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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): December 22, 1998
ARCADIA RECEIVABLES FINANCE CORP.
as originator of
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
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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, 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 December 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 December 1, 1998 between
Arcadia Automobile Receivables Trust, 1998-E and
Norwest Bank Minnesota, National Association,
as Trustee and Indenture Collateral Agent
(without exhibits)
4.3 Sale and Servicing Agreement, dated as of
December 1, 1998 among Arcadia Automobile
Receivables Trust, 1998-E, 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 December 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: December 22, 1998 ARCADIA RECEIVABLES FINANCE CORP.,
as originator of Arcadia Automobile
Receivables Trust, 1998-E
By: /s/ Brian S. Anderson
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Brian S. Anderson
Vice President
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TRUST AGREEMENT
Dated as of December 1, 1998
among
ARCADIA RECEIVABLES FINANCE CORP.,
FINANCIAL SECURITY ASSURANCE INC.
and
WILMINGTON TRUST COMPANY
Owner Trustee
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
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TABLE OF CONTENTS
PAGE
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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. . . . . . . . . . . . . . 5
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. . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.1. Action by the Security Insurer with Respect
to Bankruptcy . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.2. Rights of Security Insurer. . . . . . . . . . . . . . 9
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. . . . . . . . . . . . . . . . . . . . 11
SECTION 5.3. Action upon Instruction . . . . . . . . . . . . . . . 11
SECTION 5.4. No Duties Except as Specified in this
Agreement or in Instructions . . . . . . . . . . . . 12
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SECTION 5.5. No Action Except under Specified Documents
or Instructions. . . . . . . . . . . . . . . . . . . 13
SECTION 5.6. Restrictions. . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.7. Administration Agreement. . . . . . . . . . . . . . . 13
ARTICLE VI
CONCERNING THE OWNER TRUSTEE. . . . . . . . . . . . . . . . . . . . 14
SECTION 6.1. Acceptance of Trustee and Duties. . . . . . . . . . . 14
SECTION 6.2. Representations and Warranties. . . . . . . . . . . . 15
SECTION 6.3. Reliance; Advice of Counsel . . . . . . . . . . . . . 16
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 . . . . . . . . . . . . . 17
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. . . . . . . . . . . . . . . 18
ARTICLE XIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.1. Termination of the Trust. . . . . . . . . . . . . . . 19
SECTION 8.2. Dissolution Events with respect to the Depositor. . . 19
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 . . . . . . . 20
SECTION 9.3. Successor Owner Trustee . . . . . . . . . . . . . . . 21
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. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 10.2. Governing Law. . . . . . . . . . . . . . . . . . . . 24
SECTION 10.3. Severability of Provisions . . . . . . . . . . . . . 24
SECTION 10.4. Third-Party Beneficiaries. . . . . . . . . . . . . . 25
SECTION 10.5. Counterparts . . . . . . . . . . . . . . . . . . . . 25
SECTION 10.6. Notices. . . . . . . . . . . . . . . . . . . . . . . 25
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EXHIBITS
Exhibit A -- Form of Certificate of Trust
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THIS TRUST AGREEMENT, dated as of December 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
December 22, 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.
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,
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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 December 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.
SECURITY INSURER: Financial Security Assurance Inc., or its successor
in interest.
SELLER: Arcadia Receivables Finance Corp., a Delaware corporation, or
its successor in interest.
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SPREAD ACCOUNT: The Series 1998-E 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 Third Amended and Restated Stock Pledge
Agreement, dated as of March 25, 1993, as thereafter amended and restated, 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, supplemented or otherwise modified in accordance with the
terms thereof.
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.
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
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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-E," 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;
(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.
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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.
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.
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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 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,
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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 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
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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;
(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
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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 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.
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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 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.
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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 $64,000,000, the Class A-2 Notes in the aggregate principal
amount of $100,000,000 and the Class A-3 Notes in the aggregate principal amount
of $61,000,000. 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.
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
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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.
(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
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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 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.
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(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 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
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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
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.
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(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 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.
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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 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.
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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
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 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
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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 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
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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 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
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<PAGE>
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 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.
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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 Rate, the Class A-2
Interest Rate or the Class A-3 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
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<PAGE>
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 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,
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<PAGE>
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/ Dan Farrell
------------------------------------------------
Authorized Officer
WILMINGTON TRUST COMPANY
By /s/ Emmett R. Harmon
------------------------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
5.429% Class A-1 Automobile Receivables-Backed Notes
5.600% Class A-2 Automobile Receivables-Backed Notes
5.750% Class A-3 Automobile Receivables-Backed Notes
INDENTURE
Dated as of December 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>
<CAPTION>
TABLE OF CONTENTS
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 . . . . . . . 13
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II
THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.01. Form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Execution, Authentication and Delivery. . . . . . . . . . . . . 15
SECTION 2.03. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.04. Registration; Registration of Transfer and Exchange . . . . . . 16
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. . . . . . . . . . . 17
SECTION 2.06. Person Deemed Owner . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest . . . . . 18
SECTION 2.08. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.09. Book-Entry Notes. . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.10. Notices to Depository . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.11. Definitive Notes. . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.01. Payment of Principal, Interest and Premium. . . . . . . . . . . 21
SECTION 3.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . 21
SECTION 3.03. Money for Payments To Be Held in Trust. . . . . . . . . . . . . 21
SECTION 3.04. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.05. Protection of Trust Estate. . . . . . . . . . . . . . . . . . . 23
SECTION 3.06. Opinions as to Trust Estate . . . . . . . . . . . . . . . . . . 24
SECTION 3.07. Performance of Obligations; Servicing of Receivables. . . . . . 25
SECTION 3.08. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.09. Annual Statement as to Compliance . . . . . . . . . . . . . . . 26
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms. . . . . . . 27
SECTION 3.11. Successor or Transferee . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.12. No Other Business . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.13. No Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.14. Servicer's Obligations. . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities . . . . . . . 30
SECTION 3.16. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.17. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.18. Notice of Events of Default . . . . . . . . . . . . . . . . . . 30
-i-
<PAGE>
<CAPTION>
<S> <C>
SECTION 3.19. Further Instruments and Acts. . . . . . . . . . . . . . . . . . 31
SECTION 3.20. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust Agreement. 31
SECTION 3.22. Removal of Administrator. . . . . . . . . . . . . . . . . . . . 31
SECTION 3.23. Income Tax Characterization . . . . . . . . . . . . . . . . . . 31
ARTICLE IV
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.01. Satisfaction and Discharge of Indenture . . . . . . . . . . . . 31
SECTION 4.02. Application of Trust Money. . . . . . . . . . . . . . . . . . . 33
SECTION 4.03. Repayment of Moneys Held by Paying Agent. . . . . . . . . . . . 33
SECTION 4.04. Release of Trust Estate . . . . . . . . . . . . . . . . . . . . 33
ARTICLE V
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.02. Rights upon Event of Default. . . . . . . . . . . . . . . . . . 35
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee; Authority of Controlling Party . . . . . . . . . . . 36
SECTION 5.04. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.05. Optional Preservation of the Receivables. . . . . . . . . . . . 40
SECTION 5.06. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.07. Limitation of Suits . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.08. Unconditional Rights of Noteholders To Receive Principal
and Interest. . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.09. Restoration of Rights and Remedies. . . . . . . . . . . . . . . 42
SECTION 5.10. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . 42
SECTION 5.11. Delay or Omission Not a Waiver. . . . . . . . . . . . . . . . . 43
SECTION 5.12. Control by Noteholders. . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.13. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.14. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.15. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . 44
SECTION 5.16. Action on Notes . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.17. Performance and Enforcement of Certain Obligations. . . . . . . 45
SECTION 5.18. Claims Under Note Policy. . . . . . . . . . . . . . . . . . . . 46
SECTION 5.19. Preference Claims . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT . . . . . . . . . . . . . . . . 48
SECTION 6.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . . 52
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<CAPTION>
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SECTION 6.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . 53
SECTION 6.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . 53
SECTION 6.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . 55
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee . . . . . . . . . 56
SECTION 6.11. Eligibility; Disqualification . . . . . . . . . . . . . . . . . 57
SECTION 6.12. Preferential Collection of Claims Against Issuer. . . . . . . . 57
SECTION 6.13. Appointment and Powers. . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.14. Performance of Duties . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.15. Limitation on Liability . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.16. Reliance upon Documents . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.17. Successor Indenture Collateral Agent. . . . . . . . . . . . . . 59
SECTION 6.18. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . 60
SECTION 6.19. Representations and Warranties of the Indenture Collateral
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.20. Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.21. Control by the Controlling Party. . . . . . . . . . . . . . . . 62
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.01. Issuer To Furnish Trustee Names and Addresses to Noteholders. . 62
SECTION 7.02. Preservation of Information; Communications to Noteholders. . . 62
SECTION 7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.04. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.01. Collection of Money . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.02. Trust Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.03. General Provisions Regarding Accounts . . . . . . . . . . . . . 65
ARTICLE IX
SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders. . . . . 65
SECTION 9.02. Supplemental Indentures With Consent of Noteholders . . . . . . 67
SECTION 9.03. Execution of Supplemental Indentures. . . . . . . . . . . . . . 68
SECTION 9.04. Effect of Supplemental Indenture. . . . . . . . . . . . . . . . 69
SECTION 9.05. Conformity With Trust Indenture Act . . . . . . . . . . . . . . 69
SECTION 9.06. Reference in Notes to Supplemental Indentures . . . . . . . . . 69
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ARTICLE X
REDEMPTION OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.02. Form of Redemption Notice. . . . . . . . . . . . . . . . . . . 70
SECTION 10.03. Notes Payable on Redemption Date . . . . . . . . . . . . . . . 71
ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . . . . 71
SECTION 11.02. Form of Documents Delivered to Trustee . . . . . . . . . . . . 73
SECTION 11.03. Acts of Noteholders. . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.04. Notices, etc., to Trustee, Issuer and Rating Agencies. . . . . 74
SECTION 11.05 Notices to Noteholders; Waiver . . . . . . . . . . . . . . . . 75
SECTION 11.06. Alternate Payment and Notice Provisions. . . . . . . . . . . . 76
SECTION 11.07. Conflict with Trust Indenture Act. . . . . . . . . . . . . . . 76
SECTION 11.08. Effect of Headings and Table of Contents . . . . . . . . . . . 77
SECTION 11.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.11. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.13. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.15. Recording of Indenture . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.16. Trust Obligation . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.17. No Petition. . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.19. Limitation of Liability. . . . . . . . . . . . . . . . . . . . 79
SECTION 11.20. No Substantive Review of Compliance Documents. . . . . . . . . 79
</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 D -- Form of Note Policy
Exhibit E -- Letter Agreement Between AFL and the Trustee
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<PAGE>
INDENTURE, dated as of December 1, 1998, between ARCADIA
AUTOMOBILE RECEIVABLES TRUST, 1998-E, 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
5.429% Class A-1 Automobile Receivables-Backed Notes (the "Class A-1 Notes"),
5.600% Class A-2 Automobile Receivables-Backed Notes (the "Class A-2 Notes")
and 5.750% Class A-3 Automobile Receivables-Backed Notes (the "Class A-3
Notes" and, together with the Class A-1 Notes and the Class A-2 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 December 22,
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 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
<PAGE>
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.
