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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 23, 1998
ARCADIA RECEIVABLES FINANCE CORP.
as originator of
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B
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(Exact name of registrant as specified in its charter)
Delaware 333-48141 41-1743653
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 942-9880
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(Former name or former address, if changed since last report)
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Item 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
Item 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS.
Not applicable.
Item 5. OTHER EVENTS.
Not applicable.
Item 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The following are filed herewith. The exhibit numbers correspond
with Item 601(b) of Regulation S-K.
Exhibit No. Description
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4.1 Trust Agreement, dated as of June 1, 1998
among Arcadia Receivables Finance Corp.,
Financial Security Assurance Inc. and Wilmington
Trust Company, as Owner Trustee (without
exhibits)
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4.2 Indenture, dated as of June 1, 1998 between
Arcadia Automobile Receivables Trust, 1998-A and
Norwest Bank Minnesota, National Association,
as Trustee and Indenture Collateral Agent
(without exhibits)
4.3 Sale and Servicing Agreement, dated as of
June 1, 1998 among Arcadia Automobile
Receivables Trust, 1998-B, as Issuer, Arcadia
Receivables Finance Corp., as Seller, Arcadia
Financial Ltd., in its individual capacity and
as Servicer, and Norwest Bank Minnesota, National
Association, as Backup Servicer (without
exhibits)
4.4 Receivables Purchase Agreement and Assignment,
dated as of June 1, 1998 by and between
Arcadia Receivables Finance Corp., as Purchaser,
and Arcadia Financial Ltd., as Seller (without
exhibits)
4.5 Financial Guaranty Insurance Policy issued by
Financial Security Assurance Inc. with respect to
the Automobile Receivables-Backed Notes
8.1 Opinion and Consent of Dorsey & Whitney LLP with
respect to tax matters
23.1 Consent of Dorsey & Whitney LLP (included as part
of Exhibit 8.1)
23.2 Consent of Coopers & Lybrand L.L.P.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 23, 1998 ARCADIA RECEIVABLES FINANCE CORP.,
as originator of Arcadia Automobile
Receivables Trust, 1998-B
By: /s/ Brian S. Anderson
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Brian S. Anderson
Senior Vice President
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TRUST AGREEMENT
Dated as of June 1, 1998
among
ARCADIA RECEIVABLES FINANCE CORP.,
FINANCIAL SECURITY ASSURANCE INC.
and
WILMINGTON TRUST COMPANY
Owner Trustee
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B
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TABLE OF CONTENTS
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INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.3. Section References . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.4. Material Adverse Effect. . . . . . . . . . . . . . . . . . . 4
ARTICLE II - CREATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.1. Creation of Trust . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.2. Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.3. Purposes and Powers . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.4. Appointment of Owner Trustee . . . . . . . . . . . . . . . . 5
SECTION 2.5. Initial Capital Contribution of Trust Estate . . . . . . . . 5
SECTION 2.6. Declaration of Trust . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.7. Liability of the Depositor . . . . . . . . . . . . . . . . . 6
SECTION 2.8. Title to Trust Property . . . . . . . . . . . . . . . . . . 6
SECTION 2.9. Situs of Trust . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.10. Representations and Warranties of the Depositor . . . . . . 6
SECTION 2.11. Federal Income Tax Treatment . . . . . . . . . . . . . . . . 7
SECTION 2.12. Covenants of the Depositor . . . . . . . . . . . . . . . . . 8
SECTION 2.13. Ownership of Trust . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.14. Maintenance of Office or Agency . . . . . . . . . . . . . . 9
ARTICLE III - ACTIONS BY OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.1. Action by the Security Insurer with Respect to
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2. Rights of Security Insurer . . . . . . . . . . . . . . . . . 10
ARTICLE IV - CERTAIN DUTIES OF TRUST . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.1. Accounting; Reports; Tax Returns . . . . . . . . . . . . . . 10
ARTICLE V - AUTHORITY AND DUTIES OF OWNER TRUSTEE . . . . . . . . . . . . . . . 11
SECTION 5.1. General Authority . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.2. General Duties . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.3. Action upon Instruction . . . . . . . . . . . . . . . . . . 12
SECTION 5.4. No Duties Except as Specified in this Agreement or in
Instructions . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.5. No Action Except under Specified Documents or
Instructions . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.6. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.7. Administration Agreement . . . . . . . . . . . . . . . . . . 14
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ARTICLE VI - CONCERNING THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . 14
SECTION 6.1. Acceptance of Trustee and Duties . . . . . . . . . . . . . . 14
SECTION 6.2. Representations and Warranties . . . . . . . . . . . . . . . 16
SECTION 6.3. Reliance; Advice of Counsel . . . . . . . . . . . . . . . . 17
SECTION 6.4. Not Acting in Individual Capacity . . . . . . . . . . . . . 17
SECTION 6.5. Owner Trustee Not Liable for Notes or Receivables . . . . . 17
SECTION 6.6. Owner Trustee May Own Notes . . . . . . . . . . . . . . . . 18
ARTICLE VII - COMPENSATION OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . 18
SECTION 7.1. Owner Trustee's Fees and Expenses . . . . . . . . . . . . . 18
SECTION 7.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.3. Non-recourse Obligations . . . . . . . . . . . . . . . . . . 19
ARTICLE XIII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.1. Termination of the Trust . . . . . . . . . . . . . . . . . . 19
SECTION 8.2. Dissolution Events with respect to the Depositor . . . . . . 20
ARTICLE IX - SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES . . . . . . 20
SECTION 9.1. Eligibility Requirements for Owner Trustee . . . . . . . . . 20
SECTION 9.2. Resignation or Removal of Owner Trustee . . . . . . . . . . 21
SECTION 9.3. Successor Owner Trustee . . . . . . . . . . . . . . . . . . 22
SECTION 9.4. Merger or Consolidation of Owner Trustee . . . . . . . . . . 22
SECTION 9.5. Appointment of Co-Trustee or Separate Trustee . . . . . . . 22
ARTICLE X - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 10.3. Severability of Provisions . . . . . . . . . . . . . . . . . 25
SECTION 10.4. Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . 25
SECTION 10.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 10.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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EXHIBITS
Exhibit A -- Form of Certificate of Trust
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THIS TRUST AGREEMENT, dated as of June 1, 1998, is made among Arcadia
Receivables Finance Corp., a Delaware corporation (the "Seller"), Financial
Security Assurance Inc. ("Financial Security") and Wilmington Trust Company, a
Delaware banking corporation, as Owner Trustee (in such capacity, the "Owner
Trustee").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All terms defined in the Spread Account
Agreement or the Sale and Servicing Agreement (each as defined below) shall have
the same meaning in this Agreement. Whenever capitalized and used in this
Agreement, the following words and phrases, unless otherwise specified, shall
have the following meanings:
ADMINISTRATION AGREEMENT: The Administration Agreement, dated as of
June 23, 1998, between the Administrator and the Trust, as the same may be
amended and supplemented from time to time.
ADMINISTRATOR: Wilmington Trust Company, a Delaware banking
corporation, or any successor Administrator under the Administration Agreement.
AFL: Arcadia Financial Ltd., a Minnesota corporation, and its
successors in interest.
AGREEMENT OR "THIS AGREEMENT": This Trust Agreement, all amendments
and supplements thereto and all exhibits and schedules to any of the foregoing.
AUTHENTICATION AGENT: Wilmington Trust Company, or its successor in
interest, and any successor authentication agent appointed as provided in this
Agreement.
BUSINESS TRUST STATUTE: Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq., as the same may be amended from time to
time.
CERTIFICATE OF TRUST: The Certificate of Trust in the form of Exhibit
A hereto filed for the Trust pursuant to Section 3810(a) of the Business Trust
Statute.
CODE: The Internal Revenue Code of 1986, as amended.
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CORPORATE TRUST OFFICE: The principal office of the Owner Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the Closing Date is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration; the telecopy number for such office on the date of the execution
of this Agreement is (302) 651-8882.
DEPOSITOR: The Seller in its capacity as depositor hereunder.
DISSOLUTION EVENT: With respect to the Depositor, means the
termination or dissolution of such Person, or the occurrence of an Insolvency
Event with respect to such Person.
EXPENSES: The meaning assigned to such term in Section 7.2.
INDEMNIFIED PARTIES: The meaning assigned to such term in
Section 7.2.
INDEMNIFIED PARTIES: The meaning assigned to such term in
Section 7.2.
INSTRUCTING PARTY: The meaning assigned to such term in Section
5.3(a).
OWNER TRUSTEE: Wilmington Trust Company, or its successor in
interest, acting not individually but solely as trustee, and any successor
trustee appointed as provided in this Agreement.
RECORD DATE: With respect to any Distribution Date, the close of
business on the last Business Day immediately preceding such Distribution Date.
RELATED DOCUMENTS: The Sale and Servicing Agreement, the Indenture,
the Notes, the Purchase Agreements, each Subsequent Transfer Agreement, each
Subsequent Purchase Agreement, the Custodian Agreement, the Note Policy, the
Spread Account Agreement, the Stock Pledge Agreement, the Insurance Agreement,
the Administration Agreement, the Lockbox Agreement, the Depository Agreement,
and the Underwriting Agreement between AFL and the Seller and the underwriters
of the Notes. The Related Documents executed by any party are referred to
herein as "such party's Related Documents," "its Related Documents" or by a
similar expression.
SALE AND SERVICING AGREEMENT: The Sale and Servicing Agreement, dated
as of June 1, 1998 among the Trust, the Seller, AFL, in its individual capacity
and as Servicer, and Norwest Bank Minnesota, National Association, as Backup
Servicer, as the same may be amended and supplemented from time to time.
SECRETARY OF STATE: The Secretary of State of the State of Delaware.
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SECURITY INSURER: Financial Security Assurance Inc., or its successor
in interest.
SELLER: Arcadia Receivables Finance Corp., a Delaware corporation, or
its successor in interest.
SPREAD ACCOUNT: The Series 1998-B Spread Account established and
maintained pursuant to the Spread Account Agreement.
SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement, dated as of
March 25, 1993, as thereafter amended and restated, among the Seller, AFL, the
Security Insurer, the Collateral Agent and the Indenture Trustee, as the same
may be amended, supplemented or otherwise modified in accordance with the terms
thereof.
STOCK PLEDGE AGREEMENT: The Second Amended and Restated Stock Pledge
Agreement, dated as of March 25, 1993, as amended and restated as of December 3,
1996, among the Security Insurer, AFL and the Collateral Agent, relating to the
stock of each of Arcadia First GP Inc., Arcadia Second GP Inc. and the Seller,
as the same may be amended from time to time.
TRUST: The trust created by this Agreement, the estate of which
consists of the Trust Property.
TRUST ACCOUNTS: The Collection Account, the Subcollection Account,
the Lockbox Account, the Pre-Funding Account, the Reserve Account and the Note
Distribution Account.
TRUST PROPERTY: The property and proceeds of every description
conveyed pursuant to Section 2.5 hereof and Sections 2.1 and 2.4 of the Sale and
Servicing Agreement, together with the Trust Accounts (including all Eligible
Investments therein and all proceeds therefrom).
SECTION 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation." To the extent that definitions are contained in this Agreement, or
in any such certificate or other document, such definitions shall control.
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SECTION 1.3. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
SECTION 1.4. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust (or any similar or analogous determination), such
determination shall be made without taking into account the insurance provided
by the Note Policy.
ARTICLE II
CREATION OF TRUST
SECTION 2.1. CREATION OF TRUST. There is hereby formed a trust to be
known as "Arcadia Automobile Receivables Trust, 1998-B," in which name the Trust
may conduct business, make and execute contracts and other instruments and sue
and be sued.
SECTION 2.2. OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Security Insurer and
the Depositor.
SECTION 2.3. PURPOSES AND POWERS. The purpose of the Trust is, and
the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Notes pursuant to the Indenture and to sell the
Notes;
(ii) with the proceeds of the sale of the Notes, to fund the
Pre-Funding Account and the Reserve Account, to pay the organizational,
start-up and transactional expenses of the Trust and to pay the balance to
the Seller pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Property to the Indenture Collateral Agent pursuant to the
Indenture for the benefit of the Security Insurer and the Indenture Trustee
on behalf of the Noteholders and to hold, manage and distribute to the
Depositor pursuant to the terms of the Sale and Servicing Agreement any
portion of the Trust Property released from the Lien of, and remitted to
the Trust pursuant to, the Indenture;
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(iv) to enter into and perform its obligations under the Related
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Related Documents, to engage
in such other activities as may be required in connection with conservation
of the Trust Property and the making of distributions to the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or expressly authorized by the terms of this Agreement or
the Related Documents.
SECTION 2.4. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.
SECTION 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $10. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Trust Property. The
Depositor shall pay organizational expenses of the Trust as they may arise or
shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein, subject to the interests and rights in the Trust Property
granted to other Persons by the Related Documents. It is the intention and
agreement of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. None of the parties hereto shall make the
election provided in Treasury Regulation Section 301.7701-3(c) to have the
Trust classified as an association taxable as a corporation. On the date
hereof, the Owner Trustee shall file the Certificate of Trust required by
Section 3810(a) of the Business Trust Statute in the Office of the Secretary of
State. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
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SECTION 2.7. LIABILITY OF THE DEPOSITOR. The Depositor shall be
liable directly to indemnify each injured party for all losses, claims,
damages, liabilities and expenses of the Trust, to the extent not paid out of
the Trust Property, to the extent provided in, and subject to the terms and
conditions contained in, the Spread Account Agreement; PROVIDED, FURTHER,
that the Depositor shall not be liable to indemnify any injured party if such
party has agreed that its recourse against the Trust for any obligation or
liability of the Trust to such party shall be limited to the assets of the
Trust. In addition, any third party creditors of the Trust (other than in
connection with the obligations described in the provisos to the preceding
sentence for which the Depositor shall not be liable) shall be deemed third
party beneficiaries of this paragraph.
SECTION 2.8. TITLE TO TRUST PROPERTY. Legal title to all the Trust
Property shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Trust Property to be vested in a trustee or trustees, in which case title
shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.9. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of Delaware.
The Trust shall not have any employees in any state other than Delaware;
PROVIDED, HOWEVER, that nothing herein shall restrict or prohibit the Owner
Trustee, the Servicer or any agent of the Trust from having employees within or
without the State of Delaware. Payments will be received by the Trust only in
Delaware, and payments will be made by the Trust only from Delaware. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. By
execution of this Agreement, the Depositor makes the following representations
and warranties with respect to itself on which the Owner Trustee relies in
accepting the Trust Property in trust and upon which the Security Insurer relies
in issuing the Note Policy.
(a) ORGANIZATION AND GOOD STANDING. It has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and as such business is
currently conducted and is proposed to be conducted pursuant to this Agreement
and the Related Documents.
(b) DUE QUALIFICATION. It is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property, the conduct of its
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business and the performance of its obligations under this Agreement and the
Related Documents requires such qualification.
(c) POWER AND AUTHORITY. It has the power and authority to execute
and deliver this Agreement and its Related Documents and to perform its
obligations pursuant thereto; and the execution, delivery and performance of
this Agreement and its Related Documents have been duly authorized by all
necessary corporate action.
(d) NO CONSENT REQUIRED. No consent, license, approval or
authorization or registration or declaration with, any Person or with any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the Related Documents,
except for such as have been obtained, effected or made.
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and its Related Documents and the fulfillment of its
obligations under this Agreement and its Related Documents shall not conflict
with, result in any breach of any of the terms and provisions of or constitute
(with or without notice, lapse of time or both) a default under, its certificate
of incorporation or by-laws, or any indenture, agreement, mortgage, deed of
trust or other instrument to which it is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, or violate any law, order, rule or regulation applicable to
it of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over it or any
of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to its knowledge threatened against it before any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality
having jurisdiction over it or its properties (A) asserting the invalidity of
this Agreement or any of the Related Documents, (B) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents, or (C) seeking
any determination or ruling that might materially and adversely affect its
performance of its obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents.
SECTION 2.11. FEDERAL INCOME TAX TREATMENT. The Depositor, the
Servicer, the Owner Trustee and each Noteholder agree to treat, and to take no
action inconsistent with the treatment of, the Notes 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 Noteholder, by acceptance of
its Note, agrees to be bound by the provisions of this Section 2.11. Each
Noteholder agrees that it will cause any Note Owner acquiring an interest in a
Note through it to comply with this Agreement as to the treatment of the Notes
as indebtedness under applicable tax
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law, as described in this Section 2.11. Furthermore, subject to Section 4.1,
the Depositor and the Trustee shall treat the Trust as a security device
only, and shall not file tax returns or obtain an employer identification
number on behalf of the Trust.
In the event that any class of Notes is deemed for federal income tax
purposes to represent an equity interest in the Trust, the Trust shall be
treated for federal income tax purposes as a partnership among the Holders of
such Notes and the Depositor. In the event such a partnership is deemed to
exist, the net income of the Trust for any month as determined for Federal
income tax purposes (and each item of income, gain, loss and deduction entering
into the computation thereof) shall be allocated:
(a) among the Noteholders as of the first Record Date following the
end of such month, in proportion to their ownership of principal amount of
Notes on such date, an amount of net income up to the sum of
(i) Noteholders' Interest Distributable Amount for such month, (ii) the
portion of the market discount on the Receivables accrued during such month
that is allocable to the excess of the initial aggregate principal amount
of the Notes over their initial aggregate issue price, and (iii) any Note
Prepayment Premium distributable to the Noteholders with respect to such
month; and
(b) next, to the Depositor to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in clause (b). Net
losses of the Trust, if any, for any month as determined for Federal income tax
purposes (and each item of income, gain, loss and deduction entering into the
computation thereof) shall be allocated to the Depositor to the extent the
Depositor is reasonably expected to bear the economic burden of such net losses,
then net losses shall be allocated among the Noteholders as of the first Record
Date following the end of such month in proportion to their ownership of
principal amount of the Notes on such Record Date. The Depositor is authorized
to modify the allocation in this paragraph if necessary or appropriate, in its
sole discretion, for the allocations to reflect fairly the economic income, gain
or loss to the Noteholders to comply with the provisions of the Code and the
accompanying Treasury Regulations.
SECTION 2.12. COVENANTS OF THE DEPOSITOR. The Depositor agrees and
covenants for the benefit of the Security Insurer and the Owner Trustee, during
the term of this Agreement, and to the fullest extent permitted by applicable
law, that:
(a) it shall not sell, assign, transfer, give or encumber, by
operation of law or otherwise, in whole or in part, its interest in the
Trust;
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(b) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as permitted
by its certificate of incorporation and the Related Documents;
(c) it shall not, for any reason, institute proceedings for the
Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to the bankruptcy of the Trust, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trust or a substantial part
of the property of the Trust or cause or permit the Trust to make any
assignment for the benefit of creditors, or admit in writing the inability
of the Trust to pay its debts generally as they become due, or declare or
effect a moratorium on the debt of the Trust or take any action in
furtherance of any such action;
(d) it shall obtain from each counterparty to each Related
Document to which it or the Trust is a party and each other agreement
entered into on or after the date hereof to which it or the Trust is a
party, an agreement by each such counterparty that prior to the occurrence
of the event specified in Section 8.1(c) such counterparty shall not
institute against, or join any other Person in instituting against, it or
the Trust, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the laws of the
United States or any state of the United States;
(e) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to be
adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a petition seeking
or consenting to reorganization or relief under any applicable federal or
state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of it or a substantial part of its property, or make any
assignment for the benefit of creditors, or admit in writing its inability
to pay its debts generally as they become due, or declare or effect a
moratorium on its debt or take any action in furtherance of any such
action.
SECTION 2.13. OWNERSHIP OF TRUST. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.5, the Depositor shall
be the sole beneficiary of the Trust.
SECTION 2.14. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee
shall maintain in Wilmington, Delaware, an office or offices or agency or
agencies where notices and demands to or upon the Owner Trustee in respect of
the Related Documents may be served. The Owner Trustee initially designates
Wilmington
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Trust Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890 as its principal corporate trust office for such purposes.
The Owner Trustee shall give prompt written notice to the Depositor and the
Security Insurer of any change in the location of any such office or agency.
ARTICLE III
ACTIONS BY OWNER TRUSTEE
SECTION 3.1. ACTION BY THE SECURITY INSURER WITH RESPECT TO
BANKRUPTCY. The Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the prior written consent
of the Security Insurer.
SECTION 3.2. RIGHTS OF SECURITY INSURER. Notwithstanding anything to
the contrary in the Related Documents, without the prior written consent of the
Security Insurer (so long as no Insurer Default shall have occurred and be
continuing), the Owner Trustee shall not (i) remove the Administrator, the
Servicer or the Backup Servicer, (ii) initiate any claim, suit or proceeding by
the Trust or compromise any claim, suit or proceeding brought by or against the
Trust, (iii) authorize the merger or consolidation of the Trust with or into any
other business trust or other entity (other than in accordance with Section 3.10
of the Indenture) or (iv) amend the Certificate of Trust.
ARTICLE IV
CERTAIN DUTIES OF TRUST
SECTION 4.1. ACCOUNTING; REPORTS; TAX RETURNS.
(a) The Administrator has agreed pursuant to the Administration
Agreement that the Administrator shall (i) maintain (or cause to be maintained)
the books of the Trust on a calendar year basis on the accrual method of
accounting, and (ii) file or cause to be filed all documents required to be
filed by the Trust with the Securities and Exchange Commission and otherwise
take or cause to be taken all such actions as are notified by the Servicer in
writing to the Administrator as being required for the Trust's compliance with
all applicable provisions of state and federal securities laws.
(b) Consistent with Section 2.11, the Depositor, the Owner Trustee
and the Administrator shall not file any federal income tax returns on behalf of
the Trust; provided, however, that if any class of Notes is treated as an equity
interest in the Trust, the Administrator shall file or cause to be filed such
tax returns relating to the Trust (including a partnership information return,
Form 1065), and direct the
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Owner Trustee to make such elections as may from time to time be required or
appropriate under any applicable state or Federal statute or rule or
regulation thereunder so as to maintain the Trust's characterization as a
partnership for Federal income tax purposes. If the Trust is treated as a
partnership for federal income tax purposes, the Depositor shall be the "tax
matters partner" of the Trust pursuant to the Code.
(c) The Owner Trustee shall make all elections pursuant to this
Section 4.1 only as directed in writing by the Depositor, with the consent of
the Security Insurer. The Depositor hereby directs the Owner Trustee to elect
under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Receivables.
(d) Upon the direction of the Depositor, the Owner Trustee shall sign
on behalf of the Trust the tax returns of the Trust, if any, unless applicable
law requires the Depositor to sign such documents, in which case such documents
shall be signed by the Depositor. In signing any tax return of the Trust, the
Owner Trustee shall rely entirely upon, and shall have no liability for,
information or calculations provided by the Depositor.
(e) None of the parties hereto shall make the election provided
in Treasury Regulation Section 301.7701-3(c) to have the Trust classified as an
association taxable as a corporation.
ARTICLE V
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 5.1. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver the Related Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to or
contemplated by the Related Documents to which the Trust is to be a party and
any amendment thereto, and on behalf of the Trust, to direct the Indenture
Trustee to authenticate and deliver the Class A-1 Notes in the aggregate
principal amount of $59,500,000, the Class A-2 Notes in the aggregate principal
amount of $188,000,000, the Class A-3 Notes in the aggregate principal amount of
$141,500,000, the Class A-4 Notes in the aggregate principal amount of
$106,000,000 and the Class A-5 Notes in the aggregate principal amount of
$55,000,000. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust pursuant to
the Related Documents. The Owner Trustee is further authorized, on behalf of
the Trust, to enter into the Administration Agreement, to appoint, with the
consent of the Security Insurer, a successor Administrator and to take from time
to time such action as the Instructing Party recommends with respect to the
Related Documents so long as such actions are consistent with the terms of the
Related Documents.
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SECTION 5.2. GENERAL DUTIES. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged through the Administrator or
such agents as shall be appointed with the consent of the Security Insurer)
all of its responsibilities pursuant to the terms of this Agreement and the
Related Documents subject to the Related Documents and in accordance with the
provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Related Documents to the extent the Administrator has
agreed in the Administration Agreement to perform any act or to discharge any
duty of the Owner Trustee hereunder or under any Related Document, and the
Owner Trustee shall not be liable for the default or failure of the
Administrator to carry out its obligations under the Administration
Agreement. Notwithstanding anything herein or in any Related Document to the
contrary, the Owner Trustee shall discharge its obligations pursuant to
Section 5.3 and Section 5.4 of the Sale and Servicing Agreement directly and
not through the Administrator or any agent.
SECTION 5.3. ACTION UPON INSTRUCTION.
(a) Subject to Article IV and the terms of the Spread Account
Agreement, the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing) or the Depositor (if an Insurer Default shall
have occurred and be continuing) (the "Instructing Party") shall have the
exclusive right to direct the actions of the Owner Trustee in the management
of the Trust, so long as such instructions are not inconsistent with the
express terms set forth herein or in any Related Document. The Instructing
Party shall not instruct the Owner Trustee in a manner inconsistent with this
Agreement or the Related Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Related Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is contrary to the terms hereof or of any Related Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Related Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction received from the Instructing Party, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Related Documents, and shall have no
liability to any Person for such action or inaction.
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(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Related Document or any
such provision is ambiguous as to its application, or is, or appears to be,
in conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any
such instruction received, the Owner Trustee shall not be liable, on account
of such action or inaction, to any Person. If the Owner Trustee shall not
have received appropriate instruction within 10 days of such notice (or
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, not inconsistent
with this Agreement or the Related Documents, as it shall deem to be in the
best interests of the Owners, and shall have no liability to any Person for
such action or inaction.
SECTION 5.4. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Trust Property, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Trust is a party, except as expressly provided by the terms of this
Agreement (including as provided in Section 5.2) or in any written instruction
received by the Owner Trustee pursuant to Section 5.3; and no implied duties or
obligations shall be read into this Agreement or any Related Document against
the Owner Trustee. The Owner Trustee shall have no responsibility for
preparing, monitoring or filing any financing or continuation statements in any
public office at any time or otherwise to perfect or maintain the perfection of
any security interest or lien granted to it hereunder or to record this
Agreement or any Related Document; however, the Owner Trustee will from time to
time execute and deliver such financing or continuation statements as are
prepared by the Servicer and delivered to the Owner Trustee for its execution on
behalf of the Trust for the purpose of perfecting or maintaining the perfection
of such a security interest or lien or effecting such a recording. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense (and not
at the expense of the Trust), promptly take all action as may be necessary to
discharge any liens on any part of the Trust Property that are attributable to
claims against the Owner Trustee in its individual capacity that are not related
to the ownership or the administration of the Trust Property.
SECTION 5.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of, the Trust Property except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Related
Documents and (iii) in
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accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 5.3.
SECTION 5.6. RESTRICTIONS. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income tax
purposes.
SECTION 5.7. ADMINISTRATION AGREEMENT.
(a) The Administrator is authorized to execute on behalf of the Trust
all documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust to prepare, file or deliver pursuant to the
Related Documents. Upon written request, the Owner Trustee shall execute and
deliver to the Administrator a power of attorney appointing the Administrator
its agent and attorney-in-fact to execute all such documents, reports, filings,
instruments, certificates and opinions.
(b) If the Administrator shall resign or be removed pursuant to the
terms of the Administration Agreement, the Owner Trustee may, and is hereby
authorized and empowered to, subject to obtaining the prior written consent of
the Security Insurer, appoint or consent to the appointment of a successor
Administrator pursuant to the Administration Agreement.
(c) If the Administration Agreement is terminated, the Owner Trustee
may, and is hereby authorized and empowered to, subject to obtaining the prior
written consent of the Security Insurer, appoint or consent to the appointment
of a Person to perform substantially the same duties as are assigned to the
Administrator in the Administration Agreement pursuant to an agreement
containing substantially the same provisions as are contained in the
Administration Agreement.
(d) The Owner Trustee shall promptly notify the Security Insurer of
any default by or misconduct of the Administrator under the Administration
Agreement of which the Owner Trustee has received written notice or of which a
Responsible Officer has actual knowledge.
ARTICLE VI
CONCERNING THE OWNER TRUSTEE
SECTION 6.1. ACCEPTANCE OF TRUSTEE AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all monies actually received by it
constituting part of
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the Trust Property upon the terms of the Related Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable
hereunder or under any Related Document under any circumstances, except (i)
for its own willful misconduct or gross negligence, (ii) in the case of the
inaccuracy of any representation or warranty contained in Section 6.2, (iii)
for liabilities arising from the failure of the Owner Trustee to perform
obligations expressly undertaken by it in the last sentence of Section 5.4
hereof, (iv) for any investments issued by the Owner Trustee or any branch or
affiliate thereof in its commercial capacity or (v) for taxes, fees or other
charges on, based on or measured by, any fees, commissions or compensation
received by the Owner Trustee. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the instructions of the Instructing Party;
(c) no provision of this Agreement or any Related Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers
hereunder or under any Related Document if the Owner Trustee shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or
provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under this Agreement or any of the
Related Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or the Security Insurer or for the form, character,
genuineness, sufficiency, value or validity of any of the Trust Property or
for or in respect of the validity or sufficiency of the Related Documents
and the Owner Trustee shall in no event assume or incur any liability,
duty, or obligation to the Security Insurer, the Custodian, the Indenture
Trustee or to any Noteholder, other than as expressly provided for herein
and in the Related Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Security Insurer, the Custodian, the
Indenture Trustee or the Servicer under any of the Related Documents or
otherwise and the Owner Trustee shall have no obligation or liability to
perform the obligations of the Trust under this Agreement or the Related
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Documents that are required to be performed by the Administrator under the
Administration Agreement, the Security Insurer under the Note Policy, the
Custodian under the Custodian Agreement, the Indenture Trustee under the
Indenture or the Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any Related Document, at the
request, order or direction of the Instructing Party, unless such
Instructing Party has offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in
any Related Document shall not be construed as a duty, and the Owner
Trustee shall not be answerable for other than its gross negligence or
willful misconduct in the performance of any such act.
SECTION 6.2. REPRESENTATIONS AND WARRANTIES. The Owner Trustee
hereby represents and warrants to the Depositor and the Security Insurer (which
shall have relied on such representations and warranties in issuing the Note
Policy) that:
(a) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It has
all requisite corporate power and authority and all franchises, grants,
authorizations, consents, orders and approvals from all governmental
authorities necessary to execute, deliver and perform its obligations under
this Agreement and each Related Document to which the Trust is a party.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement and each Related Document to
which the Trust is a party, and this Agreement and each Related Document
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof will
contravene any Federal or Delaware law, governmental rule or regulation
governing the banking or trust powers of the Owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound or result in the creation or imposition of any lien, charge or
encumbrance on the Trust Property resulting from actions by or claims
against the Owner Trustee
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individually which are unrelated to this Agreement or the Related
Documents.
SECTION 6.3. RELIANCE; ADVICE OF COUNSEL.
(a) The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Related Documents, the Owner Trustee (i) may act directly or through its agents
or attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Related Document.
SECTION 6.4. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided
in this Article VI, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Related Document shall
look only to the Trust Property for payment or satisfaction thereof.
SECTION 6.5. OWNER TRUSTEE NOT LIABLE FOR NOTES OR RECEIVABLES. The
recitals contained herein shall be taken as the statements of the Depositor
(other than the signature or counter-signature of the Owner Trustee on the
Notes), and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement or of any Related Document or the Notes (other
than the signature or counter-signature of the Owner Trustee on the Notes), or
of any Receivable or related documents. The Owner Trustee shall at no time have
any responsibility or liability
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for or with respect to the legality, validity and enforceability of any
Receivable, or the perfection and priority of any security interest created
by any Receivable in any Financed Vehicle or the maintenance of any such
perfection and priority of any security interest created by any Receivable in
any Financed Vehicle or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust Property or its
ability to generate the payments to be distributed to the Noteholders under
the Indenture, including, without limitation: the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Receivable or any
computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the validity or
sufficiency of the Note Policy; the completeness of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Seller or
the Servicer with any warranty or representation made under any Related
Document or in any related document or the accuracy of any such warranty or
representation or any action of the Indenture Trustee, the Custodian or the
Servicer taken in the name of the Owner Trustee.
SECTION 6.6. OWNER TRUSTEE MAY OWN NOTES. The Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may deal with the Depositor, the Seller, the Indenture Trustee and the Servicer
in banking or other transactions with the same rights as it would have if it
were not Owner Trustee.
ARTICLE VII
COMPENSATION OF OWNER TRUSTEE
SECTION 7.1. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between AFL and the Owner Trustee,
and the Owner Trustee shall be entitled to be reimbursed by AFL for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder; PROVIDED, HOWEVER, that the Owner Trustee shall
only be entitled to reimbursement for expenses hereunder to the extent such
expenses (i) are fees of outside counsel engaged by the Owner Trustee in respect
of the performance of its obligations hereunder or (ii) relate to the
performance of its obligations pursuant to Section 4.1 hereof.
SECTION 7.2. INDEMNIFICATION. AFL shall be liable as primary obligor
for, and shall indemnify the Owner Trustee in its individual capacity and its
successors, assigns, agents and servants, and any co-trustee (including William
J. Wade) (collectively, the "Indemnified Parties") from and against, any and all
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liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by,
or asserted against the Owner Trustee or any Indemnified Party in any way
relating to or arising out of this Agreement, the Related Documents, the
Trust Property, the administration of the Trust Property or the action or
inaction of the Owner Trustee hereunder, except only that AFL shall not be
liable for or required to indemnify the Owner Trustee from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 6.1. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the
termination of this Agreement.
SECTION 7.3. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in
this Agreement or any Related Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Trust Property only.
ARTICLE XIII
TERMINATION
SECTION 8.1. TERMINATION OF THE TRUST.
(a) The respective obligations and responsibilities of the Depositor
and the Owner Trustee created by this Agreement and the Trust created by this
Agreement shall terminate upon the latest of (i) the maturity or other
liquidation of the last Receivable (including the purchase as of any Accounting
Date by the Seller or the Servicer at its option of the corpus of the Trust as
described in Section 9.1 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Receivables as provided in the
Related Documents, (ii) the payment to the Security Insurer of all amounts
payable or reimbursable to it pursuant to the Sale and Servicing Agreement or
(iii) at the time provided in Section 8.2. In any case, there shall be
delivered to the Owner Trustee, the Indenture Trustee and the Rating Agencies an
Opinion of Counsel that all applicable preference periods under federal, state
and local bankruptcy, insolvency and similar laws have expired with respect to
the payments pursuant to clause (ii); PROVIDED, HOWEVER, that in no event shall
the trust created by this Agreement continue beyond the expiration of 21 years
from the death of the last survivor of the descendants living on the date of
this Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and
PROVIDED, FURTHER, that the rights to indemnification under Section 7.2 shall
survive the termination of the Trust. The Servicer shall promptly notify the
Owner Trustee and the Security Insurer of any prospective termination pursuant
to this Section 8.1.
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(b) Except as provided in Section 8.1(a), the Depositor shall not be
entitled to revoke or terminate the Trust.
(c) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 8.2. DISSOLUTION EVENTS WITH RESPECT TO THE DEPOSITOR. In
the event that a Dissolution Event shall occur with respect to the Depositor,
the Owner Trustee promptly upon obtaining knowledge of such occurrence shall
request an opinion of counsel from counsel acceptable to the Security Insurer to
the effect that a failure to terminate the Trust upon the occurrence of such
Dissolution Event (and the transfer, if any, of the interest in the Trust held
by the Depositor) will not cause the Trust to be treated as an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. In the event that the Owner Trustee is unable to obtain such an
opinion the Trust will terminate within 90 days after the occurrence of the
Dissolution Event with respect to the Depositor. Promptly after the occurrence
of the event referred to above, (i) the Depositor shall give the Indenture
Trustee, the Owner Trustee and the Security Insurer written notice of the
occurrence of such event, (ii) the Owner Trustee shall, upon the receipt of such
written notice, give prompt written notice to the Indenture Trustee of the
occurrence of such event and (iii) the Indenture Trustee shall, upon receipt of
written notice of the occurrence of such event from the Owner Trustee or the
Seller, give prompt written notice to the Noteholders of the occurrence of such
event; PROVIDED, HOWEVER, that any failure to give a notice required by this
sentence shall not prevent or delay, in any manner, a termination of the Trust
pursuant to the first sentence of this Section 8.2. Upon a termination pursuant
to this Section, the Owner Trustee shall direct the Indenture Trustee to sell
the assets of the Trust (other than the Trust Accounts) at one or more private
or public sales conducted in any manner permitted by law. The proceeds of such
a sale of the assets of the Trust shall be distributed as provided in Section
9.1(b) of the Sale and Servicing Agreement.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 9.1. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's or A-1 by Standard & Poor's; and (v) acceptable to the Security
Insurer in its sole discretion, so long as an Insurer Default shall not have
occurred and be continuing. If such corporation shall
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<PAGE>
publish reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for
the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any
time the Owner Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Owner Trustee shall resign immediately in the
manner and with the effect specified in Section 9.2.
SECTION 9.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Depositor, the Security Insurer and the
Servicer at least 30 days before the date specified in such instrument. Upon
receiving such notice of resignation, the Depositor shall promptly appoint a
successor Owner Trustee meeting the qualifications set forth in Section 9.1 by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee, provided that the Depositor shall have received written confirmation
from each of the Rating Agencies that the proposed appointment will not result
in an increased capital charge to the Security Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Security Insurer may petition
any court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 9.1 and shall fail to resign after
written request therefor by the Depositor or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor, with the consent of the Security Insurer (so
long as an Insurer Default shall not have occurred and be continuing) may remove
the Owner Trustee. If the Depositor shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Depositor shall promptly
appoint a successor Owner Trustee meeting the qualification requirements of
Section 9.1 by written instrument, in triplicate, one copy of which instrument
shall be delivered to the outgoing Owner Trustee so removed, one copy to the
Security Insurer and one copy to the successor Owner Trustee and payment of all
fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until all fees and expenses, including any indemnity
payments, due to the outgoing Owner Trustee have been paid and until acceptance
of appointment by the successor Owner Trustee pursuant to Section 9.3. The
Depositor
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shall provide notice of such resignation or removal of the Owner Trustee to
each of the Rating Agencies.
SECTION 9.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 9.2 shall execute, acknowledge and deliver to
the Depositor, the Security Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become
effective and such successor Owner Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties,
and obligations of its predecessor under this Agreement, with like effect as
if originally named as Owner Trustee. The predecessor Owner Trustee shall
deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties,
and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner
Trustee shall be eligible pursuant to Section 9.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Depositor shall mail notice of the successor of
such Owner Trustee to the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Depositor shall fail to mail such notice within 10 days
after acceptance of appointment by the successor Owner Trustee, the successor
Owner Trustee shall cause such notice to be mailed at the expense of the
Depositor.
SECTION 9.4. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 9.1,
without the execution or filing of any instrument or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding, and provided further that the Owner Trustee shall mail
notice of such merger or consolidation to the Rating Agencies.
SECTION 9.5. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Property or any Financed Vehicle may at the time be
located, the Administrator and the Owner Trustee acting jointly shall have
the power and shall
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execute and deliver all instruments to appoint one or more Persons approved
by the Owner Trustee and the Security Insurer to act as co-trustee, jointly
with the Owner Trustee, or separate trustee or separate trustees, of all or
any part of the Trust Property, and to vest in such Person, in such capacity,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and
trusts as the Administrator and the Owner Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Owner
Trustee, subject to the approval of the Security Insurer, shall have the
power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 9.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.2.
Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties, and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed the Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties, and obligations (including the holding of title to
the Trust Property or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Owner Trustee acting jointly
may at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every
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provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Owner Trustee. Each such
instrument shall be filed with the Owner Trustee and a copy thereof given to
the Administrator and the Security Insurer.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect
of this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT.
(a) This Agreement may be amended by the Depositor and the Owner
Trustee, with the prior written consent of the Security Insurer (so long as
an Insurer Default shall not have occurred and be continuing) but without the
consent of any of the Noteholders, (i) to cure any ambiguity, or (ii) to
correct, supplement or modify any provisions in this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time, with the
prior written consent of the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing), by the Depositor and the Owner
Trustee and, if such amendment materially and adversely affects the interests
of Noteholders, the consent of a Note Majority (which consent of any Holder
of a Note given pursuant to this Section or pursuant to any other provision
of this Agreement shall be conclusive and binding on such Holder and on all
future Holders of such Note and of any Note issued upon the transfer thereof
or in exchange thereof or in lieu thereof whether or not notation of such
consent is made upon the Note) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the Holders of Notes;
PROVIDED, HOWEVER, that, subject to the express rights of the Security
Insurer under the Related Documents, including its rights to consent to
certain modifications of the Receivables pursuant to Section 3.2 of the Sale
and Servicing Agreement and its rights referred to in Section 5.02(c) of the
Indenture, no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions that shall be required to be made on any Note or
the Class A-1 Interest
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<PAGE>
Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate, the Class A-4
Interest Rate or the Class A-5 Interest Rate, or (b) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Depositor shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Indenture Trustee unless such parties have
previously received such notification.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 11.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders provided for in this Agreement) shall be
subject to such reasonable requirements as the Owner Trustee may prescribe,
including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement, the
Owner Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and that all conditions precedent to the
execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 10.2. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to the principles of conflicts of laws thereof and the obligations,
rights and remedies of the parties under this Agreement shall be determined
in accordance with such laws.
SECTION 10.3. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement.
SECTION 10.4. THIRD-PARTY BENEFICIARIES. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as otherwise provided in
this Agreement, no other Person shall have any right or obligation hereunder.
Without limiting the
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<PAGE>
generality of the foregoing, all covenants and agreements in this Agreement
which expressly confer rights upon the Security Insurer shall be for the
benefit of and run directly to the Security Insurer, and the Security Insurer
shall be entitled to rely on and enforce such covenants, subject, however, to
the limitations on such rights provided in this Agreement and the Related
Documents. The Security Insurer may disclaim any of its rights and powers
under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Owner Trustee.
SECTION 10.5. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
SECTION 10.6. NOTICES. All demands, notices and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, and shall be deemed to have been
duly given upon receipt (a) in the case of the Depositor, at the following
address: 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435,
with copies to: Arcadia Financial Ltd., 7825 Washington Avenue South,
Minneapolis, Minnesota 55439-2435, Attention: President, (b) in the case of
the Owner Trustee, at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration,
(c) in the case of each Rating Agency, 99 Church Street, New York, New York
10007 (for Moody's), and 26 Broadway, New York, New York 10004, Attention:
Asset-Backed Surveillance (for Standard & Poor's), and (d) in the case of the
Security Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York,
NY 10022, Attention: Surveillance Department, Telex No.: (212) 688-3101,
Confirmation: (212) 826-0100, Telecopy Nos.: (212) 339-3518, (212) 339-3529
(in each case in which notice or other communication to Financial Security
refers to an Event of Default, a claim on the Note Policy or with respect to
which failure on the part of Financial Security to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head--Financial Guaranty Group "URGENT MATERIAL ENCLOSED") or at such
other address as shall be designated by any such party in a written notice to
the other parties.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Depositor, the Security Insurer and the Owner
Trustee have caused this Trust Agreement to be duly executed by their respective
officers as of the day and year first above written.
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ John A. Witham
--------------------------------------
Name: John A. Witham
Title: Senior Vice President and Chief Financial
Officer
ARCADIA RECEIVABLES FINANCE CORP.,
in its capacity as Depositor
By /s/ John A. Witham
--------------------------------------
Name: John A. Witham
Title: Senior Vice President and Chief Financial
Officer
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Raymond Galkowski
--------------------------------------
Authorized Officer
WILMINGTON TRUST COMPANY
By /s/ Donald G. Mackelcan
--------------------------------------
Name: Donald G. Mackelcan
Title: Assistant Vice President
<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B
5.6275% Class A-1 Automobile Receivables-Backed Notes
5.789% Class A-2 Automobile Receivables-Backed Notes
5.950% Class A-3 Automobile Receivables-Backed Notes
6.000% Class A-4 Automobile Receivables-Backed Notes
6.060% Class A-5 Automobile Receivables-Backed Notes
-----------------------------
INDENTURE
Dated as of June 1, 1998
-----------------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee and Indenture Collateral Agent
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
-----------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.2
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08; 6.11
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02
313(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04
314(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.06;11.15
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
315(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05;11.05
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.14
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . 1.01
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . . 5.12
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . . 5.13
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03
318(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.07
</TABLE>
- - ----------------
(1) Note: This Cross Reference Table shall not, for any purpose, be deemed to
be part of this Indenture.
(2) N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . 3
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.02. Incorporation by Reference of Trust Indenture Act . . . . . 14
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . 15
ARTICLE II - THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.02. Execution, Authentication and Delivery . . . . . . . . . . . 16
SECTION 2.03. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.04. Registration; Registration of Transfer and Exchange . . . . 17
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . 18
SECTION 2.06. Person Deemed Owner . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest . . . 19
SECTION 2.08. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.09. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.10. Notices to Depository . . . . . . . . . . . . . . . . . . . 22
SECTION 2.11. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III - COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.01. Payment of Principal, Interest and Premium . . . . . . . . . 22
SECTION 3.02. Maintenance of Office or Agency . . . . . . . . . . . . . . 23
SECTION 3.03. Money for Payments To Be Held in Trust . . . . . . . . . . . 23
SECTION 3.04. Existence . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.05. Protection of Trust Estate . . . . . . . . . . . . . . . . . 25
SECTION 3.06. Opinions as to Trust Estate . . . . . . . . . . . . . . . . 26
SECTION 3.07. Performance of Obligations; Servicing of Receivables . . . . 27
SECTION 3.08. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.09. Annual Statement as to Compliance . . . . . . . . . . . . . 29
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms . . . . . 29
SECTION 3.11. Successor or Transferee . . . . . . . . . . . . . . . . . . 32
SECTION 3.12. No Other Business . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.13. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.14. Servicer's Obligations . . . . . . . . . . . . . . . . . . . 32
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities . . . . . 32
SECTION 3.16. Capital Expenditures . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.17. Restricted Payments . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.18. Notice of Events of Default . . . . . . . . . . . . . . . . 33
SECTION 3.19. Further Instruments and Acts . . . . . . . . . . . . . . . . 33
SECTION 3.20. Compliance with Laws . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 33
-i-
<PAGE>
SECTION 3.22. Removal of Administrator . . . . . . . . . . . . . . . . . . 33
SECTION 3.23. Income Tax Characterization . . . . . . . . . . . . . . . . 34
ARTICLE IV - SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.01. Satisfaction and Discharge of Indenture . . . . . . . . . . 34
SECTION 4.02. Application of Trust Money . . . . . . . . . . . . . . . . . 35
SECTION 4.03. Repayment of Moneys Held by Paying Agent . . . . . . . . . . 35
SECTION 4.04. Release of Trust Estate . . . . . . . . . . . . . . . . . . 36
ARTICLE V - REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.02. Rights upon Event of Default . . . . . . . . . . . . . . . . 37
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee; Authority of Controlling Party . . . . . . . . . 38
SECTION 5.04. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.05. Optional Preservation of the Receivables . . . . . . . . . . 43
SECTION 5.06. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.07. Limitation of Suits . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.08. Unconditional Rights of Noteholders To Receive
Principal and Interest . . . . . . . . . . . . . . . . . . . 45
SECTION 5.09. Restoration of Rights and Remedies . . . . . . . . . . . . . 45
SECTION 5.10. Rights and Remedies Cumulative . . . . . . . . . . . . . . . 46
SECTION 5.11. Delay or Omission Not a Waiver . . . . . . . . . . . . . . . 46
SECTION 5.12. Control by Noteholders . . . . . . . . . . . . . . . . . . . 46
SECTION 5.13. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 47
SECTION 5.14. Undertaking for Costs . . . . . . . . . . . . . . . . . . . 47
SECTION 5.15. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 47
SECTION 5.16. Action on Notes . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.17. Performance and Enforcement of Certain Obligations . . . . . 48
SECTION 5.18. Claims Under Note Policy . . . . . . . . . . . . . . . . . . 49
SECTION 5.19. Preference Claims . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VI - THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT . . . . . . . . . . 52
SECTION 6.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . 56
SECTION 6.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . 57
SECTION 6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . 57
SECTION 6.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . 58
SECTION 6.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . 59
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee . . . . . . . 60
SECTION 6.11. Eligibility; Disqualification . . . . . . . . . . . . . . . 61
SECTION 6.12. Preferential Collection of Claims Against Issuer . . . . . . 61
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<PAGE>
SECTION 6.13. Appointment and Powers . . . . . . . . . . . . . . . . . . . 61
SECTION 6.14. Performance of Duties . . . . . . . . . . . . . . . . . . . 62
SECTION 6.15. Limitation on Liability . . . . . . . . . . . . . . . . . . 62
SECTION 6.16. Reliance upon Documents . . . . . . . . . . . . . . . . . . 63
SECTION 6.17. Successor Indenture Collateral Agent . . . . . . . . . . . . 63
SECTION 6.18. Compensation and Indemnity . . . . . . . . . . . . . . . . . 65
SECTION 6.19. Representations and Warranties of the Indenture
Collateral Agent . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.20. Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.21. Control by the Controlling Party . . . . . . . . . . . . . . 66
ARTICLE VII - NOTEHOLDERS' LISTS AND REPORTS . . . . . . . . . . . . . . . . . . 67
SECTION 7.01. Issuer To Furnish Trustee Names and Addresses to
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.02. Preservation of Information; Communications to
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.04. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE VIII - ACCOUNTS, DISBURSEMENTS AND RELEASES . . . . . . . . . . . . . . 68
SECTION 8.01. Collection of Money . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.03. General Provisions Regarding Accounts . . . . . . . . . . . 70
ARTICLE IX - SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.02. Supplemental Indentures With Consent of Noteholders . . . . 72
SECTION 9.03. Execution of Supplemental Indentures . . . . . . . . . . . . 73
SECTION 9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . . 74
SECTION 9.05. Conformity With Trust Indenture Act . . . . . . . . . . . . 74
SECTION 9.06. Reference in Notes to Supplemental Indentures . . . . . . . 74
ARTICLE X - REDEMPTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.02. Form of Redemption Notice . . . . . . . . . . . . . . . . . 76
SECTION 10.03. Notes Payable on Redemption Date . . . . . . . . . . . . . . 76
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . . . 76
SECTION 11.02. Form of Documents Delivered to Trustee . . . . . . . . . . . 79
SECTION 11.03. Acts of Noteholders . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.04. Notices, etc., to Trustee, Issuer and Rating Agencies . . . 80
SECTION 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . . . 81
SECTION 11.06. Alternate Payment and Notice Provisions . . . . . . . . . . 82
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<PAGE>
SECTION 11.07. Conflict with Trust Indenture Act . . . . . . . . . . . . . 82
SECTION 11.08. Effect of Headings and Table of Contents . . . . . . . . . . 82
SECTION 11.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . 82
SECTION 11.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 83
SECTION 11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.15. Recording of Indenture . . . . . . . . . . . . . . . . . . . 83
SECTION 11.16. Trust Obligation . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.17. No Petition . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.19. Limitation of Liability . . . . . . . . . . . . . . . . . . 85
</TABLE>
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<PAGE>
Exhibit A -- Schedule of Receivables
Exhibit B -- Form of Depository Agreement
Exhibit C-1 -- Form of Class A-1 Note
Exhibit C-2 -- Form of Class A-2 Note
Exhibit C-3 -- Form of Class A-3 Note
Exhibit C-4 -- Form of Class A-4 Note
Exhibit C-5 -- Form of Class A-5 Note
Exhibit D -- Form of Note Policy
Exhibit E -- Letter Agreement Between AFL and the Trustee and Other
Fee Letters
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<PAGE>
INDENTURE, dated as of June 1, 1998, between ARCADIA AUTOMOBILE
RECEIVABLES TRUST, 1998-B, a Delaware business trust (the "Issuer"), and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, in its capacities as trustee (the
"Trustee") and as Indenture Collateral Agent (as defined below) and not in its
individual capacity.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's 5.6275% Class
A-1 Automobile Receivables-Backed Notes (the "Class A-1 Notes"), 5.789% Class
A-2 Automobile Receivables-Backed Notes (the "Class A-2 Notes"), 5.950% Class
A-3 Automobile Receivables-Backed Notes (the "Class A-3 Notes"), 6.000% Class
A-4 Automobile Receivables-Backed Notes (the "Class A-4 Notes") and 6.060% Class
A-5 Automobile Receivables-Backed Notes (the "Class A-5 Notes") (the Class A-1
Notes, together with the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, and the Class A-5 Notes the "Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Indenture Collateral (as defined below) as collateral to the Indenture
Collateral Agent for the benefit of the Trustee on behalf of the Noteholders.
