Transferors taken as a whole, otherwise than
as set forth or contemplated in the Prospectus, the effect of which in
the judgment of the Underwriters makes it impracticable to proceed with
the public offering or the delivery of the Offered Certificates on the
terms and in the manner contemplated in the Registration Statement;
(c) At the Time of Delivery, the Transferor shall have furnished
to the Underwriters a certificate signed by an executive officer thereof
as to (i) the accuracy of the representations and warranties of the
Transferor set forth herein at and as of the Time of Delivery; (ii) the
performance by the Transferor of all of its obligations hereunder to be
performed at or prior to such Time of Delivery in all material respects;
and (iii) the matters set forth in subsections (a), (b) and (n) of this
Section;
(d) Cleary, Gottlieb, Steen & Hamilton, counsel for the
Underwriters, shall have furnished to the Underwriters such opinion or
opinions, dated the Time of Delivery, with respect to the validity of
the Pooling and Servicing Agreement, the Offered Certificates, the
Registration Statement, the Prospectus, and other related matters as the
Underwriters may reasonably request and such counsel shall have received
from the Transferors and their counsel such papers and information as it
may reasonably request from the Transferors and their counsel to enable
it to pass upon such matters;
(e) Weil, Gotshal & Manges, counsel for the Transferor and the
Original Transferors, shall have furnished to the Underwriters their
written opinion, addressed to the Underwriters and dated the Time of
Delivery, in form and substance reasonably satisfactory to the
Underwriters and their counsel, substantially to the effect that:
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(i) The Underwriting Agreement has been duly
authorized, executed and delivered by the Transferor;
(ii) The Certificates have been duly authorized
by the Transferor and, when duly executed, authenticated and
delivered in accordance with the terms of the Pooling and
Servicing Agreement, will be validly issued and entitled to the
benefits provided by the Pooling and Servicing Agreement; and
the Certificates, the Transferor Certificate, the Pooling and
Servicing Agreement, the Sale Agreement, the Support Agreements
and the Letter Agreements conform in all material respects to
the descriptions thereof in the Prospectus;
(iii) Each of the Pooling and Servicing
Agreement, the Sale Agreement and (in the case of the
Transferor) the AIR Support Agreement has been duly authorized,
executed and delivered by each of the Transferor and the
Original Transferors and each of the Pooling and Servicing
Agreement, the Sale Agreement and (in the case of the Transferor
or the Original Transferors, as applicable) the Support
Agreements constitutes the legal, valid and binding agreement of
each of the Transferor and the Original Transferors enforceable
against each of the Transferor and the Original Transferors in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and other similar laws affecting
creditors' rights generally, and to the effect of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law);
(iv) The Pooling and Servicing Agreement need
not be qualified under the Trust Indenture Act of 1939, as
amended, and the Trust is not required to be registered as an
"investment company" under the Investment Company Act of 1940,
as amended;
(v) No consent, approval, authorization, order,
registration or qualification of or with any Federal, New York
or California governmental or regulatory agency or body is
required for the issue or sale of the Certificates or the
consummation by the Transferor and the Original Transferors of
the transactions contemplated by the Underwriting Agreement, the
Pooling and Servicing Agreement, the Sale Agreement, or the
Support Agreements except such as have been obtained under the
Act and as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the
Offered Certificates by the Underwriters;
(vi) The statements in the Prospectus under the
heading "Prospectus Summary -- ERISA Plans," to the extent that
they constitute statements of matters of law or legal
conclusions with respect thereto, have been reviewed by such
counsel and are correct in all material respects;
(vii) The issuance of the Certificates and the
sale of the Certificates by the Transferor to the Underwriters
pursuant to the Underwriting Agreement do not, and the
performance by the Transferor and the Original Transferors of
their respective obligations under the Pooling and Servicing
Agreement, the Sale Agreement, the Underwriting Agreement, the
Certificates and the Support Agreements to which each is party
will not, violate (i) any Federal law of the United States or
law of the State of New York or the State
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of California applicable to the Transferor or either of the
Original Transferors or (ii) any rule or regulation adopted by
any United States Federal, New York State or California
governmental agency or officially constituted regulatory body
applicable to the Transferor or either of the Original
Transferors; provided, however, that such counsel need express
no opinion with respect to Federal or state securities laws,
other antifraud laws, fraudulent transfer laws and state premium
finance agency licensing laws, and insofar as performance by the
Transferor and each of the Original Transferors of their
obligations under the Pooling and Servicing Agreement and the
Sale Agreement is concerned, such counsel need express no
opinion as to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights or any indemnification provisions
set forth therein that might be unenforceable as a matter of
public policy;
(viii) The Registration Statement has become
effective under the Act, and the Prospectus has been filed with
the Commission pursuant to Rule 424(b) thereunder in the manner
and within the time period required by Rule 424(b). To the best
of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceedings for that purpose are pending or threatened by the
Commission; and
(ix) The Registration Statement and the
Prospectus, as of the effective date of the Registration
Statement, appeared on their face to be appropriately responsive
in all material respects to the requirements of the Act and the
applicable rules and regulations of the Commission thereunder;
nothing that came to such counsel's attention in the course of
their review of the Registration Statement and Prospectus has
caused such counsel to believe that the Registration Statement,
as of its effective date, contained any untrue statement of a
material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus, as of the date of the
Prospectus, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; and nothing that has come
to such counsel's attention in the course of the limited
procedures described in such letter has caused them to believe
that the Prospectus, as of the Time of Delivery, contained any
untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made,
not misleading; further, such counsel does not know of any
documents that are required to be filed as exhibits to the
Registration Statement and are not so filed or of any documents
that are required to be summarized in the Prospectus and are not
so summarized. Such counsel may state that they do not assume
any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus (except as set forth in paragraph (vi) above or
subsection (f) below) and that they do not express any opinion
or belief as to the financial statements or other financial data
contained in the Registration Statement or the Prospectus.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of New York, the
State of California or the United States, to the extent they deem proper and
specify in such opinion, upon the opinion of other counsel admitted to practice
in such jurisdiction who are reasonably satisfactory to the Underwriters and (B)
as to matters of fact, to the extent they deem proper, upon certificates of
responsible officers of the
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Transferor and the Original Transferors and public officials;
(f) [Weil, Gotshal & Manges, as tax counsel for the Transferor
and the Original Transferors, shall have furnished to the Underwriters
its opinion or opinions, dated the Time of Delivery and satisfactory in
form and substance to the Underwriters and their counsel, to the effect
that for Federal, New York State, New York City and California income
and franchise tax purposes the Certificates will be characterized as
indebtedness and that the Trust will not be treated as a taxable entity
for Federal, New York State, New York City or California income and
franchise tax purposes, and the statements set forth in the Prospectus
under the headings "Prospectus Summary -- Tax Status," "Certain United
States Federal Income Tax Consequences" and "Certain State And Local Tax
Consequences" are a fair and accurate summary of the material tax
consequences of the issuance and holding of the Offered Certificates];
(g) Kenneth V. Harkins, Associate General Counsel for AIG, shall
have furnished to the Underwriters his written opinion, addressed to the
Underwriters and dated the Time of Delivery, in form and substance
satisfactory to the Underwriters and their counsel, substantially to the
effect that:
(i) AIG (A) has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (B) had, in each case
at the relevant time, power and authority (corporate and other)
to enter into the AIC Support Agreement and the AIC Letter
Agreement and (C) has power and authority (corporate and other)
to enter into the AIR Support Agreement and the AIR Letter
Agreement and to perform its obligations thereunder and under
the AIC Support Agreement and the AIC Letter Agreement;
(ii) Each of the Support Agreements has been
duly authorized, executed and delivered by AIG and constitutes
the legal, valid and binding agreement of AIG enforceable in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and other similar laws affecting
creditors' rights generally, and to the effect of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law);
(iii) Each of the Letter Agreements has been
duly authorized, executed and delivered by AIG and constitutes
the legal, valid and binding agreement of AIG enforceable in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and other similar laws affecting
creditors' rights generally, and to the effect of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law);
(iv) To the best of such counsel's knowledge,
there are no legal or governmental proceedings pending to which
AIG or any of its subsidiaries is a party or of which any
property of AIG or any of its subsidiaries is the subject which
is reasonably likely individually or in the aggregate to result
in a material adverse effect on the consummation of the
transactions as contemplated by, the validity or enforceability
of, or the ability of AIG to perform its obligations under,
either of the Support Agreements or either of the Letter
Agreements;
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(v) The compliance by AIG with all of the
provisions of each of Support Agreements and each of the Letter
Agreements and the consummation of the transactions therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument known to
such counsel to which AIG is a party or by which AIG is bound or
to which any of the property or assets of AIG is subject, nor
will such actions result in any violation of the provisions of
the by-laws or certificate of incorporation of AIG, any Federal
or New York statute applicable to AIG or any of its properties
or any order, rule, decree or regulation of any Federal or New
York court, governmental agency or body or regulatory body
having jurisdiction over AIG or any of its properties;
(vi) No consent, approval, authorization,
order, registration or qualification of or with any Federal or
New York governmental or regulatory agency or body is required
for the entry by AIG into the AIR Support Agreement or the AIR
Letter Agreement or for the performance of its obligations
thereunder or under the AIC Support Agreement or the AIC Letter
Agreement, except that, to the extent that AIG is required to
satisfy any of its obligations through the sale of insurance
assets, such sale may require the consent of regulatory
authorities;
(vii) AIC (A) has been duly incorporated and is
validly existing as a New Hampshire corporation in good standing
under the laws of the State of New Hampshire, with the corporate
power and authority to own its properties and to conduct its
business as described in the Prospectus, (B) had, at the
relevant time, corporate power and authority to enter into the
AIC Support Agreement and (C) has corporate power and authority
to enter into the Pooling and Servicing Agreement and the Sale
Agreement and to perform its obligations thereunder and under
the AIC Support Agreement;
(viii) There are no legal or governmental
proceedings or investigations pending to which AIC is a party or
of which any property of AIC is the subject, or, to the best of
such counsel's knowledge threatened against AIC, which, if
determined adversely to AIC, would individually or in the
aggregate have a material adverse effect on the financial
position or results of operation of AIC or on the issue and sale
of the Certificates or the consummation of the transactions as
contemplated by, the validity or enforceability of, or the
ability of AIC to perform its obligations under the Pooling and
Servicing Agreement, the Sale Agreement or the AIC Support
Agreement;
(ix) The Sale Agreement, the Pooling and
Servicing Agreement and the AIC Support Agreement have been duly
authorized, executed and delivered by AIC;
(x) The issue and sale of the Certificates and
the compliance by AIC with all of the provisions of the
Certificates, the Pooling and Servicing Agreement, the Sale
Agreement and the AIC Support Agreement and the consummation of
the transactions therein contemplated will not, to the knowledge
of such counsel, conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, or result in the creation of any Liens upon any
property or assets of AIC pursuant to, any indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument to which AIC is a party or by which AIC is bound, or
to which any of the
13
<PAGE>
property or assets of AIC is subject, nor will such actions
result in any violation of the provisions of the by-laws or
certificate of incorporation of AIC or of any order or decree of
any court, governmental agency or body or regulatory body
applicable to or having jurisdiction over AIC or any of its
properties;
(xi) AICCO (A) has been duly incorporated and
is validly existing as a California corporation in good standing
under the laws of the State of California, with the corporate
power and authority to own its properties and to conduct its
business as described in the Prospectus, (B) had, at the
relevant time, corporate power and authority to enter into the
AIC Support Agreement and (C) has corporate power and authority
to enter into the Pooling and Servicing Agreement and the Sale
Agreement and to perform its obligations thereunder and under
the AIC Support Agreement;
(xii) There are no legal or governmental
proceedings or investigations pending to which AICCO is a party
or of which any property of AICCO is the subject, or, to the
best of such counsel's knowledge, threatened against AICCO,
which, if determined adversely to AICCO, would individually or
in the aggregate have a material adverse effect on the financial
position or results of operation of AICCO or on the issue and
sale of the Certificates or the consummation of the transactions
as contemplated by, the validity or enforceability of, or the
ability of AICCO to perform its obligations under the Pooling
and Servicing Agreement, the Sale Agreement or the AIC Support
Agreement;
(xiii) The Sale Agreement, the Pooling and
Servicing Agreement and the AIC Support Agreement have been duly
authorized, executed and delivered by AICCO;
(xiv) The issue and sale of the Certificates
and the compliance by AICCO with all of the provisions of the
Certificates, the Pooling and Servicing Agreement, the Sale
Agreement and the AIC Support Agreement and the consummation of
the transactions therein contemplated will not, to the knowledge
of such counsel, conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, or result in the creation of any Liens upon any
property or assets of AICCO pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other material
agreement or instrument to which AICCO is a party or by which
AICCO is bound, or to which any of the property or assets of
AICCO is subject, nor will such actions result in any violation
of the provisions of the by-laws or certificate of incorporation
of AICCO or of any order or decree of any court, governmental
agency or body or regulatory body applicable to or having
jurisdiction over AICCO or any of its properties;
(xv) AIR has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority to enter
into and perform its obligations under the Underwriting
Agreement, the Pooling and Servicing Agreement, the Sale
Agreement and the AIR Support Agreement;
(xvi) There are no legal or governmental
proceedings or investigations pending to which AIR is a party or
of which any property of AIR is the subject, or, to the best of
such counsel's knowledge threatened against AIR, which, if
determined adversely to AIR, would individually or in the
aggregate have a material adverse effect on the financial
position or results of operation of AIR or on the issue and sale
of the Certificates
14
<PAGE>
or the consummation of the transactions as contemplated by, the
validity or enforceability of, or the ability of AIR to perform
its obligations under the Underwriting Agreement, the Pooling
and Servicing Agreement, the Sale Agreement or the AIR Support
Agreement;
(xvii) The Underwriting Agreement, the Pooling
and Servicing Agreement, the Sale Agreement and the AIR Support
Agreement have been duly authorized, executed and delivered by
AIR; and
(xviii) The issue and sale of the Certificates
and the compliance by AIR with all of the provisions of the
Certificates, the Pooling and Servicing Agreement, the Sale
Agreement, the AIR Support Agreement and the Underwriting
Agreement and the consummation of the transactions therein
contemplated will not, to the knowledge of such counsel,
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result
in the creation of any Liens upon any property or assets of AIR
pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which AIR
is a party or by which AIR is bound, or to which any of the
property or assets of AIR is subject, nor will such actions
result in any violation of the provisions of the by-laws or
certificate of incorporation of AIR or of any order or decree of
any court, governmental agency or body or regulatory body
applicable to or having jurisdiction over AIR or any of its
properties.
(h) On the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment to
the Registration Statement and also at the Time of Delivery, Coopers &
Lybrand shall have furnished to the Underwriters letters, dated the
respective dates of delivery thereof, in form and substance reasonably
satisfactory to the Underwriters, containing statements and information
of the type customarily included in accountants' "comfort letters" and
"specified procedures letters" to underwriters with respect to certain
financial information contained in the Registration Statement and the
Prospectus;
(i) The Law Department of the First National Bank of Chicago,
counsel for the Trustee, shall have furnished to the Underwriters its
written opinion, addressed to the Underwriters and dated the Time of
Delivery, in form and substance reasonably satisfactory to the
Underwriters and their counsel, substantially to the effect that:
(i) The Trustee is a national banking
association duly organized and validly existing and in good
standing under the laws of the United States, with power and
authority (corporate and other) to own its properties;
(ii) The Trustee has full power and authority
to execute and deliver the Pooling and Servicing Agreement and
the AIR Letter Agreement, to act as Trustee thereunder and to
conduct its trust business as presently conducted by it;
(iii) The Trustee has duly authorized, executed
and delivered the Pooling and Servicing Agreement and accepted
its appointment as trustee thereunder, and, assuming the due
execution and delivery by the Transferor, the Original
Transferors and the Servicer of the Pooling and Servicing
Agreement and that the Pooling and Servicing Agreement
constitutes the legal, valid and binding obligation of the other
parties thereto, the Pooling and Servicing Agreement constitutes
the legal, valid and binding agreement of
15
<PAGE>
the Trustee, enforceable against the Trustee in accordance with
its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally, and
to the effect of general principles of equity (regardless of
whether considered in a proceeding at law or in equity);
(iv) The Trustee has duly authorized, executed
and delivered the AIR Letter Agreement and, assuming the due
execution and delivery by AIG of the AIR Letter Agreement, such
agreement constitutes the legal, valid and binding agreement of
the Trustee enforceable in accordance with its terms, subject to
the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally, and to the effect
of general principles of equity (regardless of whether
considered in a proceeding at law or in equity);
(v) The Certificates have been duly executed,
authenticated and delivered by the Trustee pursuant to the
Pooling and Servicing Agreement;
(vi) No consent, approval, order or
authorization of, or declaration or filing with, any court or
governmental or regulatory agency or body of the United States
of America or the State of Illinois relating to the banking or
trust powers of the Trustee is required in connection with the
execution and delivery by the Trustee of the Pooling and
Servicing Agreement and the AIR Letter Agreement or the
performance by the Trustee thereunder;
(vii) There are no proceedings or
investigations pending or, to the best knowledge of such
counsel, threatened, against or affecting the Trustee which, if
determined adversely to the Trustee, would individually or in
the aggregate affect the ability of the Trustee to carry out the
transactions contemplated in the Pooling and Servicing Agreement
and the AIR Letter Agreement;
(viii) The execution and delivery by the
Trustee of the Pooling and Servicing Agreement and the AIR
Letter Agreement and the performance by the Trustee of their
terms do not conflict with or result in a violation of (A) any
law or regulation of the United States of America or the State
of Illinois governing the banking or trust powers of the Trustee
or (B) the articles of association or by-laws of the Trustee;
and
(ix) The Trustee has duly accepted appointment
as trustee under the Pooling and Servicing Agreement and, as of
the Time of Delivery, the Pooling and Servicing Agreement is in
full force and effect with respect to the Trustee; and the
Trustee meets all the requirements set forth in Section 11.06 of
the Pooling and Servicing Agreement and has full power and
authority to fulfill the obligations of the Trustee contemplated
by and described in the Pooling and Servicing Agreement and in
the AIR Letter Agreement;
(j) The Underwriters shall have received evidence satisfactory
to them that the Class A Certificates have been rated AAA by Standard &
Poor's Ratings Group ("Standard & Poor's") and Aaa by Moody's Investors
Service, Inc. ("Moody's") and that the Class B Certificates have been
rated A by Standard & Poor's and A2 by Moody's and neither Standard &
Poor's nor Moody's shall
16
<PAGE>
have rescinded, lowered or placed under surveillance or review such
ratings;
(k) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading
in securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities in Delaware, New York or
California declared by relevant authorities; or (iii) the outbreak or
escalation of hostilities involving the United States or the declaration
by the United States of a national emergency or war, if the effect of
any such event specified in clause (iii) in the judgment of the
Underwriters makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Offered Certificates on the terms
and in the manner contemplated by this Agreement and in the Prospectus
or materially and adversely affects the market for the Offered
Certificates;
(l) The Underwriters shall have received evidence satisfactory
to them that, on or before the Time of Delivery, appropriate UCC
financing statement forms have been filed in the appropriate filing
offices of the States of New York and California and such other
jurisdictions as counsel to the Underwriters deems appropriate;
(m) At the Time of Delivery, the Underwriters shall have
received any and all opinions of counsel and other memoranda prepared by
any such counsel to the Transferor and the Original Transferors which
have been addressed to or supplied to each Rating Agency rating the
Certificates concerning, among other things, the interest of the Trust
in the Receivables and collections due or to become due with respect
thereto. Any such opinions or memoranda shall be dated the Time of
Delivery and shall be addressed to the Underwriters or shall indicate
that the Underwriters may rely on such opinions or memoranda as though
such opinions or memoranda were addressed to the Underwriters
themselves;
(n) No Pay Out Event or other event or condition, which event or
condition with notice, the passage of time or both would result in a Pay
Out Event, shall have occurred or shall exist with respect to the
Certificates at the Time of Delivery;
(o) The Trustee shall have confirmed to the Underwriters (by
providing copies thereof to the Underwriters) that it has received the
Tax Opinion, the written confirmation from each Rating Agency and the
Officer's Certificate required under Section 6.09(b) of the P&S
Agreement in connection with the issuance of the Offered Certificates;
(p) The Trustee shall have confirmed to the Underwriters (by
providing a copy thereof to the Underwriters) that it has received the
Opinion of Counsel required under Section 13.01(a) of the Original P&S
Agreement in connection with the amendments to the Original P&S
Agreement and the Series 1994-1 Supplement thereto entered into as of
the date hereof by the parties thereto.
(q) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto and
thereto, including all legal opinions, shall be reasonably satisfactory
in form and substance to the Underwriters and their counsel, and the
Underwriters and their counsel shall have received such information,
certificates or documents as they or their counsel may reasonably
request.