"CLASS A-1 INTEREST RATE" means 5.429% per annum
(computed on the basis of actual days elapsed in a 360-day year).
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<PAGE>
"CLASS A-2 INTEREST RATE" means 5.600% per annum
(computed on the basis of actual days elapsed in a 360-day year).
"CLASS A-3 INTEREST RATE" means 5.750% per annum
(computed on the basis of a 360-day year of twelve 30-day months).
"CLASS A-1 NOTES" means the 5.429% Class A-1 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-1.
"CLASS A-2 NOTES" means the 5.600% Class A-2 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-2.
"CLASS A-3 NOTES" means the 5.750% Class A-3 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-3.
"CLOSING DATE" means December 22, 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 55479-0070,
Attention: Corporate Trust 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 $64,000,000 in aggregate principal amount of the Class A-1 Notes,
$100,000,000 in aggregate principal amount of the Class A-2 Notes and
$61,000,000 in aggregate principal amount of the Class A-3 Notes as of the
Closing
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<PAGE>
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 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;
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<PAGE>
(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.
"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 and the Class A-3 Interest Rate, as applicable.
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<PAGE>
"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.
"LETTER AGREEMENT" has the meaning specified in Section
6.07.
"NOTE" means a Class A-1 Note, Class A-2 Note or Class
A-3 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
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<PAGE>
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:
(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.
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<PAGE>
"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 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.
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"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 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 December 1, 1998, among the Issuer, the
Seller, the Servicer and the Backup Servicer.
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"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.
"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:
<TABLE>
<CAPTION>
Section of Sale and
Term Servicing Agreement
- - ---- --------------------
<S> <C>
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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-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-1 Prepayment Premium . . . . . . . . . . . . Section 1.1
Class A-2 Prepayment Premium . . . . . . . . . . . . Section 1.1
Class A-3 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
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
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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.
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;
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(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 and the Class A-3 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 and C-3, 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.
Each Note shall be dated the date of its authentication.
The terms of the Notes set forth in Exhibits C-1, C-2 and C-3 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.
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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 $64,000,000, Class A-2 Notes for original
issue in an aggregate principal amount of $100,000,000 and Class A-3 Notes
for original issue in an aggregate principal amount of $61,000,000. The
aggregate principal amount of the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 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.
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
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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 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
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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 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.
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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 and the Class A-3 Note
set forth in Exhibits C-1, C-2 and C-3, 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 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 and the Class A-3 Note set forth in Exhibits C-1,
C-2 and C-3, 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.
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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. 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
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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 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 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.
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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;
(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;
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(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
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
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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;
(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
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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.
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.
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(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.
(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
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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
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
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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 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
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(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 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
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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.
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-E 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-E 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
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(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.
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 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
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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.
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.
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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 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
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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 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.
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(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 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.
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(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 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
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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 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.
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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;
(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,
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(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 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
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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;
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 or the
Class A-3 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 or the Class A-3
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;
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(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;
(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 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
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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, 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,
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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 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
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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.
(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
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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 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
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(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.
(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.
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(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 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
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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.
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
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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, 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
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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 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 continuing). If the Issuer
fails to appoint such a successor Trustee, the Security Insurer may appoint a
successor Trustee.
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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 force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Trustee shall have.
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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 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
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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
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
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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) 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
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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.
(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
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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.
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
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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.
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
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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.
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).
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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 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
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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 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 and the Class A-3 Prepayment Amount or the Class A-1
Prepayment Premium, the Class A-2 Prepayment Premium and the Class A-3
Prepayment Premium shall be distributed to the Holders of the
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
respectively;
(iii) if such Payment Date is the Final Scheduled Payment
Date for the Class A-1 Notes or the Class A-2 Notes, to the Holders of
such Class until the Outstanding Amount of such Class is reduced to
zero;
(iv) the principal payable to the Noteholders on such
Payment Date (after giving effect to the payment, if any, required
pursuant to clause (iii) above) shall be paid 57% to the Holders of
the Class A-1 Notes and 43% to the Holders of the Class A-2 Notes,
until the principal balance of the Class A-1 Notes is reduced to zero;
once the
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principal balance of the Class A-1 Notes has been reduced to zero, the
Class A-2 Notes and Class A-3 Notes shall be paid sequentially in the
following manner:
(A) to the Holders of the Class A-2 Notes in
reduction of the remaining Outstanding Amount of the
Class A-2 Notes until the Outstanding Amount of the
Class A-2 Notes is reduced to zero; and
(B) 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.
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 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;
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(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 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
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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";
(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
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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 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.
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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; 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 and the Class
A-3 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 and the Class A-3
Prepayment Premium, as applicable; PROVIDED, HOWEVER, that the Issuer's
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obligation to pay the Class A-1 Prepayment Premium, the Class A-2 Prepayment
Premium or the Class A-3 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 or the Class
A-3 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.
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
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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, 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
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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 (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.
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(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.
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.
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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 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-E, 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.
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.
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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.
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
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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 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
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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 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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SECTION 11.20. NO SUBSTANTIVE REVIEW OF COMPLIANCE
DOCUMENTS. Other than as set forth in this Agreement, any reports,
information or other documents provided to the Indenture Collateral Agent or
the Trustee are for purposes only of enabling the sending party to comply
with its document delivery requirements hereunder, and such party's receipt
of any such information shall not constitute actual or constructive notice of
any information contained therein or determinable from any information
contained therein, including the Issuer's, the Seller's or the Servicer's
compliance with any of its covenants, representations or warranties hereunder.