Financial Security Assurance Inc. (the "Security Insurer") has issued
and delivered a financial guaranty insurance policy, dated the Closing Date
(with endorsements, the "Note Policy"), pursuant to which the Security Insurer
guarantees certain Scheduled Payments, as defined in the Note Policy.
As an inducement to the Security Insurer to issue and deliver the Note
Policy, the Issuer and the Security Insurer have executed and delivered the
Insurance and Indemnity Agreement, dated as of June 23, 1998 (as amended from
time to time, the "Insurance Agreement"), among the Security Insurer, the
Issuer, Arcadia Receivables Finance Corp. and Arcadia Financial Ltd.
As an additional inducement to the Security Insurer to issue the Note
Policy, and as security for the performance by the Issuer of the Insurer Issuer
Secured Obligations and as security for the performance by the Issuer of the
Trustee Issuer Secured Obligations, the Issuer has agreed to assign the
Indenture Collateral (as defined below) as collateral to the Indenture
Collateral Agent for the benefit of the Issuer Secured Parties, as their
respective interests may appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Collateral Agent at the
Closing Date, on behalf of and for the benefit of the Issuer Secured Parties to
secure the performance of the respective Issuer Secured Obligations, all of the
Issuer's right, title and interest in and to (a) the Initial Receivables and all
moneys paid or payable thereon or in respect thereof after the Initial Cutoff
Date (including amounts due on
<PAGE>
or before the Initial Cutoff Date but received by AFL, the Seller or the
Issuer after the Initial Cutoff Date); (b) the Subsequent Receivables and all
moneys paid or payable thereon or in respect thereof after the related
Subsequent Cutoff Date (including amounts due on or before the related
Subsequent Cutoff Date but received by AFL, the Seller or the Issuer after
the related Subsequent Cutoff Date); (c) an assignment of the security
interests of AFL in the Financed Vehicles; (d) the Insurance Policies and any
proceeds from any Insurance Policies relating to the Receivables, the
Obligors or the Financed Vehicles, including rebates of premiums, all
Collateral Insurance and any Force-Placed Insurance relating to the
Receivables; (e) an assignment of the rights of AFL or the Seller against
Dealers with respect to the Receivables under the Dealer Agreements and the
Dealer Assignments, (f) all items contained in the Receivable Files and any
and all other documents that AFL keeps on file in accordance with its
customary procedures relating to the Receivables, the Obligors or the
Financed Vehicles, (g) an assignment of the rights of the Seller under the
Purchase Agreement and each Subsequent Purchase Agreement, (h) property
(including the right to receive future Liquidation Proceeds) that secures a
Receivable and that has been acquired by or on behalf of the Trust pursuant
to liquidation of such Receivable, (i) the Trust Accounts and all funds on
deposit therein from time to time, and in all investments and proceeds
thereof (including all income thereon), (j) the Purchase Agreement and each
Subsequent Purchase Agreement, including the right assigned to the Issuer to
cause AFL to repurchase Receivables from the Seller under certain
circumstances, (k) the Sale and Servicing Agreement and each Subsequent
Transfer Agreement (including all rights of the Seller under the Purchase
Agreement and each Subsequent Purchase Agreement assigned to the Issuer
pursuant to the Sale and Servicing Agreement), and (l) all present and future
claims, demands, causes and choses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other
liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds
of any of the foregoing (collectively, the "Indenture Collateral").
The Indenture Collateral Agent, for the benefit of the Trustee on
behalf of the Holders of the Notes and for the benefit of the Security Insurer
acknowledges such Grant. The Trustee on behalf of the Holders of the Notes
accepts the trusts under this Indenture in accordance with the provisions of
this Indenture and agrees to perform its duties required in this Indenture to
the best of its ability to the end that the interests of the Holders of the
Notes may be adequately and effectively protected.
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<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Indenture.
"ACT" has the meaning specified in Section 11.03(a).
"ADMINISTRATOR" has the meaning specified therefor in the Trust
Agreement.
"AFFILIATE" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter).
"BOOK-ENTRY NOTE" means any Note registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"BUSINESS DAY" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of any
successor Servicer, successor Owner Trustee, successor Trustee or successor
Indenture Collateral Agent are authorized or obligated by law, executive order
or governmental decree to remain closed.
"CERTIFICATE OF TRUST" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit A to the Trust Agreement.
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<PAGE>
"CLASS A-1 INTEREST RATE" means 5.6275% per annum (computed on the
basis of actual days elapsed in a 360-day year).
"CLASS A-2 INTEREST RATE" means 5.789% per annum (computed on the
basis of actual days elapsed in a 360-day year).
"CLASS A-3 INTEREST RATE" means 5.950% per annum (computed on the
basis of a 360-day year of twelve 30-day months).
"CLASS A-4 INTEREST RATE" means 6.000% per annum (computed on the
basis of a 360-day year of twelve 30-day months).
"CLASS A-5 INTEREST RATE" means 6.060% per annum (computed on the
basis of a 360-day year of twelve 30-day months).
"CLASS A-1 NOTES" means the 5.6275% Class A-1 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-1.
"CLASS A-2 NOTES" means the 5.789% Class A-2 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-2.
"CLASS A-3 NOTES" means the 5.950% Class A-3 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-3.
"CLASS A-4 NOTES" means the 6.000% Class A-4 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-4.
"CLASS A-5 NOTES" means the 6.060% Class A-5 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-5.
"CLOSING DATE" means June 23, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"CONTROLLING PARTY" means the Security Insurer, so long as no Insurer
Default shall have occurred and be continuing, and the Trustee, for so long as
an Insurer Default shall have occurred and be continuing.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at date of the execution of this Agreement is located at Sixth
Street and Marquette Avenue, Minneapolis, MN 55479-0700, Attention: Corporate
Trust
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<PAGE>
Services--Asset Backed Administration; or at such other address as the
Trustee may designate from time to time by notice to the Noteholders, the
Security Insurer and the Issuer, or the principal corporate trust office of any
successor Trustee (the address of which the successor Trustee will notify the
Noteholders, the Security Insurer and the Issuer).
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"DEFINITIVE NOTES" has the meaning specified in Section 2.09.
"DEPOSITORY" means the initial Depository, The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of
$59,500,000 in aggregate principal amount of the Class A-1 Notes, $188,000,000
in aggregate principal amount of the Class A-2 Notes, $141,500,000 in aggregate
principal amount of the Class A-3 Notes, $106,000,000 in aggregate principal
amount of the Class A-4 Notes and $55,000,000 in aggregate principal amount of
the Class A-5 Notes as of the Closing Date, and any permitted successor
depository. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the New York UCC.
"DEPOSITORY AGREEMENT" means the agreement among the Issuer, the
Trustee and The Depository Trust Company, as the initial Depository, dated as of
the Closing Date, relating to the Notes substantially in the form of Exhibit B.
"DEPOSITORY PARTICIPANT" means a broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"EVENT OF DEFAULT" has the meaning specified in Section 5.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, any Responsible Officer, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Indenture Collateral or of any other
agreement or
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<PAGE>
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Indenture Collateral and
all other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the Granting party or
otherwise and generally to do and receive anything that the Granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time,
(a) indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations);
(b) obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
"INDENTURE COLLATERAL" has the meaning specified in the Granting
Clause of this Indenture.
"INDENTURE COLLATERAL AGENT" means, initially, Norwest Bank Minnesota,
National Association, in its capacity as collateral agent on behalf of the
Issuer Secured Parties, including its successors in interest, until and unless
and a successor Person shall have become the Indenture Collateral Agent pursuant
to Section 6.17 hereof, and thereafter "Indenture Collateral Agent" shall mean
such successor Person.
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<PAGE>
"INDEPENDENT" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing Persons,
(b) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller or any
Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Collateral Agent under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.01,
made by an Independent appraiser or other expert appointed by an Issuer Order
and approved by the Indenture Collateral Agent in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.
"INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" has the meaning
specified therefor in the Insurance Agreement.
"INSURER ISSUER SECURED OBLIGATIONS" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Security Insurer
under this Indenture, the Insurance Agreement or any other Related Document.
"INTEREST RATE" means the Class A-1 Interest Rate, the Class A-2
Interest Rate, the Class A-3 Interest Rate, the Class A-4 Interest Rate or the
Class A-5 Interest Rate, as applicable.
"ISSUER" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.
"ISSUER SECURED OBLIGATIONS" means the Insurer Issuer Secured
Obligations and the Trustee Issuer Secured Obligations.
"ISSUER SECURED PARTIES" means each of the Trustee in respect of the
Trustee Issuer Secured Obligations and the Security Insurer in respect of the
Insurer Issuer Secured Obligations.
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<PAGE>
"LETTER AGREEMENT" has the meaning specified in Section 6.07.
"NOTE" means a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class
A-4 Note or Class A-5 Note, as applicable.
"NOTE OWNER" means, with respect to a Book-Entry Note, the Person who
is the owner of such Book-Entry Note, as reflected on the books of the
Depository, or on the books of a Person maintaining an account with such
Depository (directly as a Depository participant or as an indirect participant,
in each case in accordance with the rules of such Depository) and with respect
to any Definitive Notes, the Holder.
"NOTE POLICY" means the Financial Guaranty Insurance Policy issued by
the Security Insurer with respect to the Notes, including any endorsements
thereto, in the form of Exhibit D.
"NOTE POLICY CLAIM AMOUNT" has the meaning specified in Section 5.18.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in Section 2.04.
"NOTICE OF CLAIM" has the meaning specified in Section 5.18.
"OFFICERS' CERTIFICATE" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Trustee. Unless otherwise specified, any reference in this Indenture to an
Officers' Certificate shall be to an Officers' Certificate of any Authorized
Officer of the Issuer.
"OPINION OF COUNSEL" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Trustee and, if
addressed to the Security Insurer, satisfactory to the Security Insurer, and
which shall comply with any applicable requirements of Section 11.01, and shall
be in form and substance satisfactory to the Trustee, and if addressed to the
Security Insurer, satisfactory to the Security Insurer. Such Opinion of Counsel
shall not be at the expense of the Trustee.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
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<PAGE>
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Notes (provided, however,
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor, satisfactory
to the Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
bona fide purchaser;
PROVIDED, HOWEVER, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Security Insurer has been paid as subrogee hereunder or reimbursed pursuant
to the Insurance Agreement as evidenced by a written notice from the Security
Insurer delivered to the Trustee, and the Security Insurer shall be deemed to be
the Holder thereof to the extent of any payments thereon made by the Security
Insurer; PROVIDED, FURTHER, that in determining whether the Holders of the
requisite Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any
Related Document, Notes owned by the Issuer, any other obligor upon the Notes,
the Seller or any Affiliate of any of the foregoing Persons shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the Trustee
knows to be so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all
Notes, or class of Notes, as applicable, Outstanding at the date of
determination.
"OWNER TRUSTEE" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
trustee under the Trust Agreement.
"PAYING AGENT" shall initially mean the Trustee or, with respect to
any successor to the Trustee, any other Person that meets the eligibility
standards for the
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Trustee specified in Section 6.11 and, so long as no Insurer Default shall
have occurred and be continuing, is consented to by the Security Insurer and
is authorized by the Issuer to make the distributions from the Note
Distribution Account, including payment of principal of or interest on the
Notes on behalf of the Issuer.
"PAYMENT DATE" means a Distribution Date.
"PERSON" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PREFERENCE CLAIM" has the meaning specified in Section 5.19.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"RATING AGENCY" means each of Moody's and Standard & Poor's, so long
as such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller and
(so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Servicer, the
Security Insurer, the Trustee, the Owner Trustee and the Issuer in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes and will not result in an increased capital charge to the
Security Insurer.
"RECORD DATE" means, with respect to a Payment Date or Redemption
Date, the close of business on the last Business Day immediately preceding such
Payment Date or Redemption Date.
"REDEMPTION DATE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
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10.01(c), the Payment Date specified by the Servicer or the Issuer pursuant to
Section 10.01(a) or 10.01(c), as applicable, or (b) in the case of a redemption
of Notes pursuant to Section 10.01(b), the Payment Date on or immediately
following the last day of the Funding Period.
"REDEMPTION PRICE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a), an amount equal to the principal amount of the
Notes redeemed plus accrued and unpaid interest on the principal amount of each
class of Notes at the respective Interest Rate for each such class of Notes
being so redeemed to but excluding the Redemption Date, or (b) in the case of a
payment made to Noteholders pursuant to Section 10.01(c), the amount on deposit
in the Note Distribution Account, but not in excess of the amount specified in
clause (a) above.
"REGISTERED HOLDER" means the Person in whose name a Note is
registered on the Note Register on the applicable Record Date.
"RELATED DOCUMENTS" means the Trust Agreement, the Notes, the Purchase
Agreements, the Sale and Servicing Agreement, each Subsequent Purchase
Agreement, each Subsequent Transfer Agreement, the Administration Agreement, the
Custodian Agreement, the Note Policy, the Spread Account Agreement, the
Insurance Agreement, the Lockbox Agreement, the Stock Pledge Agreement, the
Depository Agreement and the Underwriting Agreement between the Seller and AFL
and the underwriters of the Notes. The Related Documents executed by any party
are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.
"RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer
assigned to the Corporate Trust Division (or any successor thereto), including
any Vice President, Assistant Vice President, Trust Officer, any Assistant
Secretary, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of the Trust.
When used with respect to any other Person that is not an individual, the
President, any Vice President or Assistant Vice President or the Controller of
such Person, or any other officer or employee having similar functions.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of June 1, 1998, among the Issuer, the Seller, the Servicer and the
Backup Servicer.
"SCHEDULE OF RECEIVABLES" means the listing of the Receivables set
forth in Exhibit A, as supplemented on each Subsequent Transfer Date to reflect
the sale to the Issuer of Subsequent Receivables.
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"SCHEDULED PAYMENTS" has the meaning specified therefor in the Note
Policy.
"STATE" means any one of the 50 states of the United States of America
or the District of Columbia.
"TERMINATION DATE" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Security Insurer for
cancellation, (ii) the date on which the Security Insurer shall have received
payment and performance of all Insurer Issuer Secured Obligations and (iii) the
date on which the Trustee shall have received payment and performance of all
Trustee Issuer Secured Obligations.
"TRUST ESTATE" means all money, instruments, rights and other property
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including, without
limitation, the Indenture Collateral Granted to the Indenture Collateral Agent),
including all proceeds thereof.
"TRUST INDENTURE ACT" OR "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided. The
term "TIA" shall specifically include any amendments or revisions to the Trust
Indenture Act of 1939 which may be enacted from time to time.
"TRUSTEE" means Norwest Bank Minnesota, National Association, a
national banking association, as Trustee under this Indenture, or any successor
Trustee under this Indenture.
"TRUSTEE ISSUER SECURED OBLIGATIONS" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Trustee for the
benefit of the Noteholders under this Indenture or the Notes.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(b) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth in
the Sale and Servicing Agreement as in effect on the Closing Date for all
purposes of this Indenture, and the definitions of such terms are equally
applicable both to the singular and plural forms of such terms:
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<TABLE>
<CAPTION>
Section of Sale and
Term Servicing Agreement
- - ---- --------------------
<S> <C>
AFL . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Aggregate Principal Balance . . . . . . . . . . . . . . . Section 1.1
APR . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Available Funds . . . . . . . . . . . . . . . . . . . . . Section 1.1
Backup Servicer . . . . . . . . . . . . . . . . . . . . . Section 1.1
Class A-1 Final Scheduled Distribution Date . . . . . . . Section 1.1
Class A-2 Final Scheduled Distribution Date . . . . . . . Section 1.1
Class A-3 Final Scheduled Distribution Date . . . . . . . Section 1.1
Class A-4 Final Scheduled Distribution Date . . . . . . . Section 1.1
Class A-5 Final Scheduled Distribution Date . . . . . . . Section 1.1
Class A-1 Holdback Amount . . . . . . . . . . . . . . . . Section 1.1
Class A-1 Holdback Subaccount . . . . . . . . . . . . . . Section 1.1
Class A-1 Prepayment Amount . . . . . . . . . . . . . . . Section 1.1
Class A-2 Prepayment Amount . . . . . . . . . . . . . . . Section 1.1
Class A-3 Prepayment Amount . . . . . . . . . . . . . . . Section 1.1
Class A-4 Prepayment Amount . . . . . . . . . . . . . . . Section 1.1
Class A-5 Prepayment Amount . . . . . . . . . . . . . . . Section 1.1
Class A-1 Prepayment Premium. . . . . . . . . . . . . . . Section 1.1
Class A-2 Prepayment Premium. . . . . . . . . . . . . . . Section 1.1
Class A-3 Prepayment Premium. . . . . . . . . . . . . . . Section 1.1
Class A-4 Prepayment Premium. . . . . . . . . . . . . . . Section 1.1
Class A-5 Prepayment Premium. . . . . . . . . . . . . . . Section 1.1
Collateral Agent. . . . . . . . . . . . . . . . . . . . . Section 1.1
Collateral Insurance. . . . . . . . . . . . . . . . . . . Section 1.1
Collection Account. . . . . . . . . . . . . . . . . . . . Section 1.1
Custodian . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Dealer. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Dealer Agreement. . . . . . . . . . . . . . . . . . . . . Section 1.1
Dealer Assignment . . . . . . . . . . . . . . . . . . . . Section 1.1
Distribution Date . . . . . . . . . . . . . . . . . . . . Section 1.1
Draw Date . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Eligible Account. . . . . . . . . . . . . . . . . . . . . Section 1.1
Eligible Investments. . . . . . . . . . . . . . . . . . . Section 1.1
Financed Vehicle. . . . . . . . . . . . . . . . . . . . . Section 1.1
Force-Placed Insurance. . . . . . . . . . . . . . . . . . Section 1.1
Funding Period. . . . . . . . . . . . . . . . . . . . . . Section 1.1
Initial Receivables . . . . . . . . . . . . . . . . . . . Section 1.1
Insurance Agreement . . . . . . . . . . . . . . . . . . . Section 1.1
Insurance Agreement Event of Default. . . . . . . . . . . Section 1.1
Insurer Default . . . . . . . . . . . . . . . . . . . . . Section 1.1
Liquidation Proceeds. . . . . . . . . . . . . . . . . . . Section 1.1
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Lockbox Bank. . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Monthly Period. . . . . . . . . . . . . . . . . . . . . . Section 1.1
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Note Distribution Account . . . . . . . . . . . . . . . . Section 1.1
Note Majority . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Noteholders' Interest Distributable Amount. . . . . . . . Section 1.1
Noteholders' Percentage . . . . . . . . . . . . . . . . . Section 1.1
Noteholders' Principal Distributable Amount . . . . . . . Section 1.1
Obligor . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . Section 1.1
Pre-Funding Account . . . . . . . . . . . . . . . . . . . Section 4.1
Purchase Agreements . . . . . . . . . . . . . . . . . . . Section 1.1
Purchased Receivable. . . . . . . . . . . . . . . . . . . Section 1.1
Receivable. . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Reserve Account . . . . . . . . . . . . . . . . . . . . . Section 1.1
Security Insurer. . . . . . . . . . . . . . . . . . . . . Section 1.1
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Servicer Termination Event. . . . . . . . . . . . . . . . Section 1.1
Standard & Poor's . . . . . . . . . . . . . . . . . . . . Section 1.1
Subsequent Receivables. . . . . . . . . . . . . . . . . . Section 1.1
Subsequent Transfer Date. . . . . . . . . . . . . . . . . Section 1.1
Trust Accounts. . . . . . . . . . . . . . . . . . . . . . Section 1.1
Trust Agreement . . . . . . . . . . . . . . . . . . . . . Section 1.1
</TABLE>
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
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All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
SECTION 1.03. RULES OF CONSTRUCTION. Unless otherwise specified:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as
in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) references to Sections, Subsections, Schedules and Exhibits
shall refer to such portions of this Indenture.
ARTICLE II
THE NOTES
SECTION 2.01. FORM. The Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes, in each case
together with the Trustee's certificate of authentication, shall be in
substantially the forms set forth in Exhibits C-1, C-2, C-3, C-4 and C-5,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
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Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits C-1, C-2, C-3, C-4 and C-5 are part of the terms
of this Indenture.
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes
shall be executed on behalf of the Issuer by any of its Authorized Officers.
The signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall upon receipt of the Note Policy and Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $59,500,000, Class A-2 Notes in an aggregate principal
amount of $188,000,000, Class A-3 Notes in an aggregate principal amount of
$141,500,000, Class A-4 Notes in an aggregate principal amount of $106,000,000
and Class A-5 Notes in an aggregate principal amount of $55,000,000. The
aggregate principal amount of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes outstanding at any
time may not exceed that amount except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
SECTION 2.03. TEMPORARY NOTES. Pending the preparation of definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
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If temporary Notes are issued, the Issuer will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Trustee shall be "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Trustee shall authenticate and the Noteholder shall
obtain from the Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations, of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations, of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee
shall authenticate and the Noteholder shall obtain from the Trustee, the Notes
which the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to
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the same benefits under this Indenture, as the Notes surrendered upon such
registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in The City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.03 or 9.06 not involving any
transfer.
The preceding provisions of this section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Trustee and the Security Insurer (unless an
Insurer Default shall have occurred and be continuing) such security or
indemnity as may be required by them to hold the Issuer, the Trustee and the
Security Insurer harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Trustee that such Note has been acquired by a bona fide
purchaser, the Issuer shall execute and upon its request the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; PROVIDED, HOWEVER, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Issuer, the Security Insurer and the Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note
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was delivered or any assignee of such Person, except a bona fide purchaser,
and shall be entitled to recover upon the security or indemnity provided
therefor to the extent of any loss, damage, cost or expense incurred by the
Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer or the Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. PERSON DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee, the Security
Insurer and any agent of the Issuer, the Trustee or the Security Insurer may
treat the Person in whose name any Note is registered (as of the day of
determination) as the owner of such Note for the purpose of receiving payments
of principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Security Insurer, the Trustee nor any agent of the Issuer or the Trustee shall
be affected by notice to the contrary.
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.
(a) The Notes shall accrue interest as provided in the forms of the
Class A-1 Note, the Class A-2 Note, the Class A-3 Note, the Class A-4 Note and
the Class A-5 Note set forth in Exhibits C-1, C-2, C-3, C-4 and C-5,
respectively, and such interest shall be payable on each Payment Date as
specified therein, subject to Section 3.01. Any installment of interest or
principal, if any, payable on any Note which is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
Record Date, by check mailed first-class, postage prepaid to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.11, with respect
to Notes registered on the Record Date in the name of the
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nominee of the Depository, payment will be made by wire transfer in
immediately available funds to the account designated by such nominee and
except for (i) the final installment of principal payable with respect to
such Note on a Payment Date and (ii) the Redemption Price for any Note called
for redemption pursuant to Section 10.01(a), which shall be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on
each Payment Date as provided in the forms of the Class A-1 Note, the Class A-2
Note, the Class A-3 Note, the Class A-4 Note and the Class A-5 Note set forth in
Exhibits C-1, C-2, C-3, C-4 and Class C-5, respectively. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default shall
have occurred and be continuing, so long as an Insurer Default shall not have
occurred and be continuing or, if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or a Note Majority have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02. All
principal payments on a class of Notes shall be made pro rata to the Noteholders
of such Class entitled thereto. The Trustee shall notify the Person in whose
name a Note is registered at the close of business on the Record Date preceding
the Payment Date for which the Trustee has received notice from the Issuer that
the Issuer expects that the final installment of principal of and interest on
such Note will be paid. Such notice shall be mailed no later than five days
prior to such final Payment Date and shall specify that such final installment
will be payable only upon presentation and surrender of such Note and shall
specify the place where such Note may be presented and surrendered for payment
of such installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02.
(c) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been surrendered
to the Trustee, the Trustee shall, if the Security Insurer has paid any amount
in respect of the Notes under the Note Policy or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the Security Insurer.
SECTION 2.08. CANCELLATION. Subject to Section 2.07(c), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. Subject to Section 2.07(c), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture.
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Subject to Section 2.07(c), all canceled Notes may be held or disposed of by
the Trustee in accordance with its standard retention or disposal policy as
in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it, provided that such Issuer Order is
timely and the Notes have not been previously disposed of by the Trustee.
SECTION 2.09. BOOK-ENTRY NOTES. The Notes, upon original
issuance, will be issued in the form of a typewritten Note or Notes
representing the Book-Entry Notes, to be delivered to The Depository Trust
Company, the initial Depository, by, or on behalf of, the Issuer. Such Note
shall initially be registered on the Note Register in the name of Cede & Co.,
the nominee of the initial Depository, and no Note Owner will receive a
Definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.11. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to Note Owners pursuant to
Section 2.11:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Trustee shall be entitled to deal with
the Depository for all purposes of this Indenture (including the payment of
principal of and interest on the Notes and the giving of instructions or
directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Note Owners shall be exercised only through the
Depository and shall be limited to those established by law and agreements
between such Note Owners and the Depository and/or the Depository
Participants. Pursuant to the Depository Agreement, unless and until
Definitive Notes are issued pursuant to Section 2.11, the initial
Depository will make book-entry transfers among the Depository Participants
and receive and transmit payments of principal of and interest on the Notes
to such Depository Participants;
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Depository
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Depository
Participants owning or representing, respectively, such required percentage
of
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the beneficial interest in the Notes and has delivered such instructions
to the Trustee; and
(vi) Note Owners may receive copies of any reports sent to Noteholders
pursuant to this Indenture, upon written request, together with a
certification that they are Note Owners and payment of reproduction and
postage expenses associated with the distribution of such reports, from the
Trustee at the Corporate Trust Office.
SECTION 2.10. NOTICES TO DEPOSITORY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.11, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Depository and shall have no
obligation to the Note Owners.
SECTION 2.11. DEFINITIVE NOTES. If (i) the Administrator advises
the Trustee in writing that the Depository is no longer willing or able
properly to discharge its responsibilities with respect to the Notes, and the
Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Trustee in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, a Note Majority advises the Depository in
writing that the continuation of a book-entry system through the Depository
is no longer in the best interests of the Note Owners, then the Depository
shall notify all Note Owners and the Trustee of the occurrence of any such
event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the Note or Notes representing
the Book-Entry Notes by the Depository, accompanied by registration
instructions, the Issuer shall execute and the Trustee shall authenticate the
Definitive Notes in accordance with the instructions of the Depository. None
of the Issuer, the Note Registrar or the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. The Issuer
will duly and punctually pay the principal, interest and premium, if any, on the
Notes in accordance with the terms of the Notes and this Indenture. Without
limiting the foregoing, the Issuer will cause to be distributed all amounts on
deposit
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in the Note Distribution Account on a Payment Date in accordance with Section
8.02(b). Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will
maintain in the City of New York, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially appoints the Trustee to serve as its agent
for the foregoing purposes. The Issuer will give prompt written notice to the
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Trustee as its agent to receive all
such surrenders, notices and demands.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Note Distribution Account
pursuant to Section 8.02(b) shall be made on behalf of the Issuer by the Trustee
or by another Paying Agent in accordance with written instructions from the
Issuer upon which the Trustee may rely, and no amounts so withdrawn from the
Note Distribution Account for payments of Notes shall be paid over to the
Issuer.
On or before each Payment Date and Redemption Date, the Issuer shall
deposit or cause to be deposited in the Note Distribution Account an aggregate
sum sufficient to pay the amounts then becoming due, such sum to be held in
trust for the benefit of the Persons entitled thereto and (unless the Paying
Agent is the Trustee) shall promptly notify the Trustee in writing of its action
or failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee and the Security Insurer an instrument in
which such Paying Agent shall agree with the Trustee (and if the Trustee acts as
Paying Agent, it hereby so agrees), subject to the provisions of this Section,
that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
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(ii) give the Trustee written notice of any default (of which it has
actual knowledge) by the Issuer (or any other obligor upon the Notes) in
the making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Trustee all sums held in trust by
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which the sums were held by such Paying Agent; and upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust and upon
Issuer Request with the consent of the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) shall be deposited by the Trustee
in the Collection Account; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; PROVIDED, HOWEVER, that if such money or any portion
thereof had been previously deposited by the Security Insurer or the Indenture
Collateral Agent with the Trustee for the payment of principal or interest on
the Notes, to the extent any amounts are owing to the Security Insurer, such
amounts shall be paid promptly to the Security Insurer upon receipt of a written
request by the Security Insurer to such effect, and PROVIDED, FURTHER, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Issuer cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that
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such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to or for the
account of the Issuer. The Trustee may also adopt and employ, at the expense
of the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Trustee or of any Paying Agent, at the
last address of record for each such Holder).
SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Indenture Collateral and each
other instrument or agreement included in the Trust Estate.
SECTION 3.05. PROTECTION OF TRUST ESTATE. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Estate,
and the Issuer shall take all actions necessary to obtain and maintain, in favor
of the Indenture Collateral Agent, for the benefit of the Issuer Secured
Parties, a first lien on and a first priority, perfected security interest in
the Trust Estate. The Issuer will from time to time execute and deliver all
such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:
(i) grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Indenture Collateral Agent for the
benefit of the Issuer Secured Parties created by this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Indenture Collateral;
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(v) preserve and defend title to the Trust Estate and the rights of
the Indenture Collateral Agent in such Trust Estate against the claims of
all persons and parties; or
(vi) pay all taxes or assessments levied or assessed upon the Trust
Estate when due.
The Issuer hereby designates the Indenture Collateral Agent its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Collateral Agent pursuant to this
Section; PROVIDED, HOWEVER, that the Servicer shall be responsible for filing
any such financing statement or continuation statement.
SECTION 3.06. OPINIONS AS TO TRUST ESTATE.
(a) On the Closing Date and on each Subsequent Transfer Date, the
Issuer shall furnish to the Trustee, the Indenture Collateral Agent and the
Security Insurer an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording and
filing of this Indenture, any indentures supplemental hereto, and any other
requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, as are necessary to perfect
and make effective the first priority lien and security interest in favor of the
Indenture Collateral Agent, for the benefit of the Issuer Secured Parties,
created by this Indenture and reciting the details of such action, or stating
that, in the opinion of such counsel, no such action is necessary to make such
lien and security interest effective.
(b) On or before April 30 in each calendar year, beginning in 1999,
the Issuer shall furnish to the Trustee, the Indenture Collateral Agent and the
Security Insurer an Opinion of Counsel with respect to each jurisdiction in
which the Receivables are located or a Uniform Commercial Code financing
statement has been filed by the Issuer either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the first priority lien and security interest created by this Indenture
and reciting the details of such action or stating that in the opinion of such
counsel no such action is necessary to maintain such lien and security interest.
Such Opinion of Counsel shall also describe the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until April 30 in
the following calendar year.
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SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the
Security Insurer (so long as no Insurer Default shall have occurred and be
continuing) to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Trustee and the
Security Insurer in an Officers' Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer and the Administrator to assist the Issuer in performing its duties
under this Indenture. The Owner Trustee shall not be responsible for the action
or inaction of the Servicer or the Administrator.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Related Documents
and in the instruments and agreements included in the Trust Estate, including
but not limited to filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this Indenture
and the Sale and Servicing Agreement in accordance with and within the time
periods provided for herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of a
Servicer Termination Event under the Sale and Servicing Agreement, the Issuer
shall promptly in writing notify the Trustee, the Security Insurer and the
Rating Agencies thereof, and shall specify in such notice the action, if any,
the Issuer is taking with respect of such default. If a Servicer Termination
Event shall arise from the failure of the Servicer to perform any of its duties
or obligations under the Sale and Servicing Agreement with respect to the
Receivables, the Issuer shall take all reasonable steps available to it to
remedy such failure.
(e) If an Insurer Default shall have occurred and be continuing and
if the Issuer has given notice of termination to the Servicer of the Servicer's
rights and powers pursuant to Section 8.2 of the Sale and Servicing Agreement,
as promptly as possible thereafter, the Issuer shall appoint a successor
servicer in accordance with Section 8.3 of the Sale and Servicing Agreement.
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(f) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Trustee. As soon as a successor Servicer is appointed, the Issuer shall notify
the Trustee of such appointment, specifying in such notice the name and address
of such successor Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer, the Backup Servicer, the Seller or AFL of their
respective duties under the Related Documents (x) without the prior consent of
the Security Insurer (unless an Insurer Default shall have occurred and be
controlling) or (y) if the effect thereof would adversely affect the Holders of
the Notes.
SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date, the
Issuer shall not:
(i) except as expressly permitted by this Indenture, the Purchase
Agreement or the Sale and Servicing Agreement, sell, transfer, exchange or
otherwise dispose of any of the properties or assets of the Issuer,
including those included in the Trust Estate, unless directed to do so by
the Controlling Party;
(ii) claim any credit on, or make any deduction from the principal,
interest or premium payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Noteholder by reason of the payment of the
taxes levied or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Indenture Collateral
Agent created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other than
the lien in favor of the Indenture Collateral Agent created by this
Indenture) to be created on or extend to or otherwise arise upon or burden
the Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other liens
that arise by operation of law, in each case on a Financed Vehicle and
arising solely as a result of an action or omission of the related
Obligor), (C) permit the lien in favor of the Indenture Collateral Agent
created by this Indenture not to constitute a valid first priority (other
than with respect to any such tax, mechanics' or other lien) security
interest in the Trust Estate, or (D) amend, modify or fail to
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comply with the provisions of the Related Documents without the prior
written consent of the Controlling Party.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will
deliver to the Trustee and the Security Insurer, within 120 days after the end
of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 1998), an Officers' Certificate stating, as to the Authorized
Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in the
compliance of any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof.
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form and substance satisfactory to the Trustee and the Security
Insurer (so long as no Insurer Default shall have occurred and be
continuing), the due and punctual payment of the principal of and interest
on all Notes and the performance or observance of every agreement and
covenant of this Indenture and each other Related Document on the part of
the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer, at its own expense, shall have received an Opinion of
Counsel which shall be delivered to and shall be satisfactory to the
Trustee and the Security Insurer (so long as no Insurer Default shall have
occurred
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and be continuing) to the effect that such transaction will not
have any material adverse tax consequence to the Trust, the Security
Insurer or any Noteholder;
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Indenture Collateral Agent by this
Indenture shall have been taken;
(vi) the Issuer, at its own expense, shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel (which shall
describe the actions taken as required by clause (a)(v) of this Section
3.10 or that no such actions will be taken) each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been compiled with (including any filing required
by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Security Insurer written notice
of such consolidation or merger at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Security Insurer of such consolidation or merger and the
Issuer or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (a) greater than zero and (b) not less
than the net worth of the Issuer immediately prior to giving effect to such
consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in the Trust Estate, to
any Person (except as expressly permitted by the Indenture, the Purchase
Agreement or the Sale and Servicing Agreement), unless
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form and substance satisfactory
to the Trustee and the Security Insurer (so long as no Insurer Default
shall have occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture and each Related Document on
the part of the Issuer to be performed or observed, all as provided herein,
(C) expressly agree by means of such supplemental indenture that all right,
title and interest so
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conveyed or transferred shall be subject and subordinate to the rights
of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agree to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agree by means of such supplemental indenture that such Person
(or if a group of Persons, then one specified Person) shall make all
filings with the Commission (and any other appropriate Person) required
by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Trustee and the Security
Insurer (so long as no Insurer Default shall have occurred and be
continuing) to the effect that such transaction will not have any material
adverse tax consequence to the Trust, the Security Insurer, any Noteholder;
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Indenture Collateral Agent by this
Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (which shall describe the actions
taken as required by clause (b)(v) of this Section 3.10 or that no such
actions will be taken) each stating that such conveyance or transfer and
such supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Security Insurer written notice
of such conveyance or transfer of properties or assets at least 20 Business
Days prior to the consummation of such action and shall have received the
prior written approval of the Security Insurer of such conveyance or
transfer and the Person acquiring by conveyance or transfer the properties
or assets of the Issuer has a net worth, immediately after such conveyance
or transfer, that is (a) greater than zero and (b) not less than the net
worth of the Issuer immediately prior to giving effect to such conveyance
or transfer.
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SECTION 3.11. SUCCESSOR OR TRANSFEREE.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Arcadia Automobile Receivables Trust,
1998-B will be released from every covenant and agreement of this Indenture to
be observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Trustee stating that
Arcadia Automobile Receivables Trust, 1998-B is to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Related
Documents and activities incidental thereto. After the Funding Period, the
Issuer shall not fund the purchase of any new Receivables.
SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Security Insurer under the Insurance Agreement and (iii) any other
Indebtedness permitted by or arising under the Related Documents. The proceeds
of the Notes shall be used exclusively to fund the Issuer's purchase of the
Receivables and the other assets specified in the Sale and Servicing Agreement,
to fund the Pre-Funding Account, the Reserve Account and the Spread Account and
to pay the Issuer's organizational, transactional and start-up expenses.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the
Servicer to comply with Sections 3.9, 3.10, 3.11 and 4.9(b) of the Sale and
Servicing Agreement.
SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES.
Except as contemplated by the Sale and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuming
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, any other interest in, or make any capital
contribution to, any other Person.
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SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. RESTRICTED PAYMENTS. Except as expressly permitted by
this Indenture or the Sale and Servicing Agreement, the Issuer shall not,
directly or indirectly, (i) make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii) set
aside or otherwise segregate any amounts for any such purpose. The Issuer will
not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the Related
Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give
the Trustee, the Security Insurer and the Rating Agencies prompt written notice
of each Event of Default hereunder, each default on the part of the Servicer or
the Seller of its obligations under the Sale and Servicing Agreement and each
default on the part of AFL of its obligations under the Purchase Agreements.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee or the Security Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Related Document.
SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST
AGREEMENT. The Issuer shall not agree to any amendment to Section 10.1 of the
Sale and Servicing Agreement or Section 10.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22. REMOVAL OF ADMINISTRATOR. If an Insurer Default shall
have occurred and be continuing, so long as any Notes are issued and
outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
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SECTION 3.23. INCOME TAX CHARACTERIZATION. For purposes of federal
income, state and local income and franchise and any other income taxes, the
Issuer will treat the Notes as indebtedness.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This
Indenture shall cease to be of further effect with respect to the Notes except
as to (i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal, interest and premium, if any, thereon,
(iv) Sections 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20, 3.21 and
3.23, (v) the rights, obligations and immunities of the Trustee hereunder
(including the rights of the Trustee under Section 6.07 and the obligations of
the Trustee under Section 4.02) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them, and the Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.05 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Trustee for cancellation and the Note Policy has expired
and been returned to the Security Insurer for cancellation; or
(2) all Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at the Final Scheduled
Distribution Date within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice
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of redemption by the Trustee in the name, and at the expense,
of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Collateral Agent as part of the Trust Estate cash or direct obligations of
or obligations guaranteed by the United States of America (which will
mature prior to the date such amounts are payable), in trust in an Eligible
Account in the name of the Indenture Collateral Agent for such purpose, in
an amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Trustee for cancellation when due to
the Final Scheduled Distribution Date or Redemption Date (if Notes shall
have been called for redemption pursuant to Section 10.01(a)), as the case
may be;
(B) the Issuer has paid or caused to be paid all Insurer Issuer
Secured Obligations and all Trustee Issuer Secured Obligations; and
(C) the Issuer has delivered to the Trustee, the Indenture Collateral
Agent and the Security Insurer an Officers' Certificate, an Opinion of
Counsel and (if required by the TIA, the Trustee, the Indenture Collateral
Agent and the Security Insurer) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01(a) and each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with and the Rating Agency Condition has been satisfied.
SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with
the Trustee pursuant to Section 4.01 hereof shall be held in trust and applied
by it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Trustee under
the provisions of this Indenture with respect to such Notes shall, upon written
demand of the Issuer, be paid to the Trustee to be held and applied according to
Section 3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
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SECTION 4.04. RELEASE OF TRUST ESTATE. The Indenture Collateral
Agent shall, on or after the Termination Date, release any remaining portion of
the Trust Estate from the lien created by this Indenture and deposit in the
Collection Account any funds then on deposit in any other Trust Account. The
Indenture Collateral Agent shall release property from the lien created by this
Indenture pursuant to this Section 4.04 only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.01.
ARTICLE V
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of
five days (solely for purposes of this clause, a payment on the Notes
funded by the Security Insurer or the Collateral Agent pursuant to the
Spread Account Agreement shall be deemed to be a payment made by the
Issuer); or
(ii) default in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable (solely for
purposes of this clause, a payment on the Notes funded by the Security
Insurer or the Collateral Agent pursuant to the Spread Account Agreement,
shall be deemed to be a payment made by the Issuer); or
(iii) so long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Indenture Cross Default shall have
occurred; provided, however, that the occurrence of an Insurance Agreement
Indenture Cross Default may not form the basis of an Event of Default
unless the Security Insurer shall, upon prior written notice to the Rating
Agencies, have delivered to the Issuer and the Trustee and not rescinded a
written notice specifying that such Insurance Agreement Indenture Cross
Default constitutes an Event of Default under the Indenture; or
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
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agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered,
express or certified mail, to the Issuer by the Trustee or to the Issuer
and the Trustee by the Holders of at least 25% of the Outstanding Amount of
the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the commencement of an involuntary case against the Issuer
under any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, and such case is not dismissed
within 60 days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, (A) the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, (B) the entry of an order for relief in an
involuntary case against the Issuer under any such law, (C) the consent by
the Issuer to the entry of any such order for relief, (D) the consent by
the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Trust Estate, (E) the
making by the Issuer of any general assignment for the benefit of
creditors, (F) the failure by the Issuer generally to pay its debts as such
debts become due, or (G) the taking of action by the Issuer in furtherance
of any of the foregoing.
The Issuer shall deliver to the Trustee and the Security Insurer,
within five days after obtaining knowledge of the occurrence thereof, written
notice in the form of an Officers' Certificate of any event which with the
giving of notice and the lapse of time would become an Event of Default under
clause (iii), its status and what action the Issuer is taking or proposes to
take with respect thereto.
SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT.
(a) If an Insurer Default shall not have occurred and be continuing
and an Event of Default shall have occurred and be continuing, the Notes shall
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become immediately due and payable at par, together with accrued
interest thereon. If an Event of Default shall have occurred and be
continuing, the Controlling Party may exercise any of the remedies
specified in Section 5.04(a). In the event of any acceleration of any
Notes by operation of this Section 5.02, the Trustee shall continue to
be entitled to make claims under the Note Policy pursuant to Section
5.18 hereof for Scheduled Payments on the Notes. Payments under the
Note Policy following acceleration of any Notes shall be applied by the
Trustee:
FIRST: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest; and
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal.
(b) In the event any Notes are accelerated due to an Event of
Default, the Security Insurer shall have the right (in addition to its
obligation to pay Scheduled Payments on the Notes in accordance with the Note
Policy), but not the obligation, to make payments under the Note Policy or
otherwise of interest and principal due on such Notes, in whole or in part, on
any date or dates following such acceleration as the Security Insurer, in its
sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing and
an Event of Default shall have occurred and be continuing, the Trustee in its
discretion may, or if so requested in writing by Holders holding Notes
representing at least 66-2/3% of the aggregate outstanding principal amount of
the Notes shall, upon prior written notice to the Rating Agencies, declare by
written notice to the Issuer that the Notes become, whereupon they shall become,
immediately due and payable at par, together with accrued interest thereon.
Notwithstanding anything to the contrary in this paragraph (c), if an Event of
Default specified in Section 5.01(v) or (vi) shall occur and be continuing when
an Insurer Default has occurred and is continuing, the Notes shall become
immediately due and payable at par, together with accrued interest thereon.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE; AUTHORITY OF CONTROLLING PARTY.
(a) The Issuer covenants that if any Notes are accelerated following
the occurrence of an Event of Default, the Issuer will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest, at
the applicable Interest Rate
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and in addition thereto such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements, indemnified amounts and advances of the Trustee and
its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Issuer Secured Party for so long as such Issuer Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Issuer Secured Party such acts, things and deeds for or on behalf of and
in the name of such Issuer Secured Party under this Indenture (including
specifically under Section 5.04) and under the Related Documents which such
Issuer Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the purposes
contemplated hereunder and under the Related Documents and, without limitation,
following the occurrence of an Event of Default, exercise full right, power and
authority to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may
in its discretion but with the consent of the Controlling Party (except as
provided in Section 5.03(d) below), proceed to protect and enforce its rights
and the rights of the Noteholders, by such appropriate Proceedings as the
Trustee shall deem most effective to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the Trustee by
this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including without limitation Sections 5.04(a), 5.12, 5.13 and 5.17)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer fails to perform its obligations under Section
10.01(b) hereof when and as due, the Trustee may in its discretion (and without
the consent of the Controlling Party) proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate Proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
specific performance of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Trustee by this Indenture or by law;
provided that the Trustee shall only be entitled to take any such actions
without the consent of the Controlling Party to the extent such actions (x) are
taken only to enforce to Issuer's obligations to redeem the principal amount of
Notes and make payment of the Noteholders' Prepayment Premium
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required under Section 10.01(b) and (y) are taken only against the portion of
the Indenture Collateral, if any, consisting of the Pre-Funding Account, the
Reserve Account, any investments therein and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Estate, Proceedings under Title 11 of the United States
Code or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal, interest and premium, if any, owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for reimbursement
of all expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee, except as a result of negligence or
bad faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee or the
Holders of Notes allowed in any judicial proceedings relative to the
Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to
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the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(f) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(g) All rights of action and of asserting claims under this
Indenture, the Spread Account Agreement, or under any of the Notes, may be
enforced by the Trustee without the possession of any of the Notes or the
production thereof in any trial or other Proceedings relative thereto, and any
such action or Proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture or
the Spread Account Agreement), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such Proceedings.