8. (a) The Transferor will indemnify and hold harmless the
Underwriters against any losses, claims, damages or liabilities to which the
Underwriters may become subject, under the Act or otherwise,
17
<PAGE>
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in Preliminary Prospectus No. 1, the
Registration Statement or the Prospectus and any other prospectus relating to
the Offered Certificates, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Underwriters for any legal or
other expenses reasonably incurred by the Underwriters in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Transferor shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in Preliminary Prospectus No. 1, the Registration
Statement, the Prospectus or any other prospectus relating to the Offered
Certificates or any such amendment or supplement in reliance upon and in
conformity with written information furnished to AIR by the Underwriters
expressly for use therein;
(b) The Underwriters will indemnify and hold harmless the
Transferor against any losses, claims, damages or liabilities to which the
Transferor may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in Preliminary Prospectus No. 1, the Registration
Statement, the Prospectus and any other prospectus relating to the Offered
Certificates, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in Preliminary Prospectus No. 1, the Prospectus and any other prospectus
relating to the Offered Certificates or any such amendment or supplement in
reliance upon and in conformity with written information furnished to AIR by the
Underwriters expressly for use therein; and will reimburse the Transferor for
any legal or other expenses reasonably incurred by the Transferor in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement
18
<PAGE>
as to or an admission of fault, culpability or a failure to act, by or on behalf
of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Transferor on the one hand and the
Underwriters on the other from the offering of the Offered Certificates to which
such loss, claim, damage or liability (or action in respect thereof) relates.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Transferor on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Transferor on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Transferor bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by or
on behalf of the Transferor on the one hand or by the Underwriters on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Transferor and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
amount by which the total underwriting discounts and commissions received by the
Underwriters for the Offered Certificates underwritten by them and distributed
to the public exceeds the amount of any damages which the Underwriters have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Transferor under this Section 8 shall
be in addition to any liability which the Transferor may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Underwriters within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Transferor and to each
person, if any, who controls the Transferor within the meaning of the Act.
9. The respective indemnities, agreements, representations,
warranties and other statements of the Transferor and the Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of the Underwriters or any
19
<PAGE>
controlling person of the Underwriters, or the Transferor or any officer,
director or controlling person of the Transferor, and shall survive delivery of
and payment for the Offered Certificates.
10. If Offered Certificates are not delivered by or on behalf of
the Transferor as provided herein due to (i) a default by the Transferor or (ii)
failure by the appropriate party to fulfill any of the conditions precedent
listed herein under Section 7, except for those contained in subsections (d) and
(k) thereof, the Transferor will reimburse the Underwriters for all
out-of-pocket expenses approved in writing by the Underwriters, including fees
and disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Offered Certificates,
but the Transferor shall then be under no further liability to the Underwriters
except as provided in Section 6 and Section 8 hereof.
11. All statements, requests, notices and communications
hereunder shall be in writing, and if to the Underwriters shall be delivered or
sent by mail, telex or facsimile transmission to Goldman, Sachs & Co., at 85
Broad Street, New York, New York 10004, Attention: Registration Department; if
to AIR shall be delivered or sent by mail, telex or facsimile transmission to
160 Water Street, New York 10038, Attention: President, with a copy to AIG,
Attention: General Counsel, 70 Pine Street, New York, New York 10270. Any such
statements, requests, notices or communications shall take effect upon receipt
thereof.
12. This Agreement shall be binding upon, and inure solely to
the benefit of, the Underwriters, the Transferor and, to the extent provided in
Section 8 and Section 9 hereof, the officers and directors of the Transferor and
each person who controls the Transferor or the Underwriters, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Offered Certificates from the Underwriters
shall be deemed a successor or assign by reason merely of such purchase. No
right or duty under this Agreement may be assigned or delegated by the
Transferor without the prior written consent of the Underwriters and any such
assignment or delegation made without such consent shall be null and void for
all purposes.
13. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such respective counterparts shall together constitute
one and the same instrument.
20
<PAGE>
If the foregoing is in accordance with the Underwriters'
understanding, the Underwriters shall sign and return three counterparts hereof,
and upon the acceptance hereof by the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement between the Transferor
and the Underwriters.
A.I. RECEIVABLES CORP.
By: _______________________________
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.,
As Underwriters
By: _______________________________
Name:
Title:
21
Exhibit 4.2
================================================================================
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
Series 1998-1 Certificateholders
SERIES 1998-1 SUPPLEMENT
Dated as of March [__], 1998
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of March [__], 1998
AIC PREMIUM FINANCE LOAN MASTER TRUST
SERIES 1998-1
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Designation ....................................................... 1
SECTION 2. Definitions and Certain Calculations .............................. 1
SECTION 3. Servicing Compensation ............................................ 14
SECTION 4. Cleanup Call ...................................................... 14
SECTION 5. Delivery and Payment for the Certificates ......................... 15
SECTION 6. Depository; Form of Delivery of Certificates; Transfer Restrictions 15
SECTION 7. Article IV of Agreement ........................................... 15
SECTION 4.04 Rights of Certificateholders ...................... 15
SECTION 4.05 Allocations ....................................... 16
SECTION 4.06 Determination of Monthly Interest ................. 18
SECTION 4.07 Determination of Monthly Principal ................ 19
SECTION 4.08 Coverage of Required Amount ....................... 20
SECTION 4.09 Monthly Payments .................................. 21
SECTION 4.10 Charge-Offs ....................................... 26
SECTION 4.11 Allocation of Yield Enhancement Amounts ........... 27
SECTION 4.12 Reallocated Principal Collections ................. 29
SECTION 4.13 Shared Principal Collections ...................... 29
SECTION 4.14 Series 1998-1 Yield Enhancement Account ........... 30
SECTION 4.15 Excess Funding Account ............................ 31
SECTION 4.16 Determination of LIBOR ............................ 31
SECTION 4.17 Failure to Make a Deposit or Payment .............. 32
SECTION 4.18 Effect of Other Series ............................ 33
SECTION 4.19 Excess Receivables ................................ 33
SECTION 8. Article V of the Agreement ........................................ 33
SECTION 5.01 Distributions ..................................... 33
SECTION 5.02 Monthly Certificateholders' Statement ............. 34
SECTION 9. Series 1998-1 Pay Out Events ...................................... 36
SECTION 10. Series 1998-1 Termination ......................................... 38
SECTION 11. Counterparts ...................................................... 38
SECTION 12. Governing Law ..................................................... 38
SECTION 13. No Petition ....................................................... 38
</TABLE>
i
<PAGE>
EXHIBITS
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class B Certificate
Exhibit A-3 Form of Class C Certificate
Exhibit B Form of Monthly Certificateholders' Statement
ii
<PAGE>
SERIES 1998-1 SUPPLEMENT, dated as of March [__], 1998 (this
"Series Supplement"), by and among A.I. Receivables Corp., a Delaware
corporation ("AIR"), as Transferor, A.I. Credit Corp., a New Hampshire
corporation ("AIC"), and AICCO, Inc., a California corporation and a wholly
owned subsidiary of AIC ("AICCO"), as Original Transferors and Servicer, and The
First National Bank of Chicago, as Trustee, under the Amended and Restated
Pooling and Servicing Agreement dated as of March [__], 1998 among AIR, AIC,
AICCO and the Trustee (as may be amended from time to time, the "Agreement").
Section 6.02 of the Agreement provides, among other things,
that the Original Transferors, the Transferor, the Servicer and the Trustee may
enter into a supplement to the Agreement for the purpose of authorizing the
execution and authentication by the Trustee of a Series of Investor
Certificates.
SECTION 1. Designation. (a) There is hereby created a Series
of Investor Certificates to be issued in three classes pursuant to the Agreement
and this Series Supplement and to be known together as the "Series 1998-1
Certificates." The three classes shall be designated the Series 1998-1 Floating
Rate Class A Asset Backed Certificates (the "Class A Certificates"), the Series
1998-1 Floating Rate Class B Asset Backed Certificates (the "Class B
Certificates"), and the Series 1998-1 Floating Rate Class C Asset Backed
Certificates (the "Class C Certificates"). The Class A Certificates, Class B
Certificates and Class C Certificates shall be substantially in the form of
Exhibits A-1, A-2 and A-3, respectively.
(b) Series 1998-1 shall not be subordinated to any other
Series.
SECTION 2. Definitions and Certain Calculations. In the event
that any term or provision contained herein shall conflict with or be
inconsistent with any provision contained in the Agreement, the terms and
provisions of this Series Supplement shall govern. All references in this Series
Supplement to Articles, Sections or subsections shall mean Articles, Sections or
subsections of the Agreement, except as the context otherwise requires. All
capitalized terms not otherwise defined herein are defined in the Agreement.
Each capitalized term defined herein shall relate only to the Series 1998-1
Certificates and no other Series of certificates issued by the Trust.
"Aggregate Default Amount" shall mean, with respect to any
Monthly Period, the sum of the Default Amounts in respect of such Monthly
Period.
"Annualized Monthly Excess Spread Amount" shall mean, in
respect of any Monthly Period, the number of basis points derived by dividing
(i) an amount equal to (A) the amount that is deposited (or would have been
deposited but for the operation of the third paragraph of subsection 4.03(a) of
the Agreement) in the Finance Charge Account pursuant to subsection 4.05(a)(i)
on each day during such Monthly Period, plus (B) the Available Yield Enhancement
Amount for the immediately succeeding Transfer Date, minus (C) the Aggregate
Default Amount for such Monthly Period, minus (D) the Investor Servicing Fee
payable on such Transfer Date, minus (E) the aggregate amount payable to
Certificateholders in respect of interest on the immediately succeeding
Distribution Date by (ii) the Certificateholders Ownership Interests as of the
end of such Monthly Period, and multiplying the resulting quotient by 12.
"Available Investor Principal Collections" (a) shall mean with
respect to the Series 1998-1 Certificates and any Monthly Period, an amount
equal to (i) the Investor Principal Collections
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for such Monthly Period, minus (ii) the amount of Reallocated Principal
Collections with respect to such Monthly Period which pursuant to Section 4.12
are required to fund the Class A Required Amount and the Class B Required
Amount, plus (iii) the amount of Shared Principal Collections that are allocated
to Series 1998-1 in accordance with subsection 4.13(a), and (b) when used with
respect to any other Series, shall have the meaning specified in the applicable
Series supplement.
"Available Yield Enhancement Amount" shall mean, with respect
to any Transfer Date, (a) during the Revolving Period the product of (i) 2.0%
and (ii) the product of (A) the Collections for the related Monthly Period
otherwise allocable to the Transferor Ownership Interest and (B) the Floating
Investor Percentage divided by one minus the Aggregate Investor Percentage, and
(b) during the Controlled Amortization Period and the Rapid Amortization Period,
if any, the product of (i) 2.0% 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 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 Fixed Investor Percentage divided by one minus the Aggregate
Investor Percentage; provided that in no event shall the Available Yield
Enhancement Amount for any Transfer Date exceed the sum of Class A Monthly
Interest, Class A Additional Interest, Class B Monthly Interest, Class B
Additional Interest, Class C Monthly Interest and Class C Additional Interest
for such Transfer Date.
"Business Day" shall mean, for the purpose of determining
LIBOR, any Business Day (as defined in the Agreement) other than a day on which
banking institutions in London, England trading in Dollar deposits in the London
interbank market are authorized or obligated by law or executive order to be
closed; for all other purposes, Business Day shall have the meaning provided in
the Agreement.
"Certificateholder" shall mean (a) with respect to the Class A
Certificates, the holder of record of a Class A Certificate, (b) with respect to
the Class B Certificates, the holder of record of a Class B Certificate, (c)
with respect to the Class C Certificates, the holder of record of a Class C
Certificate and (d) with respect to any Investor Certificate, the holder of
record of such Investor Certificate.
"Certificateholders Ownership Interests" shall mean, on any
date of determination, an amount equal to the sum of (a) the Class A Ownership
Interest, (b) the Class B Ownership Interest and (c) the Class C Ownership
Interest, each as of such date.
"Class A Additional Interest" shall have the meaning specified
in Section 4.06(a).
"Class A Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the Class A Floating Allocation of the
Collections of Finance Charge Receivables deposited in the Finance Charge
Account for such Monthly Period (or to be deposited in the Finance Charge
Account on the related Transfer Date with respect to the preceding Monthly
Period pursuant to the third paragraph of subsection 4.03(a) of the Agreement).
"Class A Certificate Rate" shall mean for the period from the
Closing Date through [_______________], [_____]% per annum and, for the period
from [______________] through [_______________] and with respect to each
Interest Period thereafter, a per annum rate equal to
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<PAGE>
[___]% in excess of LIBOR, as determined on the related LIBOR Determination
Date, subject to a maximum annual rate of [ ]%.
"Class A Certificateholder" shall mean the Person in whose
name a Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any of the certificates
executed and authenticated by or on behalf of the Trustee, substantially in the
form of Exhibit A-1 hereto.
"Class A Charge-Off" shall have the meaning specified in
4.10(a).
"Class A Controlled Amortization Period" shall mean an
amortization period commencing on [_______________] and continuing through the
earliest to occur of (i) the day before a Pay Out Commencement Date, (ii) the
date on which the Class A Ownership Interest has been paid in full, (iii) the
date of termination of the Trust pursuant to Section 12.01 of the Agreement and
(iv) the Series 1998-1 Termination Date.
"Class A Controlled Distribution Amount" shall mean, with
respect to each Distribution Date during the Class A Controlled Amortization
Period commencing with the Distribution Date in [_____________], an amount equal
to the Controlled Distribution Amount for such Distribution Date.
"Class A Default Amount" shall mean, with respect to each
Transfer Date, an amount equal to the product of (a) the Aggregate Default
Amount for the related Monthly Period and (b) the Class A Floating Allocation
applicable for the related Monthly Period.
"Class A Deficiency Amount" shall have the meaning specified
in subsection 4.06(a).
"Class A Floating Allocation" shall mean, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class A Ownership Interest as
of the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Certificateholders Ownership Interests as
of the close of business on such day; provided, however, that, with respect to
the first Monthly Period, the Class A Floating Allocation shall mean the
percentage equivalent of a fraction, the numerator of which is the Class A
Initial Ownership Interest and the denominator of which is the Initial
Certificateholders Ownership Interests.
"Class A Initial Ownership Interest" shall mean the aggregate
initial principal amount of the Class A Certificates, which is $[_________].
"Class A Monthly Interest" shall have the meaning specified in
subsection 4.06(a).
"Class A Monthly Principal" shall mean the monthly principal
distributable in respect of the Class A Certificates as calculated in accordance
with subsection 4.07(a).
"Class A Ownership Interest" shall mean, on any date of
determination, an amount equal to (a) the Class A Initial Ownership Interest,
minus (b) the aggregate amount of principal payments made to Class A
Certificateholders prior to such date, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Transfer Dates pursuant to subsection 4.10(a), minus
(d) the amount
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<PAGE>
of Reallocated Principal Collections allocated pursuant to subsection 4.12(a) on
all prior Transfer Dates for which the Class B Ownership Interest and the Class
C Ownership Interest have not been reduced and plus (e) the aggregate of the
amounts deducted pursuant to the foregoing clauses (c) and (d) deemed to have
been reimbursed on all prior Transfer Dates pursuant to subsection 4.11(c);
provided, however, that the Class A Ownership Interest may not be reduced below
zero.
"Class A Prior Period Interest" shall mean the sum, with
respect to each Interest Period in which the Class A Certificates would have
accrued interest on the Class A Ownership Interest had such Class A Ownership
Interest not been reduced for reasons other than the payment of principal to the
Class A Certificateholders, of an amount equal to the product of (i) the 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 Class A Ownership Interest was less than the Class A
Ownership Interest during such Interest Period for reasons other than the
payment of principal to the Class A Certificateholders; provided, however, that
Class A Prior Period Interest shall not be distributed until the Distribution
Date or Distribution Dates following the Transfer Date on which the Class A
Ownership Interest has been reimbursed in full for any reductions.
"Class A Required Amount" shall have the meaning specified in
subsection 4.08(a).
"Class A Servicing Fee" shall have the meaning specified in
Section 3 hereof.
"Class B Additional Interest" shall have the meaning specified
in subsection 4.06(b).
"Class B Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the Class B Floating Allocation of the
Collections of Finance Charge Receivables deposited in the Finance Charge
Account for such Monthly Period (or to be deposited in the Finance Charge
Account on the related Transfer Date with respect to the preceding Monthly
Period pursuant to the third paragraph of subsection 4.03(a) of the Agreement).
"Class B Certificate Rate" shall mean, for the period from the
Closing Date through [______________], [____]% per annum and, for the period
from [______________] through [_______________] and with respect to each
Interest Period thereafter, a per annum rate equal to [____]% in excess of
LIBOR, as determined on the related LIBOR Determination Date, subject to a
maximum annual rate of [ ]%.
"Class B Certificateholder" shall mean the Person in whose
name a Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any of the certificates
executed and authenticated by or on behalf of the Trustee, substantially in the
form of Exhibit A-2 hereto.
"Class B Charge-Off" shall have the meaning specified in
subsection 4.10(b).
"Class B Controlled Amortization Period" shall mean an
amortization period commencing on the Distribution Date on which the Class A
Ownership Interest has been paid in full and continuing through the earliest to
occur of (i) the day before a Pay Out Commencement Date, (ii) the date on which
the Class B Ownership Interest has been paid in full, (iii) the date of
termination of the Trust pursuant to Section 12.01 of the Agreement or (iv) the
Series 1998-1 Termination Date.
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"Class B Controlled Distribution Amount" shall mean, with
respect to each Distribution Date during the Class B Controlled Amortization
Period, an amount equal to the Controlled Distribution Amount for such
Distribution Date.
"Class B Default Amount" shall mean, with respect to each
Transfer Date, an amount equal to the product of (a) the Aggregate Default
Amount for the related Monthly Period and (b) the Class B Floating Allocation
applicable for the related Monthly Period.
"Class B Deficiency Amount" shall have the meaning specified
in subsection 4.06(b).
"Class B Floating Allocation" shall mean, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class B Ownership Interest as
of the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Certificateholders Ownership Interests as
of the close of business on such day; provided, however, that, with respect to
the first Monthly Period, the Class B Floating Allocation shall mean the
percentage equivalent of a fraction, the numerator of which is the Class B
Initial Ownership Interest and the denominator of which is the Initial
Certificateholders Ownership Interests.
"Class B Initial Ownership Interest" shall mean the aggregate
initial principal amount of the Class B Certificates, which is $[_______].
"Class B Monthly Interest" shall have the meaning specified in
subsection 4.06(b).
"Class B Monthly Principal" shall mean the monthly principal
distributable in respect of the Class B Certificates as calculated in accordance
with subsection 4.07(b).
"Class B Ownership Interest" shall mean, on any date of
determination, an amount equal to (a) the Class B Initial Ownership Interest,
minus (b) the aggregate amount of principal payments made to Class B
Certificateholders prior to such date, minus (c) the aggregate amount of Class B
Charge-Offs for all prior Transfer Dates pursuant to subsection 4.10(b), minus
(d) the amount of Reallocated Principal Collections allocated pursuant to
subsection 4.12(a) on all prior Transfer Dates for which the Class C Ownership
Interest has not been reduced, minus (e) an amount equal to the amount by which
the Class B Ownership Interest has been reduced on all prior Transfer Dates
pursuant to subsection 4.10(a), and plus (f) the aggregate of the amounts
deducted pursuant to the foregoing clauses (c), (d) and (e) deemed to have been
reimbursed on all prior Transfer Dates pursuant to subsection 4.11(d); provided,
however, that the Class B Ownership Interest may not be reduced below zero.
"Class B Prior Period Interest" shall mean the sum, with
respect to each Interest Period in which the Class B Certificates would have
accrued interest on the Class B Ownership Interest had the Class B Ownership
Interest not been reduced for reasons other than the payment of principal to the
Class B Certificateholders, of an amount equal to the product of (i) the 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 Class B Ownership Interest was less than the Class B
Ownership Interest during such Interest Period for reasons other than the
payment of principal to the Class B Certificateholders; provided, however, that
Class B Prior Period Interest shall not be
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<PAGE>
distributed until the Distribution Date or Distribution Dates following the
Transfer Date on which the Class B Ownership Interest has been reimbursed in
full for any reductions.
"Class B Required Amount" shall have the meaning specified in
subsection 4.08(b).
"Class B Servicing Fee" shall have the meaning specified in
Section 3 hereof.
"Class C Additional Interest" shall have the meaning specified
in subsection 4.06(c).
"Class C Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the Class C Floating Allocation of the
Collections of Finance Charge Receivables deposited in the Finance Charge
Account for such Monthly Period (or to be deposited in the Finance Charge
Account on the related Transfer Date with respect to the preceding Monthly
Period pursuant to the third paragraph of subsection 4.03(a) of the Agreement).
"Class C Certificate Rate" shall mean, for the period from the
Closing Date through [______________], [____]% per annum and, for the period
from [______________] through [_______________] and with respect to each
Interest Period thereafter, a per annum rate equal to [___]% in excess of LIBOR,
as determined on the related LIBOR Determination Date, subject to a maximum
annual rate of [ ]%.
"Class C Certificateholder" shall mean the Person in whose
name a Class C Certificate is registered in the Certificate Register.
"Class C Certificates" shall mean any of the certificates
executed and authenticated by or on behalf of the Trustee, substantially in the
form of Exhibit A-3 hereto.
"Class C Charge-Off" shall have the meaning specified in
subsection 4.10(c).