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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-E
By WILMINGTON TRUST COMPANY
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By /s/ Emmett R. Harmon
---------------------------------------
Name: Emmett R. Harmon
Title: 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 December 1, 1998
among
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
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 . . . . . . . . . . . . . . . . . . 21
SECTION 1.3. Calculations . . . . . . . . . . . . . . . . . . . 21
SECTION 1.4. Section References . . . . . . . . . . . . . . . . 21
SECTION 1.5. No Recourse. . . . . . . . . . . . . . . . . . . . 21
SECTION 1.6. Material Adverse Effect. . . . . . . . . . . . . . 21
ARTICLE II
CONVEYANCE OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.1. Conveyance of Initial Receivables. . . . . . . . . 22
SECTION 2.2. Custody of Receivable Files. . . . . . . . . . . . 22
SECTION 2.3. Conditions to Acceptance by Owner Trustee. . . . . 24
SECTION 2.4. Conveyance of Subsequent Receivables . . . . . . . 24
SECTION 2.5. Representations and Warranties of Seller . . . . . 27
SECTION 2.6. Repurchase of Receivables Upon Breach of Warranty. 29
SECTION 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . 30
SECTION 2.8. Collecting Lien Certificates Not Delivered
on the Closing Date or Subsequent Transfer Date. . 30
SECTION 2.9. Trust's Assignment of Administrative Receivables
and Warranty Receivables . . . . . . . . . . . . . 30
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES . . . . . . . . . . . 31
SECTION 3.1. Duties of the Servicer . . . . . . . . . . . . . . 31
SECTION 3.2. Collection of Receivable Payments; Modifications
of Receivables; Lockbox Agreements . . . . . . . . 32
SECTION 3.3. Realization Upon Receivables . . . . . . . . . . . 35
SECTION 3.4. Insurance. . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.5. Maintenance of Security Interests in Vehicles. . . 37
SECTION 3.6. Covenants, Representations, and Warranties
of Servicer. . . . . . . . . . . . . . . . . . . . 38
SECTION 3.7. Purchase of Receivables Upon Breach of Covenant. . 40
SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses
by Servicer. . . . . . . . . . . . . . . . . . . . 41
SECTION 3.9. Servicer's Certificate . . . . . . . . . . . . . . 41
SECTION 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event . . . . . . . . . . . . 42
SECTION 3.11. Annual Independent Accountants' Report . . . . . . 42
SECTION 3.12. Access to Certain Documentation and Information
Regarding Receivables. . . . . . . . . . . . . . . 43
SECTION 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . 44
SECTION 3.14. Retention and Termination of Servicer. . . . . . . 44
</TABLE>
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<TABLE>
<S> <C>
SECTION 3.15. Fidelity Bond. . . . . . . . . . . . . . . . . . . 45
SECTION 3.16. Duties of the Servicer under the Indenture . . . . 45
SECTION 3.17. Duties of the Servicer under the Insurance
Agreement. . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.18. Certain Duties of the Servicer under the
Trust Agreement. . . . . . . . . . . . . . . . . . 47
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS. . . . . . . . . . . . . 47
SECTION 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . 47
SECTION 4.2. Collections. . . . . . . . . . . . . . . . . . . . 51
SECTION 4.3. Application of Collections . . . . . . . . . . . . 52
SECTION 4.4. Monthly Advances . . . . . . . . . . . . . . . . . 53
SECTION 4.5. Additional Deposits. . . . . . . . . . . . . . . . 53
SECTION 4.6. Distributions. . . . . . . . . . . . . . . . . . . 54
SECTION 4.7. Pre-Funding Account. . . . . . . . . . . . . . . . 55
SECTION 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . 56
SECTION 4.9. Statements to Noteholders. . . . . . . . . . . . . 56
SECTION 4.10. Indenture Trustee as Agent . . . . . . . . . . . . 58
SECTION 4.11. Eligible Accounts. . . . . . . . . . . . . . . . . 58
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT . . . . . . . . . . . . . 58
SECTION 5.1. Withdrawals from the Reserve Account . . . . . . . 58
SECTION 5.2. Withdrawals from Spread Account. . . . . . . . . . 59
ARTICLE VI
THE SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.1. Liability of Seller. . . . . . . . . . . . . . . . 59
SECTION 6.2. Merger or Consolidation of, or Assumption of
the Obligations of, Seller; Amendment of
Certificate of Incorporation . . . . . . . . . . . 59
SECTION 6.3. Limitation on Liability of Seller and Others . . . 60
SECTION 6.4. Seller May Own Notes . . . . . . . . . . . . . . . 61
ARTICLE VII
THE SERVICER. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.1. Liability of Servicer; Indemnities . . . . . . . . 61
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer. . 62
SECTION 7.3. Limitation on Liability of Servicer, Backup Servicer
and Others . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.4. Delegation of Duties . . . . . . . . . . . . . . . 64
SECTION 7.5. Servicer and Backup Servicer Not to Resign . . . . 64
SECTION 7.6. Advancing Obligations of Successor Servicer. . . . 65
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VIII
SERVICER TERMINATION EVENTS. . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.1. Servicer Termination Event . . . . . . . . . . . . 65
SECTION 8.2. Consequences of a Servicer Termination Event . . . 66
SECTION 8.3. Appointment of Successor . . . . . . . . . . . . . 68
SECTION 8.4. Notification to Noteholders. . . . . . . . . . . . 69
SECTION 8.5. Waiver of Past Defaults. . . . . . . . . . . . . . 69
ARTICLE IX
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.1. Optional Purchase of All Receivables; Liquidation
of Trust Estate. . . . . . . . . . . . . . . . . . 69
ARTICLE X
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.2. Protection of Title to Trust Property. . . . . . . 72
SECTION 10.3. Governing Law. . . . . . . . . . . . . . . . . . . 74
SECTION 10.4. Severability of Provisions . . . . . . . . . . . . 74
SECTION 10.5. Assignment . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.6. Third-Party Beneficiaries. . . . . . . . . . . . . 74
SECTION 10.7. Disclaimer by Security Insurer . . . . . . . . . . 74
SECTION 10.8. Counterparts . . . . . . . . . . . . . . . . . . . 75
SECTION 10.9. Intention of Parties . . . . . . . . . . . . . . . 75
SECTION 10.10. Notices. . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.11. Limitation of Liability. . . . . . . . . . . . . . 76
</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 December 1, 1998, is
made among Arcadia Automobile Receivables Trust, 1998-E (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 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.
<PAGE>
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.
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.
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.
BOA PURCHASE AGREEMENT: The Amended and Restated Purchase Agreement
and Assignment, date as of July 21, 1998, between AFL and the Seller.
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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, 2002 (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
------------------------ ----------------------------
<C> <S>
January 15, 1999 $193.959,727.38
February 15, 1999 $225,000,000.00
</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.
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: 5.429% 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 24 days, which is
the number of days elapsed from and including the Closing Date to but
excluding January 15, 1999) to but excluding such Distribution Date and the
denominator of which is 360 and (z) the
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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 November 30, 1999 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 11 month Eurodollar
Synthetic Forward ("EDSF") due November 30, 1999. 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: September 15, 2003
(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 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: 5.60% per annum.
CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 23 days, which is the number of days
elapsed from and including the Closing Date to but excluding January 15,
1999) at the Class A-2 Interest Rate on the outstanding principal balance of
the Class A-2 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date), after giving
effect to all payments of principal to
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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 September 30, 2000 over (ii) the amount of interest that would have
accrued on the Class A-2 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 4.50% U.S. Treasury Note due
September 30, 2000. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: October 15, 2006 (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: 5.75% 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 23 days, which is the number of days
elapsed from and including the Closing Date to but excluding January 15,
1999) 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 (or, in the case of the first
Distribution Date, on the Closing Date).
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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 September 30, 2002, 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 5.875% U.S. Treasury Note due
September 30, 2002. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
CLOSING DATE: December 22, 1998.
CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase Agreement
and Assignment, dated as of December 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
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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.
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).
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DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date.
DEFICIENCY NOTICE: As defined in Section 5.2(a).
DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Determination Date.
DETERMINATION DATE: With respect to any Monthly Period, the sixth
Business Day immediately preceding the related Distribution Date.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of
(i) the Actual Funds for such Distribution Date, and (ii) the Deficiency Claim
Amount, if any, received by the Indenture Trustee with respect to such
Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or if such
15th day is not a Business Day, the next succeeding Business Day, commencing
January 15, 1999, to and including the Final Scheduled Distribution Date.
DRAW DATE: With respect to any Distribution Date, the third Business
Day immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution
acceptable to the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing), or (ii) a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America, or any of the States thereof, or the
District of Columbia, having a certificate of deposit, short term deposit or
commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by
Moody's and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States, the obligations of which are backed by the full faith and credit of
the United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation, but only if, at the time of investment, such
obligations are assigned a rating in the highest credit rating category by
each Rating Agency;
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(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Indenture Trustee, the Owner Trustee or any
agent of either of them acting in their respective commercial capacities);
provided that the short-term unsecured debt obligations of such depository
institution or trust company at the time of such investment, or contractual
commitment providing for such investment, are assigned a rating in the
highest credit rating category by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 4.1, and (ii) entered into with the
corporate trust department of a depository institution or trust company
organized under the laws of the United States or any State thereof, the
deposits of which are insured by the Federal Deposit Insurance Corporation
and the short-term unsecured debt obligations of which are rated "A-1+" by
Standard & Poor's and "P-1" by Moody's (including, if applicable, the
Indenture Trustee, the Owner Trustee or any agent of either of them acting in
their respective commercial capacities);
(d) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any State
whose long-term unsecured debt obligations are assigned a rating in the
highest credit rating category by each Rating Agency at the time of such
investment or contractual commitment providing for such investment; PROVIDED,
HOWEVER, that securities issued by any particular corporation will not be
Eligible Investments to the extent that an investment therein will cause the
then outstanding principal amount of securities issued by such corporation
and held in the Trust Accounts to exceed 10% of the Eligible Investments held
in the Trust Accounts (with Eligible Investments held in the Trust Accounts
valued at par);
(e) commercial paper that (i) is payable in United States dollars and
(ii) is rated in the highest credit rating category by each Rating Agency;
(f) units of money market funds rated in the highest credit rating
category by each Rating Agency; provided that all Eligible Investments shall be
held in the name of the Indenture Trustee; or
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Rating Agencies and the Security
Insurer, as evidenced by the prior written consent of the Security Insurer,
as may from time to time be confirmed in writing to the Indenture Trustee by
the Security Insurer; PROVIDED, HOWEVER, that securities issued by any entity
(except as provided in paragraph (a)) will not be Eligible Investments to the
extent that an investment therein will cause the then outstanding principal
amount of securities issued by 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
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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. No Eligible Investment shall have an "r" highlighter
affixed to the rating of Standard & Poor's.
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 and the Class A-3 Final Scheduled Distribution
Date, respectively.
FINANCED VEHICLE: A new or used automobile or light truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.
FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b).