SECTION 5.04. REMEDIES. (a) If an Event of Default shall have
occurred and be continuing, the Controlling Party may (subject to Section 5.05):
(i) institute Proceedings in its own name and as or on behalf of a
trustee of an express trust for the collection of all amounts then payable
on the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
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(iii) exercise any remedies of a secured party under the UCC and
any other remedy available to the Trustee and take any other appropriate
action to protect and enforce the rights and remedies of the Issuer Secured
Parties; and
(iv) direct the Indenture Collateral Agent to sell the Trust Estate or
any portion thereof or rights or interest therein, at one or more public or
private sales called and conducted in any manner permitted by law;
PROVIDED, HOWEVER, that
(A) if the Security Insurer is the Controlling Party, the
Security Insurer may not sell or otherwise liquidate the Trust Estate
following an Insurance Agreement Indenture Cross Default unless
(I) such Insurance Agreement Indenture Cross Default arises
from a claim being made on the Note Policy or from the insolvency
of the Trust or the Seller, or
(II) the proceeds of such sale or liquidation distributable
to the Noteholders are sufficient to discharge in full all
amounts then due and unpaid upon such Notes for principal and
interest; or
(B) if the Trustee is the Controlling Party, the Trustee may not
sell or otherwise liquidate the Trust Estate following an Event of
Default unless
(I) such Event of Default is of the type described in
Section 5.01(i) or (ii), or
(II) either
(x) the Holders of 100% of the Outstanding Amount of
the Notes consent thereto,
(y) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for
principal and interest, or
(z) the Trustee determines that the Trust Estate will
not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and
payable, and the Trustee provides prior
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written notice to the Rating Agencies and obtains the
consent of Holders of 66-2/3% of the Outstanding Amount
of the Notes.
In determining such sufficiency or insufficiency with respect to
clause (y) and (z), the Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
SECTION 5.05. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the
Trustee is Controlling Party and if any Notes have been declared to be due and
payable under Section 5.02 following an Event of Default and such declaration
and its consequences have not been rescinded and annulled, the Trustee may, but
need not, elect to maintain possession of the Trust Estate. It is the desire of
the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes, and the Trustee
shall take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession
of the Trust Estate, the Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
SECTION 5.06. PRIORITIES.
(a) If the Trustee collects any money or property pursuant to this
Article V (excluding any payments made under the Note Policy), or if the
Indenture Collateral Agent delivers any money or property in respect of
liquidation of the Trust Estate to the Trustee pursuant to Section 5.04(a)(iv),
the Trustee shall pay as promptly as practicable out the money or property in
the following order:
FIRST: amounts due and owing and required to be distributed to the
Servicer, the Owner Trustee, the Administrator, the Trustee, the Lockbox
Bank, the Custodian, the Backup Servicer, the Collateral Agent and the
Indenture Collateral Agent, respectively, pursuant to priorities (i), (ii)
and (iii) of Section 4.6 of the Sale and Servicing Agreement and not
previously distributed, in the order of such priorities and without
preference or priority of any kind within such priorities;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest;
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THIRD: to Noteholders for amounts due and unpaid on the Notes for
principal and premium, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal;
FOURTH: amounts due and owing and required to be distributed to the
Security Insurer pursuant to priority (vi) of Section 4.6 of the Sale and
Servicing Agreement and not previously distributed; and
FIFTH: to the Collateral Agent to be applied as provided in the
Spread Account Agreement;
provided that any amounts collected from the Pre-Funding Account or the Reserve
Account shall be paid, FIRST, for amounts due and unpaid on the Notes for
principal and premium, if any, for distribution to Noteholders in accordance
with Section 10.01(b) and, SECOND, in accordance with priorities ONE through
FIFTH above; PROVIDED, HOWEVER, that the Issuer's obligation to pay the Class
A-1 Prepayment Premium, the Class A-2 Prepayment Premium, the Class A-3
Prepayment Premium, the Class A-4 Prepayment Premium or the Class A-5 Prepayment
Premium shall, as set forth in Section 2.4(d) of the Sale and Servicing
Agreement, be limited solely to funds which are received by the Issuer from AFL
pursuant to Section 6.2 of the Purchase Agreement as liquidated damages for the
failure of AFL to deliver Subsequent Receivables and no other assets of the
Issuer will be available to pay the Class A-1 Prepayment Premium, the Class A-2
Prepayment Premium, the Class A-3 Prepayment Premium, the Class A-4 Prepayment
Premium or the Class A-5 Prepayment Premium, under the circumstances.
(b) The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date the Issuer shall mail to each Noteholder and the Trustee a notice
that states the record date, the payment date and the amount to be paid.
SECTION 5.07. LIMITATION OF SUITS. No Holder of any Note shall have
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Trustee to institute such Proceeding
in respect of such Event of Default in its name as Trustee hereunder;
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(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such Proceedings;
(v) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE
PRINCIPAL AND INTEREST. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such Note
on or after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder; PROVIDED, HOWEVER, that so
long as an Insurer Default shall not have occurred and be continuing, no such
suit shall be instituted.
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Controlling
Party or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
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SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to the Controlling Party or to the Noteholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or omission
of the Controlling Party or any Holder of any Note to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such right
or remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12. CONTROL BY NOTEHOLDERS. If the Trustee is the
Controlling Party, the Holders of a majority of the Outstanding Amount of the
Notes shall have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Trustee with respect to the Notes
or exercising any trust or power conferred on the Trustee; provided that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to
the Trustee to sell or liquidate all or any portion of the Trust Estate
shall be by the Holders of Notes representing not less than 100% of the
Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Trustee elects to retain the Trust Estate pursuant to such Section,
then any direction to the Trustee by Holders of Notes representing less
than 100% of the Outstanding Amount of the Notes to sell or liquidate all
or any portion of the Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; PROVIDED, HOWEVER,
that, subject to Section 6.01, the Trustee need not take any action that it
determines might involve it in liability or might materially and adversely
affect the rights of any Noteholders not consenting to such action.
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SECTION 5.13. WAIVER OF PAST DEFAULTS.
If an Insurer Default shall have occurred and be continuing, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or
(b) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the Holder of each Note. In the case of any such
waiver, the Issuer, the Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to
(a) any suit instituted by the Trustee, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more
than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by
any Noteholder for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantages of any such law, and covenants that
it will not hinder, delay or impede
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the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
SECTION 5.16. ACTION ON NOTES. The Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights
or remedies of the Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Trustee against the Issuer or by the levy of
any execution under such judgment upon any portion of the Trust Estate or
upon any of the assets of the Issuer.
SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Trustee to do so and at the
Seller's expense, the Issuer agrees to take all such lawful action as the
Trustee may request to compel or secure the performance and observance by the
Seller, the Servicer and AFL, as applicable, of each of their obligations to the
Issuer under or in connection with the Sale and Servicing Agreement or to the
Seller under or in connection with the Purchase Agreement in accordance with the
terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the Sale
and Servicing Agreement to the extent and in the manner directed by the Trustee,
including the transmission of notices of default on the part of the Seller or
the Servicer thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Seller or the Servicer of
each of their obligations under the Sale and Servicing Agreement.
(b) If the Trustee is Controlling Party and if an Event of Default
has occurred and is continuing, the Trustee may, and at the direction (which
direction shall be in writing, including facsimile) of the Holders of 66-2/3% of
the Outstanding Amount of the Notes shall, upon the receipt of such indemnity as
the Trustee may reasonably request, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Seller or the Servicer under or
in connection with the Sale and Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Seller or the Servicer of each of their obligations to the Issuer thereunder and
to give any consent, request, notice, direction, approval, extension or waiver
under the Sale and Servicing Agreement, and any right of the Issuer to take such
action shall be suspended.
(c) Promptly following a request from the Trustee to do so and at the
Seller's expense, the Issuer agrees to take all such lawful action as the
Trustee may request to compel or secure the performance and observance by AFL of
each of its obligations to the Seller under or in connection with the Purchase
Agreement in accordance with the terms thereof, and to exercise any and all
rights, remedies,
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powers and privileges lawfully available to the Issuer under or in connection
with the Purchase Agreement to the extent and in the manner directed by the
Trustee, including the transmission of notices of default on the part of the
Seller thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by AFL of each of its obligations
under the Purchase Agreement.
(d) If the Trustee is Controlling Party and if an Event of Default
has occurred and is continuing the Trustee may, and at the direction (which
direction shall be in writing, including facsimile) of the Holders of 66-2/3% of
the Outstanding Amount of the Notes shall, upon the receipt of such indemnity as
the Trustee may reasonably request, exercise all rights, remedies, powers,
privileges and claims of the Seller against AFL under or in connection with the
Purchase Agreement, including the right or power to take any action to compel or
secure performance or observance by AFL of each of its obligations to the Seller
hereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Purchase Agreement, and any right of the Seller to
take such action shall be suspended.
SECTION 5.18. CLAIMS UNDER NOTE POLICY.
(a) In the event that the Trustee has delivered a Deficiency Notice
with respect to any Determination Date pursuant to Section 5.2 of the Sale and
Servicing Agreement, the Trustee shall on the related Draw Date determine the
Note Policy Claim Amount (as defined below) for the related Payment Date. If
the Note Policy Claim Amount for such Payment Date is greater than zero, the
Trustee shall furnish to the Security Insurer no later than 12:00 noon New York
City time on the related Draw Date a completed Notice of Claim in the amount of
the Note Policy Claim Amount. Amounts paid by the Security Insurer pursuant to
a claim submitted under this Section 5.18(a) shall be deposited by the Trustee
into the Note Distribution Account for payment to Noteholders on the related
Payment Date. The "Note Policy Claim Amount" for any Payment Date other than
the Class A-1 Final Scheduled Distribution Date shall equal the lesser of
(i) the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount for such Payment Date, and (ii) the
excess, if any, of the amount required to be distributed pursuant to clauses (i)
- - - (v) of Section 4.6 of the Sale and Servicing Agreement (without giving effect
to the limitation of the Distribution Amount specified in each such clause) over
the Distribution Amount with respect to such Payment Date. The "Note Policy
Claim Amount" with respect to the Class A-1 Final Scheduled Distribution Date
shall equal the excess, if any, of (i) the amount required to be distributed
pursuant to clauses (i) - (vi) of Section 4.6 of the Sale and Servicing
Agreement (without giving effect to the limitation of the Distribution Amount
specified in each such clause) over (ii) the sum of (A) the Distribution Amount
with respect to such Payment Date, plus (B) the amount, if any, withdrawn
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from the Class A-1 Holdback Subaccount and deposited in the Note Distribution
Account pursuant to Section 5.1(b) of the Sale and Servicing Agreement.
(b) Any notice delivered by the Trustee to the Security Insurer
pursuant to subsection 5.18(a) shall specify the Note Policy Claim Amount
claimed under the Note Policy and shall constitute a "Notice of Claim" under the
Note Policy. In accordance with the provisions of the Note Policy, the Security
Insurer is required to pay to the Trustee the Note Policy Claim Amount properly
claimed thereunder by 12:00 noon, New York City time, on the later of (i) the
third Business Day following receipt on a Business Day of the Notice of Claim,
and (ii) the applicable Payment Date. Any payment made by the Security Insurer
under the Note Policy shall be applied solely to the payment of the Notes, and
for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Note Policy Claim Amount from the Security Insurer and
(ii) deposit the same in the Note Distribution Account for distribution to
Noteholders as provided in Section 3.01 or Section 5.02 of this Indenture. Any
and all Note Policy Claim Amounts disbursed by the Trustee from claims made
under the Note Policy shall not be considered payment by the Trust or from the
Spread Account with respect to such Notes, and shall not discharge the
obligations of the Trust with respect thereto. The Security Insurer shall, to
the extent it makes any payment with respect to the Notes, become subrogated to
the rights of the recipients of such payments to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Notes by or on
behalf of the Security Insurer, the Trustee shall assign to the Security Insurer
all rights to the payment of interest or principal with respect to the Notes
which are then due for payment to the extent of all payments made by the
Security Insurer, and the Security Insurer may exercise any option, vote, right,
power or the like with respect to the Notes to the extent that it has made
payment pursuant to the Note Policy. To evidence such subrogation, the Note
Registrar shall note the Security Insurer's rights as subrogee upon the register
of Noteholders upon receipt from the Security Insurer of proof of payment by the
Security Insurer of any Noteholders' Interest Distributable Amount or
Noteholders' Principal Distributable Amount. The foregoing subrogation shall in
all cases be subject to the rights of the Noteholders to receive all Scheduled
Payments in respect of the Notes.
(d) The Trustee shall keep a complete and accurate record of all
funds deposited by the Security Insurer into the Collection Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Note. The Security Insurer shall have the right to inspect such records
at reasonable times upon one Business Day's prior notice to the Trustee.
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(e) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Security Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Related Document,
the Noteholders are not entitled to institute proceedings directly against the
Security Insurer.
SECTION 5.19. PREFERENCE CLAIMS.
(a) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any Noteholders' Interest Distributable
Amount or Noteholders' Principal Distributable Amount paid on a Note has been
avoided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Security Insurer, shall comply with the
provisions of the Note Policy to obtain payment by the Security Insurer of such
avoided payment, and shall, at the time it provides notice to the Security
Insurer, notify Holders of the Notes by mail that, in the event that any
Noteholder's payment is so recoverable, such Noteholder will be entitled to
payment pursuant to the terms of the Note Policy. The Trustee shall furnish to
the Security Insurer its records evidencing the payments of principal of and
interest on Notes, if any, which have been made by the Trustee and subsequently
recovered from Noteholders, and the dates on which such payments were made.
Pursuant to the terms of the Note Policy, the Security Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined
in the Note Policy) and not to the Trustee or any Noteholder directly (unless a
Noteholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Security
Insurer will make such payment to the Trustee for distribution to such
Noteholder upon proof of such payment reasonably satisfactory to the Security
Insurer).
(b) The Trustee shall promptly notify the Security Insurer of any
proceeding or the institution of any action (of which the Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Trustee hereby agree that so long as
an Insurer Default shall not have occurred and be continuing, the Security
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal at the expense of the Security Insurer, but subject
to reimbursement as provided in the Insurance Agreement. In addition, and
without limitation of the foregoing, as set forth in Section 5.18(c), the
Security Insurer shall be subrogated to, and each Noteholder and the Trustee
hereby delegate and assign, to the fullest extent
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permitted by law, the rights of the Trustee and each Noteholder in the
conduct of any proceeding with respect to a Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
ARTICLE VI
THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default of which a Responsible Officer of the
Trustee shall have actual knowledge has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and in the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) prior to the occurrence of a Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge, and after
the curing of all such Events of Default which may have occurred, (A) the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, (B) the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, (C) no implied covenants or
obligations shall be read into this Agreement against the Trustee and (D)
in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon all resolutions, statements, reports, documents,
orders, certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; PROVIDED, HOWEVER, that the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture and, if applicable, the
Spread Account Agreement and the Trustee's other Related Documents. If any
such instrument is found not to conform in any material respect to the
requirements of this Agreement, the Trustee shall notify the Noteholders of
such instrument in the event the Trustee, after so requesting, does not
receive a satisfactorily corrected document.
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(c) The Trustee may not be relieved from liability in its individual
capacity from liability to the Noteholders for its willful misconduct,
negligence or bad faith in connection with the distribution of amounts from the
Note Distribution Account in accordance with the terms hereof, or for its
willful misconduct, negligence or bad faith in the performance of its duties as
Trustee hereunder, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.12 or relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or executing or omitting to execute any power conferred upon the Trustee,
under this Agreement.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Indenture
or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) The Trustee shall, upon one Business Day's prior notice to the
Trustee, permit any representative of the Security Insurer, during the Trustee's
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normal business hours, to examine all books of account, records, reports and
other papers of the Trustee relating to the Notes, to make copies and extracts
therefrom and to discuss the Trustee's affairs and actions, as such affairs and
actions relate to the Trustee's duties with respect to the Notes, with the
Trustee's officers and employees responsible for carrying out the Trustee's
duties with respect to the Notes.
(j) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer, or any other party, under the Sale and Servicing Agreement, except
during such time, if any, as the Backup Servicer shall be the successor to, and
be vested with the rights, powers, duties and privileges of the Servicer in
accordance with the terms of, the Sale and Servicing Agreement.
(k) The Trustee shall, and hereby agrees that it will, perform all of
the obligations and duties required of it under the Sale and Servicing
Agreement.
(l) The Trustee shall, and hereby agrees that it will, hold the Note
Policy in trust, and will hold any proceeds of any claim on the Note Policy in
trust solely for the use and benefit of the Noteholders.
(m) Without limiting the generality of this Section 6.01, the Trustee
shall have no duty (i) to see to any recording, filing or depositing of this
Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see to the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to effect or maintain any such insurance,
(iii) to see to the payment or discharge of any tax, assessment or other
governmental charge or any Lien or encumbrance of any kind owing with respect
to, assessed or levied against any part of the Trust, (iv) to confirm or verify
the contents of any reports or certificates delivered to the Trustee pursuant to
this Indenture or the Sale and Servicing Agreement believed by the Trustee to be
genuine and to have been signed or presented by the proper party or parties, or
(v) to inspect the Financed Vehicles at any time or ascertain or inquire as to
the performance of observance of any of the Issuer's, the Seller's or the
Servicer's representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Receivable Files under the
Agreement.
(n) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of an Event of Default or any other default under this
Agreement unless a Responsible Officer of the Trustee shall have received
written notice thereof. In the absence of receipt of such notice, the Trustee
may conclusively assume that there is no Event of Default or other such default.
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SECTION 6.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Other than with respect to actions required to be taken by the
Trustee pursuant to Section 5.18 and 5.19, before the Trustee acts or refrains
from acting, it may require an Officers' Certificate (with respect to factual
matters) or an Opinion of Counsel, as applicable, which shall not be at the
expense of the Trustee. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel, as applicable, or as directed by the requisite amount of
Note Owners as provided herein.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Notes shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Holders of Notes or the
Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; PROVIDED, HOWEVER, that the Trustee
shall, upon the occurrence of an Event of Default (that has not been cured),
exercise the rights and powers vested in it by this Indenture with reasonable
care and skill.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
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opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by the Security
Insurer (so long as no Insurer Default shall have occurred and be continuing)
or (if an Insurer Default shall have occurred and be continuing) by the
Holders of Notes evidencing not less than 25% of the Outstanding Amount
thereof; PROVIDED, HOWEVER, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture or the Sale and Servicing Agreement, the Trustee may
require reasonable indemnity against such cost, expense or liability as a
condition to so proceeding; the reasonable expense of every such examination
shall be paid by the Person making such request, or, if paid by the Trustee,
shall be reimbursed by the Person making such request upon demand.
(h) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
(i) The Trustee shall not be required to give any bond or surety
in respect of the execution of the Trust or the Trust Estate created hereby
or the powers granted hereunder.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However,
the Trustee is required to comply with Sections 6.11 and 6.12.
SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture, the Trust Estate or the Notes, it shall not be accountable
for the Issuer's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes
other than the Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Trustee, the
Trustee shall mail to each Noteholder and the Security Insurer notice of the
Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant
to the mandatory redemption provisions of such Note), the Trustee may
withhold the notice if and so long as a committee of its
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Responsible Officers in good faith determines that withholding the notice is
in the interests of Noteholders.
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall
deliver to each Noteholder such information as may be required to enable such
holder to prepare its federal and state income tax returns.
SECTION 6.07. COMPENSATION AND INDEMNITY.
(a) AFL in a separate letter agreement (the "Letter Agreement")
has covenanted and agreed to pay to the Trustee, and the Trustee shall be
entitled to, certain annual fees, which shall not be limited by any law on
compensation of a trustee of an express trust. In the Letter Agreement, AFL
has also agreed to reimburse the Trustee for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition
to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. AFL has also agreed to
indemnify the Trustee and any director, officer, employee or agent of the
Trustee against any and all loss, liability or expense (including attorneys'
fees) incurred by it in connection with the administration of this trust and
the performance of its duties hereunder.
(b) If notwithstanding the provisions of the Letter Agreement, AFL
fails to pay any fee, expense or indemnified amount due to the Trustee
pursuant to the terms of the Letter Agreement, the Trustee shall be entitled
to a distribution in respect of such amount pursuant of Section 4.6(ii) of
the Sale and Servicing Agreement. If notwithstanding the provisions of the
Letter Agreement, AFL fails to make any payment or reimbursement due to the
Trustee for any expense or claim for indemnification to which the Trustee is
entitled pursuant to the terms of the Letter Agreement, the Trustee shall be
entitled to a distribution in respect of such amount pursuant to priority
SIXTH of Section 3.03(b) of the Spread Account Agreement. The Issuer's
payment obligations to the Trustee pursuant to this Section shall survive the
discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 5.01(v) or (vi) with respect to
the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other
applicable Federal or state bankruptcy, insolvency or similar law.
Notwithstanding anything else set forth in this Indenture or the Related
Documents, the Trustee agrees that the obligations of the Issuer (but not
AFL) to the Trustee hereunder and under the Related Documents shall be
recourse to the Trust Estate only. In addition, the Trustee agrees that its
recourse to the Issuer, the Trust Estate, the Seller and amounts held
pursuant of the Spread Account Agreement shall be limited to the right to
receive the distributions referred to in the first two sentences of this
Section 6.07(b).
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SECTION 6.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at
any time by so notifying the Issuer and the Security Insurer. The Issuer
may, with the consent of the Security Insurer, and, at the request of the
Security Insurer shall, remove the Trustee, unless an Insurer Default shall
have occurred and be continuing) if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or state
banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trustee or for
any substantial part of the Trustee's property, or ordering the
winding-up or liquidation of the Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect to
the Trustee and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or other similar official) for the Trustee or for any
substantial part of the Trustee's property, or makes any assignment for
the benefit of creditors or fails generally to pay its debts as such
debts become due or takes any corporate action in furtherance of any of
the foregoing;
(v) the Trustee otherwise becomes incapable of acting; or
(vi) the rating assigned to the long-term unsecured debt
obligations of the Trustee (or the holding company thereof) by the
Rating Agencies shall be lowered below the rating of "BBB", "Baa3" or
equivalent rating or be withdrawn by either of the Rating Agencies.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly appoint a successor
Trustee acceptable to the Security Insurer (so long as an Insurer Default shall
not have occurred and be
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continuing). If the Issuer fails to appoint such a successor Trustee, the
Security Insurer may appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Noteholders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the
Security Insurer (provided that no Insurer Default shall have occurred and be
continuing), the Issuer or the Holders of a majority in Outstanding Amount of
the Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to this Section and payment of all fees and expenses owed to the
outgoing Trustee. Notwithstanding the replacement of the Trustee pursuant to
this Section, the retiring Trustee shall be entitled to payment or
reimbursement of such amounts as such Person is entitled pursuant to Section
6.07.
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee. The Trustee shall provide the
Rating Agencies prompt notice of any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but
not delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes
either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have
the full
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force which it is anywhere in the Notes or in this Indenture provided that
the certificate of the Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust may at the time be located, the Trustee, with the
consent of the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing), shall have the power and may execute and deliver
all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of
the Trust, and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, such title to the Trust, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor Trustee under Section 6.11 and
no notice to Noteholders of the appointment of any co-trustee or separate
trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as
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effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the
conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed
with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute
the Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition. The Trustee shall
provide copies of such reports to the Security Insurer upon request. The
Trustee shall comply with TIA Section 310(b), including the optional
provision permitted by the second sentence of TIA Section 310(b)(9);
PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities
of the Issuer are outstanding if the requirements for such exclusion set
forth in TIA Section 310(b)(1) are met.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints Norwest
Bank Minnesota, National Association as the Indenture Collateral Agent with
respect to the Indenture Collateral, and Norwest Bank Minnesota, National
Association hereby accepts such appointment and agrees to act as Indenture
Collateral Agent with respect to the Indenture Collateral for the Issuer
Secured Parties, to maintain custody and possession of such Indenture
Collateral (except as otherwise provided hereunder) and to perform the other
duties of the Indenture Collateral Agent in accordance with the provisions of
this Indenture. Each Issuer Secured Party hereby authorizes the Indenture
Collateral Agent to take such action on its behalf, and to
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exercise such rights, remedies, powers and privileges hereunder, as the
Controlling Party may direct and as are specifically authorized to be
exercised by the Indenture Collateral Agent by the terms hereof, together
with such actions, rights, remedies, powers and privileges as are reasonably
incidental thereto. The Indenture Collateral Agent shall act upon and in
compliance with the written instructions of the Controlling Party delivered
pursuant to this Indenture promptly following receipt of such written
instructions; provided that the Indenture Collateral Agent shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Indenture, (ii) which are in violation
of any applicable law, rule or regulation or (iii) for which the Indenture
Collateral Agent has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Indenture
Collateral Agent of its express duties hereunder, except where this Indenture
provides that the Indenture Collateral Agent is permitted to act only
following and in accordance with such instructions.
SECTION 6.14. PERFORMANCE OF DUTIES. The Indenture Collateral
Agent shall have no duties or responsibilities except those expressly set
forth in this Indenture and the other Related Documents to which the
Indenture Collateral Agent is a party or as directed by the Controlling Party
in accordance with this Indenture. The Indenture Collateral Agent shall not
be required to take any discretionary actions hereunder except at the written
direction and with the indemnification of the Controlling Party. The
Indenture Collateral Agent shall, and hereby agrees that it will, perform all
of the duties and obligations required of it under the Sale and Servicing
Agreement.
SECTION 6.15. LIMITATION ON LIABILITY. Neither the Indenture
Collateral Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it or them hereunder,
or in connection herewith, except that the Indenture Collateral Agent shall
be liable for its negligence, bad faith or willful misconduct; nor shall the
Indenture Collateral Agent be responsible for the validity, effectiveness,
value, sufficiency or enforceability against the Issuer of this Indenture or
any of the Indenture Collateral (or any part thereof). Notwithstanding any
term or provision of this Indenture, the Indenture Collateral Agent shall
incur no liability to Issuer or the Issuer Secured Parties for any action
taken or omitted by the Indenture Collateral Agent in connection with the
Indenture Collateral, except for the negligence or willful misconduct on the
part of the Indenture Collateral Agent, and, further, shall incur no
liability to the Issuer Secured Parties except for negligence or willful
misconduct in carrying out its duties to the Issuer Secured Parties. Subject
to Section 6.16, the Indenture Collateral Agent shall be protected and shall
incur no liability to any such party in relying upon the accuracy, acting in
reliance upon the contents, and assuming the genuineness of any notice,
demand, certificate, signature, instrument or other document reasonably
believed by the Indenture Collateral Agent to be genuine and to have been
duly executed by the appropriate signatory, and (absent actual knowledge to
the contrary)
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the Indenture Collateral Agent shall not be required to make any independent
investigation with respect thereto. The Indenture Collateral Agent shall at
all times be free independently to establish to its reasonable satisfaction,
but shall have no duty to independently verify, the existence or nonexistence
of facts that are a condition to the exercise or enforcement of any right or
remedy hereunder or under any of the Related Documents. The Indenture
Collateral Agent may consult with counsel, and shall not be liable for any
action taken or omitted to be taken by it hereunder in good faith and in
accordance with the written advice of such counsel. The Indenture Collateral
Agent shall not be under any obligation to exercise any of the remedial
rights or powers vested in it by this Indenture or to follow any direction
from the Controlling Party unless it shall have received reasonable security
or indemnity satisfactory to the Indenture Collateral Agent against the
costs, expenses and liabilities which might be incurred by it.
SECTION 6.16. RELIANCE UPON DOCUMENTS. In the absence of bad
faith or negligence on its part, the Indenture Collateral Agent shall be
entitled to rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed
or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such
document or instrument.
SECTION 6.17. SUCCESSOR INDENTURE COLLATERAL AGENT.
(a) MERGER. Any Person into which the Indenture Collateral Agent
may be converted or merged, or with which it may be consolidated, or to which
it may sell or transfer its trust business and assets as a whole or
substantially as a whole, or any Person resulting from any such conversion,
merger, consolidation, sale or transfer to which the Indenture Collateral
Agent is a party, shall (provided it is otherwise qualified to serve as the
Indenture Collateral Agent hereunder) be and become a successor Indenture
Collateral Agent hereunder and be vested with all of the title to and
interest in the Indenture Collateral and all of the trusts, powers,
discretions, immunities, privileges and other matters as was its predecessor
without the execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding, except to the extent, if any, that any such action
is necessary to perfect, or continue the perfection of, the security interest
of the Issuer Secured Parties in the Indenture Collateral.
(b) RESIGNATION. The Indenture Collateral Agent and any successor
Indenture Collateral Agent may resign at any time by so notifying the Issuer
and the Security Insurer.
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(c) REMOVAL. The Indenture Collateral Agent may be removed by the
Controlling Party at any time, with or without cause, by an instrument or
concurrent instruments in writing delivered to the Indenture Collateral
Agent, the other Issuer Secured Party and the Issuer. A temporary successor
may be removed at any time to allow a successor Indenture Collateral Agent to
be appointed pursuant to subsection (d) below. Any removal pursuant to the
provisions of this subsection (c) shall take effect only upon the date which
is the latest of (i) the effective date of the appointment of a successor
Indenture Collateral Agent and the acceptance in writing by such successor
Indenture Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof, and
(ii) receipt by the Controlling Party of an Opinion of Counsel to the effect
described in Section 3.06.
(d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the
sole right to appoint each successor Indenture Collateral Agent. Every
temporary or permanent successor Indenture Collateral Agent appointed
hereunder shall execute, acknowledge and deliver to its predecessor and to
the Trustee, each Issuer Secured Party and the Issuer an instrument in
writing accepting such appointment hereunder and the relevant predecessor
shall execute, acknowledge and deliver such other documents and instruments
as will effectuate the delivery of all Indenture Collateral to the successor
Indenture Collateral Agent, whereupon such successor, without any further
act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessor. Such
predecessor shall, nevertheless, on the written request of either Issuer
Secured Party or the Issuer, execute and deliver an instrument transferring
to such successor all the estates, properties, rights and powers of such
predecessor hereunder. In the event that any instrument in writing from the
Issuer or an Issuer Secured Party is reasonably required by a successor
Indenture Collateral Agent to more fully and certainly vest in such successor
the estates, properties, rights, powers, duties and obligations vested or
intended to be vested hereunder in the Indenture Collateral Agent, any and
all such written instruments shall, at the request of the temporary or
permanent successor Indenture Collateral Agent, be forthwith executed,
acknowledged and delivered by the Trustee or the Issuer, as the case may be.
The designation of any successor Indenture Collateral Agent and the
instrument or instruments removing any Indenture Collateral Agent and
appointing a successor hereunder, together with all other instruments
provided for herein, shall be maintained with the records relating to the
Indenture Collateral and, to the extent required by applicable law, filed or
recorded by the successor Indenture Collateral Agent in each place where such
filing or recording is necessary to effect the transfer of the Indenture
Collateral to the successor Indenture Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.
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SECTION 6.18. COMPENSATION AND INDEMNITY.
(a) AFL in a separate Letter Agreement has covenanted and agreed
to pay to the Indenture Collateral Agent, and the Indenture Collateral Agent
shall be entitled to, certain annual fees, which shall not be limited by any
law on compensation of an Indenture Collateral Agent of an express trust. In
such Letter Agreement, AFL has also agreed to reimburse the Indenture
Collateral Agent for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements, indemnified amounts and advances of the Indenture
Collateral Agent's agents, counsel, accountants and experts. AFL has also
agreed to indemnify the Indenture Collateral Agent and any director, officer,
employee or agent of the Indenture Collateral Agent against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder.
(b) If notwithstanding the provisions of the Letter Agreement or
this Agreement, AFL fails to pay any fee expense or indemnified amount due to
the Indenture Collateral Agent pursuant to the terms of the Letter Agreement
or this Agreement, the Indenture Collateral Agent shall be entitled to a
distribution in respect of such amount pursuant to Section 4.6(ii) of the
Sale and Servicing Agreement. If notwithstanding the provisions of the
Letter Agreement or this Agreement, AFL fails to make any payment or
reimbursement due to the Indenture Collateral Agent for any expense or claim
for indemnification to which the Indenture Collateral Agent is entitled
pursuant to the terms of the Letter Agreement or this Agreement, the
Indenture Collateral Agent shall be entitled to a distribution in respect of
such amount pursuant to priority SIXTH of Section 3.03(b) of the Spread
Account Agreement. The Issuer's payment obligations to the Indenture
Collateral Agent pursuant to this Section shall survive the discharge of this
Indenture. When the Indenture Collateral Agent incurs expenses after the
occurrence of a Default specified in Section 5.01(v) or (vi) with respect to
the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other
applicable Federal or state bankruptcy, insolvency or similar law.
Notwithstanding anything else set forth in this Indenture or the Related
Documents, the Indenture Collateral Agent agrees that the obligations of the
Issuer to the Indenture Collateral Agent hereunder and under the Related
Documents shall be recourse to the Trust Estate only. In addition, the
Indenture Collateral Agent agrees that its recourse to the Issuer, the Trust
Estate, the Seller and amounts held pursuant to the Spread Account Agreement
shall be limited to the right to receive the distributions referred to in the
first two sentences of this Section 6.18.
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SECTION 6.19. REPRESENTATIONS AND WARRANTIES OF THE INDENTURE
COLLATERAL AGENT. The Indenture Collateral Agent represents and warrants to
the Issuer and to each Issuer Secured Party as follows:
(a) DUE ORGANIZATION. The Indenture Collateral Agent is a
national banking association duly organized, validly existing and in good
standing under the laws of the State of Minnesota and is duly authorized and
licensed under applicable law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Indenture Collateral Agent has all
requisite right, power and authority to execute and deliver this Indenture
and to perform all of its duties as Indenture Collateral Agent hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Indenture Collateral Agent of this Indenture and the other Transaction
Documents to which it is a party, and the performance by the Indenture
Collateral Agent of its duties hereunder and thereunder, have been duly
authorized by all necessary corporate proceedings and no further approvals or
filings, including any governmental approvals, are required for the valid
execution and delivery by the Indenture Collateral Agent, or the performance
by the Indenture Collateral Agent, of this Indenture and such other Related
Documents.
(d) VALID AND BINDING INDENTURE. The Indenture Collateral Agent
has duly executed and delivered this Indenture and each other Related
Document to which it is a party, and each of this Indenture and each such
other Related Document constitutes the legal, valid and binding obligation of
the Indenture Collateral Agent, enforceable against the Indenture Collateral
Agent in accordance with its terms, except as (i) such enforceability may be
limited by bankruptcy, insolvency, reorganization and similar laws relating
to or affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 6.20. WAIVER OF SETOFFS. The Indenture Collateral Agent
hereby expressly waives any and all rights of setoff that the Indenture
Collateral Agent may otherwise at any time have under applicable law with
respect to any Trust Account and agrees that amounts in the Trust Accounts
shall at all times be held and applied solely in accordance with the
provisions hereof.
SECTION 6.21. CONTROL BY THE CONTROLLING PARTY. The Indenture
Collateral Agent shall comply with notices and instructions given by the
Issuer only if accompanied by the written consent of the Controlling Party,
except that if any Event of Default shall have occurred and be continuing,
the Indenture Collateral Agent shall act upon and comply with notices and
instructions given by the Controlling Party alone in the place and stead of
the Issuer.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES TO
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee
(a) not more than five days after the earlier of (i) each Record Date and
(ii) three months after the last Record Date, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Notes as of such Record Date, (b) at such other times as the Trustee may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10
days prior to the time such list is furnished; PROVIDED, HOWEVER, that so
long as the Trustee is the Note Registrar, no such list shall be required to
be furnished. The Trustee or, if the Trustee is not the Note Registrar, the
Issuer shall furnish to the Security Insurer in writing on an annual basis on
each March 31 and at such other times as the Security Insurer may request a
copy of the list.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
NOTEHOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Trustee as provided in
Section 7.01 and the names and addresses of Holders of Notes received by the
Trustee in its capacity as Note Registrar. The Trustee may destroy any list
furnished to it as provided in such Section 7.01 upon receipt of a new list
so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
SECTION 7.03. REPORTS BY ISSUER.
(a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from time
to time by rules and
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regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA Section 313(c)) such summaries
of any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as may
be required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. REPORTS BY TRUSTEE. If required by TIA Section
313(a), within 60 days after each March 31, beginning with March 31, 1999,
the Trustee shall mail to the Security Insurer and each Noteholder as
required by TIA Section 313(c) a brief report dated as of such date that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b).
A copy of each report at the time of its mailing to Noteholders
shall be filed by the Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Trustee if
and when the Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to
or receivable by the Trustee pursuant to this Indenture as instructed in
writing by the Servicer. The Trustee shall apply all such money received by
it as provided in this Indenture. Except as otherwise expressly provided in
this Indenture, if any default occurs in the making of any payment or
performance under any agreement or instrument that is part of this Indenture
or the Notes, the Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and
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prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. TRUST ACCOUNTS.
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Trustee, for the
benefit of the Noteholders, the Trust Accounts as provided in Section 4.1 of
the Sale and Servicing Agreement.
(b) On each Payment Date and Redemption Date, the Trustee shall
distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and unpaid
on the Notes for principal, interest and premium, if any, first to pay all
accrued and unpaid interest, and then to pay principal and premium, if any,
on the Notes in the following amounts and in the following order of priority
as directed in writing by the Servicer (except as otherwise provided in
Section 5.06):
(i) accrued and unpaid interest on the Notes, provided that if
funds in the Note Distribution Account are not sufficient to pay the
entire amount of accrued but unpaid interest on each class of Notes, the
amount in the Note Distribution Account shall be applied to the payment
of such interest on each class of Notes pro rata on the basis of the
amount of accrued and unpaid interest on each class of Notes;
(ii) any amounts deposited in the Note Distribution Account with
respect to the Class A-1 Prepayment Amount, the Class A-2 Prepayment
Amount, the Class A-3 Prepayment Amount, the Class A-4 Prepayment Amount
and the Class A-5 Prepayment Amount or the Class A-1 Prepayment Premium,
the Class A-2 Prepayment Premium, the Class A-3 Prepayment Premium, the
Class A-4 Prepayment Premium and the Class A-5 Prepayment Premium shall
be distributed to the Holders of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes,
respectively;
(iii) to the Holders of the Class A-1 Notes in reduction of the
Outstanding Amount of the Class A-1 Notes until the Outstanding Amount
of the Class A-1 Notes is reduced to zero;
(iv) to the Holders of the Class A-2 Notes in reduction of the
Outstanding Amount of the Class A-2 Notes until the Outstanding Amount
of the Class A-2 Notes is reduced to zero;
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(v) to the Holders of the Class A-3 Notes in reduction of the
Outstanding Amount of the Class A-3 Notes until the Outstanding Amount
of the Class A-3 Notes is reduced to zero;
(vi) to the Holders of the Class A-4 Notes in reduction of the
Outstanding Amount of the Class A-4 Notes until the Outstanding Amount
of the Class A-4 Notes is reduced to zero; and
(vii) to the Holders of the Class A-5 Notes in reduction of the
Outstanding Amount of the Class A-5 Notes until the Outstanding Amount
of the Class A-5 Notes is reduced to zero.
SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS.
(a) So long as no Default or Event of Default shall have occurred
and be continuing, all or a portion of the funds in the Trust Accounts shall
be invested and reinvested in Eligible Investments in accordance with the
provisions of Section 4.1(e) of the Sale and Servicing Agreement.
(b) Subject to Section 6.01(c), the Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except
for losses attributable to the Trustee's failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as Trustee, in accordance with their terms.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
NOTEHOLDERS.
(a) Without the consent of the Holders of any Notes but with the
consent of the Security Insurer (unless an Insurer Default shall have
occurred and be continuing) and with prior notice to the Rating Agencies, the
Issuer and the Trustee, when authorized by an Issuer Order, at any time and
from time to time, may enter into one or more indentures supplemental hereto
(which shall conform to the provisions of the Trust Indenture Act as in force
at the date of the execution thereof), in form satisfactory to the Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm
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unto the Indenture Collateral Agent any property subject or required to
be subjected to the lien created by this Indenture, or to subject to the
lien created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Collateral Agent;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
PROVIDED that such action shall not adversely affect the interests of
the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
Federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but
with the consent of the Security Insurer (unless an Insurer Default shall
have occurred and be continuing) and with prior notice to the Rating
Agencies, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or
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changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Holders of the
Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.
The Issuer and the Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies, with the consent of the Security
Insurer (unless an Insurer Default shall have occurred and be continuing) and
with the consent of the Holders of not less than a majority of the
Outstanding Amount of the Notes, by Act of such Holders delivered to the
Issuer and the Trustee, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner
or eliminating any of the provisions of, this Indenture or of modifying in
any manner the rights of the Holders of the Notes under this Indenture;
PROVIDED, HOWEVER, that, subject to the express rights of the Security
Insurer under the Related Documents, including its rights to agree to certain
modifications of the Receivables pursuant to Section 3.2 of the Sale and
Servicing Agreement and its rights referred to in Section 5.02(c), no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place of
payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after
the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding";
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(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Related Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including the
calculation of any of the individual components of such calculation) or
to affect the rights of the Holders of Notes to the benefit of any
provisions for the mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien created by this Indenture with respect to any part
of the Trust Estate or, except as otherwise permitted or contemplated
herein or in the Spread Account Agreement, terminate the lien created by
this Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security provided by the lien created by this
Indenture.
The Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture, and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Trustee
shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to
the Holders of the Notes to which such amendment or supplemental indenture
relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Trustee to mail such notice, or
any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing,
or permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts
created by this
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Indenture, the Trustee shall be entitled to receive, and subject to Sections
6.01 and 6.02 shall be fully protected in relying upon, an Opinion of Counsel
(which shall not be at the expense of the Trustee) stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture.
The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the
execution of any supplemental indenture pursuant to the provisions hereof,
this Indenture shall be and be deemed to be modified and amended in
accordance therewith with respect to the Notes affected thereby, and the
respective rights, limitations of rights, obligations, duties, liabilities
and immunities under this Indenture of the Trustee, the Issuer and the
Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and
all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every
amendment of this Indenture and every supplemental indenture executed
pursuant to this Article IX shall conform to the requirements of the Trust
Indenture Act as then in effect so long as this Indenture shall then be
qualified under the Trust Indenture Act.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Trustee
shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Trustee
shall so determine, new notes so modified as to conform, in the opinion of
the Trustee and the Issuer, to any such supplemental indenture may be
prepared and executed by the Issuer and authenticated and delivered by the
Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION.
(a) In the event that the Seller or the Servicer pursuant to
Section 9.1(a) of the Sale and Servicing Agreement purchases the corpus of
the Trust, the Notes are subject to redemption in whole, but not in part, on
the Payment Date on which such repurchase occurs, for a purchase price equal
to the Redemption Price;
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PROVIDED, HOWEVER, that the Issuer has available funds sufficient to pay the
Redemption Price. The Seller, the Servicer or the Issuer shall furnish the
Trustee, Owner Trustee, Security Insurer and the Rating Agencies with written
notice of such redemption. If the Notes are to be redeemed pursuant to this
Section 10.01(a), the Servicer or the Issuer shall furnish notice of such
election to the Trustee not later than 25 days prior to the Redemption Date,
and the Issuer shall deposit with the Trustee in the Note Distribution
Account the Redemption Price of the Notes to be redeemed, whereupon all such
Notes shall be due and payable on the Redemption Date upon the furnishing of
a notice complying with Section 10.02 to each Holder of the Notes.
(b) In the event that on the Payment Date on or immediately
following the last day of the Funding Period, any portion of the Pre-Funded
Amount remains on deposit in the Pre-Funding Account after giving effect to
the purchase of all Subsequent Receivables, including any such purchase on
such Redemption Date, each class of Notes will be redeemed in part, on a pro
rata basis, in an aggregate principal amount equal to the Class A-1
Prepayment Amount, the Class A-2 Prepayment Amount, the Class A-3 Prepayment
Amount, the Class A-4 Prepayment Amount and the Class A-5 Prepayment Amount,
as applicable.
If the Pre-Funded Amount at the end of the Pre-Funding Period
exceeds $100,000, the Issuer shall also pay to the Holders of each class of
Notes, on a pro rata basis, on the Redemption Date the Class A-1 Prepayment
Premium, the Class A-2 Prepayment Premium, the Class A-3 Prepayment Premium,
the Class A-4 Prepayment Premium and the Class A-5 Prepayment Premium, as
applicable; PROVIDED, HOWEVER, that the Issuer's obligation to pay the Class
A-1 Prepayment Premium, the Class A-2 Prepayment Premium, the Class A-3
Prepayment Premium, the Class A-4 Prepayment Premium or the Class A-5
Prepayment Premium shall, as set forth in Section 2.4(d) of the Sale and
Servicing Agreement, be limited solely to funds which are received by the
Issuer from AFL pursuant to Section 6.2 of the Purchase Agreement as
liquidated damages for the failure of AFL to deliver Subsequent Receivables
and no other assets of the Issuer will be available to pay the Class A-1
Prepayment Premium, the Class A-2 Prepayment Premium, the Class A-3
Prepayment Premium, the Class A-4 Prepayment Premium or the Class A-5
Prepayment Premium, under any circumstances.
(c) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, the proceeds of such sale shall be
distributed as provided in Section 5.06. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(c), the Servicer or the Issuer
shall, to the extent practicable, furnish written notice of such event to the
Trustee and the Owner Trustee not later than 25 days prior to the Redemption
Date whereupon all such amounts shall be payable on the Redemption Date.
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SECTION 10.02. FORM OF REDEMPTION NOTICE.
(a) Notice of redemption under Section 10.01(a) shall be given by the
Trustee by first-class mail, postage prepaid, mailed not less than five days
prior to the applicable Redemption Date to each Holder of Notes, as of the close
of business on the Record Date with respect to the Payment Date immediately
preceding the applicable Redemption Date, at such Holder's address appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment
of the Redemption Price (which shall be the office or agency of the Issuer
to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Sections 10.01(b) and 10.01(c)
is not required to be given to Noteholders.
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or
portions thereof to be redeemed shall, following notice of redemption (if any)
as required by Section 10.02, on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Issuer to the Trustee or
the Indenture Collateral Agent to take any action under any provision of this
Indenture, the Issuer shall furnish to the Trustee or the Indenture Collateral
Agent,
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as the case may be, and to the Security Insurer if the application or request
is made to the Indenture Collateral Agent (i) an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA)
an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case
of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is necessary
to enable such signatory to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Indenture Collateral or other
property or securities with the Indenture Collateral Agent that is to be
made the basis for the release of any property subject to the lien created
by this Indenture, the Issuer shall, in addition to any obligation imposed
in Section 11.01(a) or elsewhere in this Indenture, furnish to the
Indenture Collateral Agent and the Security Insurer (so long as no Insurer
Default shall have occurred and be continuing) an Officers' Certificate
certifying or stating the opinion of each person signing such certificate
as to the fair value (within 90 days of such deposit) to the Issuer of the
Indenture Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Collateral Agent and the Security Insurer an Officers' Certificate
certifying or stating the opinion of any signer thereof as to the matters
described in clause
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(i) above, the Issuer shall also deliver to the Indenture Collateral Agent
and the Security Insurer an Independent Certificate as to the same matters,
if the fair value to the Issuer of the property to be so deposited and of
all other such property made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as
set forth in the certificates delivered pursuant to clause (i) above and
this clause (ii), is 10% or more of the Outstanding Amount of the Notes,
but such a certificate need not be furnished with respect to any property
so deposited, if the fair value thereof to the Issuer as set forth in the
related Officers' Certificate is less than $25,000 or less than one percent
of the Outstanding Amount of the Notes.
(iii) Other than with respect to any release described in clause
(A) or (B) of Section 11.01(b)(v), whenever any property or securities are
to be released from the lien created by this Indenture, the Issuer shall
also furnish to the Indenture Collateral Agent and the Security Insurer (so
long as no Insurer Default shall have occurred and be continuing) an
Officers' Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security created by this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee and the
Security Insurer an Officers' Certificate certifying or stating the opinion
of any signer thereof as to the matters described in clause (iii) above,
the Issuer shall also furnish to the Indenture Collateral Agent and the
Security Insurer an Independent Certificate as to the same matters if the
fair value of the property or securities and of all other property or
securities (other than property described in clauses (A) or (B) of Section
11.01(b)(v)) released from the lien created by this Indenture since the
commencement of the then current fiscal year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals
10% or more of the Outstanding Amount of the Notes, but such certificate
need not be furnished in the case of any release of property or securities
if the fair value thereof as set forth in the related Officers' Certificate
is less than $25,000 or less than one percent of the then Outstanding
Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the Issuer
may, without compliance with the other provisions of this Section
(A) collect, liquidate, sell or otherwise dispose of Receivables as and to
the extent permitted or required by the Related Documents (including as
provided in Section 3.1 of the Sale and Servicing Agreement) and (B) make
cash payments out of the Trust Accounts as and to the extent permitted or
required by the Related Documents.
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SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the Seller
or the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
SECTION 11.03. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
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Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.04. NOTICES, ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(a) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust Office,
(b) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Arcadia
Automobile Receivables Trust, 1998-B, in care of Wilmington Trust
Company, as Owner Trustee, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration, or at any other address previously furnished in
writing to the Trustee by Issuer. The Issuer shall promptly transmit
any notice received by it from the Noteholders to the Trustee, or
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(c) the Security Insurer by the Issuer or the Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by registered
mail or personally delivered or telexed or telecopied to the recipient as
follows:
To the Security Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518 or (212) 339-3529
(In each case in which notice or other communication to the Security Insurer
refers to an Event of Default, a claim on the Note Policy or with respect to
which failure on the part of the Security Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head--Financial Guaranty Group "URGENT MATERIAL ENCLOSED.")