"Class C Controlled Amortization Period" shall mean an
amortization period commencing on the Distribution Date on which the Class B
Ownership Interest has been paid in full and continuing through the earliest to
occur of (i) the day before a Pay Out Commencement Date, (ii) the date on which
the Class C Ownership Interest has been paid in full, (iii) the date of
termination of the Trust pursuant to Section 12.01 of the Agreement or (iv) the
Series 1998-1 Termination Date.
"Class C Controlled Distribution Amount" shall mean, with
respect to each Distribution Date during the Class C Controlled Amortization
Period, an amount equal to the Controlled Distribution Amount for such
Distribution Date.
"Class C Default Amount" shall mean, with respect to any
Transfer Date, an amount equal to the product of (a) the Aggregate Default
Amount for the related Monthly Period and (b) the Class C Floating Allocation
applicable for the related Monthly Period.
"Class C Deficiency Amount" shall have the meaning specified
in subsection 4.06(c).
"Class C Floating Allocation" shall mean, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class C Ownership Interest as
of the close of business on the last day of the preceding
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Monthly Period and the denominator of which is equal to the Certificateholders
Ownership Interests as of the close of business on such day; provided, however,
that, with respect to the first Monthly Period, the Class C Floating Allocation
shall mean the percentage equivalent of a fraction, the numerator of which is
the Class C Initial Ownership Interest and the denominator of which is the
Initial Certificateholders Ownership Interests.
"Class C Initial Ownership Interest" shall mean the aggregate
initial principal amount of the Class C Certificates, which is $[_______].
"Class C Monthly Interest" shall have the meaning specified in
subsection 4.06(c).
"Class C Monthly Principal" shall mean the monthly principal
distributable in respect of the Class C Certificates as calculated in accordance
with subsection 4.07(c).
"Class C Ownership Interest" shall mean, on any date of
determination, an amount equal to (a) the Class C Initial Ownership Interest,
minus (b) the aggregate amount of principal payments made to Class C
Certificateholders prior to such date, minus (c) the aggregate amount of Class C
Charge-Offs for all prior Transfer Dates pursuant to subsection 4.10(c), minus
(d) the amount of Reallocated Principal Collections allocated pursuant to
subsection 4.12(a) on all prior Transfer Dates for which the Class C Ownership
Interest was to be reduced, minus (e) an amount equal to the amount by which the
Class C Ownership Interest has been reduced on all prior Transfer Dates pursuant
to subsections 4.10(a) and 4.10(b), and plus (f) the aggregate of the amounts
deducted pursuant to the foregoing clauses (c), (d) and (e) deemed to have been
reimbursed on all prior Transfer Dates pursuant to subsection 4.11(f); provided,
however, that the Class C Ownership Interest may not be reduced below zero.
"Class C Prior Period Interest" shall mean the sum, with
respect to each Interest Period in which the Class C Certificates would have
accrued interest on the Class C Ownership Interest had the Class C Ownership
Interest not been reduced for reasons other than the payment of principal to the
Class C Certificateholders, of an amount equal to the product of (i) the 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 Class C Ownership Interest was less than the Class C
Ownership Interest during such Interest Period for reasons other than the
payment of principal to the Class C Certificateholders; provided, however, that
Class C Prior Period Interest will not be distributed until the Distribution
Date or Distribution Dates following the Transfer Date on which the Class C
Ownership Interest has been reimbursed in full for any reductions.
"Class C Required Amount" shall have the meaning specified in
subsection 4.08(c).
"Class C Servicing Fee" shall have the meaning specified in
Section 3 hereof.
"Closing Date" shall mean March [__], 1998.
"Controlled Amortization Amount" shall mean (a) for any
Distribution Date with respect to the Class A Controlled Amortization Period,
$[____________], (b) for any Distribution Date with respect to the Class B
Controlled Amortization Period, $[___________] and (c) for any Distribution Date
with respect to the Class C Controlled Amortization Period, $[___________].
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"Controlled Amortization Period" shall mean any or all of the
Class A Controlled Amortization Period, the Class B Controlled Amortization
Period or the Class C Controlled Amortization Period, as the context may
require.
"Controlled Distribution Amount" shall mean, for any
Distribution Date with respect to the Controlled Amortization Period, an amount
equal to the sum of the applicable Controlled Amortization Amount for such
Distribution Date and any Deficit Controlled Amortization Amount for the
immediately preceding Distribution Date.
"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.
"Default Amount" shall mean, 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 Floating
Investor Percentage with respect to such Monthly Period; provided, however, that
the calculation of "Default Amount" shall in no event give effect to (x) losses
in respect of Excess Borrower Concentration Amounts computed pursuant to clause
(i) of the definition of Excess Receivables Amount or losses in respect of
Excess Insurer Concentration Amounts (to the extent relating to an Insurer
Insolvency Event) computed pursuant to clause (ii) of such definition or (y)
losses incurred after the occurrence of a Pay Out Event pursuant to subsection
9(d) hereof or after the Transferor Ownership Interest falls below the Minimum
Transferor Ownership Interest following the occurrence of any other Pay Out
Event.
"Deficit Controlled Amortization Amount" shall mean (a) on the
first Distribution Date with respect to the Class A Controlled Amortization
Period, the Class B Controlled Amortization Period or the Class C Controlled
Amortization Period, the excess, if any, of the Controlled Amortization Amount
for such Distribution Date over the amount distributed from the Series 1998-1
Distribution Account as Class A Monthly Principal, Class B Monthly Principal or
Class C Monthly Principal, as the case may be, for such Distribution Date and
(b) on each subsequent Distribution Date with respect to the Class A Controlled
Amortization Period, the Class B Controlled Amortization Period or the Class C
Controlled Amortization Period, the excess, if any, of the Controlled
Distribution Amount for such subsequent Distribution Date over the amount
distributed from the Series 1998-1 Distribution Account as Class A Monthly
Principal, Class B Monthly Principal or Class C Monthly Principal, as the case
may be, for such subsequent Distribution Date.
"Distribution Date" shall mean [______________], 1998 and the
fifteenth day of each calendar month thereafter, or if such fifteenth day is not
a Business Day, the next succeeding Business Day.
"Excess Finance Charges" shall mean, with respect to any
Transfer Date, the sum of (i) the excess of (a) Class A Available Funds for the
related Monthly Period over (b) the amounts distributable on such Transfer Date
pursuant to subsections 4.09(a)(i) through (iv), (ii) the excess, if any, of (a)
Class B Available Funds for the related Monthly Period over (b) the amounts
distributable on such Transfer Date pursuant to subsections 4.09(b)(i) through
(iv) and (iii) the excess, if any, of (a) Class C Available Funds for the
related Monthly Period over (b) the amounts distributable on such Transfer Date
pursuant to subsections 4.09(c)(i) through (iv).
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"Excess Funding Account" shall have the meaning specified in
Section 4.15.
"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 (such aggregate
excess amounts, the "Excess Borrower Concentration Amounts"); 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; and
(b) the sum, for each insurer (including any affiliated
insurer), 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 (the greater of such aggregate
excess amounts in clauses (a) and (b), the "Excess Insurer
Concentration Amounts").
For purposes of making any calculation: (x) pursuant to clause (ii) above, any
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) 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 an Insurer
Insolvency Event) shall reduce 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.
"Financed Premium Percentage" shall mean, 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
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<PAGE>
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.
"Fixed Investor Percentage" shall mean, with respect to any
Monthly Period, the percentage equivalent of a fraction, the numerator of which
is the Certificateholders Ownership Interests as of the close of business on the
last day of the Monthly Period that ends immediately prior to the last day of
the Revolving Period and the denominator of which is the greater of (a) the
aggregate amount of Principal Receivables in the Trust determined as of the
close of business on the last day of the prior Monthly Period and (b) the sum of
the numerators used to calculate the respective percentages allocable to holders
of Investor Certificates (as such term is defined in the Agreement) for
allocations with respect to Principal Receivables for all outstanding Series on
such date of determination.
"Floating Investor Percentage" shall mean, with respect to any
Monthly Period, the percentage equivalent of a fraction, the numerator of which
is the 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 Initial Certificateholders Ownership Interests) and the denominator
of which is the greater of (a) the aggregate amount of Principal Receivables as
of the close of business on the last day of the preceding Monthly Period (b) the
sum of the numerators used to calculate the respective percentages allocable to
holders of Investor Certificates (as such term is defined in the Agreement) for
allocations with respect to Finance Charge Receivables, Default Amounts or
Principal Receivables, as applicable, for all outstanding Series on such date of
determination.
"H.15(519)" shall mean the weekly statistical release
designated as such, published by the Board of Governors of the Federal Reserve
System (or such other release which may replace H.15(519)).
"Initial Certificateholders Ownership Interests" shall mean
$[__________].
"Insurer Insolvency Event" shall mean, with respect to any
insurer, the commencement of a state insolvency, receivership or similar
proceeding in respect of such insurer.
"Interest Period" shall mean, with respect to any Distribution
Date, the period from and including the Distribution Date immediately preceding
such Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"Investor Certificates" shall mean the Class A Certificates,
the Class B Certificates and the Class C Certificates.
"Investor Percentage" shall mean for any Monthly Period, (a)
with respect to Finance Charge Receivables and Default Amounts at any time and
Principal Receivables during the Revolving Period, the Floating Investor
Percentage and (b) with respect to Principal Receivables during the Controlled
Amortization Period or the Rapid Amortization Period, the Fixed Investor
Percentage.
"Investor Principal Collections" shall mean, with respect to
any Monthly Period, the sum of (a) the aggregate amount deposited into the
Principal Account for such Monthly Period pursuant to subsections 4.05(a)(ii),
(iii) and (iv), or 4.05(b)(ii), in each case, as applicable to such Monthly
Period, (b) the aggregate amount to be treated as Investor Principal Collections
pursuant to subsections 4.09(a)(iv), 4.09(b)(iv), 4.09(c)(iv), 4.11(c), 4.11(d)
and 4.11(f) for such Monthly Period (other than
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such amount paid from Reallocated Principal Collections), and (c) the aggregate
amount of Collections on deposit in the Excess Funding Account on the related
Transfer Date that are to be deposited in the Principal Account pursuant to
subsection 4.09(f).
"Investor Servicing Fee" shall have the meaning specified in
Section 3 hereof.
"LIBOR" shall mean, for any Interest Period, the London
interbank offered rate for one-month Dollar deposits determined by the Trustee
for each Interest Period in accordance with the provisions of Section 4.16.
"LIBOR Determination Date" shall mean [_______________], 1998
for the period from [_______________], 1998 to [____________], 1998, and the
second Business Day prior to the commencement of the second and each subsequent
Interest Period.
"Maximum Yield Enhancement Amount" shall mean, with respect to
any Transfer Date, the amount calculated pursuant to the proviso to the
definition of "Available Yield Enhancement Amount," determined on the assumption
that the Class A Certificate Rate, the Class B Certificate Rate and the Class C
Certificate Rate used in determining Class A Monthly Interest, Class B Monthly
Interest and Class C Monthly Interest, respectively, equals in each case 16.00%
per annum.
"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 Collections received by the Trust 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.
"Monthly Period" shall have the meaning specified in the
Agreement.
"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).
"Net Servicing Fee Rate" shall mean (a) so long as AIC and
AICCO are collectively the Servicer, 0% per annum and (b) otherwise, 0.50% per
annum.
"91 Day Delinquency Amount" shall mean, as of any Transfer
Date, an amount equal to the product of (a) the Floating Investor Percentage and
(b) the aggregate outstanding principal amount as of the end of the immediately
preceding Monthly Period of the Loans relating to Receivables then in the Trust
that are then overdue 91 days or more after cancellation of the related
insurance policies (or, if cancellation was 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).
"Pay Out Commencement Date" shall mean the date on which a
Trust Pay Out Event is deemed to occur pursuant to Section 9.01 or a Series
1998-1 Pay Out Event is deemed to occur pursuant to Section 9 hereof.
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"Pool Factor" shall mean, with respect to the last day of any
Monthly Period, a number carried out to seven decimals representing the ratio of
the Certificateholders Ownership Interests as of such day (determined after
taking into account any reduction therein which will occur on the Distribution
Date following such last day of such Monthly Period) to the Initial
Certificateholders Ownership Interests.
"Prior Period Interest" shall mean, with respect to any
Distribution Date, the sum of Class A Prior Period Interest, Class B Prior
Period Interest and Class C Prior Period Interest, if any, but only to the
extent due and payable to Certificateholders on such Distribution Date.
"Rapid Amortization Period" shall mean the Amortization Period
commencing on the Pay Out Commencement Date and ending on the earlier to occur
of (a) the Series 1998-1 Termination Date and (b) the termination of the Trust
pursuant to Section 12.01.
"Rating Agency" shall mean each of Moody's and Standard &
Poor's.
"Reallocated Class A Principal Collections" shall mean, with
respect to any Transfer Date, Collections of Principal Receivables applied in
accordance with subsection 4.12(a) in an amount not to exceed the product of (a)
the Class A Floating Allocation with respect to the Monthly Period relating to
such Transfer Date and (b) the Investor Percentage with respect to the Monthly
Period relating to such Transfer Date and (c) the amount of Collections of
Principal Receivables with respect to the Monthly Period relating to such
Transfer Date; provided, however, that such amount shall not exceed the Class A
Ownership Interest after giving effect to any Class A Charge-Offs for such
Transfer Date.
"Reallocated Class B Principal Collections" shall mean, with
respect to any Transfer Date, Collections of Principal Receivables applied in
accordance with subsection 4.12(a) in an amount not to exceed the product of (a)
the Class B Floating Allocation with respect to the Monthly Period relating to
such Transfer Date and (b) the Investor Percentage with respect to the Monthly
Period relating to such Transfer Date and (c) the amount of Collections of
Principal Receivables with respect to the Monthly Period relating to such
Transfer Date; provided, however, that such amount shall not exceed the Class B
Ownership Interest after giving effect to any Class B Charge-Offs for such
Transfer Date.
"Reallocated Class C Principal Collections" shall mean, with
respect to any Transfer Date, Collections of Principal Receivables applied in
accordance with subsection 4.12(a) in an amount not to exceed the product of (a)
the Class C Floating Allocation with respect to the Monthly Period relating to
such Transfer Date and (b) the Investor Percentage with respect to the Monthly
Period relating to such Transfer Date and (c) the amount of Collections of
Principal Receivables with respect to the Monthly Period relating to such
Transfer Date; provided, however, that such amount shall not exceed the Class C
Ownership Interest after giving effect to any Class C Charge-Offs for such
Transfer Date.
"Reallocated Principal Collections" shall mean, with respect
to any Transfer Date, the sum of (a) Reallocated Class A Principal Collections
for such Transfer Date, (b) Reallocated Class B Principal Collections for such
Transfer Date and (c) Reallocated Class C Principal Collections for such
Transfer Date.
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"Reference Banks" shall mean four major banks in the London
interbank market selected by the Servicer and identified in an officer's
certificate delivered to the Trustee on the Closing Date or in any subsequent
officer's certificate delivered no later than one Business Day prior to any
applicable LIBOR Determination Date.
"Related Loan" shall mean, with respect to any Receivable in
the Trust on any date of determination, the Loan giving rise to such Receivable.
"Revolving Period" shall mean the period from and including
the Closing Date to, but not including, the earlier of (a) the day the Class A
Controlled Amortization Period commences and (b) the Pay Out Commencement Date.
"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 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 qualified solvency rating of BBBq from Standard &
Poor's), 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).
"Series 1998-1" shall mean the Series of the AIC Premium
Finance Loan Master Trust represented by the Investor Certificates.
"Series 1998-1 Certificateholder" shall mean the holder of
record of a Series 1998-1 Certificate.
"Series 1998-1 Certificates" shall mean the Class A
Certificates, the Class B Certificates and the Class C Certificates.
"Series 1998-1 Distribution Account" shall mean the account
established for the benefit of the Certificateholders pursuant to subsection
4.02(c) of the Agreement.
"Series 1998-1 Pay Out Event" shall have the meaning specified
in Section 9 hereof.
"Series 1998-1 Termination Date" shall mean the earlier to
occur of (a) the Distribution Date on which the Certificateholders Ownership
Interests are paid in full, or (b) the [__________] Distribution Date.
"Series 1998-1 Yield Enhancement Account" shall have the
meaning specified in subsection 4.14(a).
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"Series Principal Shortfall" shall mean with respect to the
Series 1998-1 Certificates and any Transfer Date, the excess, if any, of (a) (i)
with respect to any Transfer Date during the Controlled Amortization Period, the
applicable Controlled Distribution Amount for such Transfer Date or (ii) with
respect to any Transfer Date during the Rapid Amortization Period, the
Certificateholders Ownership Interests over (b) the Investor Principal
Collections minus the Reallocated Principal Collections for such Transfer Date.
"Shared Principal Collections" shall mean either (a) the
amount allocated to the Series 1998-1 Certificates which may be applied to the
"Series Principal Shortfall" with respect to other outstanding Series of
investor certificates or (b) the amounts allocated to the investor certificates
of other Series which the applicable supplements for such Series specify are to
be treated as "Shared Principal Collections" and which may be applied to cover
any Series Principal Shortfall with respect to the Series 1998-1 Certificates.
SECTION 3. Servicing Compensation. The share of the Servicing
Fee allocable to Series 1998-1 with respect to any Transfer Date (the "Investor
Servicing Fee") shall be equal to the sum of the Class A Servicing Fee, the
Class B Servicing Fee and the Class C Servicing Fee with respect to such date.
The share of the Servicing Fee allocable to the Class A Ownership Interest with
respect to any Transfer Date (the "Class A Servicing Fee") shall be equal to
one-twelfth of the product of (i) the Class A Floating Allocation, (ii) the Net
Servicing Fee Rate and (iii) the Certificateholders Ownership Interests as of
the last day of the Monthly Period preceding such Transfer Date. The share of
the Servicing Fee allocable to the Class B Ownership Interest with respect to
any Transfer Date (the "Class B Servicing Fee") shall be equal to one-twelfth of
the product of (i) the Class B Floating Allocation, (ii) the Net Servicing Fee
Rate and (iii) the Certificateholders Ownership Interests as of the last day of
the Monthly Period preceding such Transfer Date. The share of the Servicing Fee
allocable to the Class C Ownership Interest with respect to any Transfer Date
(the "Class C Servicing Fee") shall be equal to one-twelfth of the product of
(i) the Class C Floating Allocation, (ii) the Net Servicing Fee Rate and (iii)
the Certificateholders Ownership Interests as of the last day of the Monthly
Period preceding such Transfer Date. Except as specifically provided above, the
Servicing Fee shall be paid by the cash flows from the Trust allocated to the
Holder of the Transferor Certificate or the certificateholders of other Series
(as provided in the related Supplements) and in no event shall the Trust, the
Trustee or the Certificateholders be liable therefor. The Class A Servicing Fee
shall be payable to the Servicer solely to the extent amounts are available for
distribution in respect thereof pursuant to subsections 4.09(a)(iii) and
4.11(a). The Class B Servicing Fee shall be payable solely to the extent amounts
are available for distribution in respect thereof pursuant to subsections
4.09(b)(iii) and 4.11(b). The Class C Servicing Fee shall be payable solely to
the extent amounts are available for distribution in respect thereof pursuant to
subsections 4.09(c)(iii) and 4.11(e). For so long as AIC and AICCO are
collectively the Servicer, AIC and AICCO shall be entitled to apportion the
Servicing Fee between themselves in such manner as they see fit.
SECTION 4. Cleanup Call. The Investor Certificates shall be
subject to purchase by the Transferor at its option, in accordance with the
terms specified in subsection 12.02(a), on any Distribution Date on or after the
Distribution Date on which the Certificateholders Ownership Interests are
reduced to an amount less than or equal to $[________]. The deposit required in
connection with any such purchase will be equal to the sum of (a) the
Certificateholders Ownership Interests and (b) accrued and unpaid interest on
the Certificates through the day preceding the Distribution Date on which the
purchase 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 due the Certificateholders.
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SECTION 5. Delivery and Payment for the Certificates. The
Trustee shall execute, authenticate and deliver the Series 1998-1 Certificates
in accordance with Section 6.02 of the Agreement and Section 6 below.
SECTION 6. Depository; Form of Delivery of Certificates;
Transfer Restrictions.
(a) The Class A Certificates and the Class B Certificates
shall be delivered as Book-Entry Certificates as provided in Sections 6.01 and
6.10. The Class C Certificates shall be delivered as Registered Certificates in
certificated form as provided in Section 6.01, shall be registered in the name
of the Transferor and, notwithstanding anything to the contrary contained in the
Agreement, shall not be transferred, sold or pledged, in whole or in part, other
than pursuant to subsection 6(c) below.
(b) The Depository for Series 1998-1 shall be The Depository
Trust Company, and the Class A Certificates and Class B Certificates shall be
Registered Certificates initially registered in the name of Cede & Co., its
nominee.