FUNDING PERIOD: The period beginning on the Closing Date and
ending on the first to occur of (a) the Distribution Date on which the
Pre-Funded Amount (after giving effect to any reduction in the Pre-Funded
Amount in connection with the transfer of Subsequent Receivables to the Trust
on such Distribution Date) is less than $100,000, (b) the date on which an
Event of Default or a Servicer Termination Event occurs, (c) the date on
which an Insolvency Event occurs with respect to AFL and (d) the close of
business on the Distribution Date occurring in February 1999.
INDENTURE: The Indenture, dated as of December 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.
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.
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INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).
INITIAL CUTOFF DATE: December 17, 1998.
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $162, 919,454.75.
INITIAL RECEIVABLES: The Receivables listed on the Schedule of
Initial Receivables on the Closing Date.
INSOLVENCY EVENT: With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law, and such case is not
dismissed within 60 days; or (b) the filing of a decree or entry of an order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs; or (c) the commencement by such Person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case under any such law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the
event that the Servicer obtains Force-Placed Insurance pursuant to Section 3.4.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as
of December 22, 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.
INSURANCE POLICY: With respect to a Receivable, any insurance policy
benefitting 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;
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(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 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).
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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 December 22, 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.
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.
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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 and the Class A-3 Interest Distributable
Amount.
NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, 100% of the Principal Distribution Amount.
NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the sum of the Noteholders'
Monthly Principal Distributable Amount and any outstanding Noteholders'
Principal 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 and the Class A-3
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.
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ORIGINAL POOL BALANCE: As of any date, the sum of the Initial Cutoff
Date Principal Balance plus the aggregate Principal Balance (as of the related
Subsequent Cutoff Date) of all Subsequent Receivables sold to the Trust on any
Subsequent Transfer Date.
OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable and a
Determination Date, the sum of all Monthly Advances made on any Determination
Date prior to such Determination Date relating to that Receivable which have not
been reimbursed pursuant to Section 4.6(i) or Section 4.8.
OWNER TRUSTEE: Wilmington Trust Company, acting not individually but
solely as trustee, or its successor in interest, and any successor Owner Trustee
appointed as provided in the Trust Agreement.
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
PRE-FUNDED AMOUNT: As of any date, $62,080,545.25 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.
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PURCHASE AGREEMENTS: (i) The Closing Date Purchase Agreement and (ii)
one or more Assignment Agreements pursuant to the BOA Purchase Agreement,
pursuant to which, together, AFL transferred the Initial Receivables to the
Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable (without regard to any
Monthly Advances that may have been made with respect to the Receivable) as of
the Accounting Date on which the obligation to purchase such Receivable arises.
PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable
(including any Liquidated Receivable) that became a Warranty Receivable or
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.
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RELATED DOCUMENTS: The Trust Agreement, the Indenture, the Notes, the
Purchase Agreements, each Subsequent Purchase Agreement, each Subsequent
Transfer Agreement, the Custodian Agreement, the Note Policy, the Spread Account
Agreement, the Insurance Agreement, the Lockbox Agreement, the Depository
Agreement, the Stock Pledge Agreement and the Underwriting Agreement among the
Seller, AFL and the underwriters of the Notes. The Related 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, $282,599.98 and as
of any Distribution Date or Subsequent Transfer Date thereafter during the
Funding Period an amount equal to the difference between
(a) the product of (x) the weighted average of the Class A-1
Interest Rate, the Class A-2 Interest Rate and the Class A-3 Interest Rate
(based on the outstanding principal balance of the Class A-1 Notes, the
Class A-2 Notes and the Class A-3 Notes on such date), divided by 360,
(y) the Pre-Funded Amount on such date and (z) the number of days until the
Distribution Date in February 1999, and
(b) the product of (x) the Assumed Reinvestment Rate, divided by
360, (y) the Pre-Funded Amount on such date and (z) the number of days
until the Distribution Date in February 1999.
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
Date in February 1999) as if such Subsequent Transfer Date occurred on such
immediately preceding Distribution Date (or the Closing Date).
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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 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.
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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 thereafter amended and restated, among the Security Insurer, AFL
and the Collateral Agent, as the same may be amended, supplemented or otherwise
modified in accordance with the terms thereof
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.
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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 BOA 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-E.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement dated as of December 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.
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
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Persons include their permitted successors and assigns; and the terms
"include" or "including" mean "include without limitation" or "including
without limitation."
SECTION 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of twelve
30-day months, except that calculations of interest accrued on the Class A-1
Notes shall be made on the basis of actual days elapsed in a 360-day year. All
references to the Principal Balance of a Receivable as of an Accounting Date
shall refer to the close of business on such day.
SECTION 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
SECTION 1.5. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Seller, AFL, the Servicer, the Indenture Trustee, the
Backup Servicer or the Owner Trustee or of any predecessor or successor of the
Seller, AFL, the Servicer, the Indenture Trustee, the Backup Servicer or the
Owner Trustee.
SECTION 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Note Policy.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES. Subject to the terms
and conditions of this Agreement, the Seller, pursuant to the mutually agreed
upon terms contained herein, hereby sells, transfers, assigns, and otherwise
conveys to the 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
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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):
(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.
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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 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 acknowledgment 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
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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 $282,599.98 in the Reserve Account.
SECTION 2.4. CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b) below, the
Seller, pursuant to the mutually agreed upon terms contained herein and pursuant
to one or more Subsequent Transfer Agreements, shall sell, transfer, assign, and
otherwise convey to the Trust, without recourse (but without limitation of its
obligations in this Agreement), all of the right, title and interest of the
Seller in and to the Subsequent Receivables, all monies at any time paid or
payable thereon or in respect thereof after the related Subsequent Cutoff Date
(including amounts due on or before the related Subsequent Cutoff Date but
received by AFL or the Seller after the related Subsequent Cutoff Date), an
assignment of security interests of AFL in the related Financed Vehicles, the
Insurance Policies and any proceeds from any Insurance Policies relating to the
Subsequent Receivables, the Obligors or the related Financed Vehicles, including
rebates of premiums, all Collateral Insurance and any Force-Placed Insurance
relating to the Subsequent Receivables, rights of AFL or the Seller against
Dealers with respect to the Subsequent Receivables under the Dealer 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;
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(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 acknowledgment 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;
(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;
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(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
16.14%, (2) the weighted average remaining term of such Receivables will
not be greater than 67 months nor less than 60 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 3% of the
Aggregate Principal Balance of such Receivables will be attributable to
Receivables with an APR in excess of 21%, (5) not more than 0.25% of the
Aggregate Principal Balance of such Receivables will represent loans in
excess of $50,000.00, (6) not more than 3% of the Aggregate Principal
Balance of such Receivables will represent loans with original terms
greater than 72 months and (7) not more than 2.0% 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 $62,080,545.25; 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 and
Class A-3 Prepayment Premium.
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SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its
execution of this Agreement and each Subsequent Transfer Agreement, the Seller
makes the following representations and warranties on which the Trust relies in
accepting the Receivables and the other Trust Property in trust and on which the
Owner Trustee relies in issuing on behalf of the Trust, Notes and upon which the
Security Insurer relies in issuing the Note Policy. Unless otherwise specified,
such representations and warranties speak as of the Closing Date or Subsequent
Transfer Date, as appropriate, but shall survive the sale, transfer, and
assignment of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations and
warranties set forth on the Schedule of Representations are true and
correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own and
sell the Receivables and the other property transferred to the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business requires
such qualification.
(d) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and its Related Documents
and to carry out its terms and their terms, respectively; the Seller has
full power and authority to sell and assign the Trust Property to be sold
and assigned to and deposited with the Trust by it and has duly authorized
such sale and assignment to the Trust by all necessary corporate action;
and the execution, delivery and performance of this Agreement and the
Seller's Related Documents have been duly authorized by the Seller by all
necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and the
related Subsequent Transfer Agreement, if any, effects a valid sale,
transfer and assignment of the Receivables and the other Trust Property,
enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement and the related Subsequent Transfer Agreement,
if any, and the Seller's Related Documents, when duly executed and
delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the related Subsequent Transfer
Agreement, if any, and the
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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
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
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warranties to the Seller with respect to the Receivables as those made by
Seller pursuant to the Schedule of Representations, upon which the Owner
Trustee has relied in accepting the Trust Property in trust and executing the
Notes and upon which the Security Insurer has relied in issuing the Note
Policy and upon which the Indenture Trustee has relied in authenticating the
Notes. Upon discovery by any of AFL, the Seller, the Servicer, the Security
Insurer, the Indenture Trustee or the Owner Trustee of a breach of any of the
representations and warranties contained in Section 2.5 that materially and
adversely affects the interests of the Noteholders, the Security Insurer or
the Trust in any Receivable (including any Liquidated Receivable), the party
discovering such breach shall give prompt written notice to the others;
PROVIDED, HOWEVER, that the failure to give any such notice shall not affect
any obligation of AFL or the Seller. As of the second Accounting Date (or,
at AFL's election, the first Accounting Date) following its discovery or its
receipt of notice of any breach of the representations and warranties set
forth on the Schedule of Representations that materially and adversely
affects the interests of the Noteholders, the Security Insurer or the Trust
in any Receivable (including any Liquidated Receivable), AFL shall, unless
such breach shall have been cured in all material respects, purchase such
Receivable from the Trust and, on or before the related Deposit Date, AFL
shall pay the Purchase Amount to the Owner Trustee pursuant to Section 4.5.