Notices required to be given to the Rating Agencies by the
Issuer, the Trustee or the Owner Trustee shall be in writing,
personally delivered or mailed by certified mail, return receipt
requested to (i) in the case of Moody's, at the following address:
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007 and (ii) in the case of Standard &
Poor's, at the following address: Standard & Poor's Ratings Services,
26 Broadway (20th Floor), New York, New York 10004, Attention: Asset
Backed Surveillance Department; or as to each of the foregoing, at
such other address as shall be designated by written notice to the
other parties.
SECTION 11.05 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
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<PAGE>
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event of Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Trustee or any Paying Agent
to such Holder, that is different from the methods provided for in this
Indenture for such payments or notices. The Issuer will furnish to the Trustee
a copy of each such agreement and the Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not.
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<PAGE>
All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.10. SEVERABILITY. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.11. BENEFITS OF INDENTURE. The Security Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Security Insurer may disclaim any of its rights and powers
under this Indenture (in which case the Indenture Trustee may exercise such
right or power hereunder), but not its duties and obligations under the Note
Policy, upon delivery of a written notice to the Trustee.
SECTION 11.12. LEGAL HOLIDAYS. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE 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 11.14. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. RECORDING OF INDENTURE. If this Indenture is subject
to recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may
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<PAGE>
be counsel to the Trustee or any other counsel reasonably acceptable to the
Trustee, and the Security Insurer) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to
the Trustee or the Indenture Collateral Agent under this Indenture or the
Collateral Agent under the Spread Account Agreement.
SECTION 11.16. TRUST OBLIGATION. No recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Trustee on the Notes or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Trustee or of any successor or assign of the Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
SECTION 11.17. NO PETITION. The Trustee and the Indenture Collateral
Agent, by entering into this Indenture, and each Noteholder, by accepting a
Note, hereby covenant and agree that they will not at any time institute against
the Seller or the Issuer, or join in any institution against the Seller or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, this Indenture or any of the Related Documents.
SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable
prior notice, it will permit any representative of the Trustee or of the
Security Insurer, during the Issuer's normal business hours, to examine all the
books of account, records, reports, and other papers of the Issuer, to make
copies and extracts therefrom, to cause such books to be audited by independent
certified public accountants, and to discuss the Issuer's affairs, finances and
accounts with the Issuer's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for
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<PAGE>
confidential treatment are unavailing) and except to the extent that the
Trustee may reasonably determine that such disclosure is consistent with its
obligations hereunder.
SECTION 11.19. LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the
powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Agreement or any related documents.
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1998-B
By WILMINGTON TRUST COMPANY
not in its individual capacity but solely as Owner
Trustee under the Trust Agreement
By /s/ Donald G. Mackelcan
-----------------------------------------------------
Name: DONALD G. MACKELCAN
Title: ASSISTANT VICE PRESIDENT
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but solely as Trustee
and Indenture Collateral Agent
By /s/ John C. Weidner
-----------------------------------------------------
Name: John C. Weidner
Title: Corporate Trust Officer
<PAGE>
SALE AND SERVICING AGREEMENT
Dated as of June 1, 1998
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B
Issuer
ARCADIA RECEIVABLES FINANCE CORP.
Seller
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.4. Section References . . . . . . . . . . . . . . . . . . 25
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.6. Material Adverse Effect . . . . . . . . . . . . . . . . 25
ARTICLE II - CONVEYANCE OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.1. Conveyance of Initial Receivables . . . . . . . . . . . 25
SECTION 2.2. Custody of Receivable Files . . . . . . . . . . . . . . 26
SECTION 2.3. Conditions to Acceptance by Owner Trustee . . . . . . . 27
SECTION 2.4 Conveyance of Subsequent Receivables . . . . . . . . . 28
SECTION 2.5. Representations and Warranties of Seller . . . . . . . 31
SECTION 2.6. Repurchase of Receivables Upon Breach of Warranty . . . 34
SECTION 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . . . 35
SECTION 2.8. Collecting Lien Certificates Not Delivered on the
Closing Date or Subsequent Transfer Date. . . . . . . . 35
SECTION 2.9. Trust's Assignment of Administrative Receivables and
Warranty Receivables. . . . . . . . . . . . . . . . . . 35
ARTICLE III - ADMINISTRATION AND SERVICING OF RECEIVABLES . . . . . . . . . . . 36
SECTION 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . 36
SECTION 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements . . . . . . . . . . . . 37
SECTION 3.3. Realization Upon Receivables . . . . . . . . . . . . . 40
SECTION 3.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.5. Maintenance of Security Interests in Vehicles . . . . . 43
SECTION 3.6. Covenants, Representations, and Warranties of Servicer. 44
SECTION 3.7. Purchase of Receivables Upon Breach of Covenant . . . . 46
SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . 47
SECTION 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event. . . . . . . . . . . . . . . 48
SECTION 3.11. Annual Independent Accountants' Report . . . . . . . . 49
SECTION 3.12. Access to Certain Documentation and Information
Regarding Receivables . . . . . . . . . . . . . . . . . 49
SECTION 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.14. Retention and Termination of Servicer . . . . . . . . . 51
SECTION 3.15. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . 51
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<PAGE>
SECTION 3.16. Duties of the Servicer under the Indenture . . . . . . 51
SECTION 3.17. Duties of the Servicer under the Insurance Agreement. . 53
SECTION 3.18. Certain Duties of the Servicer under the Trust
Agreement. . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IV - DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS . . . . . . . . . . . . . 54
SECTION 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.2. Collections . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.3. Application of Collections . . . . . . . . . . . . . . 57
SECTION 4.4. Monthly Advances . . . . . . . . . . . . . . . . . . . 58
SECTION 4.5. Additional Deposits . . . . . . . . . . . . . . . . . . 59
SECTION 4.6. Distributions . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.7. Pre-Funding Account . . . . . . . . . . . . . . . . . . 60
SECTION 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . . . 62
SECTION 4.9. Statements to Noteholders . . . . . . . . . . . . . . . 62
SECTION 4.10. Indenture Trustee as Agent . . . . . . . . . . . . . . 63
SECTION 4.11. Eligible Accounts . . . . . . . . . . . . . . . . . . . 63
ARTICLE V - THE RESERVE ACCOUNT; THE SPREAD ACCOUNT . . . . . . . . . . . . . . 64
SECTION 5.1. Withdrawals from the Reserve Account . . . . . . . . . 64
SECTION 5.2. Withdrawals from Spread Account . . . . . . . . . . . . 64
ARTICLE VI - THE SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.1. Liability of Seller . . . . . . . . . . . . . . . . . . 65
SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Amendment of Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.3. Limitation on Liability of Seller and Others . . . . . 66
SECTION 6.4. Seller May Own Notes . . . . . . . . . . . . . . . . . 66
ARTICLE VII - THE SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.1. Liability of Servicer; Indemnities . . . . . . . . . . 67
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer . . . . 68
SECTION 7.3. Limitation on Liability of Servicer, Backup Servicer
and Others. . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . 70
SECTION 7.5. Servicer and Backup Servicer Not to Resign . . . . . . 70
ARTICLE VIII - SERVICER TERMINATION EVENTS . . . . . . . . . . . . . . . . . . . 71
SECTION 8.1. Servicer Termination Event . . . . . . . . . . . . . . 71
SECTION 8.2. Consequences of a Servicer Termination Event . . . . . 73
SECTION 8.3. Appointment of Successor . . . . . . . . . . . . . . . 74
SECTION 8.4. Notification to Noteholders . . . . . . . . . . . . . . 76
SECTION 8.5. Waiver of Past Defaults . . . . . . . . . . . . . . . . 76
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<PAGE>
ARTICLE IX - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.1. Optional Purchase of All Receivables; Liquidation of
Trust Estate. . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.2. Protection of Title to Trust Property . . . . . . . . . 79
SECTION 10.3. Governing Law . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.4. Severability of Provisions . . . . . . . . . . . . . . 81
SECTION 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . 81
SECTION 10.7. Disclaimer by Security Insurer . . . . . . . . . . . . 82
SECTION 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.9. Intention of Parties . . . . . . . . . . . . . . . . . 82
SECTION 10.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.11. Limitation of Liability . . . . . . . . . . . . . . . . 83
</TABLE>
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<PAGE>
SCHEDULES
Schedule A -- Representations and Warranties of Seller and AFL
Schedule B -- Servicing Policies and Procedures
EXHIBITS
Exhibit A -- Schedule of Initial Receivables
Exhibit B -- Form of Custodian Agreement (AFL)
Exhibit C -- Form of Spread Account Agreement
Exhibit D -- Form of Receivables Purchase Agreement
Exhibit E -- Form of Servicer's Certificate
Exhibit F -- Form of Subsequent Transfer Agreement
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<PAGE>
THIS SALE AND SERVICING AGREEMENT, dated as of June 1, 1998, is
made among Arcadia Automobile Receivables Trust, 1998-B (the "Issuer"), Arcadia
Receivables Finance Corp., a Delaware corporation, as Seller (the "Seller"),
Arcadia Financial Ltd., a Minnesota corporation, in its individual capacity and
as Servicer (in its individual capacity, "AFL"; in its capacity as Servicer, the
"Servicer"), and Norwest Bank Minnesota, National Association, a national
banking association, as Backup Servicer (the "Backup Servicer").
In consideration of the mutual agreements herein contained, and
of other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All terms defined in the Spread
Account Agreement, the Indenture or the Trust Agreement (each as defined below)
shall have the same meaning in this Agreement. Whenever capitalized and used
in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally
recognized independent accountants described in Section 3.11.
ACCOUNTING DATE: With respect to a Distribution Date, the last
day of the Monthly Period immediately preceding such Distribution Date.
ACTUAL FUNDS: With respect to a Distribution Date, the sum of
(i) Available Funds for such Distribution Date, plus (ii) the portion of the
Reserve Amount, if any, deposited pursuant to Section 5.1(a) into the Collection
Account with respect to such Distribution Date.
ADDITION NOTICE: With respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.4, a notice, which shall be given
not later than 15 days prior to the related Subsequent Transfer Date, of the
Seller's designation of Subsequent Receivables to be transferred to the Issuer
and the aggregate Principal Balance of such Subsequent Receivables.
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a
Receivable which the Servicer is required to purchase pursuant to Section 3.7 or
which the Servicer has elected to purchase pursuant to Section 3.4(c).
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and
<PAGE>
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
AFL: Arcadia Financial Ltd., a Minnesota corporation.
AGGREGATE PRINCIPAL BALANCE: With respect to any Determination
Date, the sum of the Principal Balances (computed as of the related Accounting
Date) for all Receivables (other than (i) any Receivable that became a
Liquidated Receivable during the related Monthly Period and (ii) any Receivable
that became a Purchased Receivable as of the immediately preceding Accounting
Date).
AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing
Agreement, all amendments and supplements thereto and all exhibits and schedules
to any of the foregoing.
AMOUNT FINANCED: With respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs. The term "Amount Financed" shall not include any
Insurance Add-On Amounts.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable,
the rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If
after the Closing Date, the rate per annum with respect to a Receivable as of
the Closing Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.
ARCC PURCHASE AGREEMENT: The Receivables Purchase Agreement and
Assignment, dated as of December 3, 1996, as amended, between AFL and the
Seller.
ASSUMED REINVESTMENT RATE: 2.5% per annum.
AVAILABLE FUNDS: With respect to any Determination Date, the
sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account as of the related Deposit Date,
(iii) all Monthly Advances made by the Servicer as of the related Deposit Date,
and (iv) all net income from investments of funds in the Trust Accounts during
the related Monthly Period.
BACKUP SERVICER: Norwest Bank Minnesota, National Association,
or its successor in interest pursuant to Section 8.2, or such Person as shall
have been appointed as Backup Servicer or successor Servicer pursuant to Section
8.3.
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BASIC SERVICING FEE: With respect to any Monthly Period, the fee
payable to the Servicer for services rendered during such Monthly Period, which
shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied by the
Aggregate Principal Balance as of the Determination Date falling in such Monthly
Period.
BASIC SERVICING FEE RATE: 1.25% per annum.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of
any successor Servicer, successor Owner Trustee, successor Indenture Trustee
or successor Collateral Agent are authorized or obligated by law, executive
order or governmental decree to be closed.
CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE: July 15, 1999 (or,
if such day is not a Business Day, the next succeeding Business Day thereafter).
CLASS A-1 HOLDBACK AMOUNT: As of any Subsequent Transfer Date,
an amount equal to 2.5% of the amount, if any, by which the applicable "Target
Original Pool Balance" specified below is greater than the Original Pool Balance
after giving effect to the transfer of Subsequent Receivables on such Subsequent
Transfer Date:
<TABLE>
<CAPTION>
SUBSEQUENT TRANSFER DATE TARGET ORIGINAL POOL BALANCE
------------------------ -----------------------------
<S> <C>
June 23 - July 14 $476,549,423.18
July 15 - August 14 $550,000,000.00
</TABLE>
CLASS A-1 HOLDBACK SUBACCOUNT: The subaccount of the Reserve
Account, the funds in which shall consist of all Class A-1 Holdback Amounts
deposited therein during the Funding Period, other than investment earnings
thereon. Any funds in the Class A-1 Holdback Subaccount shall be withdrawn
on the Class A-1 Final Scheduled Distribution Date and distributed as
specified in Section 5.1(b).
CLASS A-1 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-1 Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class A-1 Notes that was actually deposited in the Note Distribution Account on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to Class A-1 Noteholders on the preceding Distribution Date, to the
extent permitted by law, at the Class A-1 Interest Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
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<PAGE>
CLASS A-1 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover Shortfall
for such Distribution Date.
CLASS A-1 INTEREST RATE: 5.6275% per annum.
CLASS A-1 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, the product of (x) the Class A-1 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed from and
including the most recent date to which interest has been paid (or, in the case
of the first Distribution Date, interest accrued for 22 days, which is the
number of days elapsed from and including the Closing Date to but excluding
July 15, 1998) to but excluding such Distribution Date and the denominator of
which is 360 and (z) the outstanding principal balance of the Class A-1 Notes on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments of
principal to Class A-1 Noteholders on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).
CLASS A-1 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-1 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.
CLASS A-1 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount of
interest that would accrue on the Class A-1 Prepayment Amount at the Class A-1
Interest Rate during the period commencing on and including the Distribution
Date on which the Class A-1 Prepayment Amount is required to be deposited in the
Note Distribution Account pursuant to Section 4.7 to but excluding September 21,
1998 over (ii) the amount of interest that would have accrued on the Class A-1
Prepayment Amount over the same period at a per annum rate of interest equal to
the bond equivalent yield to maturity on the Determination Date preceding such
Distribution Date on 3 month LIBOR due September 21, 1998. Such excess shall be
discounted to present value to such Distribution Date at the yield described in
clause (ii) above.
CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE: August 15, 2001
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-2 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-2 Interest Distributable Amount for
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the preceding Distribution Date, over the amount in respect of interest on the
Class A-2 Notes that was actually deposited in the Note Distribution Account on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to Class A-2 Noteholders on the preceding Distribution Date, to the
extent permitted by law, at the Class A-2 Interest Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
CLASS A-2 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover Shortfall
for such Distribution Date.
CLASS A-2 INTEREST RATE: 5.789% per annum.
CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, the product of (x) the Class A-2 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed from and
including the most recent date to which interest has been paid (or, in the case
of the first Distribution Date, interest accrued for 22 days, which is the
number of days elapsed from and including the Closing Date to but excluding
July 15, 1998) to but excluding such Distribution Date and the denominator of
which is 360 and (z) the outstanding principal balance of the Class A-2 Notes on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments of
principal to Class A-2 Noteholders on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).
CLASS A-2 PREPAYMENT AMOUNT: As of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-2 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.
CLASS A-2 PREPAYMENT PREMIUM: An amount computed by the Servicer
equal to the excess, if any, discounted as described below, of (i) the amount of
interest that would accrue on the Class A-2 Prepayment Amount at the Class A-2
Interest Rate during the period commencing on and including the Distribution
Date on which the Class A-2 Prepayment Amount is required to be deposited in the
Note Distribution Account pursuant to Section 4.7 to but excluding June 18,
1999, over (ii) the amount of interest that would have accrued on the Class A-2
Prepayment Amount over the same period at a per annum rate of interest equal to
the yield to maturity on the Determination Date preceding such Distribution Date
on 12 month LIBOR due June 18, 1999. Such excess shall be discounted to present
value to such Distribution Date at the yield described in clause (ii) above.
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CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: November 15,
2002 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-3 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-3 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-3 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-3 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-3 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-3 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-3 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-3 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-3 INTEREST RATE: 5.950% per annum.
CLASS A-3 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 22 days, which is the number of days
elapsed from and including the Closing Date to but excluding July 15, 1998)
at the Class A-3 Interest Rate on the outstanding principal balance of the
Class A-3 Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-3 Noteholders on or prior to
such immediately preceding Distribution Date.
CLASS A-3 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-3 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-3 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of
(i) the amount of interest that would accrue on the Class A-3 Prepayment Amount
at the Class A-3 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-3 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding August 15, 2000, over (ii) the amount of interest that would have
accrued on the Class A-3 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 6.000% U.S. Treasury Note due
August 15, 2000. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
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CLASS A-4 FINAL SCHEDULED DISTRIBUTION DATE: November 15,
2003 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-4 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-4 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-4 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-4 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-4 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-4 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-4 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-4 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-4 INTEREST RATE: 6.000% per annum.
CLASS A-4 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 22 days, which is the number of days
elapsed from and including the Closing Date to but excluding July 15, 1998)
at the Class A-4 Interest Rate on the outstanding principal balance of the
Class A-4 Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-4 Noteholders on or prior to
such immediately preceding Distribution Date.
CLASS A-4 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-4 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-4 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of
(i) the amount of interest that would accrue on the Class A-4 Prepayment Amount
at the Class A-4 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-4 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding September 30, 2001, over (ii) the amount of interest that would
have accrued on the Class A-4 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 6.375% U.S. Treasury Note due
September 30, 2001. Such excess shall be
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discounted to present value to such Distribution Date at the yield described
in clause (ii) above.
CLASS A-5 FINAL SCHEDULED DISTRIBUTION DATE: June 15, 2006
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
CLASS A-5 INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Class A-5 Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of interest on
the Class A-5 Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-5 Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class A-5 Interest
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CLASS A-5 INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Class A-5 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-5 Interest Carryover
Shortfall for such Distribution Date.
CLASS A-5 INTEREST RATE: 6.060% per annum.
CLASS A-5 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 22 days, which is the number of days
elapsed from and including the Closing Date to but excluding July 15, 1998)
at the Class A-5 Interest Rate on the outstanding principal balance of the
Class A-5 Notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to Class A-5 Noteholders on or prior to
such immediately preceding Distribution Date.
CLASS A-5 PREPAYMENT AMOUNT: As of the Distribution Date on
or immediately following the last day of the Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount
equal to the Class A-5 Noteholders' pro rata share (based on the respective
current outstanding principal balance of each class of Notes) of the
Pre-Funded Amount as of such Distribution Date.
CLASS A-5 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of
(i) the amount of interest that would accrue on the Class A-5 Prepayment Amount
at the Class A-5 Interest Rate during the period commencing on and including
the Distribution Date on which the Class A-5 Prepayment Amount is required to
be deposited in the Note Distribution Account pursuant to Section 4.7 to but
excluding April 30, 2002, over (ii) the amount of interest that would have
accrued on the Class A-5 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to
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maturity on the Determination Date preceding such Distribution Date on the
6.625% U.S. Treasury Note due April 30, 2002. Such excess shall be
discounted to present value to such Distribution Date at the yield described
in clause (ii) above.
CLOSING DATE: June 23, 1998.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase
Agreement and Assignment, dated as of June 1, 1998, between AFL and the
Seller.
COLLATERAL AGENT: The Collateral Agent named in the Spread
Account Agreement, and any successor thereto pursuant to the terms of the
Spread Account Agreement.
COLLATERAL INSURANCE: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy, pursuant to Section 3.4(e).
COLLECTED FUNDS: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during the related Monthly Period, including all Liquidation
Proceeds collected during the related Monthly Period (but excluding any
Monthly Advances and any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section
4.1(a).
COLLECTION RECORDS: All manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.
COMPUTER TAPE: The computer tape generated on behalf of the
Seller which provides information relating to the Receivables and which was
used by the Seller and AFL in selecting the Receivables conveyed to the Trust
hereunder.
CORPORATE TRUST OFFICE: With respect to the Owner Trustee,
the principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing
Date is located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890; the telecopy number for the Corporate Trust Administration of
the Owner Trustee on the date of the execution of this Agreement is
(302) 651-8882; with respect to the Indenture Trustee, the principal office of
the Indenture Trustee at which at any particular time its corporate trust
business shall be administered, which office is located at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate
Trust Services--Asset Backed Administration; the telecopy number for the
Corporate Trust Services of the Indenture Trustee on the date of execution of
this Agreement is (612) 667-3539.
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CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on a Receivable, an amount
equal to the excess of the Principal Balance of such Receivable immediately
prior to such order over the Principal Balance of such Receivable as so
reduced or the net present value (using as the discount rate the higher of
the contract rate or the rate of interest, if any, specified by the court in
such order) of the Scheduled Payments as so modified or restructured. A
"Cram Down Loss" shall be deemed to have occurred on the date of issuance of
such order.
CREDIT ENHANCEMENT FEE: With respect to any Distribution
Date, the amount to be paid to the Security Insurer pursuant to Section
4.6(vi) and the amount to which the Seller is entitled pursuant to Section
4.6(vii).
CUSTODIAN: AFL and any other Person named from time to time
as custodian in any Custodian Agreement acting as agent for the Trust, which
Person must be (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to
time in effect between the Custodian named therein and the Trust,
substantially in the form of Exhibit B hereto, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, which Custodian Agreement and any amendments, supplements or
modifications thereto shall (so long as an Insurer Default shall not have
occurred and be continuing) be acceptable to the Security Insurer.
DEALER: A seller of new or used automobiles or light trucks
that originated one or more of the Receivables and sold the respective
Receivable, directly or indirectly, to AFL under an existing agreement
between such seller and AFL.
DEALER AGREEMENT: An agreement between AFL and a Dealer
relating to the sale of retail installment sale contracts and installment
notes to AFL and all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to AFL.
DEFICIENCY CLAIM AMOUNT: As defined in Section 5.2(a).
DEFICIENCY CLAIM DATE: With respect to any Distribution Date,
the fourth Business Day immediately preceding such Distribution Date.
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DEFICIENCY NOTICE: As defined in Section 5.2(a).
DEPOSIT DATE: With respect to any Monthly Period, the
Business Day immediately preceding the related Determination Date.
DETERMINATION DATE: With respect to any Monthly Period, the
sixth Business Day immediately preceding the related Distribution Date.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the
sum of (i) the Actual Funds for such Distribution Date, and (ii) the
Deficiency Claim Amount, if any, received by the Indenture Trustee with
respect to such Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or if
such 15th day is not a Business Day, the next succeeding Business Day,
commencing July 15, 1998, to and including the Final Scheduled Distribution
Date.
DRAW DATE: With respect to any Distribution Date, the third
Business Day immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution
acceptable to the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing), or (ii) a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America, or any of the States thereof, or the
District of Columbia, having a certificate of deposit, short term deposit or
commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by
Moody's and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types
of investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States, the obligations of which are backed by the full faith and credit of
the United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation, but only if, at the time of investment, such
obligations are assigned a rating in the highest credit rating category by
each Rating Agency;
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(b) demand or time deposits in, certificates of deposit of,
or bankers' acceptances issued by any depository institution or trust company
roganized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Indenture Trustee, the Owner Trustee or any
agent of either of them acting in their respective commercial capacities);
provided that the short-term unsecured debt obligations of such depository
institution or trust company at the time of such investment, or contractual
commitment providing for such investment, are assigned a rating in the
highest credit rating category by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement
(i) with respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 4.1, and (ii) entered into with the
corporate trust department of a depository institution or trust company
organized under the laws of the United States or any State thereof, the
deposits of which are insured by the Federal Deposit Insurance Corporation
and the short-term unsecured debt obligations of which are rated "A-1+" by
Standard & Poor's and "P-1" by Moody's (including, if applicable, the
Indenture Trustee, the Owner Trustee or any agent of either of them acting in
their respective commercial capacities);
(d) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States or any
State whose long-term unsecured debt obligations are assigned a rating in the
highest credit rating category by each Rating Agency at the time of such
investment or contractual commitment providing for such investment; PROVIDED,
HOWEVER, that securities issued by any particular corporation will not be
Eligible Investments to the extent that an investment therein will cause the
then outstanding principal amount of securities issued by such corporation
and held in the Trust Accounts to exceed 10% of the Eligible Investments held
in the Trust Accounts (with Eligible Investments held in the Trust Accounts
valued at par);
(e) commercial paper that (i) is payable in United States
dollars and (ii) is rated in the highest credit rating category by each
Rating Agency;
(f) units of money market funds rated in the highest credit
rating category by each Rating Agency; provided that all Eligible Investments
shall be held in the name of the Indenture Trustee; or
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Rating Agencies and the Security
Insurer, as evidenced by the prior written consent of the Security Insurer,
as may from time to time be confirmed in writing to the Indenture Trustee by
the Security Insurer; PROVIDED, HOWEVER, that securities issued by any entity
(except as provided in paragraph (a)) will not be Eligible Investments to the
extent that an investment therein will cause the then outstanding principal
amount of securities issued by
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such entity and held in the Pre-Funding Account to exceed $25 million (with
Eligible Investments held in the Pre-Funding Account valued at par), unless
and for so long as such securities are acceptable to the Rating Agencies and
the Security Insurer, as evidenced by the prior written consent of the
Security Insurer, as may from time to time be confirmed in writing to the
Indenture Trustee by the Security Insurer.
Eligible Investments may be purchased by or through the Indenture Trustee or
any of its Affiliates.
ELIGIBLE SERVICER: AFL, the Backup Servicer or another Person
which at the time of its appointment as Servicer (i) is servicing a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service
the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables
with reasonable skill and care, and (iv) is qualified and entitled to use,
pursuant to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise
has available software which is adequate to perform its duties and
responsibilities under this Agreement.
FINAL SCHEDULED DISTRIBUTION DATE: With respect to each class
of Notes, the Class A-1 Final Scheduled Distribution Date, the Class A-2
Final Scheduled Distribution Date, the Class A-3 Final Scheduled Distribution
Date, the Class A-4 Final Scheduled Distribution Date and the Class A-5 Final
Scheduled Distribution Date, respectively.
FINANCED VEHICLE: A new or used automobile or light truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.
FORCE-PLACED INSURANCE: The meaning set forth in Section
3.4(b).
FUNDING PERIOD: The period beginning on the Closing Date and
ending on the first to occur of (a) the Distribution Date on which the
Pre-Funded Amount (after giving effect to any reduction in the Pre-Funded
Amount in connection with the transfer of Subsequent Receivables to the Trust
on such Distribution Date) is less than $100,000, (b) the date on which an
Event of Default or a Servicer Termination Event occurs, (c) the date on
which an Insolvency Event occurs with respect to AFL and (d) the close of
business on the Distribution Date occurring in August 1998.
INDENTURE: The Indenture, dated as of June 1, 1998, among the
Trust, the Indenture Trustee and the Indenture Collateral Agent, as the same
may be amended and supplemented from time to time.
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INDENTURE COLLATERAL AGENT: The Person acting as Indenture
Collateral Agent under the Indenture, its successors in interest and any
successor Indenture Collateral Agent under the Indenture.
INDENTURE TRUSTEE: The Person acting as Trustee under the
Indenture, its successors in interest and any successor Trustee under the
Indenture.
INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).
INITIAL CUTOFF DATE: June 11, 1998.
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $403,098,846.35.
INITIAL RECEIVABLES: The Receivables listed on the Schedule
of Initial Receivables on the Closing Date.
INSOLVENCY EVENT: With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law, and such case
is not dismissed within 60 days; or (b) the filing of a decree or entry of an
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case
under any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs; or (c) the commencement
by such Person of a voluntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for
any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due, or the taking of
action by such Person in furtherance of any of the foregoing.
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor
in the event that the Servicer obtains Force-Placed Insurance pursuant to
Section 3.4.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement,
dated as of June 23, 1998, among the Security Insurer, the Trust, the Seller
and AFL.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default"
as defined in the Insurance Agreement.
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INSURANCE POLICY: With respect to a Receivable, any insurance
policy benefiting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the Obligor.
INSURER DEFAULT: The occurrence and continuance of any of the
following:
(a) the Security Insurer shall have failed to make a
payment required under the Note Policy;
(b) The Security Insurer shall have (i) filed a petition
or commenced any case or proceeding under any provision or chapter
of the United States Bankruptcy Code, the New York State Insurance
Law, or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (ii) made a general assignment for the benefit of
its creditors, or (iii) had an order for relief entered against it
under the United States Bankruptcy Code, the New York State
Insurance Law, or any other similar federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority
shall have entered a final and nonappealable order, judgment or
decree (i) appointing a custodian, trustee, agent or receiver for
the Security Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession by a
custodian, trustee, agent or receiver of the Security Insurer (or
the taking of possession of all or any material portion of the
property of the Security Insurer).
LIEN: Any security interest, lien, charge, pledge,
preference, equity or encumbrance of any kind, including tax liens,
mechanics' liens and any liens that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the original certificate of title is required to be given to the Obligor, the
term "Lien Certificate" shall mean only a certificate or notification issued
to a secured party.
LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer
repossessed the
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related Financed Vehicle, (ii) the Servicer has determined in good faith that
all amounts it expects to recover have been received, or (iii) all or any
portion of a Scheduled Payment shall have become more than 180 days past due.
LIQUIDATION PROCEEDS: With respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from the Spread Account or the Reserve Account and drawings
under the Note Policy) net of (i) reasonable expenses incurred by the
Servicer in connection with the collection of such Receivable and the
repossession and disposition of the Financed Vehicle and (ii) amounts that
are required to be refunded to the Obligor on such Receivable; PROVIDED,
HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall
in no event be less than zero.
LOCKBOX ACCOUNT: The segregated account maintained on behalf
of the Trust by the Lockbox Bank in accordance with Section 3.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of November
13, 1992 by and among Harris Trust and Savings Bank, AFL, Shawmut Bank, N.A.,
as Trustee, Saturn Financial Services, Inc. and the Program Parties (as
defined therein), taken together with the Retail Lockbox Agreement, dated as
of November 13, 1992, among such parties, and the Counterpart to Agency
Agreement and Retail Lockbox Agreement, dated as of June 23, 1998, among
Harris Trust and Savings Bank, AFL, the Trust, the Indenture Trustee and the
Security Insurer, as such agreements may be amended from time to time, unless
the Indenture Trustee hereunder shall cease to be a Program Party thereunder,
or such agreement shall be terminated in accordance with its terms, in which
event "Lockbox Agreement" shall mean such other agreement, in form and
substance acceptable to the Security Insurer, or if an Insurer Default shall
have occurred and be continuing, to a Note Majority, among the Servicer, the
Trust, the Indenture Trustee and the Lockbox Bank.
LOCKBOX BANK: A depository institution named by the Servicer
and, so long as an Insurer Default shall not have occurred and be continuing,
acceptable to the Security Insurer, or, if an Insurer Default shall have
occurred and be continuing, to a Note Majority.
MONTHLY ADVANCE: The amount that the Servicer is required to
advance on any Receivable pursuant to Section 4.4(a).
MONTHLY PERIOD: With respect to a Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs
(such calendar month being referred to as the "related" Monthly Period with
respect to such Distribution Date). With respect to an Accounting Date, the
calendar month in which such Accounting Date occurs is referred to herein as
the "related" Monthly Period to such Accounting Date.
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MONTHLY RECORDS: All records and data maintained by the
Servicer with respect to the Receivables, including the following with
respect to each Receivable: the account number; the identity of the
originating Dealer; Obligor name; Obligor address; Obligor home phone number;
Obligor business phone number; original Principal Balance; original term;
Annual Percentage Rate; current Principal Balance; current remaining term;
origination date; first payment date; final scheduled payment date; next
payment due date; date of most recent payment; new/used classification;
collateral description; days currently delinquent; number of contract
extensions (months) to date; amount, if any, of Force-Placed Insurance
payable monthly; amount of the Scheduled Payment; current Insurance Policy
expiration date; and past due late charges, if any.
MOODY'S: Moody's Investors Service, Inc., or any successor
thereto.
NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.1(c).
NOTE MAJORITY: As to each class of Notes, Holders of Notes
representing a majority of the outstanding principal balance of such class of
Notes.
NOTE POLICY: The financial guaranty insurance policy issued
by the Security Insurer to the Indenture Trustee on behalf of the Noteholders.
NOTE POOL FACTOR: With respect to any Distribution Date and
each class of Notes, an eight-digit decimal figure equal to the outstanding
principal balance of such class of Notes as of such Distribution Date (after
giving effect to all distributions on such date) divided by the original
outstanding principal balance of such class of Notes as of the Closing Date.
NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-1 Interest Distributable
Amount, the Class A-2 Interest Distributable Amount, the Class A-3 Interest
Distributable Amount, the Class A-4 Interest Distributable Amount and the
Class A-5 Interest Distributable Amount.
NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 100% of the Principal Distribution Amount.
With respect to the Distribution Date on which the outstanding principal
balance of the Class A-1 Notes is reduced to zero, the "Noteholders' Monthly
Principal Distributable Amount" shall equal the sum of (i) the outstanding
principal balance of the Class A-1 Notes plus (ii) 100% (after giving effect
to the retirement of the Class A-1 Notes) of the Principal Distribution
Amount less the outstanding principal balance of the Class A-1 Notes
immediately prior to such Distribution Date.
NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the sum of the Noteholders'
Monthly
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Principal Distributable Amount and any outstanding Noteholders' Principal
Carryover Shortfall from the immediately preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on such immediately preceding Distribution Date.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date (other than the Final Scheduled Distribution Date with
respect to any class of Notes), the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and any Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. The Noteholders' Principal Distributable Amount on the Final Scheduled
Distribution Date for any class of Notes will equal the sum of (i) the
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date, (ii) the Noteholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date, and (iii) the excess of the outstanding
principal balance of such class of Notes, if any, over the amounts in clauses
(i) and (ii). In no event may the Noteholders' Principal Distributable
Amount for any Distribution Date exceed the outstanding principal balance of
the Notes immediately prior to such Distribution Date.
NOTES: The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes and the Class A-5 Notes.
OBLIGOR: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.
OPINION OF COUNSEL: A written opinion of counsel acceptable
in form and substance and from counsel acceptable to the Owner Trustee and,
if such opinion or a copy thereof is required to be delivered to the
Indenture Trustee or the Security Insurer, to the Indenture Trustee or the
Security Insurer, as applicable.
ORIGINAL POOL BALANCE: As of any date, the sum of the Initial
Cutoff Date Principal Balance plus the aggregate Principal Balance (as of the
related Subsequent Cutoff Date) of all Subsequent Receivables sold to the
Trust on any Subsequent Transfer Date.
OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable
and a Determination Date, the sum of all Monthly Advances made on any
Determination Date prior to such Determination Date relating to that
Receivable which have not been reimbursed pursuant to Section 4.6(i) or
Section 4.8.
OWNER TRUSTEE: Wilmington Trust Company, acting not
individually but solely as trustee, or its successor in interest, and any
successor Owner Trustee appointed as provided in the Trust Agreement.
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PERSON: Any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.
PRE-FUNDED AMOUNT: As of any date, $146,901,153.65 minus the
aggregate Principal Balance (as of the related Subsequent Cutoff Date) of all
Subsequent Receivables sold to the Trust on or prior to such date.
PRE-FUNDING ACCOUNT: The account designated as the
Pre-Funding Account in, and which is established and maintained pursuant to,
Section 4.1(b).
PREFERENCE CLAIM: The meaning specified in Section 5.4(b).
PRINCIPAL BALANCE: With respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on
or prior to such date and allocable to principal in accordance with the terms
of the Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the amount equal to the sum of the following amounts with
respect to the related Monthly Period, in each case computed with respect to
each Receivable in accordance with the method specified in the related retail
installment sale contract or promissory note: (i) that portion of all
collections on Receivables (other than Liquidated Receivables and Purchased
Receivables) allocable to principal, including all full and partial principal
prepayments, (ii) the Principal Balance (as of the related Accounting Date)
of all Receivables that became Liquidated Receivables during the related
Monthly Period (other than Purchased Receivables), (iii) the Principal
Balance of all Receivables that became Purchased Receivables as of the
related Accounting Date, and, in the sole discretion of the Security Insurer,
provided no Insurer Default shall have occurred and be continuing, the
Principal Balance as of the related Accounting Date of all Receivables that
were required to be purchased as of the related Accounting Date but were not
so purchased, and (iv) the aggregate amount of Cram Down Losses that shall
have occurred during the related Monthly Period.
PURCHASE AGREEMENTS: (i) The Closing Date Purchase Agreement
and (ii) one or more Assignment Agreements pursuant to the ARCC Purchase
Agreement, pursuant to which, together, AFL transferred the Initial
Receivables to the Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable (without regard
to any Monthly Advances that may have been made with respect to the
Receivable) as of the Accounting Date on which the obligation to purchase
such Receivable arises.
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PURCHASED RECEIVABLE: As of any Accounting Date, any
Receivable (including any Liquidated Receivable) that became a Warranty
Receivable or Administrative Receivable as of such Accounting Date (or which
AFL or the Servicer has elected to purchase as of an earlier Accounting Date,
as permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has
been deposited in the Collection Account by the Seller, AFL or the Servicer,
as applicable, on or before the related Deposit Date.
RATING AGENCY: Each of Moody's and Standard & Poor's, so long
as such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller
and (so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.
RATING AGENCY CONDITION: With respect to any action, that
each Rating Agency shall have been given 10 days' prior notice thereof and
that each of the Rating Agencies shall have notified the Seller, the
Servicer, the Security Insurer, the Owner Trustee and the Indenture Trustee
in writing that such action will not result in a reduction or withdrawal of
the then current rating of the Notes.
RECEIVABLE: A retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of
calculating Noteholders' Distributable Amounts hereunder and for the purpose
of determining the obligations pursuant to Section 2.6 and 3.7 to purchase
Receivables), or (ii) any Purchased Receivable on or after the Accounting
Date immediately preceding the Deposit Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 4.5.
RECEIVABLE FILE: The documents, electronic entries,
instruments and writings listed in Section 2.2 pertaining to a particular
Receivable.
REFERENCE BANKS: Three major banks in the London interbank
market selected by the Servicer.
REGISTRAR OF TITLES: With respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens
thereon.
RELATED DOCUMENTS: The Trust Agreement, the Indenture, the
Notes, the Purchase Agreements, each Subsequent Purchase Agreement, each
Subsequent Transfer Agreement, the Custodian Agreement, the Note Policy, the
Spread Account Agreement, the Insurance Agreement, the Lockbox Agreement, the
Depository Agreement, the Stock Pledge Agreement and the Underwriting
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Agreement among the Seller, AFL and the underwriters of the Notes. The
Related Documents executed by any party are referred to herein as "such
party's Related Documents," "its Related Documents" or by a similar
expression.
REPURCHASE EVENTS: The occurrence of a breach of any of AFL's, the
Seller's or the Servicer's representations and warranties in this Agreement or
in the Purchase Agreement or in any Subsequent Purchase Agreement which requires
the repurchase of a Receivable by AFL or the Seller pursuant to Section 2.6 or
by the Servicer pursuant to Section 3.7.
REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies and, so long as an
Insurer Default shall not have occurred and be continuing, the Security Insurer)
so as to not affect the rating on the Notes.
REQUISITE RESERVE AMOUNT: As of the Closing Date, $744,946.40 and as
of any Distribution Date or Subsequent Transfer Date thereafter during the
Funding Period an amount equal to the difference between
(a) the product of (x) the weighted average of the Class A-1
Interest Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate,
the Class A-4 Interest Rate and the Class A-5 Interest Rate (based on the
outstanding principal balance of the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes on such
date), divided by 360, (y) the Pre-Funded Amount on such date and (z) the
number of days until the Distribution Date in August 1998, and
(b) the product of (x) the Assumed Reinvestment Rate, divided by
360, (y) the Pre-Funded Amount on such date and (z) the number of days
until the Distribution Date in August 1998.
The Requisite Reserve Amount for any Subsequent Transfer Date (i) shall be
calculated after taking into account the transfer of Subsequent Receivables
to the Trust on such Subsequent Transfer Date (unless such Subsequent
Transfer Date does not coincide with a Distribution Date and does not occur
between a Distribution Date and the related Determination Date) and (ii) (A)
if such Subsequent Transfer Date does not coincide with a Distribution Date
but occurs between a Distribution Date and the related Determination Date,
shall be calculated as of the Distribution Date immediately following such
Subsequent Transfer Date as if such Subsequent Transfer Date occurred on such
Distribution Date, (B) if such Subsequent Transfer Date coincides with a
Distribution Date, shall be calculated as of such Distribution Date or (C) if
such Subsequent Transfer Date does not coincide with a Distribution Date and
does not occur between a Distribution Date and the related Determination
Date, shall be calculated as of the immediately preceding Distribution Date
(or as of the Closing Date, if such Subsequent Transfer Date occurs before
the Determination
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Date in August 1998) as if such Subsequent Transfer Date occurred on such
immediately preceding Distribution Date (or the Closing Date).
RESERVE ACCOUNT: The account designated as the Reserve Account in,
and which is established and maintained pursuant to, Section 4.1(d), including
the Class A-1 Holdback Subaccount.
RESERVE AMOUNT: As of any date of determination, the amount on
deposit in the Reserve Account (other than the amount on deposit in the Class
A-1 Holdback Subaccount) on such date.
RESPONSIBLE OFFICER: When used with respect to the Owner Trustee,
any officer of the Owner Trustee assigned by the Owner Trustee to administer
its corporate trust affairs relating to the Trust. When used with respect to
the Indenture Trustee, any officer assigned to Corporate Trust Services (or
any successor thereto), including any Vice President, Assistant Vice
President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of the Trust. When used with
respect to any other Person that is not an individual, the President, any
Vice-President or Assistant Vice-President or the Controller of such Person,
or any other officer or employee having similar functions.
SCHEDULE OF INITIAL RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to this Agreement which is attached hereto as Schedule A.
SCHEDULE OF RECEIVABLES: The Schedule of Initial Receivables attached
hereto as Schedule A as supplemented by each Schedule of Subsequent Receivables
attached as Schedule A to each Subsequent Transfer Agreement.
SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties attached hereto as Schedule B.
SCHEDULE OF SUBSEQUENT RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to a Subsequent Transfer Agreement which is attached as Schedule
A to such Subsequent Transfer Agreement, which Schedule of Subsequent
Receivables shall supplement the Schedule of Initial Receivables.
SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Monthly Period has been modified
so as to differ from the amount specified in such Receivable as a result of
(i) the order of a court in an insolvency proceeding involving the Obligor,
(ii) pursuant to the
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Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) modifications or
extensions of the Receivable permitted by Section 3.2(b), the Scheduled
Payment with respect to such Monthly Period shall refer to the Obligor's
payment obligation with respect to such Monthly Period as so modified.
SECURITY INSURER: Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or any
successor thereto, as issuer of the Note Policy.
SELLER: Arcadia Receivables Finance Corp., a Delaware corporation, or
its successor in interest pursuant to Section 6.2.
SERVICER: Arcadia Financial Ltd., its successor in interest pursuant
to Section 8.2 or, after any termination of the Servicer upon a Servicer
Termination Event, the Backup Servicer or any other successor Servicer.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to
Section 3.14.
SERVICER TERMINATION EVENT: An event described in Section 8.1.
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 3.9, substantially in the form attached hereto as Exhibit E.
SPREAD ACCOUNT: The Spread Account established and maintained
pursuant to the Spread Account Agreement.
SPREAD ACCOUNT ADDITIONAL DEPOSIT: With respect to any transfer of
Subsequent Receivables to the Trust pursuant to Section 2.4, the amount required
to be deposited in the Spread Account pursuant to the terms of the Spread
Account Agreement.
SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement, dated as of
March 25, 1993, as thereafter amended and restated, among the Seller, AFL, the
Security Insurer, the Collateral Agent and the trustees specified therein, as
the same may be amended, supplemented or otherwise modified in accordance with
the terms thereof.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or any successor thereto.
STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of March
25, 1993, as amended and restated as of December 3, 1996, among the Security
Insurer, AFL and the Collateral Agent, as the same may be amended from time to
time.
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SUBCOLLECTION ACCOUNT: The account designated as the Subcollection
Account in, and which is established and maintained pursuant to Section 4.2(a).
SUBSEQUENT CUTOFF DATE: With respect to any Subsequent Receivables,
the date specified in the related Subsequent Transfer Agreement, which may in no
event be later than the Subsequent Transfer Date.
SUBSEQUENT PURCHASE AGREEMENT: With respect to any Subsequent
Receivables, either (i) the agreement between AFL and the Seller pursuant to
which AFL transferred the Subsequent Receivables to the Seller, the form of
which is attached to the Purchase Agreement as Exhibit A, or (ii) one or more
Assignment Agreements pursuant to the ARCC Purchase Agreement, pursuant to which
AFL transferred the Subsequent Receivables to the Seller.
SUBSEQUENT RECEIVABLES: All Receivables sold and transferred to the
Trust pursuant to Section 2.4.
SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent
Receivables, the related agreement described in Section 2.4.
SUBSEQUENT TRANSFER DATE: Any date during the Funding Period on which
Subsequent Receivables are transferred to the Trust pursuant to Section 2.4.
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all
administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, collected on the Receivables during such Monthly Period.
TELERATE PAGE 3750: The display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRUST: Arcadia Automobile Receivables Trust, 1998-B.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of June 1, 1998, among
the Seller, the Security Insurer and the Owner Trustee, as the same may be
amended and supplemented from time to time.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
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WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable
which AFL has become obligated to repurchase pursuant to Section 2.6.
SECTION 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
SECTION 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of twelve
30-day months, except that calculations of interest accrued on the Class A-1
Notes and the Class A-2 Notes shall be made on the basis of actual days elapsed
in a 360-day year. All references to the Principal Balance of a Receivable as
of an Accounting Date shall refer to the close of business on such day.
SECTION 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
SECTION 1.5. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Seller, AFL, the Servicer, the Indenture Trustee, the
Backup Servicer or the Owner Trustee or of any predecessor or successor of the
Seller, AFL, the Servicer, the Indenture Trustee, the Backup Servicer or the
Owner Trustee.
SECTION 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Note Policy.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES. Subject to the terms
and conditions of this Agreement, the Seller, pursuant to the mutually agreed
upon terms contained herein, hereby sells, transfers, assigns, and otherwise
conveys to the
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Trust, without recourse (but without limitation of its obligations in this
Agreement), all of the right, title and interest of the Seller in and to the
Initial Receivables, all monies at any time paid or payable thereon or in
respect thereof after the Initial Cutoff Date (including amounts due on or
before the Initial Cutoff Date but received by AFL or the Seller after the
Initial Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Initial Receivables, the Obligors or the
related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Initial Receivables,
an assignment of the rights of AFL or the Seller against Dealers with respect
to the Initial Receivables under the Dealer Agreements and the Dealer
Assignments, all items contained in the related Receivable Files, any and all
other documents that AFL keeps on file in accordance with its customary
procedures relating to the Initial Receivables, the Obligors or the related
Financed Vehicles, an assignment of the rights of the Seller under the
Purchase Agreements, property (including the right to receive future
Liquidation Proceeds) that secures an Initial Receivable and that has been
acquired by or on behalf of the Trust pursuant to liquidation of such
Receivable, all funds on deposit from time to time in the Trust Accounts and
all investments therein and proceeds thereof, and all proceeds of the
foregoing. It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement and each Subsequent Transfer
Agreement shall constitute a sale of the Receivables and other Trust Property
from the Seller to the Trust and the beneficial interest in and title to the
Receivables and the other Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that, notwithstanding the
intent of the Seller, the transfer and assignment contemplated hereby and
each Subsequent Transfer Agreement is held not to be a sale, this Agreement
and each Subsequent Transfer Agreement shall constitute a grant of a security
interest to the Trust in the property referred to in this Section 2.1 or
transferred to the Trust pursuant to the related Subsequent Transfer
Agreement.
SECTION 2.2. CUSTODY OF RECEIVABLE FILES.