(c) Pursuant to subsection 6.09(b) of the Agreement, the
Series 1998-1 Certificateholders shall have the right to tender their Series
1998-1 Certificates, and 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 in accordance with the terms and conditions
contained in a notice of new Series issuance delivered by the Trustee to the
Series 1998-1 Certificateholders. Any such notice shall specify, among other
things: (a) the amount of Series 1998-1 Certificates that may be tendered, (b)
the Certificate Rate with respect to the new Series, (c) the term of the new
Series, (d) the method of computing the investor percentage of the new Series,
(e) the Credit Enhancement, if any, with respect to the new Series and (f) the
time and the manner at which the tender and cancellation of the Series 1998-1
Certificates and the issuance of the new Series of Certificates will be
effectuated. Upon satisfaction of the conditions contained in subsections
6.09(b) and 6.09(c) of the Agreement, the Trustee shall cancel the applicable
Series 1998-1 Certificates and shall issue such Series of investor certificates,
dated the New Series Issuance Date.
SECTION 7. Article IV of Agreement. Sections 4.01, 4.02 and
4.03 shall be read in their entirety as provided in the Agreement. Article IV
(except for Sections 4.01, 4.02 and 4.03 thereof) shall read in its entirety as
follows and shall be applicable only to the Investor Certificates:
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.04 Rights of Certificateholders. The Investor
Certificates shall represent undivided interests in the Trust, consisting of the
right to receive, to the extent necessary to make the required payments with
respect to such Investor Certificates at the times and in the amounts specified
in the Agreement and this Series Supplement, (a) the Floating Investor
Percentage and Fixed Investor Percentage (as applicable from time to time) of
Collections received with respect to the Receivables and (b) without
duplication, funds on deposit in the Collection Account, the Finance Charge
Account, the Principal Account, the Series 1998-1 Yield Enhancement Account, the
Excess Funding Account and the Series 1998-1 Distribution Account. The Class C
Certificates shall be subordinate to the Class A Certificates and the Class B
Certificates to the extent provided herein. The Class B Certificates shall be
subordinate to the Class A
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Certificates to the extent provided herein. The Transferor Certificate shall not
represent any interest in the Collection Account, the Finance Charge Account,
the Principal Account, the Series 1998-1 Yield Enhancement Account, the Excess
Funding Account or the Series 1998-1 Distribution Account, except as
specifically provided in this Article IV.
SECTION 4.05 Allocations.
(a) Allocations During the Revolving Period and the Controlled
Amortization Period. During the Revolving Period and the Controlled Amortization
Period, the Servicer shall, prior to the close of business on the day any
Collections are deposited in the Collection Account, allocate to the
Certificateholders or the Holder of the Transferor Certificate and pay or
deposit from the Collection Account the following amounts as set forth below:
(i) Deposit into the Finance Charge Account an amount
equal to the product of (A) the Investor Percentage on the date of receipt of
such Collections and (B) the aggregate amount of Collections received in
respect of Finance Charge Receivables on such date, to be applied in
accordance with Section 4.09.
(ii) Deposit into the Principal Account an amount equal
to the product of (A) the Class C Floating Allocation on the date of receipt
of such Collections, (B) the Investor Percentage on the date of receipt of
such Collections and (C) the aggregate amount of Collections received in
respect of Principal Receivables on such date, to be applied first in
accordance with Section 4.12 and then in accordance with subsections 4.09(d)
and (e).
(iii) Deposit into the Principal Account an amount equal
to the product of (A) the Class B Floating Allocation on the date of receipt
of such Collections, (B) the Investor Percentage on the date of receipt of
such Collections and (C) the aggregate amount of Collections received in
respect of Principal Receivables on such date, to be applied first in
accordance with Section 4.12 and then in accordance with subsections 4.09(d)
and (e).
(iv) Deposit into the Principal Account an amount equal
to the product of (A) the Class A Floating Allocation on the date of receipt
of such Collections, (B) the Investor Percentage on the date of receipt of
such Collections and (C) the aggregate amount of Collections received in
respect of Principal Receivables on such date, to be applied first in
accordance with Section 4.12 and then in accordance with subsections 4.09(d)
and (e).
(v) Pay to the Holder of the Transferor Certificate
(without duplication) an amount equal to the excess, if any, of the aggregate
amount of Collections received in respect of Finance Charge Receivables and
Principal Receivables on the date of receipt of such Collections over the sum
of (A) the amounts deposited pursuant to subsections 4.05(a)(i), (ii), (iii)
and (iv) above; (B) the amount required to be deposited in the Series 1998-1
Yield Enhancement Account pursuant to subsection 4.14(b); and, (C) any
comparable provision of any other Supplement; provided, however, that the
amount to be paid to the Holder of the Transferor Certificate pursuant to
this subsection 4.05(a)(v) with respect to any such date shall be paid to
such Holder only to the extent that the Transferor Ownership Interest on such
date (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
payments referred to in subsection 4.03(b)) is greater than the Minimum
Transferor Ownership Interest as of the end of
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the immediately preceding Monthly Period and otherwise shall be deposited
into the Excess Funding Account in accordance with subsection 4.05(c) and any
comparable provision of any other Supplement; provided further, that in no
event shall the amount payable to the Holder of the Transferor Certificate
pursuant to this subsection 4.05(a)(v) and any comparable provision of any
other Supplement be greater than the Transferor Ownership Interest on such
date.
(b) Allocations During the Rapid Amortization Period. During
the Rapid Amortization Period, the Servicer shall, prior to the close of
business on the day any Collections are deposited in the Collection Account,
allocate to the Certificateholders and pay or deposit from the Collection
Account the following amounts as set forth below:
(i) Deposit into the Finance Charge Account an amount
equal to the product of (A) the Investor Percentage on the date of
receipt of such Collections and (B) the aggregate amount of Collections
received in respect of Finance Charge Receivables on such date, to be
applied in accordance with Section 4.09.
(ii) Deposit into the Principal Account an amount
equal to the product of (A) the Investor Percentage on the date of
receipt of such Collections and (B) the aggregate amount of Collections
received in respect of Principal Receivables on such date; provided,
however, that the amount deposited into the Principal Account pursuant
to this subsection 4.05(b)(ii) shall not exceed the Certificateholders
Ownership Interests as of the close of business on the last day of the
prior Monthly Period (after taking into account any payments to be made
on the Distribution Date relating to such prior Monthly Period).
(iii) Pay to the Holder of the Transferor Certificate
(without duplication) an amount equal to the excess, if any, of the
aggregate amount of Collections received in respect of Finance Charge
Receivables and Principal Receivables on the date of receipt of such
Collections over the sum of the amounts (A) deposited pursuant to
subsections 4.05(b)(i) and (ii) above; (B) the amount required to be
deposited in the Series 1998-1 Yield Enhancement Account pursuant to
subsection 4.14(b); and, (C) any comparable provision of any other
Supplement; provided, however, that the amount to be paid to the Holder
of the Transferor Certificate pursuant to this subsection 4.05(b)(iii)
and any comparable provision of any other Supplement with respect to
any such date shall be paid to such Holder only to the extent that the
Transferor Ownership Interest on such date (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 payments referred to in
subsection 4.03(b)) is greater than the Minimum Transferor Ownership
Interest as of the end of the immediately preceding Monthly Period and
otherwise shall be deposited into the Excess Funding Account in
accordance with subsection 4.05(c); provided further, that in no event
shall the amount payable to the Holder of the Transferor Certificate
pursuant to this subsection 4.05(b)(iii) and any comparable provision
of any other Supplement be greater than the Transferor Ownership
Interest on such date.
(c) Excess Funding Collections. Any Collections in respect of
Principal Receivables or Finance Charge Receivables not allocated and paid to
the Holder of the Transferor Certificate because of the limitations contained in
subsections 4.05(a)(v), 4.05(b)(iii), 4.09(d)(ii), 4.09(e)(v) and 4.11(g) shall
be deposited in the Series 1998-1 Yield Enhancement Account and any other
comparable account to the extent required by such subsections and/or subsection
4.14(b) and any comparable provision of any other Supplement, and the remainder
shall be held in the Excess Funding Account and, prior to the
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commencement of the Controlled Amortization Period or the Rapid Amortization
Period, shall be paid (without duplication) to the Holder of the Transferor
Certificate on any subsequent date when, and only to the extent that, the
Transferor Ownership Interest on such date is greater than the Minimum
Transferor Ownership Interest as of the end of the immediately preceding Monthly
Period.
Notwithstanding the preceding provisions of subsections
4.05(a) and 4.05(b), the deposits required by such subsections shall be subject
to the third paragraph of subsection 4.03(a) of the Agreement. With respect to
any Series of Certificates, and notwithstanding anything in the Agreement or any
Series Supplement to the contrary, whether or not the Servicer is required to
make monthly or daily deposits from the Collection Account into the Finance
Charge Account, the Principal Account or the Excess Funding Account pursuant to
subsections 4.05(a) and 4.05(b), 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 the Excess
Funding 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 the Certificateholders of all 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 in accordance with subsection 4.03(c) of the Agreement.
SECTION 4.06 Determination of Monthly Interest.
(a) The amount of monthly interest distributable to the Class
A Certificates shall be determined as of each Transfer Date and shall be an
amount equal to the product of (i)(A) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the Class A Certificate Rate in effect with respect to
the related Interest Period, and (ii) the Class A Ownership Interest determined
as of the Record Date occurring during such Interest Period (the "Class A
Monthly Interest"); provided, however, that in addition to Class A Monthly
Interest an amount equal to the sum of (i) the amount of any unpaid Class A
Deficiency Amounts, as defined below, and (ii) an amount equal to the product of
(A) (1) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, times (2) a rate
equal to 2% over the Class A Certificate Rate in effect with respect to the
related Interest Period, and (B) any Class A Deficiency Amount from the prior
Transfer Date, as defined below (or the portion thereof which has not
theretofore been paid to Class A Certificateholders) (such sum, the "Class A
Additional Interest") shall also be distributable to the Class A Certificates;
provided further, that the "Class A Deficiency Amount" for any Transfer Date
shall be equal to the excess, if any, of the aggregate amount accrued pursuant
to this subsection 4.06(a) as of the prior Interest Period over the amount
actually paid in respect thereof on the preceding Distribution Date.
(b) The amount of monthly interest distributable to the Class
B Certificates shall be determined as of each Transfer Date and shall be an
amount equal to the product of (i)(A) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the Class B Certificate Rate in effect with respect to
the related Interest Period, and (ii) the Class B Ownership Interest determined
as of the Record Date occurring during such Interest Period (the "Class B
Monthly Interest"); provided, however, that in addition to Class B Monthly
Interest an amount equal to the sum of (i) the amount of any unpaid Class B
Deficiency Amounts, as defined below, and (ii) an amount equal to the product of
(A) (1) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is
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360, times (2) a rate equal to 2% over the Class B Certificate Rate in effect
with respect to the related Interest Period, and (B) any Class B Deficiency
Amount from the prior Transfer Date, as defined below (or the portion thereof
which has not theretofore been paid to Class B Certificateholders) (such sum,
the "Class B Additional Interest") shall also be distributable to the Class B
Certificates; provided further, that the "Class B Deficiency Amount" for any
Transfer Date shall be equal to the excess, if any, of the aggregate amount
accrued pursuant to this subsection 4.06(b) as of the prior Interest Period over
the amount actually paid in respect thereof on the preceding Distribution Date.
Notwithstanding anything to the contrary herein, payment of any Class B
Additional Interest shall be suspended during any period when the Class B
Ownership Interest is zero and payment thereof shall be cancelled on the first
date during the Class B Controlled Amortization Period or, if applicable, the
Rapid Amortization Period when the Class B Ownership Interest is or becomes
zero.
(c) The amount of monthly interest distributable to the Class
C Certificates shall be determined as of each Transfer Date and shall be an
amount equal to the product of (i)(A) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the Class C Certificate Rate in effect with respect to
the related Interest Period, and (ii) the Class C Ownership Interest determined
as of the Record Date occurring during such Interest Period (the "Class C
Monthly Interest"); provided, however, that in addition to Class C Monthly
Interest an amount equal to the sum of (i) the amount of any unpaid Class C
Deficiency Amounts, as defined below, and (ii) an amount equal to the product of
(A) (1) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, times (2) a rate
equal to 2% over the Class C Certificate Rate in effect with respect to the
related Interest Period, and (B) any Class C Deficiency Amount from the prior
Transfer Date, as defined below (or the portion thereof which has not
theretofore been paid to Class C Certificateholders) (such sum, the "Class C
Additional Interest") shall also be distributable to the Class C Certificates;
provided further, that the "Class C Deficiency Amount" for any Transfer Date
shall be equal to the excess, if any, of the aggregate amount accrued pursuant
to this subsection 4.06(c) as of the prior Interest Period over the amount
actually paid in respect thereof on the preceding Distribution Date.
Notwithstanding anything to the contrary contained herein, payment of any Class
C Additional Interest shall be suspended during any period when the Class C
Ownership Interest is zero and payment thereof shall be cancelled on the first
date during the Class C Controlled Amortization Period or, if applicable, the
Rapid Amortization Period when the Class C Ownership Interest is or becomes
zero.
SECTION 4.07 Determination of Monthly Principal.
(a) The amount of monthly principal distributable from the
Principal Account with respect to the Class A Certificates on each Transfer
Date, beginning with the Transfer Date in the month in which the Class A
Controlled Amortization Period begins or, if earlier, the first Transfer Date
occurring after the Rapid Amortization Period begins, shall be equal to the
least of (i) the Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date, (ii) for each Transfer
Date occurring during the Class A Controlled Amortization Period, commencing
with the [____________] Transfer Date, prior to the payment in full of the Class
A Ownership Interest, the Controlled Distribution Amount for the related
Distribution Date and (iii) the Class A Ownership Interest (after taking into
account any adjustments to be made on such Transfer Date pursuant to Sections
4.10 and 4.12) on such Transfer Date.
(b) The amount of monthly principal distributable from the
Principal Account with respect to the Class B Certificates on each Transfer
Date, for the Class B Controlled Amortization
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Period, beginning with the Transfer Date immediately preceding the Distribution
Date on which the Class A Ownership Interest will have been paid in full, and
during the Rapid Amortization Period, beginning with the Transfer Date
immediately preceding the Distribution Date on which the Class A Ownership
Interest will have been paid in full, shall be an amount equal to the least of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date (minus the portion of such Available
Investor Principal Collections applied to Class A Monthly Principal on such
Transfer Date), (ii) for each Transfer Date with respect to the Class B
Controlled Amortization Period prior to the payment in full of the Class B
Ownership Interest, the Controlled Distribution Amount for the related
Distribution Date (minus the portion of such Controlled Distribution Amount
applied to Class A Monthly Principal on such Transfer Date), and (iii) the Class
B Ownership Interest (after taking into account any adjustments to be made on
such Transfer Date pursuant to Sections 4.10 and 4.12) on such Transfer Date.
(c) The amount of monthly principal distributable from the
Principal Account with respect to the Class C Certificates on each Transfer
Date, for the Class C Controlled Amortization Period, beginning with the
Transfer Date immediately preceding the Distribution Date on which the Class B
Ownership Interest will have been paid in full, and during the Rapid
Amortization Period, beginning with the Transfer Date immediately preceding the
Distribution Date on which the Class B Ownership Interest will have been paid in
full, shall be an amount equal to the least of (i) the Available Investor
Principal Collections on deposit in the Principal Account with respect to such
Transfer Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal and Class B Monthly Principal
on such Transfer Date), (ii) for each Transfer Date with respect to the Class C
Controlled Amortization Period prior to the payment in full of the Class C
Ownership Interest, the Controlled Distribution Amount for the related
Distribution Date (minus the portion of such Controlled Distribution Amount
applied to Class A Monthly Principal and Class B Monthly Principal on such
Transfer Date), and (iii) the Class C Ownership Interest (after taking into
account any adjustments to be made on such Transfer Date pursuant to Sections
4.10 and 4.12) on such Transfer Date.
SECTION 4.08 Coverage of Required Amount. (a) On or before
each Transfer Date, the Servicer shall determine the amount (the "Class A
Required Amount"), if any, by which an amount equal to (i) the Class A Monthly
Interest for such Transfer Date, plus (ii) the Class A Additional Interest, if
any, for such Transfer Date, plus (iii) the Class A Servicing Fee for such
Transfer Date, plus (iv) the Class A Servicing Fee, if any, due but not paid on
any prior Transfer Date that will be distributable on the related Distribution
Date, plus (v) the Class A Default Amount, if any, for such Transfer Date, plus
(vi) Class A Prior Period Interest, if any, for such Transfer Date that will be
distributable on the related Distribution Date, exceeds the Class A Available
Funds for the related Monthly Period.
(b) On or before each Transfer Date, the Servicer shall also
determine the amount (the "Class B Required Amount"), if any, by which an amount
equal to (i) the Class B Monthly Interest for such Transfer Date, plus (ii) the
Class B Additional Interest, if any, for such Transfer Date, plus (iii) the
Class B Servicing Fee for such Transfer Date, plus (iv) the Class B Servicing
Fee, if any, due but not paid on any prior Transfer Date, plus (v) the Class B
Default Amount, if any, for such Transfer Date, plus (vi) Class B Prior Period
Interest, if any, for such Transfer Date that will be distributable on the
related Distribution Date, exceeds the Class B Available Funds for the related
Monthly Period.
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(c) On or before each Transfer Date, the Servicer shall also
determine the amount (the "Class C Required Amount"), if any, by which an amount
equal to (i) the Class C Monthly Interest for such Transfer Date, plus (ii) the
Class C Additional Interest, if any, for such Transfer Date, plus (iii) the
Class C Servicing Fee for such Transfer Date, plus (iv) the Class C Servicing
Fee, if any, due but not paid on any prior Transfer Date, plus (v) the Class C
Default Amount, if any, for such Transfer Date, plus (vi) Class C Prior Period
Interest, if any, for such Transfer Date that will be distributable on the
related Distribution Date, exceeds the Class C Available Funds for the related
Monthly Period.
(d) In the event that the sum of the Class A Required Amount,
the Class B Required Amount and the Class C Required Amount for such Transfer
Date is greater than zero, the Servicer shall give written notice to the Trustee
thereof on such Transfer Date. In the event that the Class A Required Amount for
such Transfer Date is greater than zero, all or a portion of the funds on
deposit in the Series 1998-1 Yield Enhancement Account with respect to such
Transfer Date in an amount equal to the Class A Required Amount, to the extent
available, shall be distributed from the Series 1998-1 Yield Enhancement Account
on such Transfer Date pursuant to subsection 4.11(a). In the event that the
Class A Required Amount for such Transfer Date exceeds the amount of funds on
deposit in the Series 1998-1 Yield Enhancement Account with respect to such
Transfer Date, the Collections of Principal Receivables allocable to each Class
of Investor Certificates with respect to the prior Monthly Period shall be
applied as specified in Section 4.12. In the event that the Class B Required
Amount for such Transfer Date is greater than zero, all or a portion of the
funds on deposit in the Series 1998-1 Yield Enhancement Account with respect to
such Transfer Date in an amount equal to the Class B Required Amount, to the
extent available, shall be distributed from the Series 1998-1 Yield Enhancement
Account on such Transfer Date pursuant to Section 4.11(b). In the event that the
Class B Required Amount for such Transfer Date exceeds the amount of funds on
deposit in the Series 1998-1 Yield Enhancement Account available to fund the
Class B Required Amount pursuant to subsection 4.11(b), the Collections of
Principal Receivables allocable to each Class of Investor Certificates shall be
applied as specified in Section 4.12.
SECTION 4.09 Monthly Payments. On or before each Transfer
Date, the Servicer shall instruct the Trustee in writing (which writing shall be
substantially in the form of the Monthly Servicer Report) to withdraw and the
Trustee, acting in accordance with such instructions, shall withdraw on such
Transfer Date or the related Distribution Date, as applicable, to the extent of
available funds, the amounts in respect of the Series 1998-1 Certificates
required to be withdrawn from the Finance Charge Account, the Principal Account,
the Excess Funding Account and the Series 1998-1 Distribution Account, as
follows:
(a) An amount equal to the Class A Available Funds deposited
into the Finance Charge Account for the related Monthly Period (together with
funds deposited into the Finance Charge Account on such Transfer Date pursuant
to subsection 4.11(a) and 4.12(a)(i)) shall be distributed in the following
priority:
(i) an amount equal to Class A Monthly Interest for
such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(ii) an amount equal to Class A Additional Interest
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
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(iii) an amount equal to the Class A Servicing Fee
for such Transfer Date plus the amount of any Class A Servicing Fee due
but not paid to the Servicer on any prior Transfer Date shall be
distributed to the Servicer;
(iv) an amount equal to the Class A Default Amount,
if any, for such Transfer Date shall be treated as a portion of
Investor Principal Collections and deposited into the Principal Account
on such Transfer Date; and
(v) an amount equal to Class A Prior Period Interest,
if any, to the extent distributable on the related Distribution Date,
shall be deposited into the Series 1998-1 Distribution Account.
(b) An amount equal to the Class B Available Funds deposited
into the Finance Charge Account for the related Monthly Period (together with
funds deposited into the Finance Charge Account on such Transfer Date pursuant
to subsection 4.11(b) and 4.12(a)(ii)) shall be distributed in the following
priority:
(i) an amount equal to the Class B Monthly Interest
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(ii) an amount equal to Class B Additional Interest
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(iii) an amount equal to the Class B Servicing Fee
for such Transfer Date plus the amount of any Class B Servicing Fee due
but not paid to the Servicer on any prior Transfer Date shall be
distributed to the Servicer;
(iv) an amount equal to the Class B Default Amount,
if any, for such Transfer Date shall be treated as a portion of
Investor Principal Collections and deposited into the Principal Account
for such Transfer Date; and
(v) an amount equal to Class B Prior Period Interest,
if any, to the extent distributable on the related Distribution Date,
shall be deposited into the Series 1998-1 Distribution Account.