The obligations of the Seller with respect to any such breach of
representations and warranties shall be limited to taking any and all actions
necessary to enable the Owner Trustee to enforce directly the obligations of
AFL under the Purchase Agreement or Subsequent Purchase Agreement, as
applicable. It is understood and agreed that, except as set forth in this
Section 2.6, the obligation of AFL to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against AFL or the Seller for such breach
available to the Security Insurer or the Indenture Trustee on behalf of the
Noteholders.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Seller or AFL, AFL shall indemnify
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Collateral
Agent, the Security Insurer, the Trust and the Noteholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach.
SECTION 2.7. NONPETITION COVENANT. None of the Seller, the Servicer,
the Owner Trustee (in its individual capacity or on behalf of the Trust), the
Backup Servicer nor AFL shall petition or otherwise invoke the process of any
court or 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
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from the Registrar of Titles as promptly as practicable. If such Lien
Certificate showing AFL as first lienholder is not received by the Custodian
within 180 days after the Closing Date or Subsequent Transfer Date, as
appropriate, then the representation and warranty in Paragraph 18 of the
Schedule of Representations in respect of such Receivable shall be deemed to
have been incorrect in a manner that materially and adversely affects the
Noteholders, the Security Insurer and the Trust.
SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND
WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller or AFL, the Owner
Trustee shall take any and all actions reasonably requested by the Seller, AFL
or Servicer, at the expense of the requesting party, to assign, without
recourse, representation or warranty, to the Seller, AFL or the Servicer, as
applicable, all the Trust's right, title and interest in and to such purchased
Receivable, all monies due thereon, the security interests in the related
Financed Vehicles, proceeds from any Insurance Policies, proceeds from recourse
against Dealers on such Receivables and the interests of the Trust in certain
rebates of premiums and other amounts relating to the Insurance Policies and any
documents relating thereto, such assignment being an assignment outright and not
for security; and the Seller, AFL or the Servicer, as applicable, shall
thereupon own such Receivable, and all such security and documents, free of any
further obligation to the Owner Trustee, the Trust, the Indenture Trustee, the
Security Insurer, the Indenture Collateral Agent or the Noteholders with respect
thereto.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its 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
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Dealer Agreements, Dealer Assignments and Insurance Policies relate to the
Receivables, the Financed Vehicles or the Obligors. To the extent consistent
with the standards, policies and procedures otherwise required hereby, the
Servicer shall follow its customary standards, policies, and procedures and
shall have full power and authority, acting alone, to do any and all things
in connection with such managing, servicing, administration and collection
that it may deem necessary or desirable. Without limiting the generality of
the foregoing, the Servicer is hereby authorized and empowered by the Owner
Trustee to execute and deliver, on behalf of the Trust, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the
Receivables and with respect to the Financed Vehicles; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the Servicer shall not, except pursuant
to an order from a court of competent jurisdiction, release an Obligor from
payment of any unpaid amount under any Receivable or waive the right to
collect the unpaid balance of any Receivable from the Obligor, except that
the Servicer may forego collection efforts if the amount subject to
collection is DE MINIMIS and if it would forego collection in accordance with
its customary procedures. The Servicer is hereby authorized to commence, in
its own name or in the name of the Trust (provided the Servicer has obtained
the Owner Trustee's consent, which consent shall not be unreasonably
withheld), a legal proceeding to enforce a Receivable pursuant to Section 3.3
or to commence or participate in any other legal proceeding (including,
without limitation, a bankruptcy proceeding) relating to or involving a
Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or
participates in such a legal proceeding in its own name, the Trust shall
thereupon be deemed to have automatically assigned such Receivable to the
Servicer solely for purposes of commencing or participating in any such
proceeding as a party or claimant, and the Servicer is authorized and
empowered by the Owner Trustee to execute and deliver in the Servicer's name
any notices, 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
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the Monthly Period in which such due date occurs, (ii) re-amortize the
scheduled payments on the Receivable following a partial prepayment of
principal and (iii) grant extensions on a Receivable, provided that the
Servicer shall not be permitted to extend the monthly payments on a
Receivable more than two times in any twelve-month period, and provided
further that the aggregate period of all extensions on a Receivable shall not
exceed six months.
(c) The Servicer may grant payment extensions or deferrals on, or
other modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension, deferral,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; PROVIDED,
HOWEVER, that:
(i) In no event may a Receivable be extended beyond the
Monthly Period immediately preceding the Final Scheduled Distribution Date;
(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
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(vi) If an Insurer Default shall have occurred and be
continuing, the Servicer may not extend or modify any Receivable (other
than as permitted by Section 3.2(b)).
(d) The Servicer shall use its reasonable best efforts to cause
Obligors to make all payments on the Receivables, whether by check or by direct
debit of the Obligor's bank account, to be made directly to one or more Lockbox
Banks, acting as agent for the Trust pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Receivables may initially be
deposited into a demand deposit account maintained by the Lockbox Bank as agent
for the Trust and for other owners of automobile receivables serviced by the
Servicer. The Servicer shall use its reasonable best efforts to cause any
Lockbox Bank to deposit all payments on the Receivables in the Lockbox Account
no later than the Business Day after receipt, and 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
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Servicer as a party to each such Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under
such Lockbox Agreement. The outgoing Servicer shall, upon request of the
Owner Trustee but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such Agreement
and an accounting of amounts collected and held by the Lockbox Bank and
otherwise use its best efforts to effect the orderly and efficient transfer
of any Lockbox Agreement to the successor Servicer. In the event that the
Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note Majority (if an Insurer Default shall have occurred
and be continuing) elects to change the identity of the Lockbox Bank, the
outgoing Servicer, at its expense, shall cause the Lockbox Bank to deliver,
at the direction of the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) or a Note Majority (if an Insurer
Default shall have occurred and be continuing) to the Owner Trustee or a
successor Lockbox Bank, all documents and records relating to the Receivables
and all amounts held (or thereafter received) by the Lockbox Bank (together
with an accounting of such amounts) and shall otherwise use its best efforts
to effect the orderly and efficient transfer of the lockbox arrangements and
the Servicer shall notify the Obligors to make payments to the Lockbox
established by the successor.
(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Subcollection Account or to
the Lockbox Bank for deposit into the Collection Account without deposit into
any intervening account as soon as practicable, but in no event later than the
Business Day after receipt thereof.
SECTION 3.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and procedures required
by this Agreement, the Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
all or any portion of a Scheduled Payment has become 91 days delinquent. The
Servicer is authorized to follow such customary practices and procedures as it
shall deem necessary or advisable, consistent with the standard of care required
by Section 3.1, which practices and procedures may include reasonable efforts to
realize upon any recourse to Dealers, the sale of the related Financed Vehicle
at public or private sale, the submission of claims under an Insurance Policy
and other actions by the Servicer in order to realize upon such a Receivable.
The foregoing is subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with any repair or towards the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair and/or
repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. All amounts
received upon liquidation of a Financed Vehicle shall be remitted directly by
the Servicer to the Subcollection Account without deposit into any intervening
account as soon as practicable, but in no event later than the Business Day
after receipt thereof. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a Financed
Vehicle into cash
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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.
(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
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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, 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.
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SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Trust, including but not limited to
obtaining the execution by the Obligors and the recording, registering,
filing, re-recording, re-filing, and re-registering of all security
agreements, financing statements and continuation statements as are necessary
to maintain the security interest granted by the Obligors under the
respective Receivables. The Owner Trustee hereby authorizes the Servicer,
and the Servicer agrees, to take any and all steps necessary to re-perfect
such security interest on behalf of the Trust as necessary because of the
relocation of a Financed Vehicle or for any other reason. In the event that
the assignment of a Receivable to the Owner Trustee on behalf of the Trust is
insufficient, without a notation on the related Financed Vehicle's
certificate of title, or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to perfect a security interest in the related Financed Vehicle in
favor of the Trust, the Servicer hereby agrees that the Servicer's
designation as the secured party on the certificate of title is in its
capacity as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of
Default, the Security Insurer may (so long as an Insurer Default shall not
have occurred and be continuing) instruct the Owner Trustee and the Servicer
to take or cause to be taken, or, if an Insurer Default shall have occurred,
upon the occurrence of a Servicer Termination Event, the Owner Trustee and
the Servicer shall take or cause to be taken such action as may, in the
opinion of counsel to the Security Insurer (or, if an Insurer Default shall
have occurred and be continuing, counsel to the Owner Trustee), be necessary
to perfect or re-perfect the security interests in the Financed Vehicles
securing the Receivables in the name of the Trust by amending the title
documents of such Financed Vehicles or by such other reasonable means as may,
in the opinion of counsel to the Security Insurer or the Owner Trustee (as
applicable), be necessary or prudent. AFL hereby agrees to pay all expenses
related to such perfection or re-perfection and to take all action necessary
therefor. In addition, prior to the occurrence of an Insurance Agreement
Event of Default, the Security Insurer may (unless an Insurer Default shall
have occurred and be continuing) instruct the Owner Trustee and the Servicer
to take or cause to be taken 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
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and issuing the Notes on behalf of the Trust, on which the Indenture Trustee
relies in authenticating the Notes and on which the Security Insurer relies
in issuing the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing
each Receivable shall not be released in whole or in part from the
security interest granted by the Receivable, except upon payment in
full of the Receivable or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to
impair the rights of the Trust, the Noteholders in the Receivables,
the Dealer Agreements, the Dealer Assignments, the Insurance Policies
or the other Trust Property; and
(iii) NO AMENDMENTS. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance with
Section 3.2.