(a) In connection with the sale, transfer and assignment of the
Receivables and the other Trust Property to the Trust pursuant to this Agreement
and each Subsequent Transfer Agreement, and simultaneously with the execution
and delivery of this Agreement, the Trust shall enter into the Custodian
Agreement with the Custodian, dated as of the Closing Date, pursuant to which
the Owner Trustee, on behalf of the Trust, shall revocably appoint the
Custodian, and the Custodian shall accept such appointment, to act as the agent
of the Trust as Custodian of the following documents or instruments in its
possession which shall be delivered to the Custodian as agent of the Trust on or
before the Closing Date (with respect to each Initial Receivable) or the
applicable Subsequent Transfer Date (with respect to each Subsequent
Receivable):
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(i) The fully executed original of the Receivable (together
with any agreements modifying the Receivable, including without
limitation any extension agreements) or a microfiche copy thereof;
(ii) Documents evidencing or related to any Insurance
Policy, or copies (including but not limited to microfiche copies)
thereof;
(iii) The original credit application, or a copy thereof, of
each Obligor, fully executed by each such Obligor on AFL's customary
form, or on a form approved by AFL, for such application; and
(iv) The original certificate of title (when received) and
otherwise such documents, if any, that AFL keeps on file in
accordance with its customary procedures indicating that the Financed
Vehicle is owned by the Obligor and subject to the interest of AFL as
first lienholder or secured party (including any Lien Certificate
received by AFL), or, if such original certificate of title has not
yet been received, a copy of the application therefor, showing AFL as
secured party.
In connection with the grant of the security interest in the
Trust Estate to the Issuer Secured Parties pursuant to the Indenture, the
Trust agrees that from and after the Closing Date through the date of release
of such security interest pursuant to the terms of the Indenture, the
Custodian shall not be acting as agent of the Trust, but rather shall be
acting as agent of the Issuer Secured Parties.
The Indenture Trustee may act as the Custodian, in which case the
Indenture Trustee shall be deemed to have assumed the obligations of the
Custodian specified in the Custodian Agreement.
(b) Upon payment in full on any Receivable, the Servicer will
notify the Custodian by certification of an officer of the Servicer (which
certification shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited
in the Collection Account pursuant to Section 3.1 have been so deposited) and
shall request delivery of the Receivable and Receivable File to the Servicer.
From time to time as appropriate for servicing and enforcing any Receivable,
the Custodian shall, upon written request of an officer of the Servicer and
delivery to the Custodian of a receipt signed by such officer, cause the
original Receivable and the related Receivable File to be released to the
Servicer. The Servicer's receipt of a Receivable and/or Receivable File
shall obligate the Servicer to return the original Receivable and the related
Receivable File to the Custodian when its need by the Servicer has ceased
unless the Receivable shall be repurchased as described in Section 2.6 or 3.7.
SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As
conditions to Owner Trustee's execution and delivery of the Notes on behalf of
the
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Trust on the Closing Date, the Owner Trustee shall have received the
following on or before the Closing Date:
(a) The Schedule of Initial Receivables certified by the
President, Controller or Treasurer of the Seller;
(b) The acknowledgement of the Custodian that it holds the
Receivable File relating to each Initial Receivable;
(c) Copies of resolutions of the Board of Directors of the
Seller approving the execution, delivery and performance of this
Agreement, the Related Documents and the transactions contemplated
hereby and thereby, certified by a Secretary or an Assistant
Secretary of the Seller;
(d) Copies of resolutions of the Board of Directors of AFL
approving the execution, delivery and performance of this Agreement,
the Related Documents and the transactions contemplated hereby and
thereby, certified by a Secretary or an Assistant Secretary of AFL;
(e) Evidence that all filings (including, without
limitation, UCC filings) required to be made by any Person and
actions required to be taken or performed by any Person in any
jurisdiction (other than those actions to be taken with respect to
Subsequent Receivables pursuant to Section 2.4) to give the Owner
Trustee a first priority perfected lien on, or ownership interest in,
the Receivables and the other Trust Property have been made, taken
or performed; and
(f) An executed copy of the Spread Account Agreement and
evidence of the deposit of $744,946.40 in the Reserve Account.
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b) below,
the Seller, pursuant to the mutually agreed upon terms contained herein and
pursuant to one or more Subsequent Transfer Agreements, shall sell, transfer,
assign, and otherwise convey to the Trust, without recourse (but without
limitation of its obligations in this Agreement), all of the right, title and
interest of the Seller in and to the Subsequent Receivables, all monies at any
time paid or payable thereon or in respect thereof after the related Subsequent
Cutoff Date (including amounts due on or before the related Subsequent Cutoff
Date but received by AFL or the Seller after the related Subsequent Cutoff
Date), an assignment of security interests of AFL in the related Financed
Vehicles, the Insurance Policies and any proceeds from any Insurance Policies
relating to the Subsequent Receivables, the Obligors or the related Financed
Vehicles, including rebates of premiums, all Collateral Insurance and any
Force-Placed Insurance relating to the Subsequent Receivables, rights of AFL
or the Seller against Dealers with respect to the Subsequent Receivables under
the Dealer
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Agreements and the Dealer Assignments, all items contained in the Receivable
Files relating to the Subsequent Receivables, any and all other documents
that AFL keeps on file in accordance with its customary procedures relating
to the Subsequent Receivables, the Obligors or the related Financed Vehicles,
the rights of the Seller under the related Subsequent Purchase Agreement,
property (including the right to receive future Liquidation Proceeds) that
secures a Subsequent Receivable and that has been acquired by or on behalf of
the Trust pursuant to liquidation of such Subsequent Receivable, and all
proceeds of the foregoing.
(b) The Seller shall transfer to the Trust the Subsequent Receivables
and the other property and rights related thereto described in paragraph (a)
above only upon the satisfaction of each of the following conditions on or prior
to the related Subsequent Transfer Date:
(i) The Seller shall have provided the Owner Trustee, the
Indenture Trustee, the Security Insurer and the Rating Agencies with a
timely Addition Notice and shall have provided any information
reasonably requested by any of the foregoing with respect to the
Subsequent Receivables;
(ii) the Funding Period shall not have terminated;
(iii) the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) shall in its sole and
absolute discretion have given its prior written approval of the
transfer of such Subsequent Receivables to the Trust;
(iv) the Seller shall have delivered to the Owner Trustee
and the Indenture Trustee a duly executed written assignment
(including an acceptance by the Indenture Trustee and the Owner
Trustee) in substantially the form of Exhibit G (the "Subsequent
Transfer Agreement"), which shall include a Schedule of Subsequent
Receivables listing the Subsequent Receivables and shall specify the
Spread Account Additional Deposit, if any, the Requisite Reserve
Amount, and the Class A-1 Holdback Amount, if any, as of or for such
Subsequent Transfer Date;
(v) the Seller shall have delivered to the Custodian the
Receivable Files relating to the Subsequent Receivables, and the
Custodian shall have delivered to the Seller, the Owner Trustee, the
Security Insurer and the Indenture Collateral Agent an acknowledgement
of receipt of such Receivable Files;
(vi) the Seller shall, to the extent required by
Section 4.1, have deposited in the Collection Account collections in
respect of the Subsequent Receivables;
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(vii) as of each Subsequent Transfer Date, neither AFL nor
the Seller shall be insolvent nor shall either of them have been made
insolvent by such transfer nor shall either of them be aware of any
pending insolvency;
(viii) the applicable Spread Account Additional Deposit for
such Subsequent Transfer Date shall have been made pursuant to the
Spread Account Agreement.
(ix) the Reserve Amount on such Subsequent Transfer Date,
after taking into account any transfers of funds from the Reserve
Account to the Depositor in respect of the sale of the Subsequent
Receivables to the Trust, shall be no less than the Requisite Reserve
Amount for such Subsequent Transfer Date;
(x) each Rating Agency shall have notified the Security
Insurer that following such transfer the Notes will be rated in the
highest short-term or long-term rating category, as applicable, by
such Rating Agency;
(xi) such addition will not result in a material adverse
tax consequence to the Trust or the Noteholders as evidenced by an
Opinion of Counsel to be delivered by the Seller;
(xii) the Seller shall have delivered to the Owner Trustee
and the Indenture Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this
paragraph (b);
(xiii) the Seller shall have delivered to the Rating
Agencies and to the Security Insurer one or more Opinions of Counsel
with respect to the transfer of the Subsequent Receivables
substantially in the form of the Opinions of Counsel delivered to
such Persons on the Closing Date;
(xiv) (A) the Receivables in the Trust, including the
Subsequent Receivables to be conveyed to the Trust on the Subsequent
Transfer Date, shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cutoff
Date and the Subsequent Receivables on each related Subsequent Cutoff
Date): (1) the weighted average APR of such Receivables will not be
less than 16.31%, (2) the weighted average remaining term of such
Receivables will not be greater than 67 months nor less than 63
months, (3) not more than 90% of the Aggregate Principal Balance of
such Receivables will represent loans secured by used Financed
Vehicles, (4) not more than 73% of the Aggregate Principal Balance of
such Receivables will represent Receivables originated under AFL's
"Classic" program (excluding loans for the purchase of repossessed
automobiles that would otherwise be deemed originated under
the "Classic" program), (5) not more than 4% of the Aggregate
Principal Balance of such Receivables will be attributable to
Receivables with an APR in excess of 21%, (6) not more than 0.25% of
the
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Aggregate Principal Balance of such Receivables will represent loans
in excess of $50,000.00, (7) not more than 3.0% of the Aggregate
Principal Balance of such Receivables will represent loans with
original terms greater than 72 months and (8) not more than 4.0% of
the Aggregate Principal Balance of such Receivables will represent
loans secured by Financed Vehicles that previously secured a loan
originated by AFL with an obligor other than the current Obligor, and
(B) the Trust, the Owner Trustee, the Indenture Trustee and the
Security Insurer shall have received written confirmation
from a firm of certified independent public accountants as to the
satisfaction of such criteria;
(xv) the Seller shall have taken any action necessary or,
if requested by the Security Insurer, advisable to maintain the first
perfected ownership interest of the Trust in the Trust Property and
the first perfected security interest of the Indenture Collateral
Agent in the Indenture Collateral; and
(xvi) no selection procedures adverse to the interests of
the Noteholders shall have been utilized in selecting the Subsequent
Receivables.
(c) On such Subsequent Transfer Date, if all the conditions
specified in paragraph (b) above have been satisfied, the Trust shall accept
the transfer of such Subsequent Receivables and shall pay to the Seller from
the Pre-Funding Account an amount equal to (i) the Principal Balance as of the
related Subsequent Cutoff Date of the Subsequent Receivables transferred to
the Trust as of such date, minus (ii) the Spread Account Additional Deposit,
if any, for such Subsequent Transfer Date, minus (iii) the amount, if any, by
which the Requisite Reserve Amount for such Subsequent Transfer Date exceeds
the Reserve Amount as of such Subsequent Transfer Date, and minus (iv) the
Class A-1 Holdback Amount, if any, for such Subsequent Transfer Date.
(d) The Seller covenants to transfer to the Trust pursuant to
paragraph (a) above Subsequent Receivables with an aggregate Principal Balance
equal to $146,901,153.65; PROVIDED, HOWEVER, that the sole remedy of the Trust,
the Owner Trustee, the Indenture Trustee or the Noteholders with respect to a
failure of such covenant shall be to enforce the provisions of Sections 2.3(c)
and 6.2 of the Closing Date Purchase Agreement, Section 2.4(c) hereof (with
respect to Class A-1 Holdback Amounts) and Section 4.7(c) hereof, Section
10.01(b) of the Indenture and Section 5.2 of the Trust Agreement with respect to
payment of the Class A-1 Prepayment Premium, Class A-2 Prepayment Premium, Class
A-3 Prepayment Premium, Class A-4 Prepayment Premium and Class A-5 Prepayment
Premium.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its
execution of this Agreement and each Subsequent Transfer Agreement, the Seller
makes the following representations and warranties on which the Trust relies in
accepting the Receivables and the other Trust Property in trust and on which the
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Owner Trustee relies in issuing on behalf of the Trust, Notes and upon which
the Security Insurer relies in issuing the Note Policy. Unless otherwise
specified, such representations and warranties speak as of the Closing Date
or Subsequent Transfer Date, as appropriate, but shall survive the sale,
transfer, and assignment of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations
and warranties set forth on the Schedule of Representations are
true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables
and the other property transferred to the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified to
do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all jurisdictions
in which the ownership or lease of its property or the conduct of
its business requires such qualification.
(d) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, respectively;
the Seller has full power and authority to sell and assign the
Trust Property to be sold and assigned to and deposited with the
Trust by it and has duly authorized such sale and assignment to the
Trust by all necessary corporate action; and the execution,
delivery and performance of this Agreement and the Seller's Related
Documents have been duly authorized by the Seller by all necessary
corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and
the related Subsequent Transfer Agreement, if any, effects a valid
sale, transfer and assignment of the Receivables and the other
Trust Property, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the related
Subsequent Transfer Agreement, if any, and the Seller's Related
Documents, when duly executed and delivered, shall constitute
legal, valid and binding obligations of the Seller enforceable in
accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
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(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the related Subsequent Transfer
Agreement, if any, and the Related Documents and the fulfillment of
the terms of this Agreement and the related Subsequent Transfer
Agreement, if any, and the Related Documents shall not conflict
with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a
default under the certificate of incorporation or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than
this Agreement, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties.
(g) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Seller's knowledge, threatened
against the Seller or AFL, before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement or any of
the Related Documents, (B) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated
by this Agreement or any of the Related Documents, (C) seeking any
determination or ruling that might materially and adversely affect
the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or any of the Related
Documents, or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the Notes.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office
of the Seller is at 7825 Washington Avenue South, Suite 410,
Minneapolis, MN 55439-2435.
(i) REGISTRATION STATEMENT. No stop order suspending
the effectiveness of the Registration Statement relating to the
Notes has been issued, and no proceeding for that purpose has been
instituted or is threatened, by the Securities and Exchange
Commission.
(j) FILINGS. Since the effective date of the
Registration Statement relating to the Notes, there has occurred no
event required to be set forth in an amendment or supplement to the
Registration Statement or Prospectus that has not been so set
forth, and there has been no document required to be filed under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission
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thereunder that upon such filing would be deemed to be incorporated
by reference in the Prospectus that has not been so filed.
SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement or the applicable
Subsequent Transfer Agreement, as appropriate, AFL and the Seller have entered
into the Purchase Agreements or Subsequent Purchase Agreement, as applicable,
the rights of the Seller under which have been assigned by the Seller to the
Trust. Under the Purchase Agreements and each Subsequent Purchase Agreement, if
applicable, AFL has made the same representations and warranties to the Seller
with respect to the Receivables as those made by Seller pursuant to the Schedule
of Representations, upon which the Owner Trustee has relied in accepting the
Trust Property in trust and executing the Notes and upon which the Security
Insurer has relied in issuing the Note Policy and upon which the Indenture
Trustee has relied in authenticating the Notes. Upon discovery by any of AFL,
the Seller, the Servicer, the Security Insurer, the Indenture Trustee or the
Owner Trustee of a breach of any of the representations and warranties contained
in Section 2.5 that materially and adversely affects the interests of the
Noteholders, the Security Insurer or the Trust in any Receivable (including any
Liquidated Receivable), the party discovering such breach shall give prompt
written notice to the others; PROVIDED, HOWEVER, that the failure to give any
such notice shall not affect any obligation of AFL or the Seller. As of the
second Accounting Date (or, at AFL's election, the first Accounting Date)
following its discovery or its receipt of notice of any breach of the
representations and warranties set forth on the Schedule of Representations that
materially and adversely affects the interests of the Noteholders, the Security
Insurer or the Trust in any Receivable (including any Liquidated Receivable),
AFL shall, unless such breach shall have been cured in all material respects,
purchase such Receivable from the Trust and, on or before the related Deposit
Date, AFL shall pay the Purchase Amount to the Owner Trustee pursuant to Section
4.5. The obligations of the Seller with respect to any such breach of
representations and warranties shall be limited to taking any and all actions
necessary to enable the Owner Trustee to enforce directly the obligations of AFL
under the Purchase Agreement or Subsequent Purchase Agreement, as applicable.
It is understood and agreed that, except as set forth in this Section 2.6, the
obligation of AFL to repurchase any Receivable as to which a breach has occurred
and is continuing shall, if such obligation is fulfilled, constitute the sole
remedy against AFL or the Seller for such breach available to the Security
Insurer or the Indenture Trustee on behalf of the Noteholders.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller or AFL, AFL shall
indemnify the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust and the Noteholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach.
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SECTION 2.7. NONPETITION COVENANT. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), the Backup Servicer nor AFL shall petition or otherwise invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust or
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust.
SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON
THE CLOSING DATE OR SUBSEQUENT TRANSFER DATE. In the case of any Receivable
in respect of which written evidence from the Dealer selling the related
Financed Vehicle that the Lien Certificate for such Financed Vehicle showing
AFL as first lienholder has been applied for from the Registrar of Titles was
delivered to the Custodian on the Closing Date or Subsequent Transfer Date,
as appropriate, in lieu of a Lien Certificate, the Servicer shall use its
best efforts to collect such Lien Certificate from the Registrar of Titles as
promptly as practicable. If such Lien Certificate showing AFL as first
lienholder is not received by the Custodian within 180 days after the Closing
Date or Subsequent Transfer Date, as appropriate, then the representation and
warranty in Paragraph 18 of the Schedule of Representations in respect of
such Receivable shall be deemed to have been incorrect in a manner that
materially and adversely affects the Noteholders, the Security Insurer and
the Trust.
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES
AND WARRANTY RECEIVABLES. With respect to all Administrative Receivables and
all Warranty Receivables purchased by the Servicer, the Seller or AFL, the
Owner Trustee shall take any and all actions reasonably requested by the
Seller, AFL or Servicer, at the expense of the requesting party, to assign,
without recourse, representation or warranty, to the Seller, AFL or the
Servicer, as applicable, all the Trust's right, title and interest in and to
such purchased Receivable, all monies due thereon, the security interests in
the related Financed Vehicles, proceeds from any Insurance Policies, proceeds
from recourse against Dealers on such Receivables and the interests of the
Trust in certain rebates of premiums and other amounts relating to the
Insurance Policies and any documents relating thereto, such assignment being
an assignment outright and not for security; and the Seller, AFL or the
Servicer, as applicable, shall thereupon own such Receivable, and all such
security and documents, free of any further obligation to the Owner Trustee,
the Trust, the Indenture Trustee, the Security Insurer, the Indenture
Collateral Agent or the Noteholders with respect thereto.
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ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out in accordance
with customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the degree
of skill and attention that the Servicer exercises from time to time with
respect to all comparable motor vehicle receivables that it services for itself
or others. In performing such duties, so long as AFL is the Servicer, it shall
comply with the policies and procedures attached hereto as Schedule B. The
Servicer's duties shall include, without limitation, collection and posting of
all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting any
required tax information to Obligors, policing the collateral, complying with
the terms of the Lockbox Agreement, accounting for collections and furnishing
monthly and annual statements to the Owner Trustee, the Indenture Trustee and
the Security Insurer with respect to distributions, monitoring the status of
Insurance Policies with respect to the Financed Vehicles and performing the
other duties specified herein. The Servicer shall also administer and enforce
all rights and responsibilities of the holder of the Receivables provided for in
the Dealer Agreements (and shall maintain possession of the Dealer Agreements,
to the extent it is necessary to do so), the Dealer Assignments and the
Insurance Policies, to the extent that such Dealer Agreements, Dealer
Assignments and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors. To the extent consistent with the standards, policies
and procedures otherwise required hereby, the Servicer shall follow its
customary standards, policies, and procedures and shall have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Owner Trustee to execute and deliver, on
behalf of the Trust, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables and with respect to the Financed Vehicles;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not,
except pursuant to an order from a court of competent jurisdiction, release an
Obligor from payment of any unpaid amount under any Receivable or waive the
right to collect the unpaid balance of any Receivable from the Obligor, except
that the Servicer may forego collection efforts if the amount subject to
collection is DE MINIMIS and if it would forego collection in accordance with
its customary procedures. The Servicer is hereby authorized to commence, in its
own name or in the name of the Trust (provided the Servicer has obtained the
Owner Trustee's consent, which consent shall not be unreasonably withheld), a
legal proceeding to
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enforce a Receivable pursuant to Section 3.3 or to commence or participate in
any other legal proceeding (including, without limitation, a bankruptcy
proceeding) relating to or involving a Receivable, an Obligor or a Financed
Vehicle. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trust shall thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant,
and the Servicer is authorized and empowered by the Owner Trustee to execute
and deliver in the Servicer's name any notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with
any such proceeding. The Owner Trustee shall furnish the Servicer with any
powers of attorney and other documents which the Servicer may reasonably
request and which the Servicer deems necessary or appropriate and take any
other steps which the Servicer may deem necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement.
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with
respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
the Insurance Policies and the other Trust Property in such manner as will,
in the reasonable judgment of the Servicer, maximize the amount to be
received by the Trust with respect thereto. The Servicer is authorized in its
discretion to waive any prepayment charge, late payment charge or any other
similar fees that may be collected in the ordinary course of servicing any
Receivable.
(b) The Servicer may at any time agree to a modification,
amendment or extension of a Receivable in order to (i) change the Obligor's
regular due date to a date within the Monthly Period in which such due date
occurs, (ii) re-amortize the scheduled payments on the Receivable following a
partial prepayment of principal and (iii) grant extensions on a Receivable,
provided that the Servicer shall not be permitted to extend the monthly
payments on a Receivable more than two times in any twelve-month period, and
provided further that the aggregate period of all extensions on a Receivable
shall not exceed six months.
(c) The Servicer may grant payment extensions or deferrals
on, or other modifications or amendments to, a Receivable (in addition to
those modifications permitted by Section 3.2(b)) in accordance with its
customary procedures if the Servicer believes in good faith that such
extension, deferral, modification or amendment is necessary to avoid a
default on such Receivable, will
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maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; PROVIDED,
HOWEVER, that:
(i) In no event may a Receivable be extended beyond the
Monthly Period immediately preceding the Final Scheduled Distribution
Date;
(ii) So long as an Insurer Default shall not have occurred
and be continuing, the Servicer shall not amend or modify a Receivable
(except as provided in Section 3.2(b)) without the consent of the
Security Insurer;
(iii) So long as an Insurer Default shall not have
occurred and be continuing, the Aggregate Principal Balance of
Receivables which have been extended during any Monthly Period (A)
shall not exceed 6.5% of the Aggregate Principal Balance of
Receivables during such Monthly Period (computed as of the Accounting
Date immediately prior to the first day of the related Monthly Period)
and (B) shall not exceed 4.0% of the average of the Aggregate
Principal Balance of Receivables for such Monthly Period and the
three prior Monthly Periods (computed as of the Accounting Date
immediately prior to the first day of the related Monthly Period);
(iv) So long as an Insurer Default shall not have occurred
and be continuing, the Aggregate Principal Balance of Receivables for
which payment deferrals have been granted during any Monthly Period
(A) shall not exceed 3.0% of the Aggregate Principal Balance of
Receivables during such Monthly Period (computed as of the Accounting
Date immediately prior to the first day of the related Monthly Period)
and (B) shall not exceed 2.0% of the average of the Aggregate
Principal Balance of Receivables for such Monthly Period and the
three prior Monthly Periods (computed as of the Accounting Date
immediately prior to the first day of the related Monthly Period);
(v) No such extension, modification or amendment shall be
granted if such action, when aggregated with all previous extensions,
modifications and amendments of Receivables, would have the effect of
causing any Notes to be deemed to have been exchanged for other Notes
within the meaning of Section 1001 of the Internal Revenue Code of
1986, as amended, or any proposed, temporary or final Treasury
Regulations issued thereunder; and
(vi) If an Insurer Default shall have occurred and be
continuing, the Servicer may not extend or modify any Receivable
(other than as permitted by Section 3.2(b)).
(d) The Servicer shall use its reasonable best efforts to cause
Obligors to make all payments on the Receivables, whether by check or by direct
debit of the
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Obligor's bank account, to be made directly to one or more Lockbox Banks,
acting as agent for the Trust pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Receivables may initially be
deposited into a demand deposit account maintained by the Lockbox Bank as
agent for the Trust and for other owners of automobile receivables serviced
by the Servicer. The Servicer shall use its reasonable best efforts to cause
any Lockbox Bank to deposit all payments on the Receivables in the Lockbox
Account no later than the Business Day after receipt, and to cause all
amounts credited to the Lockbox Account on account of such payments to be
transferred to the Collection Account no later than the second Business Day
after receipt of such payments. The Lockbox Account shall be a demand
deposit account held by the Lockbox Bank, or at the request of the Security
Insurer (unless an Insurer Default shall have occurred and be continuing) an
Eligible Account satisfying clause (i) of the definition thereof.
Prior to the Closing Date and each Subsequent Transfer Date, as
applicable, the Servicer shall have notified each Obligor that makes its
payments on the Receivables by check to make such payments thereafter directly
to the Lockbox Bank (except in the case of Obligors that have already been
making such payments to the Lockbox Bank), and shall have provided each such
Obligor with a supply of mailing address labels in order to enable such Obligors
to make such payments directly to the Lockbox Bank for deposit into the Lockbox
Account, and the Servicer will continue, not less often than every three months,
to so notify those Obligors who have failed to make payments to the Lockbox
Bank. If and to the extent requested by the Security Insurer (unless an Insurer
Default shall have occurred and be continuing), the Servicer shall request each
Obligor that makes payment on the Receivables by direct debit of such Obligor's
bank account, to execute a new authorization for automatic payment which in the
judgment of the Security Insurer is sufficient to authorize direct debit by the
Lockbox Bank on behalf of the Trust. If at any time the Lockbox Bank is unable
to directly debit an Obligor's bank account that makes payment on the
Receivables by direct debit and if such inability is not cured within 15 days or
cannot be cured by execution by the Obligor of a new authorization for automatic
payment, the Servicer shall notify such Obligor that it cannot make payment by
direct debit and must thereafter make payment by check.
Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to the Lockbox Agreement, the Servicer
shall remain obligated and liable to the Owner Trustee, Indenture Trustee and
Noteholders for servicing and administering the Receivables and the other
Trust Property in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue thereof.
In the event the Servicer shall for any reason no longer be
acting as such, the successor Servicer shall thereupon assume all of the
rights and obligations of the outgoing Servicer under the Lockbox Agreement.
In such event, the successor Servicer shall be deemed to have assumed all of
the outgoing Servicer's interest therein and to have replaced the outgoing
Servicer as a party to each such
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Lockbox Agreement to the same extent as if such Lockbox Agreement had been
assigned to the successor Servicer, except that the outgoing Servicer shall
not thereby be relieved of any liability or obligations on the part of the
outgoing Servicer to the Lockbox Bank under such Lockbox Agreement. The
outgoing Servicer shall, upon request of the Owner Trustee but at the expense
of the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to each such Agreement and an accounting of amounts
collected and held by the Lockbox Bank and otherwise use its best efforts to
effect the orderly and efficient transfer of any Lockbox Agreement to the
successor Servicer. In the event that the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or a Note Majority
(if an Insurer Default shall have occurred and be continuing) elects to
change the identity of the Lockbox Bank, the outgoing Servicer, at its
expense, shall cause the Lockbox Bank to deliver, at the direction of the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note Majority (if an Insurer Default shall have occurred
and be continuing) to the Owner Trustee or a successor Lockbox Bank, all
documents and records relating to the Receivables and all amounts held (or
thereafter received) by the Lockbox Bank (together with an accounting of such
amounts) and shall otherwise use its best efforts to effect the orderly and
efficient transfer of the lockbox arrangements and the Servicer shall notify
the Obligors to make payments to the Lockbox established by the successor.
(e) The Servicer shall remit all payments by or on behalf of
the Obligors received directly by the Servicer to the Subcollection Account
or to the Lockbox Bank for deposit into the Collection Account without
deposit into any intervening account as soon as practicable, but in no event
later than the Business Day after receipt thereof.
SECTION 3.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall use its best efforts to
repossess (or otherwise comparably convert the ownership of) and liquidate
any Financed Vehicle securing a Receivable with respect to which the Servicer
has determined that payments thereunder are not likely to be resumed, as soon
as is practicable after default on such Receivable but in no event later than
the date on which all or any portion of a Scheduled Payment has become 91
days delinquent. The Servicer is authorized to follow such customary
practices and procedures as it shall deem necessary or advisable, consistent
with the standard of care required by Section 3.1, which practices and
procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private sale,
the submission of claims under an Insurance Policy and other actions by the
Servicer in order to realize upon such a Receivable. The foregoing is subject
to the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with any
repair or towards the repossession of such Financed Vehicle unless it shall
determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the
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related Receivable by an amount greater than the amount of such expenses.
All amounts received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer to the Subcollection Account without deposit into
any intervening account as soon as practicable, but in no event later than
the Business Day after receipt thereof. The Servicer shall be entitled to
recover all reasonable expenses incurred by it in the course of repossessing
and liquidating a Financed Vehicle into cash proceeds, but only out of the
cash proceeds of such Financed Vehicle, any deficiency obtained from the
Obligor or any amounts received from the related Dealer, which amounts may be
retained by the Servicer (and shall not be required to be deposited as
provided in Section 3.2(e)) to the extent of such expenses. The Servicer
shall pay on behalf of the Trust any personal property taxes assessed on
repossessed Financed Vehicles; the Servicer shall be entitled to
reimbursement of any such tax from Liquidation Proceeds with respect to such
Receivable.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement
shall be deemed to be an automatic assignment from the Trust to the Servicer
of the rights under such Dealer Agreement and Dealer Assignment for purposes
of collection only. If, however, in any enforcement suit or legal proceeding,
it is held that the Servicer may not enforce a Dealer Agreement or Dealer
Assignment on the grounds that it is not a real party in interest or a Person
entitled to enforce the Dealer Agreement or Dealer Assignment, the Owner
Trustee, at the Servicer's expense, or the Seller, at the Seller's expense,
shall take such steps as the Servicer deems necessary to enforce the Dealer
Agreement or Dealer Assignment, including bringing suit in its name or the
name of the Seller or of the Indenture Collateral Agent for the benefit of
the Issuer Secured Parties. All amounts recovered shall be remitted directly
by the Servicer as provided in Section 3.2(e).
SECTION 3.4. INSURANCE.
(a) The Servicer shall require that each Financed Vehicle be
insured by the Insurance Policies referred to in Paragraph 24 of the Schedule
of Representations and Warranties and shall monitor the status of such
physical loss and damage insurance coverage thereafter, in accordance with
its customary servicing procedures. Each Receivable requires the Obligor to
maintain such physical loss and damage insurance, naming AFL and its
successors and assigns as additional insureds, and permits the holder of such
Receivable to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to maintain such insurance. If the Servicer
shall determine that an Obligor has failed to obtain or maintain a physical
loss and damage Insurance Policy covering the related Financed Vehicle which
satisfies the conditions set forth in clause (1)(A) of such Paragraph 24
(including, without limitation, during the repossession of such Financed
Vehicle) the Servicer shall enforce the rights of the holder of the
Receivable under the Receivable to require the Obligor to obtain such
physical loss and damage insurance.
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(b) The Servicer may, if an Obligor fails to obtain or
maintain a physical loss and damage Insurance Policy, obtain insurance with
respect to the related Financed Vehicle and advance on behalf of such
Obligor, as required under the terms of the insurance policy, the premiums
for such insurance (such insurance being referred to herein as "Force-Placed
Insurance"). All policies of Force-Placed Insurance shall be endorsed with
clauses providing for loss payable to the Owner Trustee. Any cost incurred
by the Servicer in maintaining such Force-Placed Insurance shall only be
recoverable out of premiums paid by the Obligors or Liquidation Proceeds with
respect to the Receivable, as provided in Section 3.4(c).
(c) In connection with any Force-Placed Insurance obtained
hereunder, the Servicer may, in the manner and to the extent permitted by
applicable law, require the Obligors to repay the entire premium to the
Servicer. In no event shall the Servicer include the amount of the premium
in the Amount Financed under the Receivable. For all purposes of this
Agreement, the Insurance Add-On Amount with respect to any Receivable having
Force-Placed Insurance will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable,
and amounts allocable thereto will not be available for distribution on the
Notes. The Servicer shall retain and separately administer the right to
receive payments from Obligors with respect to Insurance Add-On Amounts or
rebates of Force-Placed Insurance premiums. If an Obligor makes a payment
with respect to a Receivable having Force-Placed Insurance, but the Servicer
is unable to determine whether the payment is allocable to the Receivable or
to the Insurance Add-On Amount, the payment shall be applied first to any
unpaid Scheduled Payments and then to the Insurance Add-On Amount.
Liquidation Proceeds on any Receivable will be used first to pay the
Principal Balance and accrued interest on such Receivable and then to pay the
related Insurance Add-On Amount. If an Obligor under a Receivable with
respect to which the Servicer has placed Force-Placed Insurance fails to make
scheduled payments of such Insurance Add-On Amount as due, and the Servicer
has determined that eventual payment of the Insurance Add-On Amount is
unlikely, the Servicer may, but shall not be required to, purchase such
Receivable from the Trust for the Purchase Amount on any subsequent Deposit
Date. Any such Receivable, and any Receivable with respect to which the
Servicer has placed Force-Placed Insurance which has been paid in full
(excluding any Insurance Add-On Amounts) will be assigned to the Servicer.
(d) The Servicer may sue to enforce or collect upon the
Insurance Policies, in its own name, if possible, or as agent of the Trust.
If the Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment
of the rights of the Trust under such Insurance Policy to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce an Insurance Policy
on the grounds that it is not a real party in interest or a holder entitled
to enforce the Insurance Policy, the Owner Trustee, on behalf of the Trust,
at the Servicer's expense, or the Seller, at the Seller's expense,
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shall take such steps as the Servicer deems necessary to enforce such
Insurance Policy, including bringing suit in its name or the name of the
Indenture Collateral Agent for the benefit of the Issuer Secured Parties.
(e) The Servicer shall maintain a vendor's single interest or
other collateral protection insurance policy with respect to all Financed
Vehicles, which policy shall by its terms insure against physical damage in
the event any Obligor fails to maintain physical loss and damage insurance
with respect to the related Financed Vehicle. Costs incurred by the Servicer
in maintaining such insurance shall be paid by the Servicer. The Servicer
will cause itself to be named as named insured and the Owner Trustee to be
named a loss payee under all such policies. The Servicer may, with the
consent of the Security Insurer, elect not to maintain such insurance policy
but in such event will be obligated to indemnify the Trust against any losses
arising from an Obligor's failure to maintain physical loss and damage
insurance with respect to the related Financed Vehicle.
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by
this Agreement, the Servicer shall take such steps as are necessary to
maintain perfection of the security interest created by each Receivable in
the related Financed Vehicle on behalf of the Trust, including but not
limited to obtaining the execution by the Obligors and the recording,
registering, filing, re-recording, re-filing, and re-registering of all
security agreements, financing statements and continuation statements as are
necessary to maintain the security interest granted by the Obligors under the
respective Receivables. The Owner Trustee hereby authorizes the Servicer,
and the Servicer agrees, to take any and all steps necessary to re-perfect
such security interest on behalf of the Trust as necessary because of the
relocation of a Financed Vehicle or for any other reason. In the event that
the assignment of a Receivable to the Owner Trustee on behalf of the Trust is
insufficient, without a notation on the related Financed Vehicle's
certificate of title, or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to perfect a security interest in the related Financed Vehicle in
favor of the Trust, the Servicer hereby agrees that the Servicer's
designation as the secured party on the certificate of title is in its
capacity as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of
Default, the Security Insurer may (so long as an Insurer Default shall not
have occurred and be continuing) instruct the Owner Trustee and the Servicer
to take or cause to be taken, or, if an Insurer Default shall have occurred,
upon the occurrence of a Servicer Termination Event, the Owner Trustee and
the Servicer shall take or cause to be taken such action as may, in the
opinion of counsel to the Security Insurer (or, if an Insurer Default shall
have occurred and be continuing, counsel to the Owner Trustee), be necessary
to perfect or re-perfect the security interests in the Financed Vehicles
securing the Receivables in the name of the Trust by amending
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the title documents of such Financed Vehicles or by such other reasonable
means as may, in the opinion of counsel to the Security Insurer or the Owner
Trustee (as applicable), be necessary or prudent. AFL hereby agrees to pay
all expenses related to such perfection or re-perfection and to take all
action necessary therefor. In addition, prior to the occurrence of an
Insurance Agreement Event of Default, the Security Insurer may (unless an
Insurer Default shall have occurred and be continuing) instruct the Owner
Trustee and the Servicer to take or cause to be taken such action as may, in
the opinion of counsel to the Security Insurer, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of the Trust, including by amending the title
documents of such Financed Vehicles or by such other reasonable means as may,
in the opinion of counsel to the Security Insurer, be necessary or prudent;
PROVIDED, HOWEVER, that (unless an Insurer Default shall have occurred and be
continuing) if the Security Insurer requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default,
the out-of-pocket expenses of the Servicer or the Owner Trustee in connection
with such action shall be reimbursed to the Servicer or the Owner Trustee, as
applicable, by the Security Insurer.
SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF
SERVICER. By its execution and delivery of this Agreement, the Servicer makes
the following representations, warranties and covenants on which the Owner
Trustee relies in accepting the Receivables in trust and issuing the Notes on
behalf of the Trust, on which the Indenture Trustee relies in authenticating
the Notes and on which the Security Insurer relies in issuing the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing
each Receivable shall not be released in whole or in part from
the security interest granted by the Receivable, except upon
payment in full of the Receivable or as otherwise contemplated
herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to
impair the rights of the Trust, the Noteholders in the
Receivables, the Dealer Agreements, the Dealer Assignments, the
Insurance Policies or the other Trust Property; and
(iii) NO AMENDMENTS. The Servicer shall not extend
or otherwise amend the terms of any Receivable, except in
accordance with Section 3.2.
(b) The Servicer represents, warrants and covenants as of
the Closing Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer
has been duly organized and is validly existing and in good
standing under
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the laws of its jurisdiction of organization, with power,
authority and legal right to own its properties and to conduct
its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times,
and now has, power, authority and legal right to enter into and
perform its obligations under this Agreement;
(ii) DUE QUALIFICATION. The Servicer is duly
qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses and approvals,
in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) requires or shall
require such qualification;
(iii) POWER AND AUTHORITY. The Servicer has the power
and authority to execute and deliver this Agreement and its
Related Documents and to carry out its terms and their terms,
respectively, and the execution, delivery and performance of this
Agreement and the Servicer's Related Documents have been duly
authorized by the Servicer by all necessary corporate action;
(iv) BINDING OBLIGATION. This Agreement and the
Servicer's Related Documents shall constitute legal, valid and
binding obligations of the Servicer enforceable in accordance
with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law;
(v) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the Servicer's
Related Documents, and the fulfillment of the terms of this
Agreement and the Servicer's Related Documents, shall not
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of
the Servicer, or any indenture, agreement, mortgage, deed of
trust or other instrument to which the Servicer is a party or by
which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order,
rule or regulation applicable to the Servicer of any court or of
any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the
Servicer or any of its properties;
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(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Servicer's knowledge,
threatened against the Servicer, before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or
any of the Related Documents, (B) seeking to prevent the issuance
of the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents,
or (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents or (D) seeking to
adversely affect the federal income tax or other federal, state
or local tax attributes of the Notes;
(vii) NO CONSENTS. The Servicer is not required to
obtain the consent of any other party or any consent, license,
approval or authorization, or registration or declaration with,
any governmental authority, bureau or agency in connection with
the execution, delivery, performance, validity or enforceability
of this Agreement;
(viii) COLLATERAL INSURANCE. The Collateral Insurance
is in full force and effect.
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT.
Upon discovery by any of the Servicer, the Security Insurer, the Owner
Trustee or the Indenture Trustee of a breach of any of the covenants set
forth in Sections 3.5(a) or 3.6(a), the party discovering such breach shall
give prompt written notice to the others; PROVIDED, HOWEVER, that the failure
to give any such notice shall not affect any obligation of the Servicer. As
of the second Accounting Date following its discovery or receipt of notice of
any breach of any covenant set forth in Sections 3.5(a) or 3.6(a) which
materially and adversely affects the interests of the Noteholders, the Trust
or the Security Insurer in any Receivable (including any Liquidated
Receivable) (or, at the Servicer's election, the first Accounting Date so
following), the Servicer shall, unless it shall have cured such breach in all
material respects, purchase from the Trust the Receivable affected by such
breach and, on the related Deposit Date, the Servicer shall pay the related
Purchase Amount. It is understood and agreed that the obligation of the
Servicer to purchase any Receivable (including any Liquidated Receivable)
with respect to which such a breach has occurred and is continuing shall, if
such obligation is fulfilled, constitute the sole remedy against the Servicer
for such breach available to the Security Insurer, the Noteholders, or the
Indenture Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that the
Servicer shall indemnify the Owner Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust, the Indenture Trustee and
the Noteholders against all costs, expenses, losses, damages, claims and
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liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES
BY SERVICER. On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Basic Servicing Fee and any
Supplemental Servicing Fee for the related Monthly Period pursuant to Section
4.6. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed
on the Servicer, expenses incurred in connection with distributions and
reports to Noteholders and the Security Insurer and all other fees and
expenses of the Trust, including taxes levied or assessed against the Trust,
and claims against the Trust in respect of indemnification, unless such fees,
expenses or claims in respect of indemnification are expressly stated to be
for the account of AFL or not to be for the account of the Servicer). The
Servicer shall be liable for the fees and expenses of the Owner Trustee, the
Administrator, the Indenture Collateral Agent, the Indenture Trustee, the
Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and
any fees under the Lockbox Agreement) and the Independent Accountants.
Notwithstanding the foregoing, if the Servicer shall not be AFL, a successor
to AFL as Servicer permitted by Section 7.2 or an Affiliate of any of the
foregoing, such Servicer shall not be liable for taxes levied or assessed
against the Trust or claims against the Trust in respect of indemnification.
SECTION 3.9. SERVICER'S CERTIFICATE. No later than 10:00
a.m. New York City time on each Determination Date, the Servicer shall
deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, the Collateral Agent and each Rating Agency a Servicer's
Certificate executed by a Responsible Officer of the Servicer containing,
among other things, (i) all information necessary to enable the Indenture
Trustee to make any withdrawal and deposit required by Section 5.1, to give
any notice required by Section 5.2, to make the distributions required by
Sections 4.6 and 4.7(b), to make the withdrawals, distributions and
deliveries required by Section 4.7(a) and to determine the amount to which
the Servicer is entitled to be reimbursed or has been reimbursed during the
related Monthly Period for Monthly Advances pursuant to Section 4.4(c), (ii)
all information necessary to enable the Indenture Trustee to send the
statements to Noteholders required by Section 4.9, (iii) a listing of all
Warranty Receivables and Administrative Receivables purchased as of the
related Deposit Date, identifying the Receivables so purchased, and (iv) all
information necessary to enable the Indenture Trustee to reconcile all
deposits to, and withdrawals from, the Collection Account for the related
Monthly Period and Distribution Date, including the accounting required by
Section 4.8. Receivables purchased by the Servicer or by the Seller or AFL
on the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Monthly Period shall
be identified by account number (as set forth in the Schedule of
Receivables). A copy of such certificate may be obtained by any Noteholder
(or by a Note Owner, upon
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certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof) by a request in writing to the
Indenture Trustee addressed to the Corporate Trust Office. In addition to
the information set forth in the preceding sentence, the Servicer's
Certificate delivered to the Security Insurer, the Collateral Agent and the
Indenture Trustee on the Determination Date shall also contain the following
information: (a) the Delinquency Ratio, Average Delinquency Ratio, Cumulative
Default Rate and Cumulative Net Loss Rate for such Determination Date; (b)
whether any Trigger Event has occurred as of such Determination Date; (c)
whether any Trigger Event that may have occurred as of a prior Determination
Date is Deemed Cured as of such Determination Date; (d) whether to the
knowledge of the Servicer an Insurance Agreement Event of Default has
occurred, (e) if AFL shall be the Servicer, whether a Capture Event shall
have occurred and be continuing, and (f) if AFL shall be the Servicer,
whether any Capture Event specified in any prior Servicer's Certificate has
been cured by a permanent waiver, effective in accordance with the terms of
the Purchase Agreements.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
SERVICER TERMINATION EVENT.
(a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and each Rating
Agency, on or before March 31 (or 90 days after the end of the Servicer's
fiscal year, if other than December 31) of each year, beginning on March 31,
1999, an officer's certificate signed by any Responsible Officer of the
Servicer, dated as of December 31 (or other applicable date) of the
immediately preceding year, stating that (i) a review of the activities of
the Servicer during the preceding 12-month period (or such other period as
shall have elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral
Agent, and each Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than two Business Days thereafter, written
notice in an officer's certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 8.1(a). The Seller or the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer,
the Collateral Agent, the Servicer or the Seller (as applicable) and each
Rating Agency promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an officer's
certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under any other clause of
Section 8.1.
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SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver
to the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer and each Rating Agency, on or before March 31 (or 90 days
after the end of the Servicer's fiscal year, if other than December 31) of
each year, beginning on March 31, 1999, with respect to the twelve months
ended the immediately preceding December 31 (or other applicable date) (or
such other period as shall have elapsed from the Closing Date to the date of
such certificate), a statement (the "Accountant's Report") addressed to the
Board of Directors of the Servicer, to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and to the Security Insurer, to the effect that
such firm has audited the financial statements of the Servicer and issued its
report thereon and that such audit was made in accordance with generally
accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as such firm considered
necessary in the circumstances, including procedures as determined by the
Independent Accountants related to (1) the documents and records concerning
the servicing of automobile installment sales contracts under pooling and
servicing agreements and sale and servicing agreements substantially similar
one to another (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements and sale and servicing agreements
covered thereby, including this Agreement); and (2) the delinquency and loss
statistics relating to the Servicer's portfolio of automobile installment
sales contracts; and except as described in the statement, disclosed no
exceptions or errors in the records relating to automobile and light truck
loans serviced for others that, in the firm's opinion, generally accepted
auditing standards requires such firm to report. The Accountants' Report
shall further state that (1) a review in accordance with agreed upon
procedures was made of three randomly selected Servicer's Certificates for
each Trust and (2) except as disclosed in the Report, no exceptions or errors
in the Servicer's Certificates so examined were found.
(b) The Accountants' Report shall also indicate that the firm
is independent of the Seller and the Servicer within the meaning of the Code
of Professional Ethics of the American Institute of Certified Public
Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Noteholder (or by any Note Owner, upon certification that such Person is a
Note Owner and payment of any expenses associated with the distribution
thereof) by a request in writing to the Indenture Trustee addressed to the
Corporate Trust Office.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Owner Trustee, Indenture Trustee, the Backup Servicer and the Security
Insurer reasonable
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access to the documentation regarding the Receivables. The Servicer shall
provide such access to any Noteholder (or Note Owner) only in such cases
where the Servicer is required by applicable statutes or regulations (whether
applicable to the Servicer or to such Noteholder or Note Owner) to permit
such Noteholder (or Note Owner) to review such documentation. In each case,
such access shall be afforded without charge but only upon reasonable request
and during normal business hours. Nothing in this Section shall derogate
from the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. Any Noteholder (or
Note Owner), by its acceptance of a Note (or by acquisition of its beneficial
interest therein), as applicable, shall be deemed to have agreed to keep
confidential and not to use for its own benefit any information obtained by
it pursuant to this Section, except as may be required by applicable law.
SECTION 3.13. MONTHLY TAPE. On or before the third Business
Day, but in no event later than the fifth calendar day, of each month, the
Servicer will deliver to the Indenture Trustee and the Backup Servicer a
computer tape and a diskette (or any other electronic transmission acceptable
to the Indenture Trustee and the Backup Servicer) in a format acceptable to
the Indenture Trustee and the Backup Servicer containing the information with
respect to the Receivables as of the preceding Accounting Date necessary for
preparation of the Servicer's Certificate relating to the immediately
succeeding Determination Date and necessary to determine the application of
collections as provided in Section 4.3. The Backup Servicer shall use such
tape or diskette (or other electronic transmission acceptable to the
Indenture Trustee and the Backup Servicer) to verify the Servicer's
Certificate delivered by the Servicer (based on the information contained in
such tape or diskette), and the Backup Servicer shall certify to the Security
Insurer that it has verified the Servicer's Certificate in accordance with
this Section 3.13 and shall notify the Servicer and the Security Insurer of
any discrepancies, in each case, on or before the second Business Day
following the Determination Date. In the event that the Backup Servicer
reports any discrepancies, the Servicer and the Backup Servicer shall attempt
to reconcile such discrepancies prior to the related Deficiency Claim Date,
but in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to the
related Distribution Date. In the event that the Backup Servicer and the
Servicer are unable to reconcile discrepancies with respect to a Servicer's
Certificate by the related Distribution Date, the Servicer shall cause the
Independent Accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the third Business Day, but in no event later than
the fifth calendar day, of the following month, reconcile the discrepancies.
The effect, if any, of such reconciliation shall be reflected in the
Servicer's Certificate for such next succeeding Determination Date. In
addition, the Servicer shall, if so requested by the Security Insurer (unless
an Insurer Default shall have occurred and be continuing) deliver to the
Backup Servicer its Collection Records and its Monthly Records within one
Business Day of demand therefor and a computer tape containing as of the
close of business on the date of demand all of the data
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maintained by the Servicer in computer format in connection with servicing
the Receivables. Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder,
including, without limitation, to supervise, verify, monitor or administer
the performance of the Servicer. The Backup Servicer shall have no liability
for any actions taken or omitted by the Servicer. The duties and obligations
of the Backup Servicer shall be determined solely by the express provisions
of this Agreement and no implied covenants or obligations shall be read into
this Agreement against the Backup Servicer.
SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The
Servicer hereby covenants and agrees to act as such under this Agreement for
an initial term, commencing on the Closing Date and ending on September 30,
1998, which term shall be extendible by the Security Insurer for successive
quarterly terms ending on each successive December 31, March 31, June 30 and
September 30 (or, pursuant to revocable written standing instructions from
time to time to the Servicer, the Indenture Trustee and the Owner Trustee,
for any specified number of terms greater than one), until the termination of
the Trust. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive
quarterly terms for so long as such instructions are in effect) (a "Servicer
Extension Notice") shall be delivered by the Security Insurer to the Owner
Trustee, the Indenture Trustee and the Servicer. The Servicer hereby agrees
that, as of the date hereof and upon its receipt of any such Servicer
Extension Notice, the Servicer shall become bound, for the initial term
beginning on the Closing Date and for the duration of the term covered by
such Servicer Extension Notice, to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. Until such time as
an Insurer Default shall have occurred and be continuing, the Indenture
Trustee agrees that if as of the fifteenth day prior to the last day of any
term of the Servicer the Indenture Trustee shall not have received any
Servicer Extension Notice from the Security Insurer, the Indenture Trustee
will, within five days thereafter, give written notice of such non-receipt to
the Owner Trustee, the Security Insurer and the Servicer.
SECTION 3.15. FIDELITY BOND. The Servicer shall maintain a
fidelity bond in such form and amount as is customary for entities acting as
custodian of funds and documents in respect of consumer contracts on behalf
of institutional investors.
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE.
The Servicer shall, and hereby agrees that it will, perform on behalf of the
Trust and the Owner Trustee the following duties of the Trust or the Owner
Trustee, as applicable, under the Indenture (references are to the applicable
Sections in the Indenture):
(a) the direction to the Paying Agents, if any, to deposit
moneys with the Indenture Trustee (Section 3.03);
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(b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Indenture Collateral
and each other instrument and agreement included in the Trust Estate
(Section 3.04);
(c) the preparation of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of
the Indenture, necessary to protect the Trust Estate (Section 3.05);
(d) the delivery of the Opinion of Counsel on the Closing
Date and the annual delivery of Opinions of Counsel, in accordance
with Section 3.06 of the Indenture, as to the Trust Estate, and the
annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its
obligations under the Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officers' Certificate and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(g) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee
and any written instruments necessary in connection with the
resignation or removal of any co-trustee or separate trustee
(Sections 6.08 and 6.10);
(h) the opening of one or more accounts in the Trust's
name, the preparation of Issuer Orders, Officers' Certificates and
Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections
8.02 and 8.03);
(i) the preparation of Trust Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(j) the preparation of all Officers' Certificates, Opinions
of Counsel and Independent Certificates with respect to any requests
by the Issuer to the Indenture Trustee or the Indenture Collateral
Agent to take any action under the Indenture (Section 11.01(a));
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(k) the preparation and delivery of Officers' Certificates
and the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture (Section 11.01(b));
and
(l) the recording of the Indenture, if applicable (Section
11.15).
In addition to the duties of the Servicer set forth above, the Servicer
shall, and hereby agrees that it will, prepare, distribute and file any
reports required by Section 313(b) of the Trust Indenture Act of 1939, as
amended, as a result of any transfer of Subsequent Receivables. Such
distribution and filing is to be effected by the Servicer's distribution and
filing of the Servicer's Certificate.
SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE
AGREEMENT. The Servicer shall, and hereby agrees that it will, perform on
behalf of the Trust and the Owner Trustee the following duties of the Trust
under the Insurance Agreement (references are to the applicable Sections in
the Insurance Agreement):
(a) the maintenance of books and records of accounts of the
Trust's assets and business and the furnishing to the Security Insurer
of reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee or the Noteholders pursuant to the
Related Documents (Section 2.02(b));
(b) the delivery to the Security Insurer and, upon request,
any Noteholder, of certificates with respect to compliance with, and
other matters under, the Related Documents (Section 2.02(c));
(c) the filing of financing statements, assignments or
other instruments, and amendments or continuation statements relating
thereto to preserve and protect fully the lien and security interest
in, and all rights of the Indenture Trustee and the Security Insurer
with respect to, the Trust Estate (Section 2.02(f));
(d) the maintenance of licenses, permits, charters and
registrations of the Trust material to the performance by the Trust of
its obligations under the Insurance Agreement and the Related
Documents (Section 2.02(g));
(e) the provision to the Security Insurer of executed
original copies of the documents executed in connection with the
closing of the offering of the Notes (Section 2.02(k)); and
(f) the taking of actions to ensure that the Trust is
taxable as a partnership for federal and state income tax purposes
and not as an
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association (or publicly traded partnership) taxable as a corporation
(Section 2.02(l)).
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (as defined in the
Trust Agreement) of any actions to be taken by the Trust necessary for
compliance with such laws and prepare on behalf of the Trust and the
Administrator all notices, filings or other documents or instruments required
to be filed under such laws.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
SECTION 4.1. TRUST ACCOUNTS.
(a) The Servicer shall establish the Collection Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties (as defined in the Indenture). The Collection Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.
(b) The Servicer shall establish the Pre-Funding Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties. The Pre-Funding Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Collateral Agent and maintained with the Indenture Collateral Agent.
(c) The Servicer shall establish the Note Distribution
Account in the name of the Indenture Collateral Agent for the benefit of the
Issuer Secured Parties. The Note Distribution Account shall be an Eligible
Account and initially shall be a segregated trust account established with
the Indenture Collateral Agent and maintained with the Indenture Collateral
Agent.
(d) The Servicer shall establish the Reserve Account
(including the Class A-1 Holdback Subaccount) in the name of the Indenture
Collateral Agent for the benefit of the Issuer Secured Parties. The Reserve
Account shall be an Eligible Account and initially shall be a segregated
trust account established with the Indenture Collateral Agent and maintained
with the Indenture Collateral Agent.
(e) All amounts held in the Collection Account, the
Pre-Funding Account, the Note Distribution Account and the Reserve Account
(collectively, the "Trust Accounts") shall, to the extent permitted by
applicable laws, rules and regulations, be invested, as directed in writing
by the Servicer, in Eligible
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Investments that, in the case of amounts held in the Collection Account, the
Note Distribution Account and the Reserve Account, mature not later than one
Business Day prior to the Distribution Date for the Monthly Period to which
such amounts relate, and, in the case of amounts held in the Pre-Funding
Account, mature in such amounts and on such dates, not later than one
Business Day prior to the last day of the Funding Period, as the Servicer may
direct in writing; PROVIDED, HOWEVER, that the amounts held in the Trust
Accounts shall be invested by the Indenture Trustee on behalf of the Trust in
overnight or next-day funds in such Eligible Investments as may be acceptable
to the Rating Agencies and the Security Insurer (which initially shall be the
Indenture Trustee's U.S. Government Fund and, from time to time, shall
include such other proprietary Eligible Investments of the Indenture Trustee
as shall be confirmed in writing by the Security Insurer to the Indenture
Trustee) for the period of time from the Business Day prior to the
Distribution Date or the end of the Funding Period, as applicable, until such
Distribution Date or the end of the Funding Period, as applicable. Any such
written direction shall certify that any such investment is authorized by
this Section 4.1. Investments in Eligible Investments shall be made in the
name of the Indenture Trustee on behalf of the Trust, and such investments
shall not be sold or disposed of prior to their maturity. Any investment of
funds in the Trust Accounts shall be made in Eligible Investments held by a
financial institution in accordance with the following requirements: (a) all
Eligible Investments shall be held in an account with such financial
institution in the name of the Indenture Trustee, (b) with respect to
securities held in such account, such securities shall be (i) certificated
securities (as such term is used in N.Y. UCC Section 8-313(1)(d)(i)),
securities deemed to be certificated securities under applicable regulations
of the United States government, or uncertificated securities issued by an
issuer organized under the laws of the State of New York or the State of
Delaware, (ii) either (A) in the possession of such institution, (B) in the
possession of a clearing corporation (as such term is used in N.Y. UCC
Section 8-313(1)(g)) in the State of New York, registered in the name of such
clearing corporation or its nominee, not endorsed for collection or surrender
or any other purpose not involving transfer, not containing any evidence of a
right or interest inconsistent with the Indenture Trustee's security interest
therein, and held by such clearing corporation in an account of such
institution, (C) held in an account of such institution with the Federal
Reserve Bank of New York or the Federal Reserve Bank of Minneapolis, or (D)
in the case of uncertificated securities, issued in the name of such
institution, and (iii) identified, by book entry or otherwise, as held for
the account of, or pledged to, the Indenture Trustee on the records of such
institution, and such institution shall have sent the Indenture Trustee a
confirmation thereof, (c) with respect to repurchase obligations held in such
account, such repurchase obligations shall be identified by such institution,
by book entry or otherwise, as held for the account of, or pledged to, the
Indenture Trustee on the records of such institution, and the related
securities shall be held in accordance with the requirements of clause (b)
above, and (d) with respect to other Eligible Investments other than
securities and repurchase agreements, such Eligible Investments shall be held
in a manner acceptable to the Indenture Collateral Agent. Subject to the
other provisions hereof, the Indenture Collateral Agent shall have sole
control over each such investment
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and the income thereon, and any certificate or other instrument evidencing
any such investment, if any, shall be delivered directly to the Indenture
Collateral Agent or its agent, together with each document of transfer, if
any, necessary to transfer title to such investment to the Indenture
Collateral Agent in a manner which complies with this Section 4.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Trust Accounts shall be deposited in the
Collection Account and distributed on the next Distribution Date pursuant to
Section 4.6. The Servicer shall deposit in the applicable Trust Account an
amount equal to any net loss on such investments immediately as realized.
(f) On the Closing Date, the Servicer shall deposit in the
Collection Account (i) all Scheduled Payments and prepayments of Initial
Receivables received by the Servicer after the Initial Cutoff Date and on or
prior to the Business Day immediately preceding the Closing Date or received
by the Lockbox Bank after the Initial Cutoff Date and on or prior to the
second Business Day immediately preceding the Closing Date and (ii) all
Liquidation Proceeds and proceeds of Insurance Policies realized in respect
of a Financed Vehicle and applied by the Servicer after the Initial Cutoff
Date. On each Subsequent Transfer Date, the Servicer shall deposit in the
Collection Account (x) all Scheduled Payments and prepayments of the related
Subsequent Receivables received by the Servicer after the related Subsequent
Cutoff Date and on or prior to the Business Day immediately preceding the
related Subsequent Transfer Date or received by the Lockbox Bank after the
related Subsequent Cutoff Date and on or prior to the second Business Day
immediately preceding the related Subsequent Transfer Date and (y) all
Liquidation Proceeds and proceeds of Insurance Policies related in respect of
a Financed Vehicle and applied by the Servicer after the related Subsequent
Cutoff Date.
SECTION 4.2. COLLECTIONS.
(a) The Servicer shall establish the Subcollection Account in
the name of the Indenture Trustee for the benefit of the Noteholders. The
Subcollection Account shall be an Eligible Account satisfying clause (ii) of
the definition of "Eligible Account," and shall initially be established with
the Lockbox Bank. The Servicer shall remit directly to the Subcollection
Account without deposit into any intervening account all payments by or on
behalf of the Obligors on the Receivables and all Liquidation Proceeds
received by the Servicer, in each case, as soon as practicable, but in no
event later than the Business Day after receipt thereof. Within two days of
deposit of payments into the Subcollection Account, the Servicer shall cause
the Lockbox Bank to transfer all amounts credited to the Subcollection
Account on account of such payments to the Collection Account. Amounts in
the Subcollection Account shall not be invested. Notwithstanding the
foregoing, the Servicer may utilize an alternative remittance schedule
acceptable to the Servicer if the Security Insurer consents in writing (so
long as an Insurer Default shall not have occurred and be continuing) and the
Servicer provides to the Indenture Trustee written confirmation from each
Rating Agency that such
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alternative remittance schedule will not result in the downgrading or
withdrawal by the Rating Agency of the rating then assigned to the Notes.
(b) Notwithstanding the provisions of subsection (a) hereof,
the Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer or
the Lockbox Bank to have resulted from mistaken deposits or postings or
checks returned for insufficient funds. The amount to be reimbursed
hereunder shall be paid to the Servicer on the related Distribution Date
pursuant to Section 4.6(iii) upon certification by the Servicer of such
amounts and the provision of such information to the Indenture Trustee and
the Security Insurer as may be necessary in the opinion of the Indenture
Trustee and the Security Insurer to verify the accuracy of such
certification. In the event that the Security Insurer has not received
evidence satisfactory to it of the Servicer's entitlement to reimbursement
pursuant to this Section 4.2(b), the Security Insurer shall (unless an
Insurer Default shall have occurred and be continuing) give the Indenture
Trustee notice to such effect, following receipt of which the Indenture
Trustee shall not make a distribution to the Servicer in respect of such
amount pursuant to Section 4.6, or if the Servicer prior thereto has been
reimbursed pursuant to Section 4.6 or Section 4.8, the Indenture Trustee
shall withhold such amounts from amounts otherwise distributable to the
Servicer on the next succeeding Distribution Date.
SECTION 4.3. APPLICATION OF COLLECTIONS. For the purposes of
this Agreement, all collections for a Monthly Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable, payments by or on
behalf of the Obligor thereof (other than of Supplemental Servicing
Fees with respect to such Receivable, to the extent collected) shall
be applied to interest and principal with respect to such Receivable
in accordance with the terms of such Receivable. With respect to
each Liquidated Receivable, Liquidation Proceeds shall be applied to
interest and principal with respect to such Receivable in accordance
with the terms of such Receivable, and then to any Insurance Add-On
Amount due and payable with respect to such Receivable. The Servicer
shall not be entitled to any Supplemental Servicing Fees with respect
to a Liquidated Receivable.
(b) With respect to each Receivable that has become a
Purchased Receivable on any Deposit Date, the Purchase Amount shall
be applied, for purposes of this Agreement only, to interest and
principal on the Receivable in accordance with the terms of the
Receivable as if the Purchase Amount had been paid by the Obligor
on the Accounting Date. The Servicer shall not be entitled to any
Supplemental Servicing Fees with respect to such a Receivable.
Nothing contained herein shall relieve any Obligor of any
obligation relating to any Receivable.
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(c) All amounts collected that are payable to the
Servicer as Supplemental Servicing Fees hereunder shall be
deposited in the Collection Account and paid to the Servicer in
accordance with Section 4.6(iii).
(d) All payments by or on behalf of an Obligor received
with respect to any Purchased Receivable after the Accounting Date
immediately preceding the Deposit Date on which the Purchase Amount
was paid by the Seller, AFL or the Servicer shall be paid to the
Seller, AFL or the Servicer, respectively, and shall not be
included in the Available Funds.
SECTION 4.4. MONTHLY ADVANCES.
(a) If with respect to a Receivable, the amount deposited into
the Collection Account during a Monthly Period in respect of such Receivable and
allocable to interest (determined in accordance with Section 4.3) is less than
an amount of interest equal to interest accrued on such Receivable (for the
number of calendar days in such Monthly Period) (calculated according to the
method specified in the related retail installment sale contract or promissory
note at the APR on the Principal Balance of such Receivable as of the Accounting
Date preceding such Distribution Date), the Servicer shall make a Monthly
Advance equal to the amount of such shortfall; PROVIDED, HOWEVER, that the
Servicer shall not be required to make a Monthly Advance with respect to a
Receivable extended pursuant to Section 3.2(b) for any Monthly Period during
which no Scheduled Payment is due according to the terms of such extension; and
PROVIDED FURTHER, that the Servicer shall not be required to make a Monthly
Advance with respect to a Receivable that is less than 31 days delinquent.
(b) On or before each Determination Date and prior to the
delivery of the Servicer's Certificate for such Determination Date pursuant
to Section 3.9, the Servicer shall deposit in the Collection Account the
aggregate amount of Monthly Advances required for the related Monthly Period
in immediately available funds (subject to Section 4.8).
(c) The Servicer shall be entitled to be reimbursed for
Outstanding Monthly Advances with respect to a Receivable pursuant to Section
4.6(i) or pursuant to Section 4.8 from the following sources with respect to
such Receivable on any day subsequent to the Distribution Date in respect of
which such Monthly Advance was made: (i) subsequent payments by or on behalf
of the Obligor with respect to such Receivable, (ii) collections of
Liquidation Proceeds with respect to such Receivable if such Receivable
becomes a Liquidated Receivable and (iii) payment of any Purchase Amount with
respect to such Receivable if such Receivable becomes a Purchased Receivable.
If any Receivable shall become a Liquidated Receivable and the Servicer
shall not have been fully reimbursed for Outstanding Monthly Advances with
respect to such Receivable from the sources of funds previously described in
this paragraph, the Servicer shall be entitled to
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reimbursement from collections on Receivables other than the Receivable in
respect of which such Outstanding Monthly Advance shall have been made.
SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Deposit
Date, the Servicer or AFL shall deposit in the Collection Account the
aggregate Purchase Amounts with respect to Administrative Receivables and
Warranty Receivables, respectively. All such deposits of Purchase Amounts
shall be made in immediately available funds. On or before each Draw Date,
the Indenture Trustee shall deposit in the Collection Account any amounts
delivered to the Indenture Trustee by the Collateral Agent.
SECTION 4.6. DISTRIBUTIONS. On each Distribution Date, the
Indenture Trustee shall (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) distribute the
following amounts and in the order of priority specified below. Within each
order of priority, amounts shall be deemed withdrawn first from Available
Funds, second from the Reserve Account and third from any Deficiency Claim
Amounts.
(i) first, from the Distribution Amount, (A) to the
Trust for payment of any taxes due and unpaid with respect to the
Trust, to the extent such taxes have not been previously paid by
AFL or by the Servicer pursuant to Section 3.8, and (B) then to the
Servicer, the amount of Outstanding Monthly Advances for which the
Servicer is entitled to be reimbursed pursuant to Section 4.4(c)
and for which the Servicer has not previously been reimbursed
pursuant to Section 4.8;
(ii) second, from the Distribution Amount then remaining
on deposit in the Collection Account, to the Owner Trustee, any
accrued and unpaid fees of the Owner Trustee in accordance with the
Trust Agreement and including amounts with respect to which the
Administrator is entitled to be reimbursed pursuant to the
Administration Agreement; to the Indenture Trustee, any accrued and
unpaid fees of the Indenture Trustee in accordance with the
Indenture; to any Lockbox Bank, Custodian, Backup Servicer,
Collateral Agent, Indenture Collateral Agent or Administrator
(including the Owner Trustee or Indenture Trustee if acting in any
such additional capacity), any accrued and unpaid fees (in each
case, to the extent such Person has not previously received such
amount from the Servicer or AFL), to the Backup Servicer, any
transition expenses (not to exceed $100,000) in accordance with
Section 8.3; PROVIDED, HOWEVER, in the event that the rating
assigned by Standard & Poor's to the claims-paying ability of the
Security Insurer is not AAA, the accrued and unpaid fees of the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Collateral Agent, the Indenture Collateral Agent and the
Administrator shall be distributed pursuant to this clause (ii) to
the extent such fees are not in excess of the amount (the "Servicer
Fee Threshold") obtained by dividing (x) .20% of the Aggregate
Principal Balance by (y) twelve, and any accrued and unpaid fees in
excess of the Servicer Fee
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Threshold remaining to be distributed pursuant to this clause (ii)
shall not be distributed pursuant to this clause (ii) but shall be
distributed after the distributions to be made pursuant to clause
(v) below but before the distributions to be made pursuant to
clause (vi) below;
(iii) third, from the Distribution Amount then
remaining on deposit in the Collection Account, to the Servicer,
the Basic Servicing Fee for the related Monthly Period, any
Supplemental Servicing Fees for the related Monthly Period, and any
amounts specified in Section 4.2(b), to the extent the Servicer has
not reimbursed itself in respect of such amounts pursuant to
Section 4.8;
(iv) fourth, from the Distribution Amount then remaining
on deposit in the Collection Account, to the Note Distribution
Account, an amount equal to the Noteholders' Interest Distributable
Amount for such Distribution Date;
(v) fifth, from the Distribution Amount then remaining
on deposit in the Collection Account, to the Note Distribution
Account, an amount equal to the Noteholders' Principal
Distributable Amount for such Distribution Date;
(vi) sixth, from the Distribution Amount then remaining
on deposit in the Collection Account, to the Security Insurer, to
the extent of any amounts owing to the Security Insurer under the
Insurance Agreement and not paid, whether or not AFL is also
obligated to pay such amounts, such amounts representing a portion
of the Credit Enhancement Fee otherwise payable on a subordinated
basis to the Seller; and
(vii) seventh, any remaining Available Funds to the
Collateral Agent for deposit in the Spread Account, such amounts
representing a portion of the Credit Enhancement Fee payable on a
subordinated basis to the Seller.
SECTION 4.7. PRE-FUNDING ACCOUNT.
(a) On the Closing Date, the Indenture Trustee will deposit,
on behalf of the Seller, in the Pre-Funding Account $146,901,153.65 from the
proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Indenture Trustee in writing:
(i) to withdraw from the Pre-Funding Account the Spread
Account Additional Deposit, if any, on such Subsequent Transfer
Date, and to deliver such funds to the Collateral Agent for deposit
in the Spread Account,
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(ii) to withdraw from the Pre-Funding Account the
amount, if any, by which the Requisite Reserve Amount for such
Subsequent Transfer Date exceeds the Reserve Amount, and to deposit
such funds in the Reserve Account,
(iii) to withdraw from the Pre-Funding Account the Class
A-1 Holdback Amount, if any, for such Subsequent Transfer Date, and
to deposit such funds in the Class A-1 Holdback Subaccount,
(iv) to withdraw from the Pre-Funding Account the
amount, if any, on deposit therein in excess of the remaining
Pre-Funded Amount, after giving effect to the withdrawals specified
in clauses (i) - (iii) above, and to distribute such amount to or
upon the order of the Seller upon satisfaction of the conditions
set forth in Section 2.4 with respect to such transfer, and
(v) to withdraw from the Reserve Account an amount
equal to the excess, if any, of the Reserve Amount (after giving
effect to withdrawals from the Reserve Account pursuant to Section
5.1 on the immediately following Distribution Date, if such
Subsequent Transfer Date falls between a Determination Date and the
related Distribution Date) over the Requisite Reserve Amount for
such Subsequent Transfer Date and to distribute such amount to or
upon the order of the Depositor.
(b) If (x) the Pre-Funded Amount has not been reduced to zero
on the Distribution Date on or immediately following the end of the Funding
Period) or (y) the Pre-Funded Amount has been reduced to $100,000 or less on
any Distribution Date, in either case after giving effect to any reductions
in the Pre-Funded Amount on such Distribution Date pursuant to paragraph (a)
above, the Servicer shall provide written instructions to the Indenture
Trustee to withdraw from the Pre-Funding Account on such Distribution Date an
amount equal to the sum of the Class A-1 Prepayment Amount, the Class A-2
Prepayment Amount, the Class A-3 Prepayment Amount, the Class A-4 Prepayment
Amount and the Class A-5 Prepayment Amount and deposit such amount in the
Note Distribution Account. Any remaining funds on deposit in the Pre-Funding
Account shall be distributed to the Depositor. If the funds on deposit in
the Pre-Funding Account are less than the amount described above, then the
Servicer shall provide written instructions to the Indenture Trustee to
withdraw the funds on deposit in the Pre-Funding Account and deposit such
funds in the Note Distribution Account and Collection Account, pro rata in
accordance with the amount specified above.
(c) If the Pre-Funded Amount is greater than $100,000 at the
end of the Funding Period, the Seller will deposit into the Note Distribution
Account an amount equal to the sum of the Class A-1 Prepayment Premium, the
Class A-2 Prepayment Premium, the Class A-3 Prepayment Premium, the Class A-4
Prepayment Premium and the Class A-5 Prepayment Premium; PROVIDED, HOWEVER,
that the obligation of the Seller to make the deposits referred to in this
sentence is
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expressly limited to the extent of the amount of Liquidated Damages (as
defined in the Closing Date Purchase Agreement) paid to the Seller by AFL and
by the Seller to the Trust.
SECTION 4.8. NET DEPOSITS. Subject to payment by the
Servicer of amounts otherwise payable pursuant to Section 4.6(ii) and
provided that no Servicer Termination Event shall have occurred and be
continuing with respect to such Servicer, the Servicer may make the
remittances to be made by it pursuant to Sections 4.2, 4.4 and 4.5 net of
amounts (which amounts may be netted prior to any such remittance for a
Monthly Period) to be distributed to it pursuant to Sections 3.8, 4.2(b) and
4.6(i); PROVIDED, HOWEVER, that the Servicer shall account for all of such
amounts in the related Servicer's Certificate as if such amounts were
deposited and distributed separately; and, PROVIDED, FURTHER, that if an
error is made by the Servicer in calculating the amount to be deposited or
retained by it, with the result that an amount less than required is
deposited in the Collection Account, the Servicer shall make a payment of the
deficiency to the Collection Account, immediately upon becoming aware, or
receiving notice from the Indenture Trustee, of such error.
SECTION 4.9. STATEMENTS TO NOTEHOLDERS.
(a) On each Distribution Date, the Indenture Trustee shall
include with each distribution to each Noteholder, the Servicer's Certificate
(which statement shall also have been provided to the Security Insurer and to
each Rating Agency by the Servicer) delivered on the related Determination
Date pursuant to Section 3.9, setting forth for the Monthly Period relating
to such Payment Date the following information with respect to each class of
Notes:
(i) the amount of such distribution allocable to
principal;
(ii) the amount of such distribution allocable to
interest;
(iii) the amount of such distribution payable out of
amounts withdrawn from the Reserve Account, the Class A-1 Holdback
Subaccount, the Spread Account or pursuant to a claim on the Note
Policy;
(iv) the outstanding principal balance of the Notes
(after giving effect to distributions made on such Distribution
Date);
(v) the Class A-1 Interest Carryover Shortfall, the
Class A-2 Interest Carryover Shortfall, the Class A-3 Interest
Carryover Shortfall, the Class A-4 Interest Carryover Shortfall,
the Class A-5 Interest Carryover Shortfall, and the Noteholders'
Principal Carryover Shortfall, if any, and the change in such
amounts from the preceding statement;
(vi) the amount of fees paid by the Trust with respect to
such Monthly Period;
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(vii) for Payment Dates during the Funding Period,
the remaining Pre-Funded Amount, the remaining Reserve Amount and
the amount on deposit in the Class A-1 Holdback Subaccount;
(viii) for the Payment Date on or immediately
following the end of the Funding Period, the Class A-1 Prepayment
Amount, the Class A-2 Prepayment Amount, the Class A-3 Prepayment
Amount, the Class A-4 Prepayment Amount, the Class A-5 Prepayment
Amount, the Class A-1 Prepayment Premium, the Class A-2 Prepayment
Premium, the Class A-3 Prepayment Premium, the Class A-4 Prepayment
Premium and the Class A-5 Prepayment Premium, if any, and the
remaining Reserve Amount that has not been distributed pursuant to
Section 4.6 or to the Depositor; and
(ix) the Note Pool Factor with respect to each class
of Notes (after giving effect to distributions made on such Payment
Date).
Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a
Note.
(b) Note Owners may obtain copies of the statements delivered
by the Indenture Trustee pursuant to subsection (b) above upon written
request to the Indenture Trustee at its Corporate Trust Office (together with
a certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof).
SECTION 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture
Trustee, in holding all funds in the Trust Accounts and in making
distributions as provided in this Agreement, shall act solely on behalf of
and as agent for the Noteholders.
SECTION 4.11. ELIGIBLE ACCOUNTS. Any account which is
required to be established as an Eligible Account pursuant to this Agreement
and which ceases to be an Eligible Account shall within five Business Days
(or such longer period, not to exceed 30 days, as to which each Rating Agency
and the Security Insurer may consent) be established as a new account which
shall be an Eligible Account and any cash and/or any investments shall be
transferred to such new account.
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ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT.
(a) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the amount of Available Funds with
respect to such Determination Date is less than the sum of the amounts
payable on the related Distribution Date pursuant to clauses (i) through
(vii) of Section 4.6, then on the Draw Date immediately preceding such
Distribution Date, the Indenture Trustee, in accordance with written
instructions, shall (i) withdraw amounts on deposit in the Reserve Account,
other than any funds in the Class A-1 Holdback Subaccount (up to the amount
by which the amounts payable on the related Distribution Date pursuant to
clauses (i) through (vii) of Section 4.6 exceed the amount of Available Funds
with respect to such Determination Date) and (ii) deposit the amounts so
withdrawn from the Reserve Account into the Collection Account. On each
Distribution Date, any funds on deposit in the Reserve Account (other than
funds on deposit in the Class A-1 Holdback Subaccount) in excess of the
Requisite Reserve Amount (after giving effect to any withdrawals on the
immediately preceding Draw Date as described above) shall be paid to the
Depositor.
(b) In the event that the Servicer's Certificate with respect
to the Determination Date related to the Class A-1 Final Scheduled
Distribution Date shall state that the unpaid principal balance of the Class
A-1 Notes (after giving effect to the distribution of the Available Funds
pursuant to clauses (i) - (v) of Section 4.6 for such Distribution Date), is
greater than zero, then on the Draw Date immediately preceding such
Distribution Date the Indenture Trustee, in accordance with written
instructions, shall withdraw an amount equal to such unpaid principal balance
from funds on deposit in the Class A-1 Holdback Subaccount (or the amount of
funds on deposit in the Class A-1 Holdback Subaccount, if less) and deposit
such funds in the Note Distribution Account for distribution to the Class A-1
Noteholders on such Distribution Date. Funds in the Class A-1 Holdback
Subaccount shall not be available to pay any other amounts. Any funds
remaining in the Class A-1 Holdback Subaccount, after withdrawal of any such
amount on the Class A-1 Final Scheduled Distribution Date, shall be released
to the Depositor.
SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT.
(a) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the Deficiency Claim Amount (as
defined below) with respect to the related Distribution Date is greater than
zero, then on the Deficiency Claim Date immediately preceding such
Distribution Date, the Indenture Trustee shall deliver to the Collateral
Agent, the Security Insurer, the Fiscal Agent, if any, the Owner Trustee and
the Servicer, by hand delivery, telex or facsimile transmission, a written
notice (a "Deficiency Notice"). Such Deficiency Notice shall
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direct the Collateral Agent to remit such Deficiency Claim Amount (to the
extent of the funds available to be distributed pursuant to the Spread
Account Agreement) to the Indenture Trustee for deposit in the Collection
Account. The "Deficiency Claim Amount" with respect to any Distribution Date
shall equal the excess, if any, of
(i) the amount required to be distributed pursuant to
clauses (i) - (vi) of Section 4.6 (without giving effect to the
limitation of the Distribution Amount specified in each such
clause) over
(ii) the sum of (A) the Actual Funds with respect to such
Distribution Date, plus (B) if such Distribution Date is the Class
A-1 Final Scheduled Distribution Date, the amount, if any,
withdrawn from the Class A-1 Holdback Subaccount and deposited in
the Note Distribution Account pursuant to Section 5.1(b).
(b) any Deficiency Notice shall be delivered by 10:00 a.m.,
New York City time, on the fourth Business Day preceding such Distribution
Date. The amounts distributed by the Collateral Agent to the Indenture
Trustee pursuant to a Deficiency Notice shall be deposited by the Indenture
Trustee into the Collection Account pursuant to Section 4.5.
ARTICLE VI
THE SELLER
SECTION 6.1. LIABILITY OF SELLER.
(a) The Seller shall be liable hereunder only to the extent
of the obligations in this Agreement specifically undertaken by the Seller
and the representations made by the Seller.
SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION.
(a) The Seller shall not merge or consolidate with any other
Person or permit any other Person to become the successor to the Seller's
business without (so long as an Insurer Default shall not have occurred and
be continuing) the prior written consent of the Security Insurer. The
certificate of incorporation of any corporation (i) into which the Seller may
be merged or consolidated, (ii) resulting from any merger or consolidation to
which the Seller shall be a party, or (iii) succeeding to the business of
Seller, shall contain provisions relating to limitations on business and
other matters substantively identical to those contained in the Seller's
certificate of incorporation. Any such successor corporation shall execute
an agreement of assumption of every obligation of the Seller under this
Agreement and each Related Document and, whether or not such assumption
agreement is executed, shall be the successor to the Seller under this
Agreement
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without the execution or filing of any document or any further act on the
part of any of the parties to this Agreement. The Seller shall provide
prompt notice of any merger, consolidation or succession pursuant to this
Section 6.2 to the Owner Trustee, the Indenture Trustee, the Security Insurer
and the Rating Agencies. Notwithstanding the foregoing, the Seller shall not
merge or consolidate with any other Person or permit any other Person to
become a successor to the Seller's business, unless (x) immediately after
giving effect to such transaction, no representation or warranty made
pursuant to Section 2.5 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become a Servicer Termination Event shall have occurred and be
continuing, (y) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and the Security Insurer an officer's certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.2 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Seller shall have delivered
to the Owner Trustee, the Indenture Trustee and the Security Insurer an
Opinion of Counsel, stating that, in the opinion of such counsel, either (A)
all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Trust Property and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) The Seller hereby agrees that it shall not (i) take any
action prohibited by Article XVI of its certificate of incorporation or (ii)
without the prior written consent of the Owner Trustee and the Indenture
Trustee and (so long as an Insurer Default shall not have occurred and be
continuing) the Security Insurer and without giving prior written notice to
the Rating Agencies, amend Article III, Article IX, Article XIV or Article
XVI of its certificate of incorporation.
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS.
The Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as Seller of the Receivables under this
Agreement and that in its opinion may involve it in any expense or liability.
SECTION 6.4. SELLER MAY OWN NOTES. Each of the Seller and
any Affiliate of the Seller may in its individual or any other capacity
become the owner or pledgee of Notes with the same rights as it would have if
it were not the Seller or an Affiliate thereof except as otherwise
specifically provided herein or in the Related Documents. Notes so owned by
or pledged to the Seller or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement or any
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Related Document, without preference, priority, or distinction as among all
of the Notes, provided that any Notes owned by the Seller or any Affiliate
thereof, during the time such Notes are owned by them, shall be without
voting rights for any purpose set forth in this Agreement or any Related
Document. The Seller shall notify the Owner Trustee, the Indenture Trustee
and the Security Insurer promptly after it or any of its Affiliates become
the owner or pledgee of a Note.
ARTICLE VII
THE SERVICER
SECTION 7.1. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such and, in the case of
AFL, without limitation of its obligations under the Purchase Agreement)
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Servicer and the representations
made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless
the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees,
and the Noteholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of any
Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless
the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any taxes that may at any time be
asserted against the Trust, the Owner Trustee, the Indenture Trustee, the
Backup Servicer, the Security Insurer or the Noteholders with respect to the
transactions contemplated in this Agreement, including, without limitation,
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the sale of the Receivables and the other Trust
Property to the Trust or the issuance and original sale of the Notes and
costs and expenses in defending against the same.
(d) The Servicer shall indemnify, defend and hold harmless
the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon the Trust, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer or the Noteholders through the
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breach of this Agreement, the negligence, willful misfeasance, or bad faith
of the Servicer in the performance of its duties under this Agreement or by
reason of reckless disregard of its obligations and duties under this
Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless
the Owner Trustee, in its individual capacity, its officers, directors,
agents and employees, from and against all costs, taxes (other than income
taxes on fees and expenses payable to the Owner Trustee), expenses, losses,
claims, damages and liabilities arising out of or incurred in connection with
the acceptance or performance of the trusts and duties contained in the Trust
Agreement and the Related Documents, except to the extent that such cost,
taxes (other than income taxes), expense, loss, claim, damage or liability
(A) is due to the willful misfeasance or gross negligence of the Owner
Trustee, or (B) arises from the Owner Trustee's breach of any of its
representations or warranties set forth in Section 6.2 of the Trust
Agreement; PROVIDED, HOWEVER, that amounts payable under this paragraph shall
be increased by the amount of income taxes actually paid by the Owner Trustee
in respect of any indemnity payment unless the Owner Trustee received or can
reasonably be expected to receive a tax deduction for the related loss or
cost.
(f) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer has made any indemnity payments pursuant to this
Article and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts collected to the
Servicer, without interest.
(g) AFL, in its individual capacity, hereby acknowledges that
the indemnification provisions in the Purchase Agreement benefiting the
Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer and the
Security Insurer are enforceable by each hereunder.
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any
other person, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the
successor to the Servicer's business unless, after the merger, consolidation,
conveyance, transfer, lease or succession, the successor or surviving entity
shall be an Eligible Servicer and shall be capable of fulfilling the duties
of the Servicer contained in this Agreement. Any corporation (i) into which
the Servicer may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Servicer shall be a party, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of the
Servicer, or (iv) succeeding to the business of the Servicer, in any of the
foregoing cases shall execute an agreement of assumption to perform every
obligation of the Servicer under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Servicer
under this Agreement without the
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execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall
provide notice of any merger, consolidation or succession pursuant to this
Section 7.2(a) to the Owner Trustee, the Indenture Trustee, the Security
Insurer and each Rating Agency. Notwithstanding the foregoing, the Servicer
shall not merge or consolidate with any other Person or permit any other
Person to become a successor to the Servicer's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.6 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an Insurance Agreement Event of Default shall
have occurred and be continuing, (y) the Servicer shall have delivered to the
Owner Trustee, the Indenture Trustee and the Security Insurer an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this
Section 7.2(a) and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and (z)
the Servicer shall have delivered to the Owner Trustee, the Indenture Trustee
and the Security Insurer an Opinion of Counsel, stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Owner Trustee in the
Trust Property and reciting the details of the filings or (B) no such action
shall be necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to
which the Backup Servicer shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Backup
Servicer, or (iv) succeeding to the business of the Backup Servicer, in any
of the foregoing cases shall execute an agreement of assumption to perform
every obligation of the Backup Servicer under this Agreement and, whether or
not such assumption agreement is executed, shall be the successor to the
Backup Servicer under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to release the Backup
Servicer from any obligation.
SECTION 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP
SERVICER AND OTHERS.
(a) Neither the Servicer, the Backup Servicer nor any of the
directors or officers or employees or agents of the Servicer or Backup
Servicer shall be under any liability to the Trust, or the Noteholders,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action
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pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not
protect the Servicer, the Backup Servicer or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence (excluding errors
in judgment) in the performance of duties, by reason of reckless disregard of
obligations and duties under this Agreement or any violation of law by the
Servicer, Backup Servicer or such person, as the case may be; PROVIDED
FURTHER, that this provision shall not affect any liability to indemnify the
Owner Trustee and the Indenture Trustee for costs, taxes, expenses, claims,
liabilities, losses or damages paid by the Owner Trustee or the Indenture
Trustee, each in its individual capacity. The Servicer, the Backup Servicer
and any director, officer, employee or agent of the Servicer or Backup
Servicer may rely in good faith on the advice of counsel or on any document
of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising under this Agreement.
(b) The Backup Servicer shall not be liable for any
obligation of the Servicer contained in this Agreement, and the Owner
Trustee, the Indenture Trustee, the Seller, the Security Insurer and the
Noteholders shall look only to the Servicer to perform such obligations.
SECTION 7.4. DELEGATION OF DUTIES. The Servicer may delegate
duties under this Agreement to an Affiliate of AFL with the prior written
consent of the Security Insurer, the Indenture Trustee, the Owner Trustee and
the Backup Servicer. The Servicer also may at any time perform the specific
duty of repossession of Financed Vehicles through sub-contractors who are in
the business of servicing automotive receivables and may perform other
specific duties through such sub-contractors with the prior written consent
of the Security Insurer (unless an Insurer Default shall have occurred and be
continuing), PROVIDED, HOWEVER, that no such delegation or sub-contracting
duties by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties. So long as no Insurer Default shall have occurred
and be continuing, neither AFL or any party acting as Servicer hereunder
shall appoint any subservicer hereunder without the prior written consent of
the Security Insurer, the Indenture Trustee, the Owner Trustee and the Backup
Servicer.
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.2, neither the Servicer nor the Backup
Servicer shall resign from the obligations and duties imposed on it by this
Agreement as Servicer or Backup Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements
in a manner which would have a material adverse effect on the Servicer or the
Backup Servicer, as the case may be, and the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or Note Majority
(if an Insurer Default shall have occurred and be continuing) does not elect
to waive the obligations of the Servicer or the Backup Servicer, as the case
may be, to perform the duties which render it legally unable to act or to
delegate those duties to another Person. Any such determination
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permitting the resignation of the Servicer or Backup Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered and reasonably
acceptable to the Owner Trustee, the Indenture Trustee and the Security
Insurer (unless an Insurer Default shall have occurred and be continuing).
No resignation of the Servicer shall become effective until, so long as no
Insurer Default shall have occurred and be continuing, the Backup Servicer or
an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Servicer or, if an Insurer Default
shall have occurred and be continuing, the Backup Servicer or a successor
Servicer that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Servicer. No resignation of the Backup Servicer shall
become effective until, so long as no Insurer Default shall have occurred and
be continuing, an entity acceptable to the Security Insurer shall have
assumed the responsibilities and obligations of the Backup Servicer or, if an
Insurer Default shall have occurred and be continuing, a Person that is an
Eligible Servicer shall have assumed the responsibilities and obligations of
the Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 7.5, the Backup Servicer may petition a court for its removal.
ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Indenture
Trustee for distribution to Noteholders any proceeds or payment
required to be so delivered under the terms of this Agreement (or, if
AFL is the Servicer, the Purchase Agreement) that continues
unremedied for a period of two Business Days (one Business Day
with respect to payment of Purchase Amounts) after written notice is
received by the Servicer from the Indenture Trustee or (unless an
Insurer Default shall have occurred and be continuing) the Security
Insurer or after discovery of such failure by a Responsible Officer
of the Servicer; or
(b) Failure by the Servicer to deliver to the Indenture
Trustee, the Owner Trustee and (so long as an Insurer Default shall
not have occurred and be continuing) the Security Insurer the
Servicer's Certificate by the fourth Business Day prior to the
Distribution Date, or failure on the part of the Servicer to observe
its covenants and agreements set forth in Section 7.2(a); or
(c) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the
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Servicer set forth in this Agreement (or, if AFL is the Servicer, the
Purchase Agreement), which failure (i) materially and adversely
affects the rights of Noteholders (determined without regard to the
availability of funds under the Note Policy), or of the Security
Insurer (unless an Insurer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by
the Owner Trustee, the Indenture Trustee or the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing,
any Noteholder); or
(d) (i) The commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar
law and such case is not dismissed within 60 days; or (ii) the entry
of a decree or order for relief by a court or regulatory authority
having jurisdiction in respect of the Servicer or the Seller in an
involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future, federal or state,
bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or the Seller or of any substantial
part of their respective properties or ordering the winding up or
liquidation of the affairs of the Servicer or the Seller; or
(e) The commencement by the Servicer or the Seller of a
voluntary case under the federal bankruptcy laws, as now or hereafter
in effect, or any other present or future, federal or state,
bankruptcy, insolvency or similar law, or the consent by the Servicer
or the Seller to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Servicer or the Seller or of any
substantial part of its property or the making by the Servicer or the
Seller of an assignment for the benefit of creditors or the failure by
the Servicer or the Seller generally to pay its debts as such debts
become due or the taking of corporate action by the Servicer or the
Seller in furtherance of any of the foregoing; or
(f) Any representation, warranty or statement of the
Servicer or the Seller made in this Agreement or any certificate,
report or other writing delivered pursuant hereto shall prove to
be incorrect in any material respect as of the time when the same
shall have been made (excluding, however, any representation or
warranty set forth in Section 2.5(a)), and the incorrectness of such
representation, warranty or statement has a material adverse effect
on the Trust and, within 30 days after written notice thereof shall
have been given to the Servicer or the Seller by the Owner Trustee,
the Indenture Trustee or the Security Insurer (or, if an Insurer
Default shall have occurred and be continuing, a Noteholder), the
circumstances or condition in
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respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have
occurred and be continuing, the Security Insurer shall not have
delivered a Servicer Extension Notice pursuant to Section 3.14
(in which case the Servicer Termination Event will be deemed to have
occurred as of the last day of the term of the most recent Servicer
Extension Notice received); or
(h) So long as an Insurer Default shall not have occurred
and be continuing, an Insurance Agreement Event of Default shall have
occurred; or
(i) A claim is made under the Note Policy.
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT.
If a Servicer Termination Event shall occur and be continuing, the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing,
either the Indenture Trustee, the Owner Trustee, or a Note Majority), by
notice given in writing to the Servicer (and to the Indenture Trustee, the
Backup Servicer and the Owner Trustee if given by the Security Insurer or the
Noteholders) may terminate all of the rights and obligations of the Servicer
under this Agreement. On or after (i) the receipt by the Servicer of such
written notice, or (ii) the receipt by the Backup Servicer (or any alternate
successor servicer appointed by the Security Insurer pursuant to Section
8.3(b)) of written notice from the Security Insurer that the Security Insurer
is not extending the Servicer's term pursuant to Section 3.14, all authority,
power, obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Notes or the Trust Property or otherwise, shall
be terminated and automatically shall pass to, be vested in and become
obligations and responsibilities of the Backup Servicer (or such other
successor Servicer appointed by the Security Insurer); PROVIDED, HOWEVER,
that the successor Servicer shall have no liability with respect to any
obligation which was required to be performed by the terminated Servicer
prior to the date that the successor Servicer becomes the Servicer or any
claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by
this Agreement to execute and deliver, on behalf of the terminated Servicer,
as attorney-in-fact or otherwise, any and all documents and other instruments
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement of the Receivables and the other Trust Property and
related documents to show the Owner Trustee as lienholder or secured party on
the related Lien Certificates, or otherwise. The terminated Servicer agrees
to cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the terminated
Servicer,
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in the Collection Account or thereafter received with respect to the
Receivables and the delivery to the successor Servicer of all Receivable
Files, Monthly Records and Collection Records and a computer tape in readable
form as of the most recent Business Day containing all information necessary
to enable the successor Servicer or a successor Servicer to service the
Receivables and the other Trust Property. If requested by the Security
Insurer (unless an Insurer Default shall have occurred and be continuing),
the successor Servicer shall terminate the Lockbox Agreement and direct the
Obligors to make all payments under the Receivables directly to the successor
Servicer (in which event the successor Servicer shall process such payments
in accordance with Section 3.2(e)), or to a lockbox established by the
successor Servicer at the direction of the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), at the successor
Servicer's expense. In addition to any other amounts that are then payable
to the terminated Servicer under this Agreement, the terminated Servicer
shall then be entitled to receive out of Available Funds reimbursements for
any Outstanding Monthly Advances (in accordance with Section 4.4(c)) made
during the period prior to the notice pursuant to this Section 8.2 which
terminates the obligation and rights of the terminated Servicer under this
Agreement. The Owner Trustee, the Indenture Trustee and the successor
Servicer may set off and deduct any amounts owed by the terminated Servicer
from any amounts payable to the terminated Servicer pursuant to the preceding
sentence. The terminated Servicer shall grant the Owner Trustee, the
Indenture Trustee, the successor Servicer and the Security Insurer reasonable
access to the terminated Servicer's premises at the terminated Servicer's
expense.
SECTION 8.3. APPOINTMENT OF SUCCESSOR.
(a) On and after (i) the time the Servicer receives a notice of
termination pursuant to Section 8.2, or (ii) the resignation of the Servicer
pursuant to Section 7.5, or (iii) the receipt by the Backup Servicer (or any
alternate successor servicer appointed by the Security Insurer pursuant to
Section 8.3(b)) of written notice from the Security Insurer that the Security
Insurer is not extending the Servicer's term pursuant to Section 3.14, the
Backup Servicer (unless the Security Insurer shall have exercised its option
pursuant to Section 8.3(b) to appoint an alternate successor Servicer) shall be
the successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for in this Agreement,
and shall be subject to all the responsibilities, restrictions, duties,
liabilities and termination provisions relating thereto placed on the Servicer
by the terms and provisions of this Agreement. The Owner Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it shall be subject to termination under Section 8.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer
and shall serve from term to term as provided in Section 3.14.
(b) The Security Insurer may (so long as an Insurer Default
shall not have occurred and be continuing) exercise at any time its right to
appoint as Backup
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Servicer or as successor to the Servicer a Person other than the Person
serving as Backup Servicer at the time, and (without limiting its obligations
under the Note Policy) shall have no liability to the Owner Trustee, the
Indenture Trustee, AFL, the Seller, the Person then serving as Backup
Servicer, any Noteholders, any Note Owner or any other Person if it does so.
Notwithstanding the above, if the Backup Servicer shall be legally unable or
unwilling to act as Servicer and an Insurer Default shall have occurred and
be continuing, the Backup Servicer, the Indenture Trustee, a Note Majority or
the Owner Trustee may petition a court of competent jurisdiction to appoint
any Eligible Servicer as the successor to the Servicer. Pending appointment
pursuant to the preceding sentence, the Backup Servicer shall act as
successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has
been appointed and accepted such appointment. Subject to Section 7.5, no
provision of this Agreement shall be construed as relieving the Backup
Servicer of its obligation to succeed as successor Servicer upon the
termination of the Servicer pursuant to Section 8.2 or the resignation of the
Servicer pursuant to Section 7.5. If upon the termination of the Servicer
pursuant to Section 8.2 or the resignation of the Servicer pursuant to
Section 7.5, the Security Insurer appoints a successor Servicer other than
the Backup Servicer, the Backup Servicer shall not be relieved of its duties
as Backup Servicer hereunder.