(c) An amount equal to the Class C Available Funds deposited
into the Finance Charge Account for the related Monthly Period (together with
funds deposited into the Finance Charge Account on such Transfer Date pursuant
to subsection 4.11(e)) shall be distributed in the following priority:
(i) an amount equal to Class C Monthly Interest for
such Transfer Date, shall be deposited into the Series 1998-1
Distribution Account;
(ii) an amount equal to Class C Additional Interest
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(iii) an amount equal to the Class C Servicing Fee
for such Transfer Date, plus the amount of any Class C Servicing Fee
due but not paid to the Servicer on any prior Transfer Date shall be
distributed to the Servicer;
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(iv) an amount equal to the Class C Default Amount,
if any, for such Transfer Date shall be treated as a portion of
Investor Principal Collections and deposited into the Principal Account
on such Transfer Date; and
(v) an amount equal to Class C Prior Period Interest,
if any, to the extent distributable on the related Distribution Date,
shall be deposited into the Series 1998-1 Distribution Account.
(d) During the Revolving Period, an amount equal to the
Available Investor Principal Collections for Series 1998-1 deposited into the
Principal Account for the related Monthly Period (giving effect to amounts to be
deposited therein on such Transfer Date pursuant to subsections 4.09(a)(iv),
4.09(b)(iv), 4.09(c)(iv), 4.11(c), 4.11(d) and 4.11(f)) shall be distributed in
the following priority:
(i) an amount equal to the lesser of (A) the product
of (1) a fraction, the numerator of which is equal to the Available
Investor Principal Collections for Series 1998-1 and the denominator of
which is equal to the sum of the Available Investor Principal
Collections available for sharing as specified in the related Series
Supplement for each Series and (2) the Cumulative Series Principal
Shortfall, if any, and (B) Available Investor Principal Collections for
Series 1998-1, shall remain in the Principal Account to be treated as
Shared Principal Collections and applied to Series other than this
Series 1998-1; and
(ii) an amount equal to the excess, if any, of (A)
the Available Investor Principal Collections for Series 1998-1 for such
Monthly Period over (B) the applications specified in subsection
4.09(d)(i) above shall be paid on such Transfer Date, without
duplication, to the Holder of the Transferor Certificate; provided,
however, that the amount to be paid to such Holder pursuant to this
subsection 4.09(d)(ii) with respect to such date shall be paid only if
the Transferor Ownership Interest on such date (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 payments referred to in
subsection 4.03(b)) is greater than the Minimum Transferor Ownership
Interest as of the end of the immediately preceding Monthly Period and
otherwise shall be deposited into the Excess Funding Account in
accordance with subsection 4.05(c); provided further, that in no event
shall the amount payable to the Holder of the Transferor Certificate
pursuant to this subsection 4.09(d)(ii) be greater than the Transferor
Ownership Interest on such Transfer Date.
(e) During the Controlled Amortization Period or the Rapid
Amortization Period, an amount equal to the Available Investor Principal
Collections for Series 1998-1 deposited into the Principal Account for the
related Monthly Period (giving effect to amounts to be deposited therein on such
Transfer Date pursuant to subsections 4.09(a)(iv), 4.09(b)(iv), 4.09(c)(iv),
4.09(f), 4.11(c), 4.11(d) and 4.11(f)) shall be distributed in the following
priority:
(i) an amount equal to the Class A Monthly Principal
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(ii) for each Distribution Date beginning with the
Distribution Date on which the Class A Ownership Interest is paid in
full, after giving effect to the distribution referred to
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in clause (i) above, an amount equal to the Class B Monthly Principal
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(iii) for each Distribution Date beginning with the
Distribution Date on which the Class B Ownership Interest is paid in
full, after giving effect to the distribution referred to in clauses
(i) and (ii) above, an amount equal to the Class C Monthly Principal
for such Transfer Date shall be deposited into the Series 1998-1
Distribution Account;
(iv) an amount equal to the lesser of (A) the product
of (1) a fraction, the numerator of which is equal to the Available
Investor Principal Collections for Series 1998-1 remaining after the
applications specified in subsections 4.09(e)(i), (ii) and (iii) above
and the denominator of which is equal to the sum of the Available
Investor Principal Collections available for sharing as specified in
the related Series Supplement for each Series and (2) the Cumulative
Series Principal Shortfall, if any, and (B) the Available Investor
Principal Collections for Series 1998-1 remaining after the
applications specified in subsections 4.09(e)(i), (ii) and (iii) above,
shall remain in the Principal Account to be treated as Shared Principal
Collections and applied to Series other than this Series 1998-1; and
(v) an amount equal to the excess, if any, of (A) the
Available Investor Principal Collections for Series 1998-1 for such
Monthly Period over (B) the applications specified in subsection
4.09(e)(i) through (iv) above shall be paid on such Transfer Date to
the Holder of the Transferor Certificate; provided, however, that the
amount to be paid to such Holder pursuant to this subsection 4.09(e)(v)
with respect to such date shall be paid only if the Transferor
Ownership Interest on such date (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 payments referred to in subsection
4.03(b)) is greater than the Minimum Transferor Ownership Interest as
of the end of the immediately preceding Monthly Period and otherwise
shall be deposited into the Excess Funding Account in accordance with
subsection 4.05(c); provided further, that in no event shall the amount
payable to the Holder of the Transferor Certificate pursuant to this
subsection 4.09(e)(v) be greater than the Transferor Ownership Interest
on such Transfer Date.
(f) On each Transfer Date with respect to the Controlled
Amortization Period, any amounts on deposit in the Excess Funding Account on
such Transfer Date (or, if such Transfer Date also relates to an Amortization
Period for any other Series, a portion of such amounts determined on a pari
passu basis in accordance with the fixed investor percentage of each such other
Series and the Fixed Investor Percentage for Series 1998-1) shall be deposited
into the Principal Account and included in the Investor Principal Collections to
be applied pursuant to subsection 4.09(e) on such Transfer Date. On the earlier
to occur of the first Transfer Date with respect to the Rapid Amortization
Period or the Transfer Date immediately preceding the Series 1998-1 Termination
Date, and on each subsequent Transfer Date occurring during the Rapid
Amortization Period, the Trustee, acting in accordance with instructions from
the Servicer, shall withdraw from the Excess Funding Account and deposit in the
Principal Account for application as Investor Principal Collections pursuant to
subsection 4.09(e) the entire amount on deposit in the Excess Funding Account
(or, if such Transfer Date also relates to an Amortization Period for any other
Series, a portion of such amount determined on a pari passu basis in accordance
with the fixed investor percentage of each such other Series and the Fixed
Investor Percentage for Series 1998-1).
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(g) On each Distribution Date during the Revolving Period, the
Trustee shall pay in accordance with Section 5.01 from the Series 1998-1
Distribution Account the following amounts (in each case determined as of the
immediately preceding Transfer Date) in the following order of priority:
(i) to the Class A Certificateholders:
(A) Class A Monthly Interest;
(B) Class A Additional Interest, if any;
(C) Class A Prior Period Interest, if
any, to the extent distributable on such Distribution
Date;
(ii) to the Class B Certificateholders:
(A) Class B Monthly Interest;
(B) Class B Additional Interest, if any;
(C) Class B Prior Period Interest, if
any, to the extent distributable on such Distribution
Date;
(iii) to the Class C Certificateholders:
(A) Class C Monthly Interest;
(B) Class C Additional Interest, if any;
(C) Class C Prior Period Interest, if
any, to the extent distributable on such Distribution
Date.
(h) On the earlier to occur of the first Distribution Date in
the month in which the Class A Controlled Amortization Period begins or the
first Distribution Date occurring after the Rapid Amortization Period begins,
and on each Distribution Date thereafter, the Trustee, acting in accordance with
instructions from the Servicer, shall pay in accordance with Section 5.01 from
the Series 1998-1 Distribution Account the following amounts (in each case
determined as of the immediately preceding Transfer Date) in the following order
of priority:
(i) to the Class A Certificateholders:
(A) Class A Monthly Interest;
(B) Class A Additional Interest, if any;
(C) Class A Prior Period Interest, if
any, to the extent distributable on such Distribution
Date;
(ii) to the Class B Certificateholders:
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(A) Class B Monthly Interest;
(B) Class B Additional Interest, if any;
(C) Class B Prior Period Interest, if
any, to the extent distributable on such Distribution
Date;
(iii) to the Class A Certificateholders, Class A
Monthly Principal;
(iv) to the Class B Certificateholders, Class B
Monthly Principal;
(v) to the Class C Certificateholders:
(A) Class C Monthly Interest;
(B) Class C Additional Interest, if any;
(C) Class C Prior Period Interest, if
any, to the extent distributable on such Distribution
Date;
(D) Class C Monthly Principal.
SECTION 4.10 Charge-Offs.
(a) On each Transfer Date, the Servicer shall calculate the
Class A Default Amount. If on any Transfer Date, the Class A Default Amount for
such Transfer Date exceeds the sum of the amounts allocated with respect thereto
pursuant to subsection 4.09(a)(iv) and, without duplication, subsection 4.11(a)
and Section 4.12 with respect to such Transfer Date, the Class C Ownership
Interest (after giving effect to reductions therein for any Class C Charge-Offs
and any Reallocated Principal Collections on such Transfer Date) shall be
reduced by the amount of such excess. In the event that such reduction would
cause the Class C Ownership Interest to be a negative number, the Class C
Ownership Interest will be reduced to zero and the Class B Ownership Interest
(after giving effect to reductions therein for any Class B Charge-Offs and any
Reallocated Principal Collections on such Transfer Date) shall be reduced by the
amount by which the Class C Ownership Interest would have been reduced below
zero. In the event that such reduction would cause the Class B Ownership
Interest to be a negative number, the Class B Ownership Interest shall be
reduced to zero and the Class A Ownership Interest shall be reduced (but not
below zero) by the amount by which the Class B Ownership Interest would have
been reduced below zero (a "Class A Charge-Off"). The Class A Ownership Interest
shall then be reduced (but not below zero) by the amount of Reallocated
Principal Collections in excess of the Class B Ownership Interest and the Class
C Ownership Interest allocated thereto pursuant to Section 4.12. The Class A
Ownership Interest will thereafter be deemed to be reimbursed on any subsequent
Transfer Date (but not in excess of reductions in the Class A Ownership Interest
that have not been previously reimbursed) by the amount of funds on deposit in
the Series 1998-1 Yield Enhancement Account pursuant to subsection 4.11(c).
(b) On each Transfer Date, the Servicer shall calculate the
Class B Default Amount. If on any Transfer Date, the Class B Default Amount for
such Transfer Date exceeds the sum of the amounts allocated with respect thereto
pursuant to subsection 4.09(b)(iv) and, without duplication,
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<PAGE>
subsection 4.11(b) and Section 4.12, the Class C Ownership Interest (after
giving effect to reductions therein for any Class C Charge-Offs and any
Reallocated Principal Collections on such Transfer Date and any adjustments with
respect thereto as described in subsection 4.10(a) above) shall be reduced by
the amount of such excess. In the event that such reduction would cause the
Class C Ownership Interest to be a negative number, the Class C Ownership
Interest shall be reduced to zero and the Class B Ownership Interest shall be
reduced (but not below zero) by the amount by which the Class C Ownership
Interest would have been reduced below zero (a "Class B Charge-Off"). The Class
B Ownership Interest shall then be reduced (but not below zero) by the amount of
Reallocated Principal Collections in excess of the Class C Ownership Interest
allocated thereto pursuant to Section 4.12 and then by the amount of any portion
of the Class B Ownership Interest allocated to the Class A Certificates to avoid
a reduction in the Class A Ownership Interest pursuant to subsection 4.10(a)
above. The Class B Ownership Interest will thereafter be deemed to be reimbursed
(but not in excess of reductions in the Class B Ownership Interest that have not
been previously reimbursed) on any subsequent Transfer Date by the amount of
funds on deposit in the Series 1998-1 Yield Enhancement Account pursuant to
subsection 4.11(d).
(c) On each Transfer Date, the Servicer shall calculate the
Class C Default Amount. If on any Transfer Date, the Class C Default Amount for
such Transfer Date exceeds the amount allocated with respect thereto pursuant to
subsection 4.09(c)(iv) and, without duplication, subsection 4.11(e), the Class C
Ownership Interest shall be reduced by the amount of such excess but not by more
than the lesser of the Class C Default Amount and the Class C Ownership Interest
for such Transfer Date (a "Class C Charge-Off"). The Class C Ownership Interest
shall then be reduced (but not below zero) by the amount of Reallocated
Principal Collections allocated thereto pursuant to Section 4.12, then by the
amount of any portion of the Class C Ownership Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Ownership Interest pursuant to
subsection 4.10(a) and then by the amount of any portion of the Class C
Ownership Interest allocated to the Class B Certificates to avoid a reduction in
the Class B Ownership Interest pursuant to subsection 4.10(b). The Class C
Ownership Interest will thereafter be deemed to be reimbursed (but not in excess
of reductions in the Class C Ownership Interest that have not been previously
reimbursed) on any subsequent Transfer Date by the amount of funds on deposit in
the Series 1998-1 Yield Enhancement Account pursuant to subsection 4.11(f).
(d) For purposes of calculating the Default Amount and the
Excess Receivables Amount, the Servicer shall keep records sufficient to track
cumulative losses in respect of Receivables on an Obligor-by-Obligor basis and
on an insurer-by-insurer basis.
(e) Except as otherwise expressly provided herein, if losses
and investment expenses attributable to the investment of amounts on deposit in
any Investor Account or any Series Account shall exceed interest and investment
earnings in respect of such amounts during any Monthly Period, the net losses
and expenses shall be allocated between the certificateholders ownership
interests of all outstanding Series, on the one hand, and the Transferor
Ownership Interest, on the other hand, in the same proportion that losses in
respect of Receivables are so allocated for such Monthly Period.
SECTION 4.11 Allocation of Yield Enhancement Amounts. On each
Transfer Date, the Trustee, acting pursuant to the Servicer's instructions,
shall apply funds on deposit in the Series 1998-1 Yield Enhancement Account with
respect to the related Monthly Period (after giving effect to the deposits to be
made therein on such date pursuant to Section 4.14) to make the following
distributions in the following priority:
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(a) an amount equal to the 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 Class A Required Amount in accordance with, and in
the priority set forth in, subsection 4.09(a);
(b) an amount equal to the 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 Class B Required Amount in accordance with, and in
the priority set forth in, subsection 4.09(b);
(c) an amount equal to the aggregate amount by which the Class
A Ownership Interest has been reduced below the initial Class A Ownership
Interest on previous Transfer Dates for reasons other than the payment of
principal to the Class A Certificateholders (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) will be
treated as a portion of Investor Principal Collections and deposited into the
Principal Account on such Transfer Date (and the Class A Ownership Interest
shall be deemed to have been reimbursed by such amount but only if the Class A
Ownership Interest shall not have previously been reduced to zero during the
Class A Controlled Amortization Period or Rapid Amortization Period);
(d) an amount equal to the aggregate amount by which the Class
B Ownership Interest has been reduced below the initial Class B Ownership
Interest on previous Transfer Dates for reasons other than the payment of
principal to the Class B Certificateholders (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) will be
treated as a portion of Investor Principal Collections and deposited into the
Principal Account on such Transfer Date (and the Class B Ownership Interest
shall be deemed to have been reimbursed by such amount but only if the Class B
Ownership Interest shall not have previously been reduced to zero during the
Class B Controlled Amortization Period or Rapid Amortization Period);
(e) an amount equal to the 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 Class C Required Amount in accordance with, and in
the priority set forth in, subsection 4.09(c);
(f) an amount equal to the aggregate amount by which the Class
C Ownership Interest has been reduced below the initial Class C Ownership
Interest on previous Transfer Dates for reasons other than the payment of
principal to the Class C Certificateholders (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) will be
treated as a portion of Investor Principal Collections and deposited into the
Principal Account on such Transfer Date (and the Class C Ownership Interest
shall be deemed to have been reimbursed by such amount but only if the Class C
Ownership Interest shall not have previously been reduced to zero during the
Class C Controlled Amortization Period or Rapid Amortization Period); and
(g) the balance, if any, in excess of the 91 Day Delinquency
Amount, after giving effect to the payments made pursuant to subsections (a)
through (f) above, shall be paid on such Transfer Date to the Holder of the
Transferor Certificate (but only if a Pay Out Event has not theretofore
occurred); provided, however, that the amount to be paid to such Holder pursuant
to this subsection 4.11(g) with respect to such date shall be paid only if the
Transferor Ownership Interest on such date (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 payments referred to in subsection 4.03(b)) is
greater than the Minimum Transferor Ownership Interest as of the end of the
immediately preceding Monthly Period and otherwise shall be deposited into the
Excess Funding Account in accordance with Section 4.05(c);
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provided further, that in no event shall the amount payable to the Holder of the
Transferor Certificate pursuant to this subsection 4.11(g) be greater than the
Transferor Ownership Interest on such Transfer Date. Funds remaining on deposit
in the Series 1998-1 Yield Enhancement Account under this subsection 4.11(g)
shall be available on the next succeeding Transfer Date for application,
together with any additional amounts required to be deposited therein on or
prior to such Transfer Date as provided elsewhere herein, in accordance with
this Section 4.11.
SECTION 4.12 Reallocated Principal Collections.
(a) On each Transfer Date, the Trustee shall apply Reallocated
Principal Collections (applying first all Reallocated Class C Principal
Collections, then Reallocated Class B Principal Collections and finally
Reallocated Class A Principal Collections, to the extent necessary) with respect
to such Transfer Date, to make the following distributions in the following
priority:
(i) an amount equal to the excess, if any, of (A) the
Class A Required Amount, if any, with respect to such Transfer Date
over (B) the amount of funds on deposit in the Series 1998-1 Yield
Enhancement Account and available to cover the Class A Required Amount
pursuant to subsection 4.11(a) on such Transfer Date shall be
transferred to the Finance Charge Account and applied pursuant to
subsection 4.09(a); and
(ii) an amount equal to the excess, if any, of (A) the
Class B Required Amount, if any, with respect to such Transfer Date
over (B) the amount of funds on deposit in the Series 1998-1 Yield
Enhancement Account and available to cover the Class B Required Amount
pursuant to subsection 4.11(b) on such Transfer Date shall be
transferred to the Finance Charge Account and applied pursuant to
subsection 4.09(b).
(b) On each Transfer Date the Class C Ownership Interest shall
be reduced by the amount of Reallocated Principal Collections for such Transfer
Date. In the event that such reduction would cause the Class C Ownership
Interest (after giving effect to any Class C Charge-Offs for such Transfer Date)
to be a negative number, the Class C Ownership Interest (after giving effect to
any Class C Charge-Offs for such Transfer Date) shall be reduced to zero and the
Class B Ownership Interest shall be reduced by the amount by which the Class C
Ownership Interest would have been reduced below zero. In the event that the
reallocation of Reallocated Principal Collections pursuant to the preceding
sentence would cause the Class B Ownership Interest (after giving effect to any
Class B Charge-Offs for such Transfer Date) to be a negative number on any
Transfer Date, the Class B Ownership Interest (after giving effect to any Class
B Charge-Offs for such Transfer Date) shall be reduced to zero and the Class A
Ownership Interest (after giving effect to any Class A Charge-Offs for such
Transfer Date) shall be reduced (but not below zero) by the amount by which the
Class B Ownership Interest would have been reduced below zero.
SECTION 4.13 Shared Principal Collections.
(a) The portion of Shared Principal Collections on deposit in
the Principal Account equal to the amount of Shared Principal Collections
allocable to Series 1998-1 on any Transfer Date shall be treated as part of
Available Investor Principal Collections and applied pursuant to Section 4.09.
(b) Shared Principal Collections allocable to Series 1998-1
with respect to any Transfer Date shall mean an amount equal to the Series
Principal Shortfall, if any, with respect to Series 1998-1
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for such Transfer Date; provided, however, that if the aggregate amount of
Shared Principal Collections for all Series for such Transfer Date is less than
the Cumulative Series Principal Shortfall for such Transfer Date, then Shared
Principal Collections allocable to Series 1998-1 on such Transfer Date shall
equal the product of (i) Shared Principal Collections for all Series for such
Transfer Date and (ii) a fraction, the numerator of which is the Series
Principal Shortfall with respect to Series 1998-1 for such Transfer Date and the
denominator of which is the Cumulative Series Principal Shortfall for all Series
for such Transfer Date.
(c) Solely for the purpose of determining the amount of
Available Investor Principal Collections for Series 1998-1 to be treated as
Shared Principal Collections on any Transfer Date allocable to other Series, on
each Determination Date the Servicer shall determine the Class A Required
Amount, the Class B Required Amount, the Class C Required Amount, the Available
Yield Enhancement Amount and Reallocated Principal Collections as of such
Determination Date for the following Transfer Date.
SECTION 4.14 Series 1998-1 Yield Enhancement Account.