(b) The Servicer represents, warrants and covenants as of the
Closing Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer has
been duly organized and is validly existing and in good standing under
the laws of its jurisdiction of organization, with power, authority
and legal right to own its properties and to conduct its business as
such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power,
authority and legal right to enter into and perform its obligations
under this Agreement;
(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
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equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(v) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the Servicer's Related
Documents, and the fulfillment of the terms of this Agreement and the
Servicer's Related Documents, shall not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
any of its properties;
(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Servicer's knowledge, threatened
against the Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or any of
the Related Documents, (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,
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the Trust or the Security Insurer in any Receivable (including any Liquidated
Receivable) (or, at the Servicer's election, the first Accounting Date so
following), the Servicer shall, unless it shall have cured such breach in all
material respects, purchase from the Trust the Receivable affected by such
breach and, on the related Deposit Date, the Servicer shall pay the related
Purchase Amount. It is understood and agreed that the obligation of the
Servicer to purchase any Receivable (including any Liquidated Receivable)
with respect to which such a breach has occurred and is continuing shall, if
such obligation is fulfilled, constitute the sole remedy against the Servicer
for such breach available to the Security Insurer, the Noteholders, or the
Indenture Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that the
Servicer shall indemnify the Owner Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust, the Indenture Trustee and
the Noteholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
SECTION 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. On each Distribution Date, the Servicer shall be entitled to receive
out of the Collection Account the Basic Servicing Fee and any Supplemental
Servicing Fee 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
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the related Monthly Period and Distribution Date, including the accounting
required by Section 4.8. Receivables purchased by the Servicer or by the
Seller or AFL on the related Deposit Date and each Receivable which became a
Liquidated Receivable or which was paid in full during the related Monthly
Period shall be identified by account number (as set forth in the Schedule of
Receivables). A copy of such certificate may be obtained by any Noteholder
(or by a Note Owner, upon certification that such Person is a Note Owner and
payment of any expenses associated with the distribution thereof) by a
request in writing to the Indenture Trustee addressed to the Corporate Trust
Office. In addition to the information set forth in the preceding sentence,
the Servicer's Certificate delivered to the Security Insurer, the Collateral
Agent and the Indenture Trustee on the Determination Date shall also contain
the following information: (a) the Delinquency Ratio, Average Delinquency
Ratio, Cumulative Default Rate and Cumulative Net Loss Rate for 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
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giving of notice or lapse of time, or both, would become a Servicer
Termination Event under any other clause of Section 8.1.
SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver to
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer and 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 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
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(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 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.
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SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on March 31, 1999, which term
shall be extendible by the Security Insurer for successive quarterly terms
ending on each successive June 30, September 30, December 31 and March 31 (or,
pursuant to revocable written standing instructions from time to time to the
Servicer, the Indenture Trustee and the Owner Trustee, for any specified number
of terms greater than one), until the termination of the Trust. Each such
notice (including each notice pursuant to standing instructions, which shall be
deemed delivered at the end of successive quarterly terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be delivered
by the Security Insurer to the Owner Trustee, the Indenture Trustee and the
Servicer. The Servicer hereby agrees that, as of the date hereof and upon its
receipt of any such Servicer Extension Notice, the Servicer shall become bound,
for the initial term beginning on the Closing Date and for the duration of the
term covered by such Servicer Extension Notice, to continue as the Servicer
subject to and in accordance with the other provisions of this Agreement. Until
such time as an Insurer Default shall have occurred and be continuing, the
Indenture Trustee agrees that if as of the fifteenth day prior to the last day
of any term of the Servicer the Indenture Trustee shall not have received any
Servicer Extension Notice from the Security Insurer, the Indenture Trustee will,
within five days thereafter, give written notice of such non-receipt to the
Owner Trustee, the Security Insurer and the Servicer.
SECTION 3.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Trust
and the Owner Trustee the following duties of the Trust or the Owner Trustee, as
applicable, under the Indenture (references are to the applicable Sections in
the Indenture):
(a) the direction to the Paying Agents, if any, to deposit
moneys with the Indenture Trustee (Section 3.03);
(b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Indenture Collateral and
each other instrument and agreement included in the Trust Estate (Section
3.04);
(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
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statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its obligations
under the Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officers' Certificate and the obtaining of the Opinion of Counsel and the
Independent Certificate relating thereto (Section 4.01);
(g) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee and
any written instruments necessary in connection with the resignation or
removal of any co-trustee or separate trustee (Sections 6.08 and 6.10);
(h) the opening of one or more accounts in the Trust's name,
the preparation of Issuer Orders, Officers' Certificates and Opinions of
Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(i) the preparation of Trust Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(j) the preparation of all Officers' Certificates, Opinions
of Counsel and Independent Certificates with respect to any requests by the
Issuer to the Indenture Trustee or the Indenture Collateral Agent to take
any action under the Indenture (Section 11.01(a));
(k) the preparation and delivery of Officers' Certificates
and the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture (Section 11.01(b)); and
(l) the recording of the Indenture, if applicable (Section
11.15).
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
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Trustee the following duties of the Trust under the Insurance Agreement
(references are to the applicable Sections in the Insurance Agreement):
(a) the maintenance of books and records of accounts of the
Trust's assets and business and the furnishing to the Security Insurer of
reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee or the Noteholders pursuant to the
Related Documents (Section 2.02(b));
(b) the delivery to the Security Insurer and, upon request,
any Noteholder, of certificates with respect to compliance with, and other
matters under, the Related Documents (Section 2.02(c));
(c) the filing of financing statements, assignments or other
instruments, and amendments or continuation statements relating thereto to
preserve and protect fully the lien and security interest in, and all
rights of the Indenture Trustee and the Security Insurer with respect to,
the Trust Estate (Section 2.02(f));
(d) the maintenance of licenses, permits, charters and
registrations of the Trust material to the performance by the Trust of its
obligations under the Insurance Agreement and the Related Documents
(Section 2.02(g));
(e) the provision to the Security Insurer of executed
original copies of the documents executed in connection with the closing of
the offering of the Notes (Section 2.02(k)); and
(f) the taking of actions to ensure that the Trust is taxable
as a partnership for federal and state income tax purposes and not as an
association (or publicly traded partnership) taxable as a corporation
(Section 2.02(l)).
SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (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
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segregated trust account established with the Indenture Collateral Agent and
maintained with the Indenture Collateral Agent.
(b) The Servicer shall establish the Pre-Funding Account in the
name of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties. The Pre-Funding Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Indenture Collateral
Agent and maintained with the Indenture Collateral Agent.
(c) The Servicer shall establish the Note Distribution Account in the
name of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties. The Note Distribution Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Collateral Agent and maintained with the Indenture Collateral Agent.
(d) The Servicer shall establish the Reserve Account (including the
Class A-1 Holdback Subaccount) in the name of the Indenture Collateral Agent for
the benefit of the Issuer Secured Parties. The Reserve Account shall be an
Eligible Account and initially shall be a segregated trust account established
with the Indenture Collateral Agent and maintained with the Indenture Collateral
Agent.
(e) All amounts held in the Collection Account, the Pre-Funding
Account, the Note Distribution Account and the Reserve Account (collectively,
the "Trust Accounts") shall, to the extent permitted by applicable laws, rules
and regulations, be invested, as directed in writing by the Servicer, in
Eligible Investments that, in the case of amounts held in the Collection
Account, the Note Distribution Account and the Reserve Account, mature not later
than one Business Day prior to the Distribution Date for the Monthly Period to
which such amounts relate, and, in the case of amounts held in the Pre-Funding
Account, mature in such amounts and on such dates, not later than one Business
Day prior to the last day of the Funding Period, as the Servicer may direct in
writing; PROVIDED, HOWEVER, that the amounts held in the Trust Accounts shall be
invested by the Indenture Collateral Agent 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
Collateral Agent's U.S. Government Fund and, from time to time, shall include
such other proprietary Eligible Investments of the Indenture Collateral Agent as
shall be confirmed in writing by the Security Insurer to the Indenture
Collateral Agent) 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 Collateral Agent 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:
(i) all Eligible Investments shall be held in an account with such
financial institution in the name of the Indenture Collateral Agent;
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(ii) all Eligible Investments held in such account shall be
delivered to the Indenture Collateral Agent in the following manner:
(A) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC (other than certificated securities) and are susceptible of
physical delivery, transferred to the Indenture Collateral Agent by
physical delivery to the Indenture Collateral Agent, indorsed to, or
registered in the name of, the Indenture Collateral Agent or its
nominee or indorsed in blank; or such additional or alternative
procedures as may hereafter become appropriate to effect the complete
transfer of ownership of any such Eligible Investments to the
Indenture Collateral Agent free of any adverse claims, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(B) with respect to a "certificated security" (as defined in
Section 8-102(a)(4) of the UCC), transferred:
(1) by physical delivery of such certificated security
to the Indenture Collateral Agent, provided that if the
certificated security is in registered form, it shall be indorsed
to, or registered in the name of, the Indenture Collateral Agent
or indorsed in blank;
(2) by physical delivery of such certificated security
in registered form to a "securities intermediary" (as defined in
Section 8-102(a)(14) of the UCC) acting on behalf of the
Indenture Collateral Agent if the certificated security has been
specially indorsed to the Indenture Collateral Agent by an
effective indorsement.