(c) Any successor Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as
the Servicer would have been entitled to under the Agreement if the Servicer
had not resigned or been terminated hereunder, except that the Basic
Servicing Fee Rate for such successor Servicer shall be calculated on a pro
rata basis at the rate of 1.00% per annum for all loans originated under
AFL's "Premier" program and 1.50% per annum for all loans originated under
AFL's "Classic" program. If any successor Servicer is appointed as a result
of the Backup Servicer's refusal (in contravention of the terms of this
Agreement) to act as Servicer although it is legally able to do so, the
Security Insurer and such successor Servicer may agree on reasonable
additional compensation to be paid to such successor Servicer by the Backup
Servicer, which additional compensation shall be paid by the Backup Servicer
in its individual capacity and solely out of its own funds. If any successor
Servicer is appointed for any reason other than the Backup Servicer's refusal
to act as Servicer although legally able to do so, the Security Insurer and
such successor Servicer may agree on additional compensation to be paid to
such successor Servicer, which additional compensation shall be payable as
provided in the Spread Account Agreement. If the Backup Servicer is the
successor Servicer, the Backup Servicer shall be entitled to reimbursement,
pursuant to Section 4.6(ii), of reasonable transition expenses, not in excess
of $100,000, incurred in acting as successor Servicer. In addition, any
successor Servicer shall be entitled to reimbursement, as provided in the
Spread Account Agreement, of reasonable transition expenses incurred in
acting as successor Servicer.
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SECTION 8.4. NOTIFICATION TO NOTEHOLDERS. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to
this Article VIII, the Indenture Trustee shall give prompt written notice
thereof to Noteholders at their respective addresses appearing in the Note
Register.
SECTION 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, a Note
Majority) may, on behalf of all Holders of Notes, waive any default by the
Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall
cease to exist, and any Servicer Termination Event arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon. Nothing in this Section 8.5 shall preclude the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing, a
Note Majority) from waiving any default for a period of time or subject to
any contingency or from waiving some but not all of the consequences of such
default.
ARTICLE IX
TERMINATION
SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES;
LIQUIDATION OF TRUST ESTATE.
(a) On each Determination Date as of which the Aggregate
Principal Balance is less than 10% of the Original Pool Balance, the Servicer
and the Seller each shall have the option to purchase the corpus of the Trust
(with the consent of the Security Insurer, if a claim has previously been
made under the Note Policy or if such purchase would result in a claim on the
Note Policy or if such purchase would result in any amount owing to the
Security Insurer remaining unpaid); PROVIDED, HOWEVER, that the amount to be
paid for such purchase (as set forth in the following sentence) shall be
sufficient to pay the full amount of principal, premium, if any, and interest
then due and payable on the Notes. To exercise such option, the Servicer or
the Seller, as the case may be, shall pay the aggregate Purchase Amounts for
the Receivables, plus the appraised value of any other property (including
the right to receive any future recoveries) held as part of the Trust, such
appraisal to be conducted by an appraiser mutually agreed upon by the
Servicer or the Seller, as the case may be, and the Security Insurer (or the
Indenture Trustee, if an Insurer Default shall have accrued and be
continuing), and shall succeed to all interests in and to the Trust Property.
The fees and expenses related to such appraisal shall be paid by the party
exercising the option to purchase. The party exercising such option to
repurchase shall deposit the aggregate Purchase Amounts for the Receivables
and the amount of the appraised value of any other property held as part of
the Trust into the Collection Account, and the Indenture Trustee shall
distribute the amounts so deposited in accordance with Section 4.6.
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(b) Upon any sale of the assets of the Trust pursuant to
Section 8.2 of the Trust Agreement, the Owner Trustee shall instruct the
Indenture Trustee in writing to deposit the proceeds from such sale after all
payments and reserves therefrom have been made (the "Insolvency Proceeds") in
the Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are
not so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Owner Trustee shall instruct the Indenture
Trustee in writing to make the following deposits (after the application on
such Distribution Date of the Available Funds) from the Insolvency Proceeds:
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited
into the Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Class A-1
Prepayment Premium, Class A-2 Prepayment Premium, Class A-3
Prepayment Premium, Class A-4 Prepayment Premium and Class A-5
Prepayment Premium (only to the extent of the amount of Liquidated
Damages (as defined in the Purchase Agreement) received by the Trust
from the Seller); and
(iii) to the Note Distribution Account, the outstanding
principal balance of the Notes (after giving effect to the reduction
in the outstanding principal balance of the Notes to result from the
deposits otherwise made in the Note Distribution Account on such
Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid, first, to the Security Insurer, to the extent of any amounts owing to
the Security Insurer under the Insurance Agreement and not paid, whether or
not AFL is obligated to pay such amounts, and second to the Collateral Agent
for deposit in the Spread Account.
(c) Notice of any termination of the Trust shall be given by
the Servicer to the Owner Trustee and the Indenture Trustee as soon as
practicable after the Servicer has received notice thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT.
(a) This Agreement may be amended by the Seller, the Servicer
and the Trust, with the prior written consent of the Indenture Trustee and
the Security
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Insurer (so long as an Insurer Default shall not have occurred and be
continuing) but without the consent of any of the Noteholders, (i) to cure
any ambiguity, (ii) to correct or supplement any provisions in this Agreement
or (iii) for the purpose of adding any provision to or changing in any manner
or eliminating any provision of this Agreement or of modifying in any manner
the rights of the Noteholders; PROVIDED, HOWEVER, that such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of the Noteholders.
(b) This Agreement may also be amended from time to time by
the Seller, the Servicer and the Trust with the prior written consent of the
Indenture Trustee and the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) and with the consent of a Note
Majority (which consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such Note
and of any Note issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the Note)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Notes; PROVIDED, HOWEVER, that, subject
to the express rights of the Security Insurer under the Related Documents,
including its rights to agree to certain modifications of the Receivables
pursuant to Section 3.2 and its rights to cause the Indenture Collateral
Agent to liquidate the Collateral under the circumstances and subject to the
provisions of Section 5.04 of the Indenture, no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions required
to be made on any Note or the Class A-1 Interest Rate, Class A-2 Interest
Rate, Class A-3 Interest Rate, Class A-4 Interest Rate or Class A-5 Interest
Rate, (b) amend any provisions of Section 4.6 in such a manner as to affect
the priority of payment of interest, principal or premium to Noteholders, or
(c) reduce the aforesaid percentage required to consent to any such amendment
or any waiver hereunder, without the consent of the Holders of all Notes then
outstanding.
(c) Prior to the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to the Indenture Trustee.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of the
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execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe, including the
establishment of record dates.
(f) Prior to the execution of any amendment to this
Agreement, the Owner Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement, in addition to the Opinion of Counsel
referred to in Section 10.2(i). The Owner Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 10.2. PROTECTION OF TITLE TO TRUST PROPERTY.
(a) The Servicer shall execute and file such financing
statements and cause to be executed and filed such continuation and other
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Trust, the Owner
Trustee and the Indenture Collateral Agent in the Trust Property and in the
proceeds thereof. The Servicer shall deliver (or cause to be delivered) to
the Owner Trustee, the Indenture Collateral Agent and the Security Insurer
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Neither the Seller, the Servicer nor the Trust shall
change its name, identity or corporate structure in any manner that would,
could or might make any financing statement or continuation statement filed
by the Seller in accordance with paragraph (a) above seriously misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given
the Owner Trustee, the Indenture Trustee and the Security Insurer (so long as
an Insurer Default shall not have occurred and be continuing) at least 60
days' prior written notice thereof, and shall promptly file appropriate
amendments to all previously filed financing statements and continuation
statements.
(c) Each of the Seller, the Servicer and the Trust shall give
the Owner Trustee, the Indenture Trustee and the Security Insurer at least 60
days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The
Servicer shall at all times maintain each office from which it services
Receivables and its principal executive office within the United States of
America.
(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between
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payments or recoveries on (or with respect to) each Receivable and the
amounts from time to time deposited in the Collection Account in respect of
such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Receivables to
the Trust, the Servicer's master computer records (including any backup
archives) that refer to any Receivable indicate clearly (with reference to
the particular trust) that the Receivable is owned by the Trust. Indication
of the Trust's ownership of a Receivable shall be deleted from or modified on
the Servicer's computer systems when, and only when, the Receivable has been
paid in full or repurchased by the Seller or Servicer.
(f) If at any time the Seller or the Servicer proposes to
sell, grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender or
other transferee computer tapes, records or print-outs (including any
restored from backup archives) that, if they refer in any manner whatsoever
to any Receivable, indicate clearly that such Receivable has been sold and is
owned by the Trust unless such Receivable has been paid in full or
repurchased by the Seller or Servicer.
(g) The Servicer shall permit the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and their
respective agents, at any time to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Receivables or any other
portion of the Trust Property.
(h) The Servicer shall furnish to the Owner Trustee, the
Indenture Trustee, the Backup Servicer and the Security Insurer at any time
upon request a list of all Receivables then held as part of the Trust,
together with a reconciliation of such list to the Schedule of Receivables
and to each of the Servicer's Certificates furnished before such request
indicating removal of Receivables from the Trust. Upon request, the Servicer
shall furnish a copy of any list to the Seller. The Owner Trustee shall hold
any such list and Schedule of Receivables for examination by interested
parties during normal business hours at the Corporate Trust Office upon
reasonable notice by such Persons of their desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee and the Security Insurer simultaneously with
the execution and delivery of this Agreement and of each amendment thereto
and upon the occurrence of the events giving rise to an obligation to give
notice pursuant to Section 10.2(b) or (c), an Opinion of Counsel either (a)
stating that, in the opinion of such Counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Owner Trustee and the Indenture
Collateral Agent in the Receivables and the other Trust Property, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (b) stating that, in the opinion
of such counsel, no such action is necessary to preserve and protect such
interest.
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(j) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee and the Security Insurer, within 90 days after the
beginning of each calendar year beginning with the first calendar year
beginning more than three months after the Closing Date, an Opinion of
Counsel, either (a) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trust
and the Indenture Collateral Agent in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (b) stating that, in the opinion of such counsel,
no action shall be necessary to preserve and protect such interest.
SECTION 10.3. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York without regard to the principles of conflicts of laws thereof and the
obligations, rights and remedies of the parties under this Agreement shall be
determined in accordance with such laws.
SECTION 10.4. SEVERABILITY OF PROVISIONS. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or
of the Notes or the rights of the Holders thereof.
SECTION 10.5. ASSIGNMENT. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 7.2 or
Section 8.2 (and as provided in the provisions of the Agreement concerning
the resignation of the Servicer and the Backup Servicer), this Agreement may
not be assigned by the Seller or the Servicer without the prior written
consent of the Owner Trustee, the Indenture Trustee and the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, the Owner
Trustee, the Indenture Trustee and a Note Majority).
SECTION 10.6. THIRD-PARTY BENEFICIARIES. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. The Security Insurer and
its successors and assigns shall be a third-party beneficiary to the
provisions of this Agreement, and shall be entitled to rely upon and directly
to enforce such provisions of this Agreement so long as no Insurer Default
shall have occurred and be continuing. Nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement. Except as expressly stated otherwise herein or in
the Related Documents, any right of the Security Insurer to direct, appoint,
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consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Security Insurer in its sole and absolute discretion.
SECTION 10.7. DISCLAIMER BY SECURITY INSURER. The Security
Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a
written notice to the Owner Trustee and the Indenture Trustee.
SECTION 10.8. COUNTERPARTS. For the purpose of facilitating
its execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
SECTION 10.9. INTENTION OF PARTIES. The execution and
delivery of this Agreement shall constitute an acknowledgement by the Seller,
that it is intended that the assignment and transfer herein contemplated
constitute a sale and assignment outright, and not for security, of the
Receivables and the other Trust Property, conveying good title thereto free
and clear of any Liens, from the Seller to the Trust, and that the
Receivables and the other Trust Property shall not be a part of the Seller's
estate in the event of the insolvency, receivership, conservatorship or the
occurrence of another similar event, of, or with respect to, the Seller. In
the event that such conveyance is determined to be made as security for a
loan made by the Trust to the Seller, the Seller intends that it shall have
granted to the Owner Trustee a first priority security interest in all of the
Seller's right, title and interest in and to the Trust Property conveyed to
the Trust pursuant to Sections 2.1 and 2.4 of this Agreement, and that this
Agreement shall constitute a security agreement under applicable law.
SECTION 10.10. NOTICES. All demands, notices and
communications under this Agreement shall be in writing, personally
delivered, sent by facsimile or mailed by certified mail-return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in
the case of AFL, the Seller or the Servicer, at the following address:
Arcadia Receivables Finance Corp., 7825 Washington Avenue South, Suite 410,
Minneapolis, Minnesota 55439-2435, with copies to: Arcadia Financial Ltd.,
7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention:
John A. Witham, (b) in the case of the Owner Trustee, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate
Trust Administration, (c) in the case of the Indenture Trustee and, for so
long as the Indenture Trustee is the Backup Servicer or the Collateral Agent,
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070,
Attention: Corporate Trust Services--Asset Backed Administration, (d) in the
case of each Rating Agency, 99 Church Street, New York, New York 10007 (for
Moody's) and 26 Broadway, New York, New York 10004 (for Standard & Poor's),
Attention: Asset-Backed Surveillance, and (e) in the case of the Security
Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, New
York 10022, Attention:
-82-
<PAGE>
Surveillance Department, Telex No.: (212) 688-3103, Confirmation: (212)
826-0100, Telecopy Nos.: (212) 339-3518, (212) 339-3529 (in each case in
which notice or other communication to Financial Security refers to an Event
of Default, a claim on the Note Policy or with respect to which failure on
the part of Financial Security to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication
should also be sent to the attention of the General Counsel and the
Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register, and any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Noteholder receives such notice.
SECTION 10.11. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Trust under the Trust
Agreement, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein
made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but
is made and intended for the purpose for binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to this Agreement and by any person claiming
by, through or under them and (d) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Trust or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any related documents.
[SIGNATURE PAGE FOLLOWS]
-83-
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Seller, AFL, the Servicer
and the Backup Servicer have caused this Sale and Servicing Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1998-B
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By /s/ Donald G. Mackelcan
----------------------------------
Name: Donald G. Mackelcan
Title: Assistant Vice President
SELLER:
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ John A. Witham
----------------------------------
Name: John A. Witham
Title: Senior Vice President and Chief
Financial Officer
ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer
By /s/ John A. Witham
----------------------------------
Name: John A. Witham
Title: Executive Vice President and
Chief Financial Officer
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ John C. Weidner
----------------------------------
Name: John C. Weidner
Title: Corporate Trust Officer
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee
By /s/ John C. Weidner
----------------------------------
Name: John C. Weidner
Title: Corporate Trust Officer
<PAGE>
SCHEDULE A
REPRESENTATIONS AND WARRANTIES OF SELLER AND AFL
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and such Dealer had all necessary
licenses and permits to originate Receivables in the state where such Dealer
was located, was fully and properly executed by the parties thereto, was
purchased by AFL from such Dealer under an existing Dealer Agreement with AFL
and was validly assigned by such Dealer to AFL, (B) contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral security, and
(C) is fully amortizing and provides for level monthly payments (provided
that the payment in the first Monthly Period and the final Monthly Period of
the life of the Receivable may be minimally different from the level payment)
which, if made when due, shall fully amortize the Amount Financed over the
original term.
2. NO FRAUD OR MISREPRESENTATION. Each Receivable was
originated by a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.
3. COMPLIANCE WITH LAW. All requirements of applicable
federal, state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.
4. ORIGINATION. Each Receivable was originated in the
United States.
5. BINDING OBLIGATION. Each Receivable represents the
genuine, legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is
S-A-1
<PAGE>
considered in a proceeding in equity or at law and (B) as such Receivable may
be modified by the application after the Initial Cutoff Date or any
Subsequent Cutoff Date, as the case may be, of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended; and all parties to each Receivable had
full legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to be
granted thereby.
6. NO GOVERNMENT OBLIGOR. No Obligor is the United States
of America or any State or any agency, department, subdivision or
instrumentality thereof.
7. OBLIGOR BANKRUPTCY. At the Initial Cutoff Date or each
Subsequent Cutoff Date, as applicable, no Obligor had been identified on the
records of AFL as being the subject of a current bankruptcy proceeding.
8. SCHEDULE OF RECEIVABLES. The information set forth in
the Schedule of Receivables has been produced from the Electronic Ledger and
was true and correct in all material respects as of the close of business on
the Initial Cutoff Date or each Subsequent Cutoff Date, as applicable.
9. MARKING RECORDS. By the Closing Date or by each
Subsequent Transfer Date, the Seller will have caused the portions of the
Electronic Ledger relating to the Receivables to be clearly and unambiguously
marked to show that the Receivables constitute part of the Trust Property and
are owned by the Trust in accordance with the terms of the Agreement.
10. COMPUTER TAPE. The Computer Tape made available by the
Seller to the Owner Trustee on the Closing Date or on each Subsequent
Transfer Date was complete and accurate as of the Initial Cutoff Date or
Subsequent Cutoff Date, as applicable, and includes a description of the same
Receivables that are described in the Schedule of Receivables.
11. ADVERSE SELECTION. No selection procedures adverse to
the Noteholders were utilized in selecting the Receivables from those
receivables owned by AFL which met the selection criteria contained in the
Sale and Servicing Agreement.
12. CHATTEL PAPER. The Receivables constitute chattel paper
within the meaning of the UCC as in effect in the States of Minnesota and New
York.
13. ONE ORIGINAL. There is only one original executed copy
of each Receivable.
14. RECEIVABLE FILES COMPLETE. There exists a Receivable
File pertaining to each Receivable and such Receivable File contains (a) a
fully executed original of the Receivable, (b) a certificate of insurance,
application form for
S-A-2
<PAGE>
insurance signed by the Obligor, or a signed representation letter from the
Obligor named in the Receivable pursuant to which the Obligor has agreed to
obtain physical damage insurance for the related financial vehicle, or copies
thereof, (c) the original Lien Certificate or application therefor and (d) a
credit application signed by the Obligor, or a copy thereof. Each of such
documents which is required to be signed by the Obligor has been signed by
the Obligor in the appropriate spaces. All blanks on any form have been
properly filled in and each form has otherwise been correctly prepared. The
complete Receivable File for each Receivable currently is in the possession
of the Custodian.
15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered
or modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified
as a result of application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in, or
is subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or pursuant to transfers of the Notes.
17. GOOD TITLE. No Receivable has been sold, transferred,
assigned or pledged by AFL to any Person other than the Seller or by the
Seller to any Person other than the Trust; immediately prior to the
conveyance of the Receivables pursuant to the Purchase Agreement, AFL was the
sole owner of and had good and indefeasible title thereto, free and clear of
any Lien; immediately prior to the conveyance of the Receivables to the Trust
pursuant to this Agreement or any Subsequent Purchase Agreement, as
applicable, the Seller was the sole owner thereof and had good and
indefeasible title thereto, free of any Lien and, upon execution and delivery
of this Agreement or any Subsequent Purchase Agreement, as applicable, by the
Seller, the Trust shall have good and indefeasible title to and will be the
sole owner of such Receivables, free of any Lien. No Dealer has a
participation in, or other right to receive, proceeds of any Receivable.
Neither AFL nor the Seller has taken any action to convey any right to any
Person that would result in such Person having a right to payments received
under the related Insurance Policies or the related Dealer Agreements or
Dealer Assignments or to payments due under such Receivables.
18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable
created or shall create a valid, binding and enforceable first priority
security interest in favor of AFL in the Financed Vehicle. The Lien
Certificate and original certificate of title for each Financed Vehicle show,
or if a new or replacement Lien Certificate is being applied for with respect
to such Financed Vehicle the Lien Certificate will be received within 180
days of the Closing Date or any Subsequent Transfer Date, as
S-A-3
<PAGE>
applicable, and will show AFL named as the original secured party under each
Receivable as the holder of a first priority security interest in such
Financed Vehicle. With respect to each Receivable for which the Lien
Certificate has not yet been returned from the Registrar of Titles, AFL has
received written evidence from the related Dealer that such Lien Certificate
showing AFL as first lienholder has been applied for. AFL's security interest
has been validly assigned by AFL to the Seller and by the Seller to the Owner
Trustee pursuant to this Agreement or any Subsequent Transfer Agreement, as
applicable. Immediately after the sale, transfer and assignment thereof to
the Trust, each Receivable will be secured by an enforceable and perfected
first priority security interest in the Financed Vehicle in favor of the
Trust as secured party, which security interest is prior to all other liens
upon and security interests in such Financed Vehicle which now exist or may
hereafter arise or be created (except, as to priority, for any lien for
taxes, labor or materials affecting a Financed Vehicle). As of the Initial
Cutoff Date or each Subsequent Cutoff Date, as applicable, there were no
Liens or claims for taxes, work, labor or materials affecting a Financed
Vehicle which are or may be Liens prior or equal to the lien of the related
Receivable.
19. ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to give
the Trust a first priority perfected lien on, or ownership interest in, the
Receivables and the proceeds thereof and the other Trust Property have been
made, taken or performed.
20. NO IMPAIRMENT. Neither AFL nor the Seller has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under the Receivable or otherwise to impair
the rights of the Trust, the Indenture Trustee and the Noteholders in any
Receivable or the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
23. NO DEFAULT. There has been no default, breach, violation
or event permitting acceleration under the terms of any Receivable (other
than payment delinquencies of not more than 30 days), and no condition exists
or event has occurred and is continuing that with notice, the lapse of time
or both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the Initial Cutoff Date or any Subsequent
Cutoff Date, as applicable, no Financed Vehicle had been repossessed.
S-A-4
<PAGE>
24. INSURANCE. As of the Closing Date or as of any
Subsequent Transfer Date, as applicable, each Financed Vehicle is covered by
a comprehensive and collision insurance policy (i) in an amount at least
equal to the lesser of (a) its maximum insurable value or (b) the principal
amount due from the Obligor under the related Receivable, (ii) naming AFL as
loss payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive
and collision coverage. Each Receivable requires the Obligor to maintain
physical loss and damage insurance, naming AFL and its successors and assigns
as additional insured parties, and each Receivable permits the holder thereof
to obtain physical loss and damage insurance at the expense of the Obligor if
the Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the Cutoff Date.
25. PAST DUE. At Initial Cutoff Date or any Subsequent
Cutoff Date, as applicable, no Receivable was more than 30 days past due.
26. REMAINING PRINCIPAL BALANCE. At the Initial Cutoff Date
or any Subsequent Cutoff Date, as applicable, each Receivable had a remaining
principal balance equal to or greater than $500.00, and the Principal Balance
of each Receivable set forth in the Schedule of Receivables is true and
accurate in all material respects.
27. FINAL SCHEDULED MATURITY DATE. No Receivable has a final
scheduled maturity later than August 31, 2005.
28. CERTAIN CHARACTERISTICS. (A) Each Initial Receivable had
a remaining maturity, as of the Initial Cutoff Date, of at least three months
but not more than 84 months; (B) each Initial Receivable had an original
maturity of at least six months but not more than 84 months; (C) each Initial
Receivable had an original principal balance of at least $1,500.00 and not
more than $38,613.19; (D) each Initial Receivable had a remaining Principal
Balance as of the Initial Cutoff Date of at least $784.98 and not more than
$38,613.19; (E) each Initial Receivable has an Annual Percentage Rate of at
least 8.50% and not more than 24.00%; (F) no Initial Receivable was more than
30 days past due as of the Initial Cutoff Date; (G) no funds have been
advanced by the Seller, the Servicer, any Dealer, or anyone acting on behalf
of any of them in order to cause any Receivable to qualify under clause (F)
above; (H) no Initial Receivable has a final scheduled payment date on or
before September 1, 1998; (I) the Principal Balance of each Receivable set
forth in Schedule of Receivables is true and accurate in all material
respects as of the Initial Cutoff Date; (J) 12.32% of the Initial
Receivables, by principal balance as of the Initial Cutoff Date, was
attributable to loans for the purchase of new Financed Vehicles and 87.68% of
the Initial Receivables was attributable to loans for the purchase of used
Financed Vehicles; (K) not more than 73% of the Aggregate Principal Balance
as of the Initial Cutoff Date was attributable to loans originated under
AFL's "Classic" program (excluding loans for the purchase of repossessed
automobiles that would otherwise be deemed originated under the "Classic"
program); (L) not more than 3.0% of the
S-A-5
<PAGE>
Principal Balance of the Initial Receivables as of the Initial Cutoff Date
had an Annual Percentage Rate in excess of 21.0%; (M) none of such
Receivables represented loans in excess of $50,000.00; (N) not more than
0.15% of the Aggregate Principal Balance of such Receivables represented
loans with original terms greater than 72 months; and (O) not more than 4.0%
of the Aggregate Principal Balance of such Receivables represented loans
secured by Financed Vehicles that previously secured a loan originated by AFL
with an obligor other than the current Obligor.
S-A-6
<PAGE>
SCHEDULE B
SERVICING POLICIES AND PROCEDURES
NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE.
I. PAST DUE PAYMENT COLLECTIONS
A. Past due payment notices are generated and sent on the 9th and 15th
day of delinquency.
B. The collection officer will make at least one phone call by day 10.
C. The collection officer will write a personalized collection letter by
day 15 and will have made at least two collection phone calls.
D. The collection officer will make at least two (2) more phone calls and
write at least one (1) more letter between days 15 and 30.
E. The collection officer will send a final demand letter on or about 31
days past due. The letter will allow 10 days to bring the account
current.
F. The collection officer will recommend either repossession, or some
form of reasonable forbearance (e.g., one extension in exchange for a
partial payment for cooperative debtors).
All phone calls and correspondence will require a brief handwritten
comment in the credit file. The date of each comment and the officer's
initials will be documented.
II. PAYMENT EXTENSIONS
Extensions of monthly payments must be granted only after careful
consideration and analysis. The extension is not to be used to mask
delinquencies, but rather assist in the collection and correction of
verifiable and legitimate customer problems. All extensions or modifications
require the prior approval of the Branch Manager. In the absence of the
Branch Manager, the Executive Vice President's or the President's approval is
required.
Possible qualifications for extensions to cooperative and
trustworthy customers include:
(a) Medical problems - verifiable;
(b) Temporary work loss - verifiable;
S-B-1
<PAGE>
(c) Pending insurance claim - verifiable; or
(d) Bankruptcy trustee cram down.
III. REPOSSESSIONS
Repossessions of the collateral is only to be pursued after
exhausting all other collection efforts. Once the decision is made to
attempt repossession, the following process is to be utilized:
(a) Decision on repossession.
(b) If the customer is cooperative, attempt repossession by Servicer
personnel. If uncooperative or unable to locate, utilize a third
party collection agency.
(c) Once secured, complete an inventory of personal belongings and brief
condition report on the vehicle. Return the property to the customer
and obtain a signed statement of inventory receipt.
(d) If the repossession is involuntary, notify the police department in
the city where the repossession occurred.
(e) Notify the originating dealership of repossession as soon as possible
and request a refund of all rebateable dealer adds.
(f) Send written notification to the customer regarding a 10-day notice to
redeem the loan.
(g) Decide on proper method of liquidation and plan for sale after the
10-day redemption period has expired.
(h) If consignment, set 21-day maximum term with the dealership, after
which time, if unsold, the vehicle is returned to the Servicer.
If wholesale, contact the appropriate auction company to make
arrangements for immediate sale.
If private sale, place advertisements in the proper media and attempt
to liquidate within one week.
(i) After the collateral is liquidated, send the debtor a letter stating
the amount of deficiency. Continued collection efforts will take the
form of voluntary payments or involuntary payments via judgment,
garnishment, and levy.
S-B-2
<PAGE>
IV. CHARGE OFFS
It is the responsibility of the collection officer to diligently
pursue any and all deficiencies which result from problem accounts. All
avenues of potential collection will be pursued, ranging from cash
settlements to amortized deficiency notes to judgment and garnishment.
A complete list of all charge offs will be maintained. The list
will be categorized into "active" and "dead" accounts. A brief action plan
will be shown for each active account. Accounts will only be designated as
"dead" with the recommendation of the collection officer and approval of the
Executive Vice President. The "dead" designation will only be granted for
those accounts which hold no potential for recovery (e.g., discharged Chapter
7).
Active charge off action plans will be presented at least monthly
to the Executive Vice President. Decisions regarding pursuit of legal action
and incurring potential legal fees will need prior approval by the Executive
Vice President.
V. DEFICIENCY COLLECTIONS
(a) Establish the exact amount of the deficiency, using the repossession
worksheet. This includes all fees and per diem interest.
(b) Attempt verbal and/or written negotiations with the debtor to settle
the deficiency.
(c) Send a certified letter to the debtor and cosigner(s) stating that we
need $X by ________, 19__ (7-10 days), or we will begin legal action.
If no reasonable response is received move to (d).
(d) Complete a General Claim Form. Send the form to [applicable local
court].
(e) We should receive notification of the court's decision within one
week. If we receive notice of judgment, it is possible that the
debtor will pay the court and the court will then pay the Servicer.
As this usually does not happen, proceed to exercise on the judgment
as follows:
(1) File both the Transcript of Judgment and the Affidavit of
Identification of Judgment Debtor with [appropriate office].
(2) Order a Writ of Execution from [appropriate office].
S-B-3
<PAGE>
(3) "Service" of the Writ of Execution is handled by the Sheriff or
an Attorney.
S-B-4
<PAGE>
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
between
ARCADIA RECEIVABLES FINANCE CORP.
Purchaser
and
ARCADIA FINANCIAL LTD.
Seller
dated as of
June 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Specific Terms . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.4. Certain References . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.6. Action by or Consent of Noteholders . . . . . . . . . . . . 5
SECTION 1.7. Material Adverse Effect . . . . . . . . . . . . . . . . . . 5
ARTICLE II CONVEYANCE OF THE INITIAL RECEIVABLES AND THE INITIAL
OTHER CONVEYED PROPERTY . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.1. Conveyance of the Initial Receivables and the Initial
Other Conveyed Property . . . . . . . . . . . . . . . . . . 5
SECTION 2.2. Purchase Price of Initial Receivables . . . . . . . . . . . 6
SECTION 2.3. Conveyance of Subsequent Receivables and Subsequent
Other Conveyed Property . . . . . . . . . . . . . . . . . . 6
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 8
SECTION 3.1. Representations and Warranties of AFL . . . . . . . . . . . 8
SECTION 3.2. Representations and Warranties of ARFC . . . . . . . . . . . 10
ARTICLE IV COVENANTS OF AFL . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.1. Protection of Title of ARFC and the Trust . . . . . . . . . 12
SECTION 4.2. Other Liens or Interests . . . . . . . . . . . . . . . . . . 14
SECTION 4.3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.1. Repurchase of Receivables Upon Breach of Warranty . . . . . 16
SECTION 5.2. Reassignment of Purchased Receivables . . . . . . . . . . . 17
SECTION 5.3. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.1. Liability of AFL . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.2. Failure of AFL to Sell Subsequent Receivables . . . . . . . 18
SECTION 6.3. Merger or Consolidation of AFL or ARFC . . . . . . . . . . . 18
SECTION 6.4. Limitation on Liability of AFL and Others . . . . . . . . . 19
SECTION 6.5. AFL May Own Notes . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.6. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.8. Merger and Integration . . . . . . . . . . . . . . . . . . . 21
SECTION 6.9. Severability of Provisions . . . . . . . . . . . . . . . . . 21
-i-
<PAGE>
SECTION 6.10 Intention of the Parties . . . . . . . . . . . . . . . . . . 21
SECTION 6.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.13. Conveyance of the Initial Receivables and the Initial
Other Conveyed Property to the Trust . . . . . . . . . . . . 22
SECTION 6.14. Nonpetition Covenant . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
SCHEDULES
Schedule A -- Schedule of Initial Receivables
Schedule B -- Representations and Warranties of AFL
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RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of
June 1, 1998, executed between Arcadia Receivables Finance Corp., a Delaware
corporation, as purchaser ("ARFC"), and Arcadia Financial Ltd., a Minnesota
corporation, as seller ("AFL").
W I T N E S S E T H:
WHEREAS, ARFC has agreed to purchase from AFL and AFL, pursuant to one
or more Assignments pursuant to a Receivables Purchase Agreement and Assignment,
dated as of December 3, 1996, as amended, between ARFC and AFL (the "ARCC
Purchase Agreement"), has transferred to ARFC certain of the Initial Receivables
and Initial Other Conveyed Property;
WHEREAS, ARFC has agreed to purchase from AFL and AFL, pursuant to
this Agreement, is transferring to ARFC the remainder of the Initial Receivables
and Initial Other Conveyed Property; and
WHEREAS, ARFC has agreed to purchase (or has purchased) from AFL and
AFL has agreed to transfer (or has transferred) to ARFC the Subsequent
Receivables and Subsequent Other Conveyed Property in an amount set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable consideration,
the receipt of which is acknowledged, ARFC and AFL, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. GENERAL. The specific terms defined in this Article
include the plural as well as the singular. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Article,
Section, Schedule and Exhibit references, unless otherwise specified, refer to
Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Sale and Servicing Agreement, dated as of
June 1, 1998, by and among Arcadia Receivables Finance Corp. (as Seller),
Arcadia Financial Ltd. (in its individual capacity and as Servicer), Arcadia
Automobile Receivables Trust, 1998-B (as Issuer) (the "Trust") and Norwest Bank
Minnesota, National Association, a national banking association (as Backup
Servicer).
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SECTION 1.2. SPECIFIC TERMS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"AGREEMENT" shall mean this Receivables Purchase Agreement and
Assignment and all amendments hereof and supplements hereto.
"CLOSING DATE" means June 23, 1998.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National
Association, a national banking association, as trustee and indenture collateral
agent under the Indenture, dated as of June 1, 1998, between the Trust, the
Indenture Trustee and the Indenture Collateral Agent.
"INITIAL OTHER CONVEYED PROPERTY" means all monies at any time paid or
payable on the Initial Receivables or in respect thereof after the Initial
Cutoff Date (including amounts due on or before the Initial Cutoff Date but
received by AFL after the Initial Cutoff Date), an assignment of security
interests in the Financed Vehicles, the Collection Account (including all
Eligible Investments therein and all proceeds therefrom), the Subcollection
Account, the Insurance Policies and any proceeds from any Insurance Policies
relating to the Initial Receivables, the Obligors or the related Financed
Vehicles, including rebates of premiums, rights under any Collateral Insurance
and any Force-Placed Insurance relating to the Initial Receivables, an
assignment of the rights of AFL against Dealers with respect to the Initial
Receivables under the Dealer Agreements and the Dealer Assignments, all items
contained in the Receivable Files relating to the Initial Receivables, any and
all other documents or electronic records that AFL keeps on file in accordance
with its customary procedures relating to the Initial Receivables, the Obligors
or the related Financed Vehicles, property (including the right to receive
future Liquidation Proceeds) that secures an Initial Receivable and that has
been acquired by or on behalf of the Trust pursuant to liquidation of such
Initial Receivable, and all proceeds of the foregoing.
"INITIAL RECEIVABLES" means the Receivables listed on the Schedule of
Initial Receivables attached hereto as Schedule A.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $0.
"INSURANCE AGREEMENT" means the Insurance and Indemnity Agreement,
dated as of June 23, 1998, among the Security Insurer, the Trust, ARFC and AFL.
"LIQUIDATED DAMAGES" means an amount equal to the sum of the Class A-1
Prepayment Premium, the Class A-2 Prepayment Premium, the Class A-3 Prepayment
Premium, the Class A-4 Prepayment Premium and the Class A-5 Prepayment Premium.
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"OTHER CONVEYED PROPERTY" means the Initial Other Conveyed Property
conveyed by AFL to ARFC pursuant to this Agreement together with any and all
Subsequent Other Conveyed Property conveyed by AFL to ARFC pursuant to each
Subsequent Purchase Agreement.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware
corporation, not in its individual capacity but solely as trustee of the Trust,
and any successor trustee appointed and acting pursuant to the Trust Agreement.
"RELATED DOCUMENTS" means the Notes, the Custodian Agreement, the
Trust Agreement, the Administration Agreement, the Indenture, each Subsequent
Purchase Agreement, the Sale and Servicing Agreement, each Subsequent Transfer
Agreement, the Note Policy, the Spread Account Agreement, the Insurance
Agreement, the Lockbox Agreement and the Underwriting Agreement among AFL, ARFC
and the underwriters of the Notes. The Related Documents to be executed by any
party are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.
"REPURCHASE EVENT" means the occurrence of a breach of any of AFL's
representations and warranties hereunder or under any Subsequent Purchase
Agreement or any other event which requires the repurchase of a Receivable by
AFL under the Sale and Servicing Agreement.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of June 1, 1998, executed and delivered by Arcadia Receivables Finance
Corp., as Seller, Arcadia Financial Ltd., in its individual capacity and as
Servicer, Arcadia Automobile Receivables Trust, 1998-B, as Issuer, and Norwest
Bank Minnesota, National Association, as Backup Servicer.
"SCHEDULE OF INITIAL RECEIVABLES" means the schedule of all retail
installment sales contracts and promissory notes sold and transferred pursuant
to this Agreement which is attached hereto as Schedule A.
"SCHEDULE OF RECEIVABLES" means the Schedule of Initial Receivables
attached hereto as Schedule A as supplemented by each Schedule of Subsequent
Receivables attached to each Subsequent Purchase Agreement as Schedule A.
"SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"SCHEDULE OF SUBSEQUENT RECEIVABLES" means the schedule of all retail
installment sales contracts and promissory notes sold and transferred pursuant
to a Subsequent Purchase Agreement which is attached to such Subsequent Purchase
Agreement as Schedule A, which Schedule of Subsequent Receivables shall
supplement the Schedule of Initial Receivables.
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"SPREAD ACCOUNT" means the Spread Account established and maintained
pursuant to the Spread Account Agreement. The Spread Account shall in no event
be deemed to be part of the Trust Property.
"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated
as of March 25, 1993, as thereafter amended and restated, among AFL, ARFC, the
Security Insurer, the Collateral Agent and the trustees specified therein, as
the same may be amended, supplemented or otherwise modified in accordance with
the terms thereof.
"SUBSEQUENT OTHER CONVEYED PROPERTY" means the Subsequent Other
Conveyed Property conveyed by AFL to ARFC pursuant to each Subsequent Purchase
Agreement.
"SUBSEQUENT RECEIVABLES" means the Receivables specified in the
Schedule of Subsequent Receivables attached as Schedule A to each Subsequent
Purchase Agreement.
"TRUST" means the trust created by the Trust Agreement, the estate of
which consists of the Trust Property.
"TRUST PROPERTY" means the property and proceeds of every description
conveyed pursuant to Section 2.5 of the Trust Agreement, Sections 2.1 and 2.4 of
the Sale and Servicing Agreement and Section 2.1 hereof and pursuant to any
Subsequent Purchase Agreement and Subsequent Transfer Agreement, together with
the Trust Accounts (including all Eligible Investments therein and all proceeds
therefrom). Although ARFC has pledged the Spread Account to the Collateral
Agent pursuant to the Spread Account Agreement, the Spread Account shall not
under any circumstances be deemed to be a part of or otherwise includable in the
Trust or the Trust Property.
SECTION 1.3. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement or the Sale and
Servicing Agreement; references to Persons include their permitted successors
and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."
SECTION 1.4. CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of an Accounting Date shall refer to the close of
business on such day, or as of the first day of a Monthly Period shall refer to
the opening of
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business on such day. All references to the last day of a Monthly Period
shall refer to the close of business on such day.
SECTION 1.5. NO RECOURSE. Without limiting the obligations of AFL
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of AFL, or
of any predecessor or successor of AFL.
SECTION 1.6. ACTION BY OR CONSENT OF NOTEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to Noteholders of record as
of the Record Date immediately preceding the date on which such action is to be
taken, or consent given, by Noteholders. Solely for the purposes of any action
to be taken, or consented to, by Noteholders, any Note registered in the name of
the Seller, AFL or any Affiliate thereof shall be deemed not to be outstanding,
and the related Outstanding Amount, evidenced thereby shall not be taken into
account in determining whether the requisite Outstanding Amount necessary to
effect any such action or consent has been obtained; PROVIDED, HOWEVER, that,
solely for the purpose of determining whether the Indenture Trustee is entitled
to rely upon any such action or consent, only Notes which the Indenture Trustee
knows to be so owned shall be so disregarded.
SECTION 1.7. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Note Policy.
ARTICLE II
CONVEYANCE OF THE INITIAL RECEIVABLES
AND THE INITIAL OTHER CONVEYED PROPERTY
SECTION 2.1. CONVEYANCE OF THE INITIAL RECEIVABLES AND THE INITIAL
OTHER CONVEYED PROPERTY. Subject to the terms and conditions of this Agreement,
AFL hereby sells, transfers, assigns, and otherwise conveys to ARFC without
recourse (but without limitation of its obligations in this Agreement), and ARFC
hereby purchases, all right, title and interest of AFL in and to the Initial
Receivables and the Initial Other Conveyed Property. AFL and ARFC acknowledge
that certain of the Initial Receivables and Initial Other Conveyed Property have
previously been sold, transferred, assigned and conveyed to ARFC pursuant to the
Telluride Purchase Agreement, and AFL hereby confirms such prior sale, transfer,
assignment and conveyance. It is the intention of AFL and ARFC that the
transfer and
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assignment contemplated by this Agreement shall constitute a sale of the
Initial Receivables and the Initial Other Conveyed Property from AFL to ARFC,
conveying good title thereto free and clear of any Liens, and the Initial
Receivables and the Initial Other Conveyed Property shall not be part of
AFL's estate in the event of the filing of a bankruptcy petition by or
against AFL under any bankruptcy or similar law.
SECTION 2.2. PURCHASE PRICE OF INITIAL RECEIVABLES. Simultaneously
with the conveyance of the Initial Receivables and the Initial Other Conveyed
Property to ARFC, ARFC has paid or caused to be paid to or upon the order of AFL
approximately $401,628,899.95 by wire transfer of immediately available funds
(representing the proceeds to ARFC from the sale of the Initial Receivables
after
(i) deducting expenses of $725,000 incurred by ARFC in connection with
such sale,
(ii) depositing the Pre-Funded Amount in the Pre-Funding Account and
(iii) depositing the Reserve Amount in the Reserve Account).
SECTION 2.3. CONVEYANCE OF SUBSEQUENT RECEIVABLES AND SUBSEQUENT
OTHER CONVEYED PROPERTY.
(a) Subject to the conditions set forth in paragraph (b) below and
the terms and conditions in the related Subsequent Purchase Agreement, in
consideration of AFL's delivery on the related Subsequent Transfer Date to or
upon the order of ARFC of an amount equal to the purchase price of the
Subsequent Receivables (as set forth in the related Subsequent Purchase
Agreement), AFL hereby agrees to sell, transfer, assign, and otherwise convey to
ARFC without recourse (but without limitation of its obligations in this
Agreement and the related Subsequent Purchase Agreement), and ARFC hereby agrees
to purchase all right, title and interest of AFL in and to the Subsequent
Receivables and the Subsequent Other Conveyed Property described in the related
Subsequent Purchase Agreement.
(b) AFL shall transfer to ARFC, and ARFC shall acquire, the
Subsequent Receivables and the Subsequent Other Conveyed Property to be
transferred on any Subsequent Transfer Date only upon the satisfaction of each
of the following conditions on or prior to such Subsequent Transfer Date:
(i) ARFC shall have provided the Owner Trustee, the Indenture
Trustee, the Security Insurer and the Rating Agencies with a timely
Addition Notice and shall have provided any information reasonably
requested by any of the foregoing with respect to the Subsequent
Receivables;
(ii) the Funding Period shall not have terminated;
(iii) the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) shall in its sole and absolute
discretion have given its prior written approval of the transfer of the
Subsequent
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Receivables and the Subsequent Other Conveyed Property by AFL to ARFC and,
in turn, by ARFC to the Trust;
(iv) ARFC shall have delivered to AFL a duly executed
Subsequent Receivables Purchase Agreement and Assignment, in substantially
the form of Exhibit A hereto (the "Subsequent Purchase Agreement"), which
shall include a Schedule of Subsequent Receivables;
(v) as of each Subsequent Transfer Date, neither AFL nor ARFC
was insolvent nor will either of them have been made insolvent by such
transfer nor is either of them aware of any pending insolvency;
(vi) each Rating Agency shall have notified the Security
Insurer that following such transfer the Notes will be rated in the highest
rating category by such Rating Agency;
(vii) such addition will not result in a material adverse tax
consequence to the Trust or the Noteholders as evidenced by an Opinion of
Counsel to be delivered by AFL;
(viii) ARFC shall have delivered to the Rating Agencies and to
the Security Insurer one or more Opinions of Counsel with respect to the
transfer of the Subsequent Receivables substantially in the form of the
Opinions of Counsel delivered to such persons on the Closing Date;
(ix) (A) the Receivables in the Trust, including the Subsequent
Receivables to be conveyed by AFL to ARFC and, in turn, by ARFC to the
Trust on the Subsequent Transfer Date, shall meet the following criteria
(based on the characteristics of the Initial Receivables on the Initial
Cutoff Date and the Subsequent Receivables on each related Subsequent
Cutoff Date): (1) the weighted average APR of such Receivables will not be
less than 16.31%, (2) the weighted average remaining term of such
Receivables will not be more than 67 nor less than 63 months, (3) not more
than 90% of the Aggregate Principal Balance of such Receivables will
represent used Financed Vehicles, (4) not more than 73% of the Aggregate
Principal Balance of such Receivables will represent Receivables originated
under AFL's "Classic" program (excluding loans for the purchase of
repossessed automobiles that would otherwise be deemed originated under the
"Classic" program), (5) not more than 4% of the Aggregate Principal Balance
of such Receivables will be attributable to Receivables with an Annual
Percentage Rate in excess of 21%, (6) not more than 0.25% of the Aggregate
Principal Balance of such Receivables will represent loans on Financed
Vehicles in excess of $50,000.00, (7) not more than 3.0% of the Aggregate
Principal Balance of such Receivables will represent loans with original
terms greater than 72 months and (8) not more than 4.0% of the Aggregate
Principal Balance of such Receivables will represent loans secured by
Financed Vehicles that previously secured a loan
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originated by AFL with an obligor other than the current Obligor, and (B)
the Trust, the Owner Trustee, the Indenture Trustee and the Security
Insurer shall have received written confirmation from a firm of certified
independent public accountants as to the satisfaction of such criteria;
(x) AFL shall have taken any action necessary, or if requested
by the Security Insurer, advisable to maintain the first perfected
ownership interest of the Trust in the Trust Property and the first
perfected security interest of ARFC in the Subsequent Receivables and the
Subsequent Other Conveyed Property, the Trust in the Trust Property and the
first perfected security interest of the Indenture Collateral Agent in the
Indenture Collateral;
(xi) AFL is conveying Subsequent Receivables to the Seller in
substantially the order they were originated by AFL; and
(xii) no selection procedures believed by AFL to be adverse
to the interests of the Noteholders shall have been utilized in selecting
the Subsequent Receivables.
It is the intention of AFL and ARFC that the transfer and assignment
contemplated by this Agreement and the related Subsequent Purchase Agreement
shall constitute a sale of the Subsequent Receivables and the Subsequent Other
Conveyed Property from AFL to ARFC, conveying good title thereto free and clear
of any Liens, and the Subsequent Receivables and the Subsequent Other Conveyed
Property shall not be part of AFL's estate in the event of the filing of a
bankruptcy petition by or against AFL under any bankruptcy or similar law.
(c) AFL covenants to transfer to ARFC pursuant to paragraph (a) above
Subsequent Receivables with an aggregate Principal Balance equal to
$146,901,153.65; PROVIDED, HOWEVER, that the sole remedy of ARFC with respect to
a failure of such covenant shall be to enforce the provisions of Section 6.2 of
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF AFL. AFL makes the
following representations and warranties, on which ARFC relies in purchasing the
Initial Receivables and the Initial Other Conveyed Property and in transferring
the Initial Receivables and the Initial Other Conveyed Property to the Trust
under the Sale and Servicing Agreement and on which the Security Insurer will
rely in issuing the Note Policy. Such representations are made as of the
execution and delivery of this Agreement, but shall survive the sale, transfer
and assignment of the Initial Receivables and the Initial Other Conveyed
Property hereunder and the
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sale, transfer and assignment thereof by ARFC to the Trust under the Sale and
Servicing Agreement. AFL and ARFC agree that ARFC will assign to the Trust
all of ARFC's rights under this Agreement and that the Trust will thereafter
be entitled to enforce this Agreement against AFL in the Trust's own name.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties
set forth on the Schedule of Representations are true and correct.
(b) ORGANIZATION AND GOOD STANDING. AFL has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Minnesota, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the Initial
Receivables and the Initial Other Conveyed Property transferred to ARFC.