(a) The Servicer shall establish and maintain with a Qualified
Institution in the name of the Trustee, on behalf of the Trust, for the benefit
of the Series 1998-1 Certificateholders, a segregated account (the "Series
1998-1 Yield Enhancement Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Certificateholders. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Series 1998-1 Yield Enhancement
Account and in all proceeds thereof. The Series 1998-1 Yield Enhancement Account
shall be under the sole dominion and control of the Trustee for the benefit of
the Certificateholders. If at any time the institution holding the Series 1998-1
Yield Enhancement Account ceases to be a Qualified Institution, the Trustee
shall notify each Rating Agency and within 10 Business Days establish a new
Series 1998-1 Yield Enhancement Account meeting the conditions specified above
with a Qualified Institution, and shall transfer any cash or any investments to
such new Series 1998-1 Yield Enhancement Account.
(b) On each Transfer Date, an amount equal to the Available
Yield Enhancement Amount shall be deposited by the Trustee 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 such
insufficiency out of its own funds. Notwithstanding the two preceding sentences
or subsection 4.03(c) or the third paragraph of subsection 4.03(a) of the
Agreement, 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 pursuant to subsections 4.05(a)(v) or 4.05(b)(iii),
there shall be deposited into the Series 1998-1 Yield Enhancement Account on
each date amounts allocable to the Series 1998-1 Certificates otherwise
allocable to such Holder until the amount so deposited equals the Maximum Yield
Enhancement Amount for the next Transfer Date. In addition, on each Transfer
Date (prior to giving effect to the withdrawals set forth in Section 4.09) the
amount of any Excess Finance Charges shall be withdrawn from the Finance Charge
Account and deposited into the Series 1998-1 Yield Enhancement Account. The
Trustee, at the direction of the Servicer, shall make withdrawals from the
Series 1998-1 Yield Enhancement Account from time to time, in the amounts and
for the purposes set forth in Section 4.11.
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(c) Funds deposited into the Series 1998-1 Yield Enhancement
Account pursuant to the third sentence of subsection 4.14(b) or remaining on
deposit therein pursuant to the last paragraph of Section 9 shall be invested at
the direction of the Transferor by the Trustee in Permitted Investments that
will mature so that such funds will be available for withdrawal on or prior to
the following Transfer Date. The Trustee shall maintain for the benefit of the
Certificateholders possession of the negotiable instruments or securities, if
any, evidencing such Permitted Investments. No Permitted Investment shall be
disposed of prior to its maturity. Except as otherwise provided in subsection
4.11(g) above, on each Transfer Date, after giving effect to withdrawals from
the Series 1998-1 Yield Enhancement Account required by subsection 4.14(b), all
amounts remaining on deposit in the Series 1998-1 Yield Enhancement Account,
including interest and earnings (net of losses and investment expenses, which
shall reduce the amounts on deposit therein) accrued on funds on deposit in the
Series 1998-1 Yield Enhancement Account, shall be paid to the Holder of the
Transferor Certificate.
SECTION 4.15 Excess Funding Account.
(a) The Servicer has established and maintained and shall
continue to maintain, with a Qualified Institution, in the name of the Trustee,
on behalf of the Trust, for the benefit of the certificateholders of all
outstanding Series, including the Certificateholders, a segregated trust account
(the "Excess Funding Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of such certificateholders.
The Trustee shall possess all right, title and interest in all funds on deposit
from time to time in the Excess Funding Account and in all proceeds thereof. The
Excess Funding Account shall be under the sole dominion and control of the
Trustee for the benefit of the certificateholders of all outstanding Series,
including the Certificateholders. If at any time the institution holding the
Excess Funding Account ceases to be a Qualified Institution, the Trustee shall
notify each Rating Agency and within 10 Business Days establish a new Excess
Funding Account meeting the conditions specified above with a Qualified
Institution, and shall transfer any cash or any investments to such new Excess
Funding Account. The Trustee, at the direction of the Servicer, shall (i) make
withdrawals from the Excess Funding Account from time to time for the purposes
set forth in subsections 4.05(c) and 4.09(f), and any comparable provision of
any Supplement and (ii) make deposits into the Excess Funding Account as
specified in subsection 4.05(c) and any comparable provision of any Supplement.
(b) Funds on deposit in the Excess Funding Account shall be
invested at the direction of the Transferor by the Trustee in Permitted
Investments. Funds on deposit in the Excess Funding Account on any Transfer
Date, after giving effect to any withdrawals from the Excess Funding Account on
such Transfer Date, shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the following
Transfer Date. The Trustee shall maintain for the benefit of the
certificateholders of all outstanding Series, including the Certificateholders,
possession of the negotiable instruments or securities, if any, evidencing such
Permitted Investments. No Permitted Investment shall be disposed of prior to its
maturity. All interest and earnings (net of losses and investment expenses)
accrued on funds on deposit in the Excess Funding Account shall be retained in
the Excess Funding Account (to the extent that the Transferor Ownership Interest
on any date does not exceed the Minimum Transferor Ownership Interest as of the
end of the immediately preceding Monthly Period).
SECTION 4.16 Determination of LIBOR.
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(a) On each LIBOR Determination Date, the Trustee shall
determine LIBOR on the basis of the rate for Dollar deposits 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).
(b) 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 Dollar
deposits are offered by the Reference Banks at approximately 11:00 A.M. (London
time) on such LIBOR Determination Date to prime banks in the London interbank
market for a period equal to one month (commencing on the first day of such
Interest Period). The Trustee shall request the principal London office of each
of the Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for such Interest Period shall be the
arithmetic mean of such quotations (rounded, if necessary, to the nearest whole
multiple of 0.0625%). If on the LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR shall be:
(i) the rate per annum (rounded, as aforesaid) that
the Trustee determines to be 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 such
LIBOR Determination Date to leading European banks for Dollar deposits
for a period equal to one month (commencing on the first day of the
applicable Interest Period); or
(ii) if the banks selected as aforesaid by the
Servicer are not quoting as described in clause (i) 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, 6.0625% per annum).
(c) The Class A Certificate Rate, the Class B Certificate Rate
and the Class C Certificate Rate applicable to the then current and the
immediately preceding Interest Periods may be obtained by any Certificateholder
by telephoning the Trustee at its Corporate Trust Office at [(800) 524-9472 or
(312) 407-4660].
(d) On each LIBOR Determination Date prior to 12:00 noon (New
York time), the Trustee shall send to the Servicer, by facsimile, notification
of LIBOR for the following Interest Period.
SECTION 4.17 Failure to Make a Deposit or Payment.
If the Servicer or the Transferor fails to make, or give
instructions to make, any payment, deposit or withdrawal (other than as required
by subsections 2.04(d) and (e) and 12.02(a) or Sections 10.02 and 12.01)
required to be made or given by the Servicer or the Transferor, respectively, at
the time specified in the Agreement or this Series Supplement (including
applicable grace periods), the Trustee shall make such payment, deposit or
withdrawal from the applicable Investor Account or other Series 1998-1 account
without instruction from the Servicer or the Transferor. The Trustee shall be
required to make any such payment, deposit or withdrawal hereunder only to the
extent that the Trustee has sufficient information to allow it to determine the
amount thereof; provided, however, that the Trustee shall in all cases be deemed
to have sufficient information to determine the amount of interest payable to
the Series 1998-1 Certificateholders on each Distribution Date. The Servicer
shall,
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upon request of the Trustee, promptly provide the Trustee with all information
necessary to allow the Trustee to make such payment, deposit or withdrawal. Such
funds or the proceeds of such withdrawal shall be applied by the Trustee in the
manner in which such payment or deposit should have been made by the Transferor
or the Servicer, as the case may be.
SECTION 4.18 Effect of Other Series.
Notwithstanding anything to the contrary contained herein, in
the event that additional Series of certificates are issued from time to time in
accordance with Section 6.09 of the Agreement, the Excess Funding Account may be
retitled in order to reflect the fact that amounts on deposit therein shall be
for the additional benefit of the holders of such other Series and the amounts
to be deposited therein and withdrawn therefrom may be calculated with reference
to such other Series as well as to Series 1998-1 and Series 1994-1; provided
that no such action or calculation shall adversely affect the interests of the
Series 1998-1 Certificateholders in any material respect.
SECTION 4.19 Excess Receivables.
On any date of determination, the Minimum Transferor Ownership
Interest shall be calculated by adding the Excess Receivables Amount to the
amount derived pursuant to clause (a) of the definition of Minimum Transferor
Ownership Interest in the Agreement unless (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 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
and (ii) the agreement and the rating referred to in clause (a) above remain in
effect on such date of determination and such agreement provides that it shall
continue in effect through at least the end of the first full Monthly Period
following such date of determination.
SECTION 8. Article V of the Agreement. Article V of the
Agreement shall read in its entirety as follows and shall be applicable only to
the Certificateholders:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
SECTION 5.01 Distributions. (a) On each Distribution Date, the
Trustee shall distribute (in accordance with the Monthly Servicer Report
delivered by the Servicer to the Trustee pursuant to subsection 3.04(b)) to each
Class A Certificateholder of record on the immediately preceding Record Date
(other than as provided in Section 12.03 respecting a final distribution) such
Certificateholder's pro rata share (based on the aggregate Undivided Interests
represented by Class A Certificates held by such Certificateholder) of amounts
on deposit in the Series 1998-1 Distribution Account as are payable to the Class
A Certificateholders pursuant to Section 4.09 by check mailed to each Class A
Certificateholder (at such Certificateholder's address as it appears in the
Certificate
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Register), except that with respect to Class A Certificates registered in the
name of the nominee of a Clearing Agency, such distribution shall be made in
immediately available funds.
(b) On each Distribution Date, the Trustee shall distribute
(in accordance with the Monthly Servicer Report delivered by the Servicer to the
Trustee pursuant to subsection 3.04(b)) to each Class B Certificateholder of
record on the immediately preceding Record Date (other than as provided in
Section 12.03 respecting a final distribution) such Certificateholder's pro rata
share (based on the aggregate Undivided Interests represented by Class B
Certificates held by such Certificateholder) of amounts on deposit in the Series
1998-1 Distribution Account as are payable to the Class B Certificateholders
pursuant to Section 4.09 by check mailed to each Class B Certificateholder (at
such Certificateholder's address as it appears in the Certificate Register),
except that with respect to Class B Certificates registered in the name of the
nominee of a Clearing Agency, such distribution shall be made in immediately
available funds.
(c) On each Distribution Date, the Trustee shall distribute
(in accordance with the Monthly Servicer Report delivered by the Servicer to the
Trustee pursuant to subsection 3.04(b)) to each Class C Certificateholder of
record on the immediately preceding Record Date (other than as provided in
Section 12.03 respecting a final distribution) such Certificateholder's pro rata
share (based on the aggregate Undivided Interests represented by Class C
Certificates held by such Certificateholder) of amounts on deposit in the Series
1998-1 Distribution Account as are payable to the Class C Certificateholders
pursuant to Section 4.09 by check mailed to each Class C Certificateholder (at
such Certificateholder's address as it appears in the Certificate Register).
(d) Notwithstanding anything to the contrary contained in the
Agreement or this Series Supplement, if the amount distributable in respect of
principal on any Class of Certificates on any Distribution Date is less than one
dollar, then no such distribution of principal need be made on such Distribution
Date.
SECTION 5.02 Monthly Certificateholders' Statement.
(a) On or before each Distribution Date, the Trustee shall
forward to each Series 1998-1 Certificateholder and each Rating Agency a
statement substantially in the form of Exhibit B to this Series Supplement
prepared by the Servicer and delivered to the Trustee on the preceding
Determination Date and setting forth, among other things, the following
information (which, in the case of subclauses (i), (ii) and (iii) below, shall
be stated on the basis of an original principal amount of $1,000 per Certificate
and, in the case of subclauses (ix), (x) and (xi) shall be stated on an
aggregate basis and on the basis of an original principal amount of $1,000 per
Certificate):
(i) the total amount distributed to holders of
Investor Certificates;
(ii) the amount of such distribution allocable to
Class A Monthly Principal, Class B Monthly Principal and Class C
Monthly Principal, respectively;
(iii) the amount of such distribution allocable to
Class A Monthly Interest, Class A Additional Interest, Class B Monthly
Interest, Class B Additional Interest, Class C Monthly Interest and
Class C Additional Interest, respectively;
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(iv) the amount of Collections of Principal
Receivables received during the related Monthly Period and allocated in
respect of the Investor Certificates;
(v) the amount of Collections of Finance Charge
Receivables received during the related Monthly Period and allocated in
respect of the Investor Certificates;
(vi) the aggregate amount of Principal Receivables,
the Certificateholders Ownership Interests, the Class A Ownership
Interest, the Class B Ownership Interest, the Class C Ownership
Interest, the Floating Investor Percentage, the Class A Floating
Allocation, the Class B Floating Allocation, the Class C Floating
Allocation and the Fixed Investor Percentage with respect to the
Principal Receivables in the Trust as of the end of the preceding
Monthly Period;
(vii) the aggregate outstanding balance of
Receivables which were 1-30 days, 31-60 days, 61-90 days, 91-120 days,
121-150 days and more than 150 days delinquent, respectively, following
cancellation of the related insurance policies in accordance with the
Servicer's then existing Guidelines as of the end of the preceding
Monthly Period (or, if cancellation was 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);
(viii) the Aggregate Default Amount as of the end of
the preceding Monthly Period and the Class A Default Amount, the Class
B Default Amount and the Class C Default Amount for the related
Transfer Date;
(ix) the aggregate amount of Class A Charge-Offs,
Class B Charge-Offs, Class C Charge-Offs and other reductions in the
absence of principal distributions in the Certificateholders Ownership
Interests for such Transfer Date;
(x) the aggregate amount of Class A Charge-Offs,
Class B Charge-Offs, Class C Charge-Offs and other reductions in the
absence of principal distributions in the Certificateholders Ownership
Interests deemed to have been reimbursed on such Transfer Date;
(xi) the aggregate amount of Prior Period Interest,
the Class A Prior Period Interest, the Class B Prior Period Interest
and the Class C Prior Period Interest reimbursed on such Distribution
Date;
(xii) the amount of the Class A Servicing Fee, the
Class B Servicing Fee and the Class C Servicing Fee for such Transfer
Date;
(xiii) the amount of Reallocated Class C Principal
Collections, Reallocated Class B Principal Collections and Reallocated
Class A Principal Collections with respect to such Distribution Date;
(xiv) LIBOR for the Interest Period ending on the day
before such Distribution Date;
(xv) the Pool Factor as of the end of the immediately
preceding Monthly Period;
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(xvi) the Available Yield Enhancement Amount, the
aggregate of any Excess Finance Charges deposited into the Series
1998-1 Yield Enhancement Account, the 91 Day Delinquency Amount and the
amount, if any, of funds required to be withdrawn from the Series
1998-1 Yield Enhancement Account for such Transfer Date;
(xvii) the amount of Class A Available Funds, Class B
Available Funds and Class C Available Funds on deposit in the Finance
Charge Account on the related Transfer Date;
(xviii) the date on which the Class A Controlled
Amortization Period, the Class B Controlled Amortization Period, the
Class C Controlled Amortization Period and/or the Rapid Amortization
Period commenced; and
(xix) such other items as are set forth in Exhibit B
to this Series Supplement.
(b) Annual Certificateholders' Tax Statement. On or before
January 31 of each calendar year, beginning with calendar year 1999, the Trustee
shall distribute to each Person who at any time during the preceding calendar
year was a Series 1998-1 Certificateholder, a statement prepared by the Trustee
containing the information required to be contained in the regular monthly
report to Series 1998-1 Certificateholders, as set forth in subclauses (i), (ii)
and (iii) 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
Certificates as debt) as the Trustee deems necessary or desirable to enable the
Series 1998-1 Certificateholders to prepare their tax returns. Such obligations
of the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee pursuant
to any requirements of the Internal Revenue Code as from time to time in effect.
SECTION 9. Series 1998-1 Pay Out Events. If any one of the
following events (a "Series 1998-1 Pay Out Event") shall occur with respect to
the Investor Certificates:
(a) (i) failure on the part of either of the Original
Transferors or the Transferor to make any payment or deposit required by the
terms of the Agreement or this Series Supplement, on or before the date
occurring five Business Days after the date such payment or deposit is required
to be made herein or (ii) failure on the part of either of the Original
Transferors or the Transferor duly to observe or perform in any material respect
any other covenants or agreements of such entity set forth in the Agreement or
this Series Supplement, which failure has a material adverse effect on the
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 Investor Certificates) and
continues unremedied 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 such entity by the Trustee, or to such entity and the Trustee by the Holders
of Certificates evidencing Undivided Interests aggregating not less than 50% of
the Certificateholders Ownership Interests of this Series 1998-1, and continues
to affect materially and adversely the interests of the 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 Investor Certificates) for such period;
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<PAGE>
(b) any representation or warranty made by either of the
Original Transferors or the Transferor in the Agreement or this Series
Supplement, or any information contained in a computer file or microfiche list
required to be delivered by such entity pursuant to Section 2.01 or 2.06, (i)
shall prove to have been incorrect in any material respect when made or when
delivered, 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 such entity by the Trustee, or to
such entity and the Trustee by the Holders of Certificates evidencing Undivided
Interests aggregating not less than 50% of the Certificateholders Ownership
Interests of this Series 1998-1, and (ii) 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 Investor 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 Account or by reason of the subordination of any Class of Investor
Certificates) for such period; provided, however, that a Series 1998-1 Pay Out
Event pursuant to this subsection 9(b) shall not be deemed to have occurred
hereunder if the related Original Transferor or the Transferor, as applicable,
has accepted reassignment of the related Receivable, or all of such Receivables,
if applicable, during such period in accordance with the provisions of
subsections 2.04(e) or 2.04(f) of the Agreement;
(c) if the Financed Premium Percentage exceeds 90% for three
consecutive Monthly Periods;
(d) the Transferor Ownership Interest as of any Determination
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 as required by subsection 2.06(a) of the Agreement;
(e) any Servicer Default occurs which would have a material
adverse effect on the 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 the Class C Ownership
Interest);
(f) if the Monthly Payment Rate is less than 14% for three
consecutive Monthly Periods; or
(g) if the Annualized Monthly Excess Spread Amount is less
than 400 basis points for three consecutive Monthly Periods;
then, in the case of any event described in subsection 9(a), (b) or (e) hereof,
after the applicable grace period set forth in such subsections, a Series 1998-1
Pay Out Event shall occur 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 Certificateholders Ownership Interests of
this Series 1998-1 shall notify the Trustee, the Transferor and the Servicer in
writing that a Series 1998-1 Pay Out Event should not occur, and in the case of
any event described in subsection 9(c), (d), (f) or (g) hereof, a Series 1998-1
Pay Out Event shall occur without any notice or other action on the part of the
Trustee or the Certificateholders immediately upon the occurrence of such event.
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Notwithstanding anything to the contrary contained in the
Agreement or this Series Supplement, 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 shall, subject to the
requirements of the following sentence, 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, such 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. If so required to purchase Receivables, the
Transferor shall select for purchase, from the group of Receivables having a
remaining maturity of more than 12 months then in the Trust, Receivables that
were conveyed to the Trust as of the Addition Date immediately preceding the
date of purchase, or, if such Receivables are insufficient to satisfy the
requirement of the immediately preceding sentence, as of the Addition Dates
closest in time to such purchase date. The proceeds of such purchase shall be
treated as Collections of Principal Receivables and Finance Charge Receivables
in respect of the related Receivables.
SECTION 10. Series 1998-1 Termination. Except as otherwise
provided in subsection 12.03(b) of the Agreement, the right of the
Certificateholders to receive payments from the Trust will terminate on the
first Business Day following the Series 1998-1 Termination Date.
SECTION 11. Counterparts. This Series Supplement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all of such counterparts shall together constitute
but one and the same instrument.
SECTION 12. Governing Law. THIS SERIES SUPPLEMENT 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. No Petition. The Original Transferors, the
Transferor, the Servicer and the Trustee, by entering into this Series
Supplement, and each Certificateholder, by accepting a Series 1998-1
Certificate, hereby covenant and agree that they 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, the Agreement or this Series Supplement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Series
1998-1 Supplement 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:
39
<PAGE>
Exhibit A-1
Form of Class A Certificate
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trustee
referred to below or an agent of the Trustee referred to below for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or in such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
No. $
--------- ---------
CUSIP NO.
---------
AIC PREMIUM FINANCE LOAN MASTER TRUST
CLASS A FLOATING RATE ASSET BACKED CERTIFICATE,
SERIES 1998-1
This Certificate does not represent an obligation of, or any interest
in, the Original Transferors, the Transferor or the Servicer referred to below,
or any of their affiliates, and neither the Series 1998-1 Certificates, the
Receivables nor the related Loans are insured or guaranteed by any governmental
agency or instrumentality or any other Person. This Certificate is 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 _____________ (the "Class A Certificateholder") 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 (i)
the Receivables existing at any time after the Initial Cut-Off Date or
thereafter created up to (but excluding) the Closing Date (the "Existing
Receivables"), including all Collections thereon, other than Credit Balances,
received by the Original Transferors after the Initial Cut-Off Date, and (ii)
the Receivables existing at any time on or after the Closing Date or thereafter
created that are required or permitted to be conveyed to the Trust pursuant to
Section 2.06 of the Pooling and Servicing Agreement referred to below (the
"Additional Receivables"), including all Collections thereon, other than Credit
Balances, received [by the Servicer] on or after the Closing Date, together with
other assets and interests constituting the Trust pursuant to the Amended and
Restated Pooling and Servicing Agreement dated as of March [_], 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
A-1:1
<PAGE>
"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.