(C) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a securities
intermediary which is also a "depositary" pursuant to applicable
federal regulations and issuance by such securities intermediary of a
deposit advice or other written confirmation of such book-entry
registration to the Indenture Collateral Agent of the purchase by the
securities intermediary on behalf of the Indenture Collateral Agent of
such book-entry security; the making by such securities intermediary
of entries in its books and records identifying such book-entry
security held through the Federal Reserve System pursuant to Federal
book-entry regulations as belonging to the Indenture Collateral Agent
and indicating that such securities intermediary holds such book-entry
security solely as agent for the Indenture Collateral Agent; or such
additional or alternative procedures as
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may hereafter become appropriate to effect complete transfer of
ownership of any such Eligible Investments to the Indenture
Collateral Agent free of any adverse claims, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(D) with respect to any "uncertificated security" (as defined
in Section 8-102(a)(18) of the UCC) that is not governed by clause (C)
above, transferred:
(1)(A) by registration to the Indenture Collateral Agent
as the registered owner thereof, on the books and records of the
issuer thereof, or
(B) by another Person (not a securities intermediary)
either becomes the registered owner of the uncertificated
security on behalf of the Indenture Collateral Agent, or having
become the registered owner acknowledges that it holds for the
Indenture Collateral Agent; or
(2) by the issuer thereof having agreed that it will
comply with instructions originated by the Indenture Collateral
Agent without further consent of the registered owner thereof;
(E) with respect to any "security entitlement" (as defined in
Section 8-102(a)(17) of the UCC):
(1) if a securities intermediary (A) indicates by book
entry that a "financial asset" (as defined in Section 8-102(a)(9)
of the UCC) has been credited to the Indenture Collateral Agent's
"securities account" (as defined in Section 8-501(a) of the UCC),
(B) receives a financial asset (as so defined) from the Indenture
Collateral Agent or acquires a financial asset for the Indenture
Collateral Agent, and in either case, accepts it for credit to
the Indenture Collateral Agent's securities account (as so
defined), (C) becomes obligated under other law, regulation or
rule to credit a financial asset to the Indenture Collateral
Agent's securities account, or (D) has agreed that it will comply
with "entitlement orders" (as defined in Section 8-102(a)(8) of
the UCC) originated by the Indenture Collateral Agent, without
further consent by the "entitlement holder" (as defined in
Section 8-102(a)(7) of the UCC), of a confirmation of the
purchase and the making by such securities intermediary of
entries on its books and records identifying as belonging to the
Indenture Collateral Agent of (I) a specific certificated
security in the securities intermediary's possession, (II) a
quantity of securities that constitute or are part of a fungible
bulk of certificated securities in the securities intermediary's
possession, or (III) a quantity of securities that constitute or
are part of a fungible bulk of securities shown on the account of
the securities intermediary on the books of another securities
intermediary.
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(F) in each case of delivery contemplated pursuant to clauses
(A) through (E) of subsection (ii) hereof, the Indenture Collateral
Agent shall make appropriate notations on its records, and shall cause
the same to be made on the records of its nominees, indicating that
such Eligible Investment is held in trust pursuant to and as provided
in this Indenture.
Any cash held by the Indenture Collateral Agent shall not be considered a
"financial asset" for purposes of this Section 4.1(e). Subject to the other
provisions hereof, the Indenture Collateral Agent shall have sole control over
each such investment and the income thereon, and any certificate or other
instrument evidencing any such investment, if any, shall be delivered directly
to the Indenture Collateral Agent or its agent, together with each document of
transfer, if any, necessary to transfer title to such investment to the
Indenture Collateral Agent in a manner which complies with this Section 4.1.
All interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Trust Accounts shall be deposited in the Collection
Account and distributed on the next Distribution Date pursuant to Section 4.6.
The Servicer shall deposit in the applicable Trust Account an amount equal to
any net loss on such investments immediately as realized.
(f) On the Closing Date, the Servicer shall deposit in the Collection
Account (i) all Scheduled Payments and prepayments of Initial Receivables
received by the Servicer after the Initial Cutoff Date and on or prior to the
Business Day immediately 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
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schedule acceptable to the Servicer if the Security Insurer consents in
writing (so long as an Insurer Default shall not have occurred and be
continuing) and the Servicer provides to the Indenture Trustee written
confirmation from each Rating Agency that such alternative remittance
schedule will not result in the downgrading or withdrawal by the Rating
Agency of the rating then assigned to the Notes.
(b) Notwithstanding the provisions of subsection (a) hereof, the
Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer or the
Lockbox Bank to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Distribution Date pursuant to Section
4.6(iii) upon certification by the Servicer of such amounts and the provision of
such information to the Indenture Trustee and the Security Insurer as may be
necessary in the opinion of the Indenture Trustee and the Security Insurer to
verify the accuracy of such certification. In the event that the Security
Insurer has not received evidence satisfactory to it of the Servicer's
entitlement to reimbursement pursuant to this Section 4.2(b), the Security
Insurer shall (unless an Insurer Default shall have 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 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
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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 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;
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(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 $62,080,545.25 from the
proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Indenture Trustee in writing:
(i) to withdraw from the Pre-Funding Account the Spread
Account Additional Deposit, if any, on such Subsequent Transfer Date, and
to deliver such funds to the Collateral Agent for deposit in the Spread
Account,
(ii) to withdraw from the Pre-Funding Account the amount, if
any, by which the Requisite Reserve Amount for such Subsequent Transfer
Date exceeds the Reserve Amount, and to deposit such funds in the Reserve
Account,
(iii) to withdraw from the Pre-Funding Account the Class A-1
Holdback Amount, if any, for such Subsequent Transfer Date, and to deposit
such funds in the Class A-1 Holdback Subaccount,
(iv) to withdraw from the Pre-Funding Account the amount, if
any, on deposit therein in excess of the remaining 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
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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 and the
Class A-3 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 and the Class A-3 Prepayment Premium; PROVIDED, HOWEVER, that
the obligation of the Seller to make the deposits referred to in this sentence
is expressly limited to the extent of the amount of Liquidated Damages (as
defined in the Closing Date Purchase Agreement) paid to the Seller by AFL and by
the Seller to the Trust.
SECTION 4.8. NET DEPOSITS. Subject to payment by the Servicer of
amounts otherwise payable pursuant to Section 4.6(ii) and provided that no
Servicer Termination Event shall have occurred and be continuing with respect to
such Servicer, the Servicer may make the remittances to be made by it pursuant
to Sections 4.2, 4.4 and 4.5 net of amounts (which amounts may be netted prior
to any such remittance for a Monthly Period) to be distributed to it pursuant to
Sections 3.8, 4.2(b) and 4.6(i); PROVIDED, HOWEVER, that the Servicer shall
account for all of such amounts in the related Servicer's Certificate as if such
amounts were deposited and distributed separately; and, PROVIDED, FURTHER, that
if an error is made by the Servicer in calculating the amount to be deposited or
retained by it, with the result that an amount less than required is deposited
in the Collection Account, the Servicer shall 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:
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(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
and the Noteholders' Principal Carryover Shortfall, if any, and the change
in such amounts from the preceding statement;
(vi) the amount of fees paid by the Trust with respect to such
Monthly Period;
(vii) for Payment Dates during the Funding Period, the
remaining Pre-Funded Amount, the remaining Reserve Amount and the amount on
deposit in the Class A-1 Holdback Subaccount;
(viii) for the Payment Date on or immediately following the end
of the Funding Period, the Class A-1 Prepayment Amount, the Class A-2
Prepayment Amount, the Class A-3 Prepayment Amount, the Class A-1
Prepayment Premium, the Class A-2 Prepayment Premium and the Class A-3
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.
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SECTION 4.11. ELIGIBLE ACCOUNTS. Any account which is required to be
established as an Eligible Account pursuant to this Agreement and which ceases
to be an Eligible Account shall within five Business Days (or such longer
period, not to exceed 30 days, as to which each Rating Agency and the Security
Insurer may consent) be established as a new account which shall be an Eligible
Account and any cash and/or any investments shall be transferred to such new
account.
ARTICLE V
THE RESERVE ACCOUNT; THE SPREAD ACCOUNT
SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the amount of Available Funds with respect
to such Determination Date is less than the sum of the amounts payable on the
related Distribution Date pursuant to clauses (i) through (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.