(c) DUE QUALIFICATION. AFL is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) POWER AND AUTHORITY. AFL has the power and authority to execute
and deliver this Agreement and its Related Documents and to carry out its
terms and their terms, respectively; AFL has full power and authority to
sell and assign the Initial Receivables and the Initial Other Conveyed
Property to be sold and assigned to and deposited with ARFC hereunder and
has duly authorized such sale and assignment to ARFC by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and AFL's Related Documents have been duly authorized by AFL by
all necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and AFL's
Related Documents have been duly executed and delivered, shall effect a
valid sale, transfer and assignment of the Initial Receivables and the
Initial Other Conveyed Property, enforceable against AFL and creditors of
and purchasers from AFL; and this Agreement and AFL's Related Documents
constitute legal, valid and binding obligations of AFL enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the Related Documents and the fulfillment of the
terms of this Agreement and the Related Documents shall
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not conflict with, result in any breach of any of the terms and provisions
of or constitute (with or without notice, lapse of time or both) a default
under, the articles of incorporation or bylaws of AFL, or any indenture,
agreement, mortgage, deed of trust or other instrument to which AFL is a
party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, the Spread Account Agreement and the Sale and
Servicing Agreement, or violate any law, order, rule or regulation
applicable to AFL of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over AFL or any of its properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to AFL's knowledge, threatened against AFL, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over AFL or its properties
(i) asserting the invalidity of this Agreement or any of the Related
Documents, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, (iii) seeking any determination or ruling
that might materially and adversely affect the performance by AFL of its
obligations under, or the validity or enforceability of, this Agreement or
any of the Related Documents or (iv) seeking to affect adversely the
federal income tax or other federal, state or local tax attributes of, or
seeking to impose any excise, franchise, transfer or similar tax upon, the
transfer and acquisition of the Initial Receivables and the Initial Other
Conveyed Property hereunder or under the Sale and Servicing Agreement.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of AFL is
located at 7825 Washington Avenue South, Minneapolis, MN 55439-2435.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF ARFC. ARFC makes the
following representations and warranties, on which AFL relies in selling,
assigning, transferring and conveying the Initial Receivables and the Initial
Other Conveyed Property to ARFC hereunder. Such representations are made as of
the execution and delivery of this Agreement, but shall survive the sale,
transfer and assignment of the Initial Receivables and the Initial Other
Conveyed Property hereunder and the sale, transfer and assignment thereof by
ARFC to the Trust under the Sale and Servicing Agreement.
(a) ORGANIZATION AND GOOD STANDING. ARFC has been duly organized and
is validly existing and in good standing as a corporation under the laws of
the State of Delaware, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and has,
full power, authority and legal right to acquire and own the Initial
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Receivables and the Initial Other Conveyed Property and to transfer the
Initial Receivables and the Initial Other Conveyed Property to the Trust
pursuant to the Sale and Servicing Agreement.
(b) DUE QUALIFICATION. ARFC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect (i) ARFC's ability to acquire the
Initial Receivables or the Initial Other Conveyed Property, (ii) the
validity or enforceability of the Initial Receivables and the Initial Other
Conveyed Property or (iii) ARFC's ability to perform its obligations
hereunder and under the Related Documents.
(c) POWER AND AUTHORITY. ARFC has the power, authority and legal
right to execute and deliver this Agreement and its Related Documents and
to carry out the terms hereof and thereof and to acquire the Initial
Receivables and the Initial Other Conveyed Property hereunder; and the
execution, delivery and performance of this Agreement and its Related
Documents and all of the documents required pursuant hereto or thereto have
been duly authorized by ARFC by all necessary action.
(d) NO CONSENT REQUIRED. ARFC is not required to obtain the consent
of any other Person, or any consent, license, approval or authorization or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery or performance of this
Agreement and the Related Documents, except for such as have been obtained,
effected or made.
(e) BINDING OBLIGATION. This Agreement and each of its Related
Documents constitutes a legal, valid and binding obligation of ARFC,
enforceable against ARFC in accordance with its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, reorganization,
conservatorship, receivership, liquidation and other similar laws and to
general equitable principles.
(f) NO VIOLATION. The execution, delivery and performance by ARFC of
this Agreement, the consummation of the transactions contemplated by this
Agreement and the Related Documents and the fulfillment of the terms of
this Agreement and the Related Documents do not and will not conflict with,
result in any breach of any of the terms and provisions of or constitute
(with or without notice or lapse of time) a default under the certificate
of incorporation or bylaws of ARFC, or conflict with or breach any of the
terms or provisions of, or constitute (with or without notice or lapse of
time) a default under, any indenture, agreement, mortgage, deed of trust or
other instrument to which ARFC is a party or by which ARFC is bound or to
which any of its properties are subject, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
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any such indenture, agreement, mortgage, deed of trust or other instrument
(other than the Sale and Servicing Agreement and the Indenture), or violate
any law, order, rule or regulation, applicable to ARFC or its properties,
of any federal or state regulatory body or any court, administrative
agency, or other governmental instrumentality having jurisdiction over ARFC
or any of its properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending, or, to the knowledge of ARFC, threatened against ARFC, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality having jurisdiction over ARFC or its
properties: (i) asserting the invalidity of this Agreement or any of the
Related Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Related
Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by ARFC of its obligations under, or
the validity or enforceability of, this Agreement or any of the Related
Documents or (iv) that may adversely affect the federal or state income tax
attributes of, or seeking to impose any excise, franchise, transfer or
similar tax upon, the transfer and acquisition of the Initial Receivables
and the Initial Other Conveyed Property hereunder or the transfer of the
Initial Receivables and the Initial Other Conveyed Property to the Trust
pursuant to the Sale and Servicing Agreement.
In the event of any breach of a representation and warranty made by ARFC
hereunder, AFL covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the later of (i) the date on which
all pass-through certificates or other similar securities issued by the
Trust, or a trust or similar vehicle formed by ARFC, have been paid in full,
or (ii) all Notes or other similar securities issued by the Trust, or a trust
or similar vehicle formed by ARFC, have been paid in full. AFL and ARFC
agree that damages will not be an adequate remedy for such breach and that
this covenant may be specifically enforced by ARFC or by the Owner Trustee on
behalf of the Trust.
ARTICLE IV
COVENANTS OF AFL
SECTION 4.1. PROTECTION OF TITLE OF ARFC AND THE TRUST.
(a) At or prior to the Closing Date or each Subsequent Transfer Date,
as the case may be, AFL shall have filed or caused to be filed a UCC-1 financing
statement, executed by AFL as seller or debtor, naming ARFC as purchaser or
secured party and describing the Initial Receivables and the Initial Other
Conveyed
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Property, with respect to this Agreement, and the Subsequent Receivables and
the Subsequent Other Conveyed Property, with respect to each Subsequent
Purchase Agreement, being sold by it to ARFC as collateral, with the office
of the Secretary of State of the State of Minnesota and in such other
locations as ARFC shall have required. From time to time thereafter, AFL
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places as
may be required by law fully to preserve, maintain and protect the interest
of ARFC under this Agreement and each Subsequent Purchase Agreement and of
the Trust under the Sale and Servicing Agreement and each Subsequent Transfer
Agreement in the Initial Receivables and the Initial Other Conveyed Property
and the Subsequent Receivables and the Subsequent Other Conveyed Property, as
the case may be, and in the proceeds thereof. AFL shall deliver (or cause to
be delivered) to ARFC, the Owner Trustee, the Indenture Trustee and the
Security Insurer file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing. In the
event that AFL fails to perform its obligations under this subsection, ARFC
or the Owner Trustee may do so at the expense of AFL.
(b) AFL shall not change its name, identity, or corporate structure
in any manner that would, could or might make any financing statement or
continuation statement filed by AFL (or by ARFC or the Owner Trustee on behalf
of AFL) in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless it shall have given ARFC, the
Owner Trustee and the Security Insurer at least 60 days' prior written notice
thereof, and shall promptly file appropriate amendments to all previously filed
financing statements and continuation statements.
(c) AFL shall give ARFC, the Security Insurer (so long as an Insurer
Default shall not have occurred and be continuing), the Indenture Trustee and
the Owner Trustee at least 60 days' prior written notice of any relocation of
its principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement. AFL shall at all times maintain each office from which it services
Receivables and its principal executive office within the United States of
America.
(d) AFL shall maintain its computer systems so that, from and after
the time of sale under this Agreement of the Initial Receivables to ARFC, and
from and after the time of sale under each Subsequent Purchase Agreement of the
Subsequent Receivables to ARFC, and the conveyance of the Initial Receivables
and the Subsequent Receivables by ARFC to the Trust, AFL's master computer
records (including archives) that shall refer to an Initial Receivable or
Subsequent Receivable indicate clearly that such Initial Receivable or
Subsequent Receivable has been sold to ARFC and has been conveyed by ARFC to the
Trust. Indication of the Trust's ownership of an Initial Receivable or
Subsequent Receivable shall be deleted from or modified on AFL's computer
systems when, and only when, the Initial
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Receivable or Subsequent Receivable shall become a Purchased Receivable or
shall have been paid in full.
(e) If at any time AFL shall propose to sell, grant a security
interest in, or otherwise transfer any interest in motor vehicle receivables to
any prospective purchaser, lender or other transferee, AFL shall give to such
prospective purchaser, lender, or other transferee computer tapes, records, or
print-outs (including any restored from archives) that, if they shall refer in
any manner whatsoever to any Initial Receivable or Subsequent Receivable, shall
indicate clearly that such Initial Receivable or Subsequent Receivable has been
sold to ARFC and is owned by the Trust.
SECTION 4.2. OTHER LIENS OR INTERESTS. Except for the conveyances
hereunder and under any Subsequent Purchase Agreement, AFL will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur, assume
or suffer to exist any Lien on the Initial Receivables or the Initial Other
Conveyed Property or on the Subsequent Receivables or the Subsequent Other
Conveyed Property, or any interest therein, and AFL shall defend the right,
title, and interest of ARFC and the Trust in and to the Initial Receivables and
the Initial Other Conveyed Property and the Subsequent Receivables and the
Subsequent Other Conveyed Property against all claims of third parties claiming
through or under AFL.
SECTION 4.3. COSTS AND EXPENSES. AFL shall pay all reasonable costs
and disbursements in connection with the performance of its obligations
hereunder and under each Subsequent Purchase Agreement and its Related
Documents.
SECTION 4.4. INDEMNIFICATION.
(a) AFL shall defend, indemnify and hold harmless ARFC, the Trust,
the Owner Trustee, the Security Insurer, the Indenture Trustee, the Backup
Servicer and the Noteholders from and against any and all costs, expenses,
losses, damages, claims, and liabilities, arising out of or resulting from any
breach of any of AFL's representations and warranties contained herein or in any
Subsequent Purchase Agreement.
(b) AFL shall defend, indemnify and hold harmless ARFC, the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer and the
Noteholders from and against any and all costs, expenses, losses, damages,
claims, and liabilities, arising out of or resulting from the use, ownership or
operation by AFL or any affiliate thereof of a Financed Vehicle.
(c) AFL shall defend and indemnify ARFC, the Trust, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer and
the Noteholders against any and all costs, expenses, losses, damages, claims and
liabilities arising out of or resulting from any action taken, or failed to be
taken, by it in respect of any portion of the Trust Property other than in
accordance with this
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Agreement, each Subsequent Purchase Agreement or the Sale and Servicing
Agreement and each Subsequent Transfer Agreement.
(d) AFL agrees to pay, and shall defend, indemnify and hold harmless
ARFC, the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer
and the Noteholders from and against any taxes that may at any time be asserted
against ARFC, the Owner Trustee, the Indenture Trustee, the Backup Servicer and
the Noteholders with respect to the transactions contemplated in this Agreement
or in any Subsequent Purchase Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible personal
property, privilege, or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale, transfer and assignment of the
Initial Receivables and the Initial Other Conveyed Property or the Subsequent
Receivables or Subsequent Other Conveyed Property to ARFC and of the Trust
Property to the Trust or the issuance and original sale of the Notes, or
asserted with respect to ownership of the Initial Receivables and Initial Other
Conveyed Property or the Subsequent Receivables or Subsequent Other Conveyed
Property or the Trust Property which shall be indemnified by AFL pursuant to
clause (e) below, or federal, state or other income taxes, arising out of
distributions on the Notes or transfer taxes arising in connection with the
transfer of the Notes) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by AFL under this Agreement or
under any Subsequent Purchase Agreement or imposed against such Persons.
(e) AFL agrees to pay, and to indemnify, defend and hold harmless
ARFC, the Trust, the Owner Trustee, the Indenture Trustee, the Backup
Servicer and the Noteholders from, any taxes which may at any time be
asserted against such Persons with respect to, and as of the date of, the
conveyance or ownership of the Initial Receivables or the Initial Other
Conveyed Property hereunder or the Subsequent Receivables or Subsequent Other
Conveyed Property under each Subsequent Purchase Agreement and the conveyance
or ownership of the Trust Property under the Sale and Servicing Agreement and
the Subsequent Transfer Agreements or the issuance and original sale of the
Notes, including, without limitation, any sales, gross receipts, personal
property, tangible or intangible personal property, privilege or license
taxes (but not including any federal or other income taxes, including
franchise taxes, arising out of the transactions contemplated hereby or
transfer taxes arising in connection with the transfer of Notes) and costs
and expenses in defending against the same, arising by reason of the acts to
be performed by AFL under this Agreement or under any Subsequent Purchase
Agreement or imposed against such Persons.
(f) AFL shall defend, indemnify, and hold harmless ARFC, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer, the
Trust and the Noteholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon ARFC, the Trust,
the
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Indenture Trustee and the Noteholders through the negligence, willful
misfeasance, or bad faith of AFL in the performance of its duties under this
Agreement or under any Subsequent Purchase Agreement or by reason of reckless
disregard of AFL's obligations and duties under this Agreement or under any
Subsequent Purchase Agreement.
(g) AFL shall indemnify, defend and hold harmless ARFC, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer, the
Trust and the Noteholders from and against any loss, liability or expense
incurred by reason of the violation by AFL of federal or state securities laws
in connection with the registration or the sale of the Notes.
(h) AFL shall indemnify, defend and hold harmless ARFC, the Owner
Trustee, the Security Insurer, the Indenture Trustee, the Backup Servicer, the
Trust and the Noteholders from and against any loss, liability or expense
imposed upon, or incurred by, ARFC, the Owner Trustee, the Indenture Trustee,
the Trust or the Noteholders as a result of the failure of any Initial
Receivable or Subsequent Receivable, or the sale of the related Financed
Vehicle, to comply with all requirements of applicable law.
(i) AFL shall defend, indemnify, and hold harmless ARFC from and
against all costs, expenses, losses, claims, damages, and liabilities arising
out of or incurred in connection with the acceptance or performance of AFL's
trusts and duties as Servicer under the Sale and Servicing Agreement, except to
the extent that such cost, expense, loss, claim, damage, or liability shall be
due to the willful misfeasance, bad faith, or negligence (except for errors in
judgment) of ARFC.
(j) AFL shall indemnify, defend and hold harmless ARFC, the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Trust and the
Noteholders from and against any loss, liability or expense imposed upon, or
incurred by, ARFC, the Owner Trustee and the Indenture Trustee, the Trust and
the Noteholders as a result of AFL's or ARFC's use of the name "Arcadia."
Indemnification under this Section 4.4 shall include reasonable fees
and expenses of counsel and expenses of litigation and shall survive termination
of the Trust. The indemnity obligations hereunder shall be in addition to any
obligation that AFL may otherwise have.
ARTICLE V
REPURCHASES
SECTION 5.1. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. Upon
the occurrence of a Repurchase Event AFL shall, unless such breach shall have
been cured in all material respects, repurchase such Receivable from the Trust
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and, on or before the related Deposit Date, AFL shall pay the Purchase Amount to
the Trust pursuant to Section 4.5 of the Sale and Servicing Agreement. It is
understood and agreed that, except as set forth in Section 6.1, the obligation
of AFL to repurchase any Receivable as to which a breach has occurred and is
continuing shall, if such obligation is fulfilled, constitute the sole remedy
against AFL for such breach available to ARFC, the Security Insurer,
Noteholders, or the Indenture Trustee on behalf of Noteholders. The provisions
of this Section 5.1 are intended to grant the Owner Trustee and the Indenture
Trustee a direct right against AFL to demand performance hereunder, and in
connection therewith, AFL waives any requirement of prior demand against ARFC
with respect to such repurchase obligation. Any such purchase shall take place
in the manner specified in Section 2.6 of the Sale and Servicing Agreement.
Notwithstanding any other provision of this Agreement, any Subsequent Purchase
Agreement or the Sale and Servicing Agreement or any Subsequent Transfer
Agreement to the contrary, the obligation of AFL under this Section shall not
terminate upon a termination of AFL as Servicer under the Sale and Servicing
Agreement and shall be performed in accordance with the terms hereof
notwithstanding the failure of the Servicer or ARFC to perform any of their
respective obligations with respect to such Receivable under the Sale and
Servicing Agreement.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by AFL, AFL shall indemnify the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer, the
Trust and the Noteholders against all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such Repurchase Events.
SECTION 5.2. REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit in
the Collection Account of the Purchase Amount of any Receivable repurchased by
AFL under Section 5.1, ARFC and the Owner Trustee shall take such steps as may
be reasonably requested by AFL in order to assign to AFL all of ARFC's and the
Trust's right, title and interest in and to such Receivable and all security and
documents and all Other Conveyed Property conveyed to ARFC and the Trust
directly relating thereto, without recourse, representation or warranty, except
as to the absence of liens, charges or encumbrances created by or arising as a
result of actions of ARFC or the Owner Trustee. Such assignment shall be a sale
and assignment outright, and not for security. If, following the reassignment
of a Purchased Receivable, in any enforcement suit or legal proceeding, it is
held that AFL may not enforce any such Receivable on the ground that it shall
not be a real party in interest or a holder entitled to enforce the Receivable,
ARFC and the Owner Trustee shall, at the expense of AFL, take such steps as AFL
deems reasonably necessary to enforce the Receivable, including bringing suit in
ARFC's or the Owner Trustee's name.
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SECTION 5.3. WAIVERS. No failure or delay on the part of ARFC, or
the Owner Trustee as assignee of ARFC, in exercising any power, right or
remedy under this Agreement or under any Subsequent Purchase Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other or future exercise thereof or
the exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. LIABILITY OF AFL. AFL shall be liable in accordance
herewith only to the extent of the obligations in this Agreement or in any
Subsequent Purchase Agreement specifically undertaken by AFL and the
representations and warranties of AFL.
SECTION 6.2. FAILURE OF AFL TO SELL SUBSEQUENT RECEIVABLES. In
the event that AFL shall fail to deliver and sell to ARFC any or all of the
Subsequent Receivables required under this Agreement, AFL shall be obligated
to pay to ARFC the Liquidated Damages on the Business Day immediately
preceding the Distribution Date on which the Funding Period ends (or, if the
Funding Period does not end on a Distribution Date, on the first Distribution
Date following the end of the Funding Period).
SECTION 6.3. MERGER OR CONSOLIDATION OF AFL OR ARFC. Any
corporation or other entity (i) into which AFL or ARFC may be merged or
consolidated, (ii) resulting from any merger or consolidation to which AFL or
ARFC is a party or (iii) succeeding to the business of AFL or ARFC, in the
case of ARFC, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters
substantively identical to those contained in ARFC's certificate of
incorporation, provided that in any of the foregoing cases such corporation
shall execute an agreement of assumption to perform every obligation of AFL
or ARFC, as the case may be, under this Agreement and each Subsequent
Purchase Agreement and, whether or not such assumption agreement is executed,
shall be the successor to AFL or ARFC, as the case may be, hereunder and
under each such Subsequent Purchase Agreement (without relieving AFL or ARFC
of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution or filing of any document or any further
act by any of the parties to this Agreement or each Subsequent Purchase
Agreement. Notwithstanding the foregoing, so long as an Insurer Default
shall not have occurred and be continuing, ARFC shall not merge or
consolidate with any other Person or permit any other Person to become the
successor to ARFC's business without the prior written consent of the
Security Insurer. AFL or ARFC shall promptly inform the other party, the
Owner Trustee and the Indenture Trustee and, so long as an Insurer Default
shall not have occurred and be continuing, the
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Security Insurer of such merger, consolidation or purchase and assumption.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Sections 3.1 and 3.2 and this Agreement, or similar
representation or warranty made in any Subsequent Purchase Agreement, shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no
event that, after notice or lapse of time, or both, would become an event of
default under the Insurance Agreement, shall have occurred and be continuing,
(y) AFL or ARFC, as applicable, shall have delivered written notice of such
consolidation, merger or purchase and assumption to the Rating Agencies prior
to the consummation of such transaction and shall have delivered to the Owner
Trustee and the Indenture Trustee an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 6.3 and that all conditions
precedent, if any, provided for in this Agreement, or in each Subsequent
Purchase Agreement, relating to such transaction have been complied with, and
(z) AFL or ARFC, as applicable, shall have delivered to the Owner Trustee and
the Indenture Trustee an Opinion of Counsel, stating that, in the opinion of
such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary to
preserve and protect the interest of the Owner Trustee in the Trust Property
and reciting the details of the filings or (B) no such action shall be
necessary to preserve and protect such interest.
SECTION 6.4. LIMITATION ON LIABILITY OF AFL AND OTHERS. AFL and
any director, officer, employee or agent may rely in good faith on the advice
of counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
AFL shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement,
any Subsequent Purchase Agreement or its Related Documents and that in its
opinion may involve it in any expense or liability.
SECTION 6.5. AFL MAY OWN NOTES. Subject to the provisions of the
Sale and Servicing Agreement, AFL and any Affiliate of AFL may in its
individual or any other capacity become the owner or pledgee of Notes with
the same rights as it would have if it were not AFL or an Affiliate thereof.
SECTION 6.6. AMENDMENT.
(a) This Agreement and any Subsequent Purchase Agreement may be
amended by AFL and ARFC, so long as an Insurer Default shall not have
occurred and be continuing, with the prior written consent of the Security
Insurer and without the consent of the Owner Trustee, the Indenture Trustee
or any of the Noteholders (A) to cure any ambiguity or (B) to correct any
provisions in this Agreement or any such Subsequent Purchase Agreement;
PROVIDED, HOWEVER, that
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such action shall not, as evidenced by an Opinion of Counsel delivered to the
Owner Trustee and the Indenture Trustee, adversely affect in any material
respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by AFL
and ARFC, so long as an Insurer Default shall not have occurred and be
continuing, with the prior written consent of the Security Insurer, the Owner
Trustee and the Indenture Trustee and a Note Majority, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Noteholders; PROVIDED, HOWEVER, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables, distributions that shall be required
to be made on any Note or the Note Interest Rate or (ii) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, AFL
shall have furnished written notification of the substance of such amendment
or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee or the Indenture Trustee, as applicable, shall furnish
written notification of the substance of such amendment or consent to each
Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Owner Trustee or the Indenture
Trustee, as applicable, may prescribe, including the establishment of record
dates. The consent of any Holder of a Note given pursuant to this Section or
pursuant to any other provision of this Agreement shall be conclusive and
binding on such Holder and on all future Holders of such Note and of any Note
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Note.
SECTION 6.7. NOTICES. All demands, notices and communications to
AFL or ARFC hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), reputable overnight courier
or mailed by certified mail, return receipt requested, and shall be deemed to
have been given upon receipt (a) in the case of AFL, to Arcadia Financial
Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435,
Attention: John A. Witham, or such other address as shall be designated by
AFL in a written notice delivered to the other party or to the Owner Trustee
or the Indenture Trustee, as applicable, or (b) in case of ARFC, to Arcadia
Receivables Finance Corp., 7825
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Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435,
Attention: John A. Witham.
SECTION 6.8. MERGER AND INTEGRATION. Except as specifically
stated otherwise herein, this Agreement and the Related Documents set forth
the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement and the Related Documents. This Agreement may not be modified,
amended, waived or supplemented except as provided herein.
SECTION 6.9. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement.
SECTION 6.10. INTENTION OF THE PARTIES. The execution and
delivery of this Agreement and of each Subsequent Purchase Agreement shall
constitute an acknowledgment by AFL and ARFC that they intend that each
assignment and transfer herein and therein contemplated constitute a sale and
assignment outright, and not for security, of the Initial Receivables and the
Initial Other Conveyed Property and the Subsequent Receivables and Subsequent
Other Conveyed Property, as the case may be, conveying good title thereto
free and clear of any Liens, from AFL to ARFC, and that the Initial
Receivables and the Initial Other Conveyed Property and the Subsequent
Receivables and Subsequent Other Conveyed Property shall not be a part of
AFL's estate in the event of the bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal
or state bankruptcy or similar law, or the occurrence of another similar
event, of, or with respect to, AFL. In the event that such conveyance is
determined to be made as security for a loan made by ARFC, the Trust or the
Noteholders to AFL, the parties intend that AFL shall have granted to ARFC a
security interest in all of AFL's right, title and interest in and to the
Initial Receivables and the Initial Other Conveyed Property and the
Subsequent Receivables and Subsequent Other Conveyed Property, as the case
may be, conveyed pursuant to Section 2.1 hereof or pursuant to any Subsequent
Purchase Agreement, and that this Agreement and each Subsequent Purchase
Agreement shall constitute a security agreement under applicable law.
SECTION 6.11. GOVERNING LAW. This Agreement shall be construed in
accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof, and the obligations, rights and
remedies of the parties under this Agreement shall be determined in
accordance with such laws.
SECTION 6.12. COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
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executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 6.13. CONVEYANCE OF THE INITIAL RECEIVABLES AND THE
INITIAL OTHER CONVEYED PROPERTY TO THE TRUST. AFL acknowledges that ARFC
intends, pursuant to the Sale and Servicing Agreement, to convey the Initial
Receivables and the Initial Other Conveyed Property, together with its rights
under this Agreement, to the Trust on the date hereof. AFL acknowledges and
consents to such conveyance and waives any further notice thereof and
covenants and agrees that the representations and warranties of AFL contained
in this Agreement and the rights of ARFC hereunder are intended to benefit
the Security Insurer, the Owner Trustee, the Indenture Trustee, the Trust,
and the Noteholders. In furtherance of the foregoing, AFL covenants and
agrees to perform its duties and obligations hereunder, in accordance with
the terms hereof for the benefit of the Security Insurer, the Owner Trustee,
the Indenture Trustee, the Trust, and the Noteholders and that,
notwithstanding anything to the contrary in this Agreement, AFL shall be
directly liable to the Owner Trustee and the Trust (notwithstanding any
failure by the Servicer, the Backup Servicer or ARFC to perform its duties
and obligations hereunder or under the Sale and Servicing Agreement) and that
the Owner Trustee may enforce the duties and obligations of AFL under this
Agreement against AFL for the benefit of the Security Insurer, the Trust, and
the Noteholders.
SECTION 6.14. NONPETITION COVENANT. Neither ARFC nor AFL shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Trust (or, in
the case of AFL, against ARFC) under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust (or
ARFC) or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust (or ARFC).
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IN WITNESS WHEREOF, the parties have caused this Receivables
Purchase Agreement and Assignment to be duly executed by their respective
officers as of the day and year first above written.
ARCADIA RECEIVABLES FINANCE CORP.,
as Purchaser
By /s/ John A. Witham
----------------------------------------------------
Name: John A. Witham
Title: Senior Vice President and Chief Financial
Officer
ARCADIA FINANCIAL LTD., as Seller
By /s/ John A. Witham
-----------------------------------------------------
Name: John A. Witham
Title: Executive Vice President and Chief Financial
Officer
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[LOGO] FINANCIAL GUARANTY
INSURANCE POLICY
<TABLE>
<S> <C>
Obligor: Arcadia Automobile Receivables Trust, 1998-B Policy No.: 50698-N
Obligations: $550,000,000 Automobile Receivables-Backed Date of Issuance: 6/23/98
Notes, as described in Endorsement No. 1
</TABLE>
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of
Scheduled Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees :
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term Of This Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by
Financial Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated
on the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the
Obligation. "Scheduled Payments" means payments which are scheduled to be
made during the Term Of This Policy in accordance with the original terms of
the Obligations when issued and without regard to any amendment or
modification of such Obligations thereafter; payments which become due on an
accelerated basis as a result of (a) a default by the Obligor, (b) an
election by the Obligor to pay principal on an accelerated basis or (c) any
other cause, shall not constitute "Scheduled Payments" unless Financial
Security shall elect, in its sole discretion, to pay such principal due upon
such acceleration together with any accrued interest to the date of
acceleration. "Term Of This Policy" shall have the meaning set forth in
Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the
merger, consolidation or dissolution of the Obligor. Except to the extent
expressly modified by an endorsement hereto, the premiums paid in respect of
this Policy are nonrefundable for any reason whatsoever, including payment,
or provision being made for payment, of the Obligations prior to maturity.
This Policy may not be canceled or revoked during the Term Of This Policy.
THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Russell B. Brewer II
--------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE>
ENDORSEMENT NO. 1
TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: Arcadia Automobile Receivables Trust, 1998-B
OBLIGATIONS: $ 59,500,000 5.6275% Class A-1 Automobile Receivables-Backed Notes
$188,000,000 5.789% Class A-2 Automobile Receivables-Backed Notes
$141,500,000 5.950% Class A-3 Automobile Receivables-Backed Notes
$106,000,000 6.000% Class A-4 Automobile Receivables-Backed Notes
$ 55,000,000 6.060% Class A-5 Automobile Receivables-Backed Notes
Policy No.: 50698-N
Date of Issuance: June 23, 1998
1. DEFINITIONS. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
provided in the Indenture unless otherwise specified.
"BUSINESS DAY" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in the City of
New York or Minneapolis, Minnesota or any other location of any successor
Servicer, successor Owner Trustee, successor Indenture Trustee or successor
Collateral Agent are authorized or obligated by law, executive order, or
governmental decree to remain closed.
"INDENTURE" means the Indenture, dated as of June 1, 1998, between the
Obligor and Norwest Bank Minnesota, National Association, as Trustee and
Indenture Collateral Agent, as amended from time to time with the consent of
Financial Security.
"POLICY" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"RECEIPT" and "RECEIVED" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be receipt
on the next succeeding Business Day. If any notice or certificate given
hereunder by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Trustee
and the Trustee may submit an amended notice.
<PAGE>
"SCHEDULED PAYMENTS" means, as to each Payment Date, the payment to be
made to Holders in accordance with the original terms of the Obligations when
issued and without regard to any subsequent amendment or modification of the
Obligations or of the Indenture except amendments or modifications to which
Financial Security has given its prior written consent in an amount equal to
(i) the Noteholders' Interest Distributable Amount and (ii) the Noteholders'
Principal Distributable Amount. Scheduled Payments do not include payments
which become due on an accelerated basis as a result of (a) a default by the
Obligor, (b) an election by the Obligor to pay principal on an accelerated
basis, (c) the occurrence of an Event of Default under the Indenture or (d)
any other cause, unless Financial Security elects, in its sole discretion, to
pay in whole or in part such principal due upon acceleration, together with
any accrued interest to the date of acceleration. In the event Financial
Security does not so elect, this Policy will continue to guarantee payment on
the Notes in accordance with their original terms. Scheduled Payments shall
not include (x) any portion of a Noteholders' Interest Distributable Amount
due to Noteholders because a notice and certificate in proper form as
required by paragraph 2 hereof was not timely Received by Financial Security,
(y) any portion of a Noteholders' Interest Distributable Amount due to
Noteholders representing interest on any Noteholders' Interest Carryover
Shortfall accrued from and including the date of payment of the amount of
such Noteholders' Interest Carryover Shortfall pursuant hereto, or (z) any
Note Prepayment Amounts or any Note Prepayment Premiums, unless, in each
case, Financial Security elects, in its sole discretion, to pay such amount
in whole or in part. Scheduled Payments shall not include any amounts due in
respect of the Obligations attributable to any increase in interest rate,
penalty or other sum payable by the Obligor by reason of any default or event
of default in respect of the Obligations, or by reason of any deterioration
of the credit worthiness of the Obligor, nor shall Scheduled Payments
include, nor shall coverage be provided under this Policy in respect of, any
taxes, withholding or other charge with respect to any Holder imposed by any
governmental authority due in connection with the payment of any Scheduled
Payment to a Holder.
"TERM OF THIS POLICY" means the period from and including the Closing
Date to and including the latest of the date on which (i) all Scheduled
Payments have been paid or deemed to be paid within the meaning of Section
4.01 of the Indenture; (ii) any period during which any Scheduled Payment
could have been avoided in whole or in part as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law shall have
expired and (iii) if any proceedings requisite to avoidance as a preference
payment have been commenced prior to the occurrence of (i) and (ii), a final
and nonappealable order in resolution of each such proceeding has been
entered.
"TRUSTEE" means Norwest Bank Minnesota, National Association, in its
capacity as Trustee under the Indenture and any successor in such capacity.
2. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF SCHEDULED PAYMENTS.
Following Receipt by Financial Security of a notice and certificate from the
Trustee in the form attached as Exhibit A to this Endorsement, Financial
Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the
later to occur of (a) 12:00 noon, New York City time, on the third Business
Day following such Receipt;
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<PAGE>
and (b) 12:00 noon, New York City time, on the date on which such payment is
due on the Obligations. Payments due hereunder in respect of Scheduled
Payments will be disbursed to the Trustee by wire transfer of immediately
available funds.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amount due on
the Obligations upon acceleration, whether or not any notice and certificate
shall have been Received by Financial Security as provided above. Financial
Security shall be entitled to pay hereunder any amount due on the Obligations
upon acceleration at any time or from time to time, in whole or in part,
prior to the scheduled date of payment thereof; Scheduled Payments insured
hereunder shall not include interest, in respect of principal paid hereunder
upon acceleration, accruing from after the date of such payment of principal.
Financial Security's obligations hereunder in respect of Scheduled Payments
shall be discharged to the extent such amounts are paid by the Issuer in
accordance with the Indenture or disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Trustee except
as otherwise provided in paragraph 3 of this Endorsement.
3. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF SCHEDULED PAYMENTS
AVOIDED AS PREFERENCE PAYMENTS. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant
to the Order referred to below or (b) the first to occur of (i) the fourth
Business Day following Receipt by Financial Security from the Trustee of (A)
a certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal of or interest paid on the Obligations during the Term Of This
Policy because such payments were avoidable as preference payments under
applicable bankruptcy law (the "Order"), (B) a certificate of the Holder that
the Order has been entered and is not subject to any stay and (C) an
assignment duly executed and delivered by the Holder, in such form as is
reasonably required by Financial Security, and provided to the Holder by
Financial Security, irrevocably assigning to Financial Security all rights
and claims of the Holder relating to or arising under the Obligations against
the estate of the Obligor or otherwise with respect to such preference
payment or (ii) the date of Receipt by Financial Security from the Trustee of
the items referred to in clauses (A), (B) and (C) above if, at least four
Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered
on such date and such date was specified in such notice. Such payment shall
be disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Holder directly
(unless a Holder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the
Order, in which case such payment shall be disbursed to the Trustee for
distribution to such Holder upon proof of such payment reasonably
satisfactory to Financial Security). In connection with the foregoing,
Financial Security shall have the rights provided pursuant to Section 5.19 of
the Indenture.
4. GOVERNING LAW. This Policy shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
the conflict of laws principles thereof.
5. FISCAL AGENT. At any time during the Term Of This Policy, Financial
Security may
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<PAGE>
appoint a fiscal agent (the "Fiscal Agent") for purposes of this Policy by
written notice to the Trustee at the notice address specified in the
Indenture specifying the name and notice address of the Fiscal Agent. From
and after the date of receipt of such notice by the Trustee, (i) copies of
all notices and documents required to be delivered to Financial Security
pursuant to this Policy shall be simultaneously delivered to the Fiscal Agent
and to Financial Security and shall not be deemed Received until Received by
both, and (ii) all payments required to be made by Financial Security under
this policy may be made directly by Financial Security or by the Fiscal Agent
on behalf of Financial Security. The Fiscal Agent is the agent of Financial
Security only and the Fiscal Agent shall in no event be liable to any Holder
for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due
under the Policy.
6. WAIVER OF DEFENSES. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the
benefit of each Holder, all rights (whether by counterclaim, setoff or
otherwise) and defenses (including, without limitation, the defenses of
fraud), whether acquired by subrogation, assignment or otherwise, to the
extent that such rights and defenses may be available to Financial Security
to avoid payment of its obligations under this Policy in accordance with the
express provisions of this Policy.
7. NOTICES. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security
as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. PRIORITIES. In the event that any term or provision of the fact of
this Policy is inconsistent with the provisions of this Endorsement, the
provisions of this Endorsement shall take precedence and shall be binding.
9. EXCLUSIONS FROM INSURANCE GUARANTY FUNDS. This Policy is not
covered by the Property/Casualty Insurance Security Fund specified in Article
76 of the New York Insurance Law. This Policy is not covered by the Florida
Insurance Guaranty Association created under Part II of Chapter 631 of the
Florida Insurance Code. In the event that Financial Security were to become
insolvent, any claims arising under this Policy are excluded from coverage by
the California Insurance Guaranty Association, established pursuant to
Article 14.2 of Chapter 1 of Part 2 of Division 1 of the California Insurance
Code.
4
<PAGE>
10. SURRENDER OF POLICY. The Holder shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term Of This
Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ RUSSELL B. BREWER II
-------------------------------
Authorized Officer
5
<PAGE>
EXHIBIT A
To Endorsement No. 1
NOTICE OF CLAIM AND CERTIFICATE
(Letterhead of Trustee)
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
Re: Arcadia Automobile Receivables Trust, 1998-B
--------------------------------------------
The undersigned, a duly authorized officer of Norwest Bank Minnesota,
National Association (the "Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50698-N dated June 23, 1998 (the "Policy") issued by
Financial Security in respect of the $59,500,000 5.6275% Class A-1 Automobile
Receivables-Backed Notes, $188,000,000 5.789% Class A-2 Automobile
Receivables-Backed Notes, $141,500,000 5.950% Class A-3 Automobile
Receivables-Backed Notes, $106,000,000 6.000% Class A-4 Automobile
Receivables-Backed Notes and $55,000,000 6.060% Class A-5 Automobile
Receivables-Backed Notes of the above referenced Trust (the "Obligations"),
that:
(i) The Trustee is the Trustee under the Indenture for the
Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Note Distribution Account and available for distribution to
the Holders pursuant to the Indenture will be $_________ (the "Shortfall")
less than the aggregate amount of Scheduled Payments due on
___________________.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to the payment of Scheduled Payments.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply the
same directly to the payment of Scheduled Payments on the Obligations when
due; (b) not apply such funds for any other purpose; (c) not commingle such
funds with other funds held by the Trustee and (d) maintain an accurate
record of such payments with respect to each Obligation and the corresponding
claim on the Policy and proceeds thereof, and, if the Obligation is required
to be surrendered or presented for such payment, shall stamp on each such
Obligation the legend $"[insert applicable amount] paid by Financial Security
and the balance hereof has been canceled and reissued" and then shall deliver
such Obligation to Financial Security.
A-1
<PAGE>
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the Obligations
to the extent of any payments under the Policy, including, without
limitation, any amounts due to the Holders in respect of securities law
violations arising from the offer and sale of the Obligations. The foregoing
assignment is in addition to, and not in limitation of, rights of subrogation
otherwise available to Financial Security in respect of such payments.
Payments to Financial Security in respect of the foregoing assignment shall
in all cases be subject to and subordinate to the rights of the Holders to
receive all Scheduled Payments in respect of the Obligations. The Trustee
shall take such action and deliver such instruments as may be reasonably
requested or required by Financial Security to effectuate the purpose or
provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for the
Trustee and each such Holder in any legal proceeding with respect to the
Obligations. The Trustee hereby agrees that, so long as an Insurer Default
(as defined in the Indenture) shall not exist, Financial Security may at any
time during the contribution of any proceeding by or against the Obligor
under the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding,
including without limitation, (A) all matters relating to any claim in
connection with an Insolvency Proceeding seeking the avoidance as a
preferential transfer of any payment made with respect to the Obligations (a
"Preference Claim"), (B) the direction of any appeal of any order relating to
any Preference Claim at the expense of Financial Security but subject to
reimbursement as provided in the Insurance Agreement and (C) the posting of
any surety, supersedeas or performance bond pending any such appeal. In
addition, the Trustee hereby agrees that Financial Security shall be
subrogated to, and the Trustee on its behalf and on behalf of each Holder,
hereby delegates and assigns, to the fullest extent permitted by law, the
rights of the Trustee and each Holder in the conduct of any Insolvency
Proceeding, including, without limitation, all rights of any party to an
adversary proceeding or action with respect to any court order issued in
connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to
[SPECIFY ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the
meanings provided in the Policy.
A-2
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the ____ day of ______, _____.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By
---------------------------------
Title
------------------------------
- - ------------------------------
For Financial Security or
Fiscal Agent Use Only
Wire transfer sent on by
------------ --------------------------
Confirmation Number .
---------------------
A-3
<PAGE>
EXHIBIT 8.1
Arcadia Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Re: Registration Statement on Form S-3
File No. 333-48141
Ladies and Gentlemen:
We have acted as counsel to Arcadia Receivables Finance Corp. (the
"Seller") in connection with the registration under the Securities Act of
1933, as amended, by the Seller of $2,500,000,000 of Automobile
Receivables-Backed Certificates (the "Certificates") and Automobile
Receivables-Backed Notes (the "Notes") to be issued from time to time by
trusts established by the Seller, the related preparation and filing of a
registration statement on Form S-3, filed by the Seller with the Securities
and Exchange Commission (the "Commission") on March 17, 1998 (the
"Registration Statement"), and the preparation of a Prospectus Supplement,
dated June 10, 1998, and related Prospectus, dated June 10, 1998 (together,
the "Prospectus") relating to the offering and sale of $59,500,000 aggregate
principal amount of Class A-1 Automobile Receivables-Backed Notes (the "Class
A-1 Notes"), $188,000,000 aggregate principal balance of Class A-2 Automobile
Receivables-Backed Notes (the "Class A-2 Notes"), $141,500,000 aggregate
principal amount of Class A-3 Automobile Receivables-Backed Notes (the "Class
A-3 Notes"), $106,000,000 aggregate principal amount of Class A-4 Automobile
Receivables-Backed Notes (the "Class A-4 Notes"), and $55,000,000 aggregate
principal balance of Class A-5 Automobile Receivables-Backed Notes (the
"Class A-5 Notes" and, together with the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, and the Class A-4 Notes, the "Notes") to be
issued by Arcadia Automobile Receivables Trust, 1998-B (the "Trust"). The
corpus of the Trust will consist of a pool of motor vehicle retail
installment sales contracts and promissory notes (the "Receivables") and
certain other property. The Notes are to be issued under an Indenture (the
"Indenture"), dated as of June 1, 1998, between the Trust and Norwest Bank
Minnesota, National Association, as Indenture Trustee and
<PAGE>
Arcadia Receivables Finance Corp.
June 23, 1998
Page 2
Indenture Collateral Agent. The Notes are described in the Prospectus
forming part of the Registration Statement.
You have requested our opinion with respect to the federal income
tax characterization of the Trust and the Notes. For purposes of rendering
our opinion we have examined the Registration Statement, the Trust Agreement
(the "Trust Agreement"), dated as of June 1, 1998 among the Seller, Financial
Security Assurance Inc. ("Financial Security") and Wilmington Trust Company,
as Owner Trustee, the Indenture, and the related documents and agreements
contemplated therein (collectively, the "Transaction Documents"), and we have
reviewed such questions of law as we have considered necessary and
appropriate. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Prospectus.
Our opinion is based upon the existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable Treasury
Department regulations issued thereunder, current published administrative
positions of the Internal Revenue Service (the "Service") contained in
revenue rulings and revenue procedures, and judicial decisions, all of which
are subject to change, either prospectively or retroactively, and to possibly
differing interpretations. Any change in such authorities may affect the
opinions rendered herein. Our opinion is also based on the representations
set forth in the certificate dated the date hereof delivered to us by the
Seller, the representations and warranties set forth in the Transaction
Documents and the assumptions that the Seller, the Servicer, the Owner
Trustee and the Indenture Trustee will at all times comply with the
requirements of the Transaction Documents.
An opinion of counsel is predicated on all the facts and conditions
set forth in the opinion and is based upon counsel's analysis of the
statutes, regulatory interpretations and case law in effect as of the date of
the opinion. It is not a guarantee of the current status of the law and
should not be accepted as a guarantee that a court of law or an
administrative agency will concur in the opinion.
1. CHARACTERIZATION OF THE TRUST. In many respects, the Trust is
similar to trusts established to hold collateral pledged as security in
connection with lending transactions. Section 2.11 of the Trust Agreement
provides that the Depositor and the Trustee shall treat the Trust as a
security device only and shall not file tax returns or obtain an employer
identification number on behalf of the Trust, unless a class of Notes is
treated as an equity interest in the Trust. Therefore, the Trust should be
disregarded for federal income tax purposes and should be
<PAGE>
Arcadia Receivables Finance Corp.
June 23, 1998
Page 3
characterized as a mere security arrangement. Treas. Reg. Section
1.61-13(b); Rev. Rul. 76-265, 1976-2 C.B. 448; SEE ALSO Rev. Rul. 73-100,
1973-1 C.B. 613; Rev. Rul. 71-119, 1971 C.B. 163.
If the Trust is recognized as an entity for federal tax purposes,
whether as a result of a class of Notes being treated as an equity interest
in the Trust or for some other reason, the Trust will be a business entity
whose federal tax characterization will be determined under Treasury
Regulations Sections 301.7701-2 and 301.7701-3. Treasury Regulations Section
301.7701-2 provides that "a BUSINESS ENTITY is any entity recognized for
federal tax purposes . . . that is not properly classified as a trust under
Section 301.7701-4 or otherwise subject to special treatment under the
Internal Revenue Code."
Treasury Regulations Section 301.7701-2 also provides that certain
types of entities are treated as corporations for federal tax purposes,
including entities formed under a state statute which refers to the entity as
"incorporated or as a corporation, body corporate or body politic," or as a
"joint-stock company or joint-stock association." The definition of
corporation also includes insurance companies, certain banking entities,
foreign entities and other entities specified in Section 301.7701-2. The
Trust is not an entity which is treated as a corporation under Section
301.7701-2.
Treasury Regulations Section 301.7701-3 refers to a business entity
that is not classified as a corporation as an "eligible entity." That
section provides that an eligible entity with a single owner can elect to be
classified as an association (which is taxed as a corporation) or to be
disregarded as an entity separate from its owner. An eligible entity with at
least two members can elect to be classified as either an association or a
partnership. Treasury Regulations Section 301.7701-3 further provides
certain default rules pursuant to which, unless the entity affirmatively
elects to be classified as an association, an eligible entity is disregarded
as an entity separate from its owner if it has a single owner, and is treated
as a partnership if it has two or more members.
Under Sections 2.6 and 4.1 of the Trust Agreement, the Seller and
the Owner Trustee have agreed not to file any election to treat the Trust as
an association taxable as a corporation.
Based on the foregoing, it is our opinion that the Trust will not
be treated as an association taxable as a corporation for federal tax
purposes.
<PAGE>
Arcadia Receivables Finance Corp.
June 23, 1998
Page 4
Under Section 7704 of the Code, certain publicly traded
partnerships are treated as corporations for federal income tax purposes.
This treatment does not apply, however, to any publicly traded partnership if
90% or more of the gross income of the partnership constitutes "qualifying
income." For purposes of Section 7704, "qualifying income" generally
includes interest, dividends and certain other types of passive income.
Based on the representations made in the Transaction Documents, we conclude
that if the Trust is treated as a partnership for federal income tax
purposes, 90% or more of the Trust's gross income will constitute "qualifying
income" within the meaning of Section 7704 of the Code. Therefore, it is our
opinion that the Trust will not be taxed as a corporation under the publicly
traded partnership rules of Section 7704 of the Code.
2. CHARACTERIZATION OF THE NOTES. The characterization of an
instrument as debt or equity for federal income tax purposes depends on all
of the facts and circumstances in each case. In any such determination,
several factors must be considered, including, among other things, the
independence of the debt holder and equity holders, the intention of the
parties to create a debt, the creation of a formal debt instrument, the
safety of the principal amount, and the debt to equity ratio of the issuer.
In this regard, we note that the Owner Trustee, on behalf of the Trust, and
each Noteholder will agree to treat the Notes as debt for federal income tax
purposes. Based on such agreement, the factors listed above and other
considerations, although there is no authority on transactions which resemble
the issuance of the Notes by the Trust, it is our opinion that the Notes will
be treated as debt for federal income tax purposes.
We express no opinion about the tax treatment of any features of
the Trust's activities or an investment therein other than those expressly
set forth above.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Certain
Federal Income Tax Consequences" in the Prospectus Supplement, and we hereby
confirm that, insofar as they constitute statements of law or legal
conclusions as to the likely outcome of material issues under the federal
income tax laws, the discussion under such heading accurately sets forth our
advice.
Dated: June 23, 1998
Very truly yours,
CFS /S/ DORSEY & WHITNEY LLP
<PAGE>
CONSENT of INDEPENDENT ACCOUNTANTS
---------
We consent to the incorporation by reference in the Prospectus Supplement of
Arcadia Receivables Finance Corp. relating to the Arcadia Automobile Receivables
Trust, 1998-B of our report dated January 26, 1998, on our audits of the
consolidated financial statements of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997. We also consent to the reference to
our Firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
June 19, 1998