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 holder hereof by virtue
of the acceptance hereof assents and by which the holder hereof is bound.
The Original Transferors and the Transferor have structured the Pooling
and Servicing Agreement and the Series 1998-1 Certificates with the intention
that the Series 1998-1 Certificates will qualify under applicable tax law as
indebtedness, and each of the Original Transferors, the Transferor, the Holder
of the Transferor Certificate, the Servicer and each Series 1998-1
Certificateholder (or Series 1998-1 Certificate Owner) by acceptance of its
Series 1998-1 Certificate (or in the case of a Series 1998-1 Certificate Owner,
by virtue of such Series 1998-1 Certificate Owner's acquisition of a beneficial
interest therein), agrees to treat and to take no action inconsistent with the
treatment of the Series 1998-1 Certificates (or any beneficial interest therein)
as indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each Series
1998-1 Certificateholder agrees that it will cause any Series 1998-1 Certificate
Owner acquiring an interest in a Series 1998-1 Certificate through it to comply
with the Pooling and Servicing Agreement as to treatment of the Series 1998-1
Certificates as indebtedness for certain tax purposes.
The Original Transferors, the Transferor, the Servicer and the Trustee,
by entering into the Series 1998-1 Supplement, and each holder of a Series
1998-1 Certificate, by accepting such Certificate, covenant and agree that they
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 or the Pooling and Servicing Agreement.
This Class A Certificate is one of a duly authorized Series of Investor
Certificates entitled "AIC Premium Finance Loan Master Trust Class A Floating
Rate Asset Backed Certificates, Series 1998-1" (the "Class A Certificates"),
each of which represents an undivided interest in the Trust, including the right
to receive the Collections and other amounts allocated to the Class A
Certificates at the times and in the amounts specified in the Pooling and
Servicing Agreement. Also issued under the Pooling and Servicing Agreement are
the "AIC Premium Finance Loan Master Trust Class B Floating Rate Asset Backed
Certificates, Series 1998-1" (the "Class B Certificates"), which represent an
undivided interest in the Trust subordinate to the Class A Certificates to the
extent provided in the Pooling and Servicing Agreement, and the "AIC Premium
Finance Loan Master Trust Class C Floating Rate Asset Backed Certificates,
Series 1998-1 (the "Class C Certificates"), which represent an undivided
interest in the Trust subordinate to the Class A Certificates and the Class B
Certificates to the extent provided in the Pooling and Servicing Agreement.
A-1:2
<PAGE>
The aggregate interest represented by the Class A Certificates, the
Class B Certificates and the Class C Certificates at any time in the Receivables
in the Trust shall not exceed an amount equal to the Certificateholders
Ownership Interests at such time. The Class A Initial Ownership Interest is $[ ]
as of [ ], 1998 (the "Closing Date"). The Class B Initial Ownership Interest is
$[ ] as of the Closing Date. The Class C Initial Ownership Interest is $[ ] as
of the Closing Date. The Class A Ownership Interest on any date of determination
will be an amount equal to (a) the Class A Initial Ownership Interest, minus (b)
the aggregate amount of payments of principal made to the Class A
Certificateholders prior to such date, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Transfer Dates pursuant to subsection 4.10(a) of the
Pooling and Servicing Agreement, minus (d) the amount of Reallocated Principal
Collections allocated pursuant to subsection 4.12(a) of the Pooling and
Servicing Agreement on all prior Transfer Dates for which the Class B Ownership
Interest and the Class C Ownership Interest have not been reduced and plus (e)
the aggregate of the amounts deducted pursuant to the foregoing clauses (c) and
(d) deemed to have been reimbursed on all prior Transfer Dates pursuant to
subsection 4.11(c) of the Pooling and Servicing Agreement; provided, however,
that the Class A Ownership Interest may not be reduced below zero. The Class A
Ownership Interest, together with the aggregate interest represented by the
Class B Certificates in the Receivables in the Trust (the "Class B Ownership
Interest") and the aggregate interest represented by the Class C Certificates in
the Receivables in the Trust (the "Class C Ownership Interest"), is sometimes
collectively referred to herein as the "Certificateholders Ownership Interests."
In addition to the issuance of the Class A Certificates, the Class B
Certificates and the Class C Certificates, the Transferor Certificate,
representing an undivided interest in the Trust, will be transferred on the
Closing Date from the Original Transferors to the Transferor pursuant to the
Pooling and Servicing Agreement. The Transferor Certificate represents the
interest in the Receivables not represented by all of the Series of Certificates
issued by the Trust. The interest represented by the Transferor Certificate may
be reduced by the Transferor pursuant to the Pooling and Servicing Agreement to
effectuate the issuance of a new Series of investor Certificates upon the
conditions set forth in the Pooling and Servicing Agreement. Under the
circumstances provided in the Pooling and Servicing Agreement, the Series 1998-1
Certificates may be included in such a New Series Issuance.
Interest will accrue on the Class A Certificates for the period from
the Closing Date through [ ], 1998 at [ ]% per annum and, for the period from
[ ], 1998 through [ ], 1998 and with respect to each Interest Period thereafter,
at a per annum rate equal to [ ]% in excess of LIBOR, as more specifically set
forth in the Pooling and Servicing Agreement, subject to a maximum annual rate
of [ ]% (the "Class A Certificate Rate"), and will be distributed on [ ], 1998
and on the 15th day of each calendar month thereafter or, if such day is not a
Business Day, on the next succeeding Business Day (a "Distribution Date"), to
the Class A Certificateholders of record as of the last Business Day of the
calendar month preceding such Distribution Date. On each Distribution Date
during the Rapid Amortization Period, if any, in addition to Class A Monthly
Interest, Available Investor Principal Collections with respect to such
Distribution Date will be distributed to such Class A Certificateholders until
the Class A Ownership Interest has been paid in full. On each Distribution Date
during the Class A Controlled Amortization Period, such Class A
Certificateholders will receive a principal payment equal to the least of (i)
Available Investor Principal Collections with respect to such Distribution Date,
(ii) the Controlled Distribution Amount with respect to such Distribution Date
and
A-1:3
<PAGE>
(iii) the Class A Ownership Interest for such Distribution Date, unless
distributed earlier as a result of the occurrence of a Pay Out Event in
accordance with the Pooling and Servicing Agreement.
The transfer of this Class A Certificate shall be registered in the
Certificate Register upon surrender of this Class A Certificate for registration
of transfer at any office of agency maintained by the Transfer Agent and
Registrar accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the Class A
Certificateholder or such Class A Certificateholder's attorney-in-fact duly
authorized in writing, and thereupon one or more new Class A Certificates of
authorized denominations and for the same aggregate undivided interests will be
issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations set forth therein, Class A Certificates are exchangeable for
new Class A Certificates evidencing like aggregate undivided interests, as
requested by the Class A Certificateholder surrendering such Class A
Certificates. No service charge may be imposed for any such exchange but the
Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Trustee, the Paying Agent, the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them,
shall be affected by notice to the contrary except in certain circumstances
described in the Pooling and Servicing Agreement.
Except as otherwise set forth in the Pooling and Servicing Agreement,
the right of the Series 1998-1 Certificateholders to receive payment from the
Trust will terminate on the first Business Day following the Series 1998-1
Termination Date.
Upon the termination of the Trust pursuant to Section 12.01 of the
Pooling and Servicing Agreement, 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.
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.
A-1:4
<PAGE>
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:
------------------------------
[Title]
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:
------------------------------
Authorized Officer
A-1:5
<PAGE>
Exhibit A-2
Form of Class B Certificate
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trustee
referred to below or an agent of the Trustee referred to below for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or in such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
No. $
--------- -----------
CUSIP NO. -----------
AIC PREMIUM FINANCE LOAN MASTER TRUST
CLASS B FLOATING RATE ASSET BACKED CERTIFICATE,
SERIES 1998-1
This Certificate does not represent an obligation of, or any interest
in, the Original Transferors, the Transferor or the Servicer referred to below,
or any of their affiliates, and neither the Series 1998-1 Certificates, the
Receivables nor the related Loans are insured or guaranteed by any governmental
agency or instrumentality or any other Person. This Certificate is 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 _________________ (the "Class B Certificateholder")
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 (i)
the Receivables existing at any time after the Initial Cut-Off Date or
thereafter created up to (but excluding) the Closing Date (the "Existing
Receivables"), including all Collections thereon, other than Credit Balances,
received by the Original Transferors after the Initial Cut-Off Date, and (ii)
the Receivables existing at any time on or after the Closing Date or thereafter
created that are required or permitted to be conveyed to the Trust pursuant to
Section 2.06 of the Pooling and Servicing Agreement referred to below (the
"Additional Receivables"), including all Collections thereon, other than Credit
Balances, received [by the Servicer] on or after the Closing Date, together with
other assets and interests constituting the Trust pursuant to the Amended and
Restated Pooling and Servicing Agreement dated as of March [_], 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
A-2:1
<PAGE>
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.
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 holder hereof by virtue
of the acceptance hereof assents and by which the holder hereof is bound.
The Original Transferors and the Transferor have structured the Pooling
and Servicing Agreement and the Series 1998-1 Certificates with the intention
that the Series 1998-1 Certificates will qualify under applicable tax law as
indebtedness, and each of the Original Transferors, the Transferor, the Holder
of the Transferor Certificate, the Servicer and each Series 1998-1
Certificateholder (or Series 1998-1 Certificate Owner) by acceptance of its
Series 1998-1 Certificate (or in the case of a Series 1998-1 Certificate Owner,
by virtue of such Series 1998-1 Certificate Owner's acquisition of a beneficial
interest therein), agrees to treat and to take no action inconsistent with the
treatment of the Series 1998-1 Certificates (or any beneficial interest therein)
as indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each Series
1998-1 Certificateholder agrees that it will cause any Series 1998-1 Certificate
Owner acquiring an interest in a Series 1998-1 Certificate through it to comply
with the Pooling and Servicing Agreement as to treatment of the Series 1998-1
Certificates as indebtedness for certain tax purposes.
The Original Transferors, the Transferor, the Servicer and the Trustee,
by entering into the Series 1998-1 Supplement, and each holder of a Series
1998-1 Certificate, by accepting such Certificate, covenant and agree that they
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 or the Pooling and Servicing Agreement.
This Class B Certificate is one of a duly authorized Series of Investor
Certificates entitled "AIC Premium Finance Loan Master Trust Class B Floating
Rate Asset Backed Certificates, Series 1998-1" (the "Class B Certificates"),
each of which represents an undivided interest in the Trust, including the right
to receive the Collections and other amounts allocated to the Class B
Certificates at the times and in the amounts specified in the Pooling and
Servicing Agreement. Also issued under the Pooling and Servicing Agreement are
the "AIC Premium Finance Loan Master Trust Class A Floating Rate Asset Backed
Certificates, Series 1998-1" (the "Class A Certificates"), which represent an
undivided interest in the Trust senior to the Class B Certificates to the extent
provided in the Pooling and Servicing Agreement, and the "AIC Premium Finance
Loan Master Trust Class C Floating Rate Asset Backed Certificates, Series 1998-1
(the "Class C Certificates"), which represent an undivided interest in the Trust
subordinate to the Class A Certificates and the Class B Certificates to the
extent provided in the Pooling and Servicing Agreement.
A-2:2
<PAGE>
The aggregate interest represented by the Class A Certificates, the
Class B Certificates and the Class C Certificates at any time in the Receivables
in the Trust shall not exceed an amount equal to the Certificateholders
Ownership Interests at such time. The Class A Initial Ownership Interest is $[ ]
as of [ ], 1998 (the "Closing Date"). The Class B Initial Ownership Interest is
$[ ] as of the Closing Date. The Class C Initial Ownership Interest is $[ ] as
of the Closing Date. The Class B Ownership Interest on any date of determination
will be an amount equal to (a) the Class B Initial Ownership Interest, minus (b)
the aggregate amount of payments of principal made to the Class B
Certificateholders prior to such date, minus (c) the aggregate amount of Class B
Charge-Offs for all prior Transfer Dates pursuant to subsection 4.10(b) of the
Pooling and Servicing Agreement, minus (d) the amount of Reallocated Principal
Collections allocated pursuant to subsection 4.12(a) of the Pooling and
Servicing Agreement on all prior Transfer Dates for which the Class C Ownership
Interest has not been reduced, minus (e) an amount equal to the amount by which
the Class B Ownership Interest has been reduced on all prior Transfer Dates
pursuant to subsection 4.10(a) of the Pooling and Servicing Agreement, and plus
(f) the aggregate of the amount deducted pursuant to the foregoing clauses (c),
(d) and (e) deemed to have been reimbursed on all prior Transfer Dates pursuant
to subsection 4.11(d) of the Pooling and Servicing Agreement; provided, however,
that the Class B Ownership Interest may not be reduced below zero. The Class B
Ownership Interest, together with the aggregate interest represented by the
Class A Certificates in the Receivables in the Trust (the "Class A Ownership
Interest") and the aggregate interest represented by the Class C Certificates in
the Receivables in the Trust (the "Class C Ownership Interest"), is sometimes
collectively referred to herein as the "Certificateholders Ownership Interests."
In addition to the issuance of the Class A Certificates, the Class B
Certificates and the Class C Certificates, the Transferor Certificate,
representing an undivided interest in the Trust, will be transferred on the
Closing Date from the Original Transferors to the Transferor pursuant to the
Pooling and Servicing Agreement. The Transferor Certificate represents the
interest in the Receivables not represented by all of the Series of Certificates
issued by the Trust. The interest represented by the Transferor Certificate may
be reduced by the Transferor pursuant to the Pooling and Servicing Agreement to
effectuate the issuance of a new Series of investor Certificates upon the
conditions set forth in the Pooling and Servicing Agreement. Under the
circumstances provided in the Pooling and Servicing Agreement, the Series 1998-1
Certificates may be included in such a New Series Issuance.
Interest will accrue on the Class B Certificates for the period from
the Closing Date through [ ], 1998 at [ ]% per annum and, for the period from
[ ], 1998 through [ ], 1998 and with respect to each Interest Period thereafter,
at a per annum rate equal to [ ]% in excess of LIBOR, as more specifically set
forth in the Pooling and Servicing Agreement, subject to a maximum annual rate
of [ ]% (the "Class B Certificate Rate"), and will be distributed on [ ], 1998
and on the 15th day of each calendar month thereafter or, if such day is not a
Business Day, on the next succeeding Business Day (a "Distribution Date"), to
the Class A Certificateholders of record as of the last Business Day of the
calendar month preceding such Distribution Date. On each Distribution Date
during the Rapid Amortization Period, if any, after the Class A Ownership
Interest has been paid in full, in addition to Class B Monthly Interest,
Available Investor Principal Collections with respect to such Distribution Date
will be distributed to such Class B Certificateholders until the Class B
Ownership Interest has been paid in full. On each Distribution Date during the
Class B Controlled Amortization Period, such Class B Certificateholders will
receive a principal payment equal to the least of (i) Available Investor
Principal Collections with respect to such Distribution Date (minus the portion
A-2:3
<PAGE>
of such Available Investor Principal Collections applied to Class A Monthly
Principal on such Transfer Date), (ii) the Controlled Distribution Amount with
respect to such Distribution Date (minus the portion of such Controlled
Distribution Amount applied to Class A Monthly Principal on such Transfer Date)
and (iii) the Class B Ownership Interest for such Distribution Date, unless
distributed earlier as a result of the occurrence of a Pay Out Event in
accordance with the Pooling and Servicing Agreement.
The transfer of this Class B Certificate shall be registered in the
Certificate Register upon surrender of this Class B Certificate for registration
of transfer at any office of agency maintained by the Transfer Agent and
Registrar accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the Class B
Certificateholder or such Class B Certificateholder's attorney-in-fact duly
authorized in writing, and thereupon one or more new Class B Certificates of
authorized denominations and for the same aggregate undivided interests will be
issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations set forth therein, Class B Certificates are exchangeable for
new Class B Certificates evidencing like aggregate undivided interests, as
requested by the Class B Certificateholder surrendering such Class B
Certificates. No service charge may be imposed for any such exchange but the
Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Trustee, the Paying Agent, the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them,
shall be affected by notice to the contrary except in certain circumstances
described in the Pooling and Servicing Agreement.
Except as otherwise set forth in the Pooling and Servicing Agreement,
the right of the Series 1998-1 Certificateholders to receive payment from the
Trust will terminate on the first Business Day following the Series 1998-1
Termination Date.
Upon the termination of the Trust pursuant to Section 12.01 of the
Pooling and Servicing Agreement, 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.
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.
A-2:4
<PAGE>
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:
----------------------------------
[Title]
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates referred to in the within-
mentioned Pooling and Servicing Agreement.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:
--------------------------------
Authorized Officer
A-2:5
<PAGE>
Exhibit A-3
Form of Class C 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.
No. $
--------- ---------
CUSIP NO.
-------
AIC PREMIUM FINANCE LOAN MASTER TRUST
CLASS C FLOATING RATE ASSET BACKED CERTIFICATE,
SERIES 1998-1
This Certificate does not represent an obligation of, or any interest
in, the Original Transferors, the Transferor or the Servicer referred to below,
or any of their affiliates, and neither the Series 1998-1 Certificates, the
Receivables nor the related Loans are insured or guaranteed by any governmental
agency or instrumentality or any other Person. This Certificate is 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 _________________ (the "Class C Certificateholder")
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 (i)
the Receivables existing at any time after the Initial Cut-Off Date or
thereafter created up to (but excluding) the Closing Date (the "Existing
Receivables"), including all Collections thereon, other than Credit Balances,
received by the Original Transferors after the Initial Cut-Off Date, and (ii)
the Receivables existing at any time on or after the Closing Date or thereafter
created that are required or permitted to be conveyed to the Trust pursuant to
Section 2.06 of the Pooling and Servicing Agreement referred to below (the
"Additional Receivables"), including all Collections thereon, other than Credit
Balances, received [by the Servicer] on or after the Closing Date, together with
other assets and interests constituting the Trust pursuant to the Amended and
Restated Pooling and Servicing Agreement dated as of March [_], 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
A-3:1
<PAGE>
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.
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 holder hereof by virtue
of the acceptance hereof assents and by which the holder hereof is bound.
The Original Transferors and the Transferor have structured the Pooling
and Servicing Agreement and the Series 1998-1 Certificates with the intention
that the Series 1998-1 Certificates will qualify under applicable tax law as
indebtedness, and each of the Original Transferors, the Transferor, the Holder
of the Transferor Certificate, the Servicer and each Series 1998-1
Certificateholder (or Series 1998-1 Certificate Owner) by acceptance of its
Series 1998-1 Certificate (or in the case of a Series 1998-1 Certificate Owner,
by virtue of such Series 1998-1 Certificate Owner's acquisition of a beneficial
interest therein), agrees to treat and to take no action inconsistent with the
treatment of the Series 1998-1 Certificates (or any beneficial interest therein)
as indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each Series
1998-1 Certificateholder agrees that it will cause any Series 1998-1 Certificate
Owner acquiring an interest in a Series 1998-1 Certificate through it to comply
with the Pooling and Servicing Agreement as to treatment of the Series 1998-1
Certificates as indebtedness for certain tax purposes.
The Original Transferors, the Transferor, the Servicer and the Trustee,
by entering into the Series 1998-1 Supplement, and each holder of a Series
1998-1 Certificate, by accepting such Certificate, covenant and agree that they
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 or the Pooling and Servicing Agreement.
This Class C Certificate is one of a duly authorized Series of Investor
Certificates entitled "AIC Premium Finance Loan Master Trust Class C Floating
Rate Asset Backed Certificates, Series 1998-1" (the "Class C Certificates"),
each of which represents an undivided interest in the Trust, including the right
to receive the Collections and other amounts allocated to the Class C
Certificates at the times and in the amounts specified in the Pooling and
Servicing Agreement. Also issued under the Pooling and Servicing Agreement are
the "AIC Premium Finance Loan Master Trust Class A Floating Rate Asset Backed
Certificates, Series 1998-1" (the "Class A Certificates"), which represent an
undivided interest in the Trust senior to the Class C Certificates to the extent
provided in the Pooling and Servicing Agreement, and the "AIC Premium Finance
Loan Master Trust Class B Floating Rate Asset Backed Certificates, Series 1998-1
(the "Class B Certificates"), which represent an undivided interest in the Trust
senior to the Class C Certificates to the extent provided in the Pooling and
Servicing Agreement.
A-3:2
<PAGE>
The aggregate interest represented by the Class A Certificates, the
Class B Certificates and the Class C Certificates at any time in the Receivables
in the Trust shall not exceed an amount equal to the Certificateholders
Ownership Interests at such time. The Class A Initial Ownership Interest is $[ ]
as of [ ], 1998 (the "Closing Date"). The Class B Initial Ownership Interest is
$[ ] as of the Closing Date. The Class C Initial Ownership Interest is $[ ] as
of the Closing Date. The Class C Ownership Interest on any date of determination
will be an amount equal to (a) the Class C Initial Ownership Interest, minus (b)
the aggregate amount of payments of principal made to the Class C
Certificateholders prior to such date, minus (c) the aggregate amount of Class C
Charge-Offs for all prior Transfer Dates pursuant to subsection 4.10(c) of the
Pooling and Servicing Agreement, minus (d) the amount of Reallocated Principal
Collections allocated pursuant to subsection 4.12(a) of the Pooling and
Servicing Agreement on all prior Transfer Dates for which the Class C Ownership
Interest was to be reduced, minus (e) an amount equal to the amount by which the
Class C Ownership Interest has been reduced on all prior Transfer Dates pursuant
to subsections 4.10(a) and 4.10(b) of the Pooling and Servicing Agreement, and
plus (f) the aggregate of the amounts deducted pursuant to the foregoing clauses
(c), (d) and (e) deemed to have been reimbursed on all prior Transfer Dates
pursuant to subsection 4.11(f) of the Pooling and Servicing Agreement; provided,
however, that the Class C Ownership Interest may not be reduced below zero. The
Class C Ownership Interest, together with the aggregate interest represented by
the Class A Certificates in the Receivables in the Trust (the "Class A Ownership
Interest") and the aggregate interest represented by the Class B Certificates in
the Receivables in the Trust (the "Class B Ownership Interest"), is sometimes
collectively referred to herein as the "Certificateholders Ownership Interests."
In addition to the issuance of the Class A Certificates, the Class B
Certificates and the Class C Certificates, the Transferor Certificate,
representing an undivided interest in the Trust, will be transferred on the
Closing Date from the Original Transferors to the Transferor pursuant to the
Pooling and Servicing Agreement. The Transferor Certificate represents the
interest in the Receivables not represented by all of the Series of Certificates
issued by the Trust. The interest represented by the Transferor Certificate may
be reduced by the Transferor pursuant to the Pooling and Servicing Agreement to
effectuate the issuance of a new Series of investor Certificates upon the
conditions set forth in the Pooling and Servicing Agreement. Under the
circumstances provided in the Pooling and Servicing Agreement, the Series 1998-1
Certificates may be included in such a New Series Issuance.
Interest will accrue on the Class C Certificates for the period from
the Closing Date through [ ], 1998 at [ ]% per annum and, for the period from
[ ], 1998 through [ ], 1998 and with respect to each Interest Period thereafter,
at a per annum rate equal to [ ]% in excess of LIBOR, as more specifically set
forth in the Pooling and Servicing Agreement, subject to a maximum annual rate
of [ ]% (the "Class C Certificate Rate"), and will be distributed on [ ], 1998
and on the 15th day of each calendar month thereafter or, if such day is not a
Business Day, on the next succeeding Business Day (a "Distribution Date"), to
the Class A Certificateholders of record as of the last Business Day of the
calendar month preceding such Distribution Date. On each Distribution Date
during the Rapid Amortization Period, if any, after the Class B Ownership
Interest has been paid in full, in addition to Class C Monthly Interest,
Available Investor Principal Collections with respect to such Distribution Date
will be distributed to such Class C Certificateholders until the Class C
Ownership Interest has been paid in full. On each Distribution Date during the
Class C Controlled Amortization Period, such Class C Certificateholders will
receive a principal payment equal to the least
A-3:3
<PAGE>
of (i) Available Investor Principal Collections with respect to such
Distribution Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal and Class B Monthly Principal
on such Transfer Date), (ii) the Controlled Distribution Amount with respect to
such Distribution Date (minus the portion of such Controlled Distribution Amount
applied to Class A Monthly Principal and Class B Monthly Principal on such
Transfer Date) and (iii) the Class C Ownership Interest for such Distribution
Date, unless distributed earlier as a result of the occurrence of a Pay Out
Event in accordance with the Pooling and Servicing Agreement.
The transfer of this Class C Certificate is subject to the restrictions
set forth in the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations set forth therein, Class C Certificates are exchangeable for
new Class C Certificates evidencing like aggregate undivided interests, as
requested by the Class C Certificateholder surrendering such Class C
Certificates. No service charge may be imposed for any such exchange but the
Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Trustee, the Paying Agent, the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them,
shall be affected by notice to the contrary except in certain circumstances
described in the Pooling and Servicing Agreement.
Except as otherwise set forth in the Pooling and Servicing Agreement,
the right of the Series 1998-1 Certificateholders to receive payment from the
Trust will terminate on the first Business Day following the Series 1998-1
Termination Date.
Upon the termination of the Trust pursuant to Section 12.01 of the
Pooling and Servicing Agreement, 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.
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.
A-3:4
<PAGE>
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:
---------------------------------
[Title]
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates referred to in the within-
mentioned Pooling and Servicing Agreement.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:
----------------------------------
Authorized Officer
A-3:5
<PAGE>
Exhibit B
Form of Monthly Certificateholders' Statement
MONTHLY CERTIFICATEHOLDERS' STATEMENT
-------------------------------------
AIC PREMIUM FINANCE LOAN MASTER TRUST
SERIES 1998-1
Set forth below is information with respect to the Distribution Date of
_______ __, _____ and with respect to the performance of the Trust during the
related Monthly Period.
Capitalized terms used in this Monthly Certificateholders' Statement
have their respective meanings set forth in the Pooling and Servicing Agreement,
as supplemented by the Series 1998-1 Supplement.
A. Information Regarding the Current Monthly Distribution
(Stated on the Basis of $1,000 Original Certificate
Principal Amount)
1. The total amount of the distribution
to holders of Class A, Class B and
Class C Certificates ........................ $______
2. The amount of the distribution set
forth in A1 above in respect of
Class A Monthly Principal ................... $______
3. The amount of the distribution set
forth in A1 above in respect of
Class B Monthly Principal ................... $______
4. The amount of the distribution set
forth in A1 above in respect of Class C
Monthly Principal ........................... $______
5. The amount of the distribution set
forth in A1 above in respect of
Class A Monthly Interest .................... $______
6. The amount of the distribution set
forth in A1 above in respect of
Class A Additional Interest ................. $______
B:1
<PAGE>
7. The amount of the distribution set
forth in A1 above in respect of
Class A Prior Period Interest ............... $______
8. The amount of the distribution set
forth in A1 above in respect of
Class B Monthly Interest .................... $______
9. The amount of the distribution set
forth in A1 above in respect of
Class B Additional Interest ................. $______
10. The amount of the distribution set
forth in A1 above in respect of
Class B Prior Period Interest ............... $______
11. The amount of the distribution set
forth in A1 above in respect of Class C
Monthly Interest ............................ $______
12. The amount of the distribution set
forth in A1 above in respect of Class C
Additional Interest ......................... $______
13. The amount of the distribution set
forth in A1 above in respect of Class C
Prior Period Interest ....................... $______
B. Information Regarding the Performance of the Trust
1. Collections of Principal Receivables
The aggregate amount of Collections of
Principal Receivables received during the
related Monthly Period which were allocated
in respect of the Class A, Class B and
Class C Certificates ........................ $______
2. Certificateholders Ownership Interests
and Principal Receivables in the Trust
(a) The aggregate amount of Principal
Receivables in the Trust as of the
end of the related Monthly Period .. $_______
(b) The Certificateholders Ownership
Interests as of the end of the
related Monthly Period ............. $_______
B:2
<PAGE>
(c) The Class A Ownership Interest
as of the end of the
related Monthly Period ............. $_______
(d) The Class B Ownership Interest
as of the end of the
related Monthly Period ............. $_______
(e) The Class C Ownership Interest
as of the end of the
related Monthly Period ............. $_______
(f) The Floating Investor Percentage
with respect to the related Monthly
Period ............................. $_______
(g) The Class A Floating Allocation
with respect to the related Monthly
Period ............................. $_______
(h) The Class B Floating Allocation
with respect to the related Monthly
Period ............................. $_______
(i) The Class C Floating Allocation
with respect to the related Monthly
Period ............................. $_______
(j) The Fixed Investor Percentage with
respect to the related Monthly
Period ............................. $_______
3. Delinquent Receivables
The aggregate outstanding balances of Receivables which were
delinquent as of the end of the related Monthly Period following
cancellation of the related insurance policies:
Aggregate Percentage
Outstanding of Total
Balance Receivables
----------- -----------
(a) 1 - 30 days ....... $ %
-------- ---------
(b) 31 - 60 days ....... $ %
-------- ---------
(c) 61 - 90 days ....... $ %
-------- ---------
(d) 91 - 120 days ....... $ %
-------- ---------
(e) 121 - 150 days ....... $ %
-------- ---------
(f) 151 - or more days ... $ %
-------- ---------
Total .............. $ %
-------- ---------
B:3
<PAGE>
4. Default Amounts
(a) The Aggregate Default Amount
for the related Monthly Period ......... $______
(b) The Class A Default Amount for
the related Transfer Date .............. $______
(c) The Class B Default Amount for
the related Transfer Date .............. $______
(d) The Class C Default Amount for
the related Transfer Date .............. $______
5. Investor Charge-Offs
(a) The aggregate amount of Class A
Charge-Offs and other principal
writedowns for the related
Transfer Date ......................... $______
(b) The aggregate amount of Class A
Charge-Offs and other principal
writedowns set forth in 5(a) above
per $1,000 of original Class A
Certificate principal amount .......... $______
(c) The aggregate amount of Class B
Charge-Offs and other principal
writedowns for the related
Transfer Date ......................... $______
(d) The aggregate amount of Class B
Charge-Offs and other principal
writedowns set forth in 5(c) above
per $1,000 of original Class B
Certificate principal amount .......... $______
(e) The aggregate amount of Class C
Charge-Offs and other principal
writedowns for the related
Transfer Date ......................... $______
(f) The aggregate amount of Class C
Charge-Offs and other principal
writedowns set forth in 5(e) above
per $1,000 of original Class C
Certificate principal amount ......... $______
B:4
<PAGE>
(g) The aggregate amount of Class A
Charge-Offs and other principal
writedowns reimbursed on the
Transfer Date immediately
preceding this Distribution Date ...... $______
(h) The aggregate amount of Class A
Charge-Offs and other principal
writedowns set forth in 5(g) above
per $1,000 original Class A Certificate
principal amount reimbursed on the
Transfer Date immediately preceding
this Distribution Date ................ $______
(i) The aggregate amount of Class B
Charge-Offs and other principal
writedowns reimbursed on the Transfer
Date immediately preceding this
Distribution Date ..................... $______
(j) The aggregate amount of Class B
Charge-Offs and other principal
writedowns set forth in 5(i) above
per $1,000 original Class B Certificate
principal amount reimbursed on the
Transfer Date immediately preceding
this Distribution Date ................ $______
(k) The aggregate amount of Class C
Charge-Offs and other principal
writedowns reimbursed on the Transfer
Date immediately preceding this
Distribution Date .................... $______
(l) The aggregate amount of Class C
Charge-Offs and other principal
writedowns set forth in 5(k) above
per $1,000 original Class C Certificate
principal amount reimbursed on the
Transfer Date immediately preceding
this Distribution Date ............... $______
6. Investor Servicing Fee
(a) The amount of the Class A Servicing
Fee payable by the Trust to the
Servicer for the related Monthly
Period .............................. $______
B:5
<PAGE>
(b) The amount of the Class B Servicing
Fee payable by the Trust to the
Servicer for the related Monthly
Period .............................. $______
(c) The amount of the Class C Servicing
Fee payable by the Trust to the
Servicer for the related Monthly
Period .............................. $______
7. Reallocations
(a) The amount of Reallocated Class C
Principal Collections with respect
to this Distribution Date ........... $______
(b) The amount of Reallocated Class B
Principal Collections with respect
to this Distribution Date ........... $______
(c) The amount of Reallocated Class A
Principal Collections with respect
to this Distribution Date ........... $______
8. Collection of Finance Charge Receivables
The aggregate amount of Collections of
Finance Charge Receivables (including Recoveries)
received during the related Monthly Period which
were allocated in respect of the Class A, Class B
and Class C Certificates ...................... $______
9. Available Funds
(a) The amount of Class A Available
Funds on deposit in the Finance
Charge Account on the related
Transfer Date ....................... $______
(b) The amount of Class B Available
Funds on deposit in the Finance
Charge Account on the related
Transfer Date ....................... $______
(c) The amount of Class C Available
Funds on deposit in the Finance
Charge Account on the related
Transfer Date ....................... $______
B:6
<PAGE>
10. Pool Factor .................................... ______%
11. Yield Enhancement
(a) Available Yield Enhancement Amount
with respect to the related
Transfer Date ........................ $______
(b) Excess Finance Charges with respect
to the related Transfer Date ......... $______
(c) Amount withdrawn from Yield
Enhancement Account on the related
Transfer Date ........................ $______
C. Floating Rate Determination
1. LIBOR for the Interest Period ending on this
Distribution Date ............................. ______%
D. Amortization Periods
1. Class A Controlled Amortization Period commenced on ____ __, __.
2. Class B Controlled Amortization Period commenced on ____ __, __.
3. Class C Controlled Amortization Period commenced on ____ __, __.
4. Rapid Amortization Period commenced on ____ __, __.
E. Pay Out Events
(a) Finance Premium Percentage for
the related Monthly Period .................... ______%
(b) Financed Premium Percentage for the
Monthly Period immediately preceding
the related Monthly Period .................... ______%
(c) Financed Premium Percentage for the
Monthly Period next preceding the
related Monthly Period ........................ ______%
(d) Monthly Payment Rate for the related
Monthly Period ................................ ______%
(e) Monthly Payment Rate for the Monthly
Period immediately preceding the
related Monthly Period ........................ ______%
B:7
<PAGE>
(f) Monthly Payment Rate for the Monthly
Period next preceding the related
Monthly Period ................................ ______%
(g) Annualized Monthly Excess Spread
Amount for the related Monthly Period ......... ______%
(h) Annualized Monthly Excess Spread
Amount for the Monthly Period
immediately preceding the related
Monthly Period ................................ ______%
(i) Annualized Monthly Excess Spread
Amount for the Monthly Period
next preceding the related Monthly
Period ........................................ ______%
To the knowledge of the undersigned, no Series 1998-1 Pay Out Event or Trust Pay
Out Event has occurred except as described below:
A.I. Credit Corp.,
AICCO, Inc., Servicer
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
B:8
Exhibit 5.1
[Form of Legality Opinion]
March ___, 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 (File No.
333-44653) (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 drafts of the Amended
and Restated Pooling and Servicing Agreement, to be dated as of the Closing Date
(the "Pooling and Servicing Agreement") among the Company, AIC, AICCO and The
First National Bank of Chicago, as Trustee, and the Series 1998-1 Supplement to
the Pooling and Servicing Agreement, to be dated as of the Closing Date
(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 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
<PAGE>
A.I. Receivables Corp.
Page 2
documents. As to all questions of fact material to this opinion that have not
been independently established, we have relied upon resolutions of the board of
directors of the Company and incumbency certificates 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 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,
Exhibit 8.1
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, New York, NY 10153-0119
(212) 310-8000
Fax: (212) 310-8007
March 19, 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
(File No. 333-44635) (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 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, we
confirm that the discussions included in the Prospectus under the captions
"United States Federal Income Tax Consequences" and "Certain State and Local
Tax
<PAGE>
A.I. Receivables Corp.
Page 2
Consequences," insofar as they contain statements of law or legal conclusions
and except to the extent qualified therein, represent our opinions.
Those opinions are based on current provisions of the Internal
Revenue Code of 1986, as amended, New York State, New York City and California
tax statutes, relevant regulations promulgated thereunder, published
pronouncements of the various taxing authorities, 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, the
New York State Department of Taxation and Finance, the New York City Department
of Finance, the California State Board of Equalization or the courts. We express
no opinion either as to any matters not specifically covered by the foregoing
opinions or as to the effect on the matters covered by these opinions of the
laws of any other jurisdictions. Additionally, we undertake no obligation to
update these opinions 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 these opinions are based, or an inaccuracy in any of the
representations or warranties upon which we have relied in rendering these
opinions.
We consent to the references to our firm in the Prospectus
under the captions "United States Federal Income Tax Consequences" and "Certain
State and Local Tax Consequences."
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
Exhibit 10.2
SUPPORT AGREEMENT
between
AMERICAN INTERNATIONAL GROUP, INC.
and
A.I. RECEIVABLES CORP.
This Agreement, made and entered into as of March [__], 1998,
between American International Group, Inc., a Delaware corporation ("Parent"),
and A.I. Receivables Corp., a Delaware corporation ("Subsidiary").
WITNESSETH:
WHEREAS, Parent is the ultimate beneficial owner of 100% of
the outstanding common stock of Subsidiary;
WHEREAS, Subsidiary simultaneously herewith is entering into,
as transferor, the Amended and Restated Pooling and Servicing Agreement dated as
of the date hereof, among Subsidiary, A.I. Credit Corp., a New Hampshire
Corporation, as an original transferor and a servicer, AICCO, Inc., a California
corporation, as an original transferor and a servicer, and The First National
Bank of Chicago, as trustee (together with any successor thereto, the
"Trustee"), as amended or supplemented from time to time (the "PSA"); and
WHEREAS, Parent and Subsidiary desire to take certain actions
to enhance and maintain the financial condition of Subsidiary as hereinafter set
forth, and to guarantee the solvency of Subsidiary by Parent, in order to enable
Subsidiary to meet its financial obligations as set forth herein;
NOW THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Stock Ownership. During the term of this
Agreement, Parent will be the ultimate beneficial owner of all of the voting
capital stock of Subsidiary now or hereafter issued and outstanding, and Parent
will not pledge or encumber, nor will it permit to be pledged or encumbered,
such capital stock of Subsidiary.
2. Net Worth. Parent agrees that it shall cause
Subsidiary to have at all times a positive tangible net worth of at least one
dollar ($1.00), as determined in accordance with generally accepted accounting
principles. Parent and Subsidiary agree that Subsidiary shall not file a
voluntary case under the United States Bankruptcy Code, as now or hereafter in
effect.
3. Liquidity Provision. If, during the term of this
Agreement:
(a) Subsidiary needs funds not otherwise available to
it to meet any of its obligations as transferor under the PSA, or
(b) Subsidiary 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
Subsidiary under the United States Bankruptcy Code, as now or hereafter
in effect,
<PAGE>
Parent shall provide Subsidiary funds as a loan, in a manner sufficiently timely
to cause such obligations to be satisfied when due. Such loan shall bear a
market rate of interest, shall be negotiated in an arm's length transaction, and
otherwise shall be on such terms and conditions, including maturity, as Parent
and Subsidiary shall agree. Notwithstanding the foregoing, any such loan shall
be subordinated in all respects to any and all debt of Subsidiary, whether or
not such debt is outstanding at the time of such loan, and to all financial
obligations of Subsidiary under the PSA, whether or not such loan or PSA has
such express subordination provisions therein and notwithstanding anything to
the contrary in such loan or PSA.
4. Waivers. Parent hereby waives any set-off or
counterclaim against Subsidiary and any failure or delay on the part of
Subsidiary in asserting or enforcing any of its rights or in making any claims
or demands hereunder.
5. Termination; Amendment. Notwithstanding any
provision to the contrary pursuant to this Agreement or otherwise, Parent shall
have the absolute right to terminate this Agreement upon either (a) the
expiration of one year plus one day after the Trust Termination Date (as defined
in the PSA) or (b) the valid and enforceable assumption by Parent of
Subsidiary's obligations then outstanding or thereafter arising under the PSA.
This Agreement may be amended at any time by a written amendment signed by both
parties. No amendment to this Agreement shall be effective until such time as
each holder of any certificates (the "Certificates") issued under the PSA and
outstanding on the date of such amendment shall consent in writing to such
amendment and each Rating Agency (as defined in the PSA) shall have confirmed in
writing that such amendment shall not adversely affect the then ratings of any
Certificates.
6. Notices. Any notice, instruction, request,
consent, demand or other communication required or contemplated by this
Agreement shall be in writing, shall be given or made or communicated by United
States first class mail, addressed as follows:
If to Parent: American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: Treasurer
If to Subsidiary: A.I. Receivables Corp.
160 Water Street
New York, New York 10038
Attention: President
or to such other address as any party shall have specified by notice to the
other parties in accordance with this Section 6.
7. Successors. The covenants, representations,
warranties and agreements herein set forth shall be mutually binding upon and
inure to the mutual benefit of Parent and its successors and Subsidiary and its
successors.
2
<PAGE>
8. Governing Law. This Agreement shall be governed by
the laws of the State of New York.
9. Binding Effect. The provisions of this Agreement
and the rights created hereunder shall inure solely to, and are intended solely
for the benefit of, the parties hereto and the Trustee and the
Certificateholders (as defined in the PSA), as set forth in the Letter Agreement
between Parent and the Trustee of even date herewith.
IN WITNESS WHEREOF, the parties hereto have set their hands
and affixed their corporate seals as of the day and year first above written.
AMERICAN INTERNATIONAL GROUP,
INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
A.I. RECEIVABLES CORP.
By:
---------------------------
Name:
Title:
3