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SECTION 5.2. WITHDRAWALS FROM SPREAD ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Deficiency Claim Amount (as defined
below) with respect to the related Distribution Date is greater than zero, then
on the Deficiency Claim Date immediately preceding such Distribution Date, the
Indenture Trustee shall deliver to the Collateral Agent, the Security Insurer,
the Fiscal Agent, if any, the Owner Trustee and the Servicer, by hand delivery,
telex or facsimile transmission, a written notice (a "Deficiency Notice"). Such
Deficiency Notice shall direct the Collateral Agent to remit such Deficiency
Claim Amount (to the extent of the funds available to be distributed pursuant to
the Spread Account Agreement) to the Indenture Trustee for deposit in the
Collection Account. The "Deficiency Claim Amount" with respect to any
Distribution Date shall equal the excess, if any, of
(i) the amount required to be distributed pursuant to clauses
(i) - (vi) of Section 4.6 (without giving effect to the limitation of the
Distribution Amount specified in each such clause) over
(ii) the sum of (A) the Actual Funds with respect to such
Distribution Date, plus (B) if such Distribution Date is the Class A-1
Final Scheduled Distribution Date, the amount, if any, withdrawn from the
Class A-1 Holdback Subaccount and deposited in the Note Distribution
Account pursuant to Section 5.1(b).
(b) any Deficiency Notice shall be delivered by 10:00 a.m., New York
City time, on the fourth Business Day preceding such Distribution Date. The
amounts distributed by the Collateral Agent to the Indenture Trustee pursuant to
a Deficiency Notice shall be deposited by the Indenture Trustee into the
Collection Account pursuant to Section 4.5.
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
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limitations on business and other matters substantively identical to those
contained in the Seller's certificate of incorporation. Any such successor
corporation shall execute an agreement of assumption of every obligation of
the Seller under this Agreement and each Related Document and, whether or not
such assumption agreement is executed, shall be the successor to the Seller
under this Agreement without the execution or filing of any document or any
further act on the part of any of the parties to this Agreement. The Seller
shall provide prompt notice of any merger, consolidation or succession
pursuant to this Section 6.2 to the Owner Trustee, the Indenture Trustee, the
Security Insurer and the Rating Agencies. Notwithstanding the foregoing, the
Seller shall not merge or consolidate with any other Person or permit any
other Person to become a successor to the Seller's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 2.5 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become a Servicer Termination Event shall have occurred
and be continuing, (y) the Seller shall have delivered to the Owner Trustee,
the Indenture Trustee and the Security Insurer an officer's certificate and
an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 6.2 and
that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) the Seller
shall have delivered to the Owner Trustee, the Indenture Trustee and the
Security Insurer an Opinion of Counsel, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to
preserve and protect the interest of the Trust in the Trust Property and
reciting the details of the filings or (B) no such action shall be necessary
to preserve and protect such interest.
(b) The Seller hereby agrees that it shall not (i) take any action
prohibited by Article XVI of its certificate of incorporation or (ii) without
the prior written consent of the Owner Trustee and the Indenture Trustee and (so
long as an Insurer Default shall not have occurred and be continuing) the
Security Insurer and without giving prior written notice to the Rating Agencies,
amend Article III, Article IX, Article XIV or Article XVI of its certificate of
incorporation.
SECTION 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations as Seller of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.
SECTION 6.4. SELLER MAY OWN NOTES. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become the
owner or pledgee of Notes with the same rights as it would have if it were not
the Seller or an Affiliate thereof except as otherwise specifically provided
herein or in the Related Documents. Notes so owned by or pledged to the Seller
or such Affiliate shall have an equal and proportionate benefit under the
provisions of this Agreement or any Related Document, without preference,
priority, or distinction as among all of
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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, withholding, general corporation, tangible personal property,
privilege or license taxes (but not including (i) income taxes on fees and
expenses payable to the Owner Trustee, the Indenture Trustee, the Backup
Servicer or the Security Insurer, (ii) income taxes arising out of distributions
on the Notes or (iii) transfer taxes arising in connection with transfers of
Notes).
(d) The Servicer shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer, their respective officers, directors, agents and employees and the
Noteholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss, claim,
damage, or liability arose out of, or was imposed upon the Trust, the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer or the
Noteholders through the breach of this Agreement, the negligence, willful
misfeasance, or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
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(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 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
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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 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.
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(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 permitting
the resignation of the Servicer or Backup Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered and reasonably acceptable to the
Owner Trustee, the Indenture Trustee and the Security Insurer (unless an
Insurer Default shall have occurred and be continuing). No resignation of
the Servicer shall become effective until, so long as no Insurer Default
shall have occurred and be continuing, the Backup Servicer or an entity
acceptable to the Security Insurer shall have assumed the responsibilities
and obligations of the Servicer or, if an Insurer Default shall have occurred
and be continuing, the Backup Servicer or a successor Servicer that is an
Eligible Servicer shall have assumed the responsibilities and obligations of
the Servicer. No resignation of the Backup Servicer shall become effective
until, so long as no Insurer Default shall have occurred and be continuing,
an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Backup Servicer or, if an Insurer
Default shall have occurred and be continuing, a Person that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the
Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 7.5, the Backup Servicer may petition a court for its removal.
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SECTION 7.6. ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER. The
successor Servicer, if Norwest Bank Minnesota, National Association, its
successors or assigns, shall have no obligation to perform any repurchase or
advancing obligations, if any, of the Servicer hereunder.
ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Indenture
Trustee for distribution to Noteholders any proceeds or payment required to
be so delivered under the terms of this Agreement (or, if AFL is the
Servicer, the Purchase Agreement) that continues unremedied for a period of
two Business Days (one Business Day with respect to payment of Purchase
Amounts) after written notice is received by the Servicer from the
Indenture Trustee or (unless an Insurer Default shall have occurred and be
continuing) the Security Insurer or after discovery of such failure by a
Responsible Officer of the Servicer; or
(b) Failure by the Servicer to deliver to the Indenture
Trustee, the Owner Trustee and (so long as an Insurer Default shall not
have occurred and be continuing) the Security Insurer the Servicer's
Certificate by the fourth Business Day prior to the Distribution Date, or
failure on the part of the Servicer to observe its covenants and agreements
set forth in Section 7.2(a); or
(c) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement (or, if AFL is the Servicer, the
Purchase Agreement), which failure (i) materially and adversely affects the
rights of Noteholders (determined without regard to the availability of
funds under the Note Policy), or of the Security Insurer (unless an Insurer
Default shall have occurred and be continuing), and (ii) continues
unremedied for a period of 30 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Owner Trustee, the Indenture Trustee or the Security
Insurer (or, if an Insurer Default shall have occurred and be continuing,
any Noteholder); or
(d) (i) The commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar law
and such case is not dismissed within 60 days; or (ii) the entry of a
decree or order for relief by a court or regulatory authority having
jurisdiction in respect of the Servicer or the Seller in an involuntary
case under the federal bankruptcy laws, as now or hereafter in effect, or
another present or future, federal or state, bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee,
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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 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
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Servicer under this Agreement, whether with respect to the Notes or the Trust
Property or otherwise, shall be terminated and automatically shall pass to,
be vested in and become obligations and responsibilities of the Backup
Servicer (or such other successor Servicer appointed by the Security
Insurer); PROVIDED, HOWEVER, that the successor Servicer shall have no
liability with respect to any obligation which was required to be performed
by the terminated Servicer prior to the date that the successor Servicer
becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the terminated Servicer. The successor Servicer is
authorized and empowered by this Agreement to execute and deliver, on behalf
of the terminated Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables and the other Trust Property and related documents to show the
Owner Trustee as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Servicer agrees to cooperate with
the successor Servicer in effecting the termination of the responsibilities
and rights of the terminated Servicer under this Agreement, including,
without limitation, the transfer to the successor Servicer for administration
by it of all cash amounts that shall at the time be held by the terminated
Servicer for deposit, or have been deposited by the terminated Servicer, in
the Collection Account or thereafter received with respect to the Receivables
and the delivery to the successor Servicer of all Receivable Files, Monthly
Records and Collection Records and a computer tape in readable form as of the
most recent Business Day containing all information necessary to enable the
successor Servicer or a successor Servicer to service the Receivables and the
other Trust Property. If requested by the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), the successor
Servicer shall terminate the Lockbox Agreement and direct the Obligors to
make all payments under the Receivables directly to the successor Servicer
(in which event the successor Servicer shall process such payments in
accordance with Section 3.2(e)), or to a lockbox established by the successor
Servicer at the direction of the Security Insurer (unless an Insurer Default
shall have occurred and be continuing), at the successor Servicer's expense.
In addition to any other amounts that are then payable to the terminated
Servicer under this Agreement, the terminated Servicer shall then be entitled
to receive out of Available Funds reimbursements for any Outstanding Monthly
Advances (in accordance with Section 4.4(c)) made during the period prior to
the notice pursuant to this Section 8.2 which terminates the obligation and
rights of the terminated Servicer under this Agreement. The Owner Trustee,
the Indenture Trustee and the successor Servicer may set off and deduct any
amounts owed by the terminated Servicer from any amounts payable to the
terminated Servicer pursuant to the preceding sentence. The terminated
Servicer shall grant the Owner Trustee, the 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
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alternate successor Servicer) shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Servicer by the terms
and provisions of this Agreement. The Owner Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. If a successor Servicer is acting as
Servicer hereunder, it shall be subject to termination under Section 8.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer
and shall serve from term to term as provided in Section 3.14.
(b) The Security Insurer may (so long as an Insurer Default shall
not have occurred and be continuing) exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a Person other
than the Person serving as Backup Servicer at the time, and (without limiting
its obligations under the Note Policy) shall have no liability to the Owner
Trustee, the Indenture Trustee, AFL, the Seller, the Person then serving as
Backup Servicer, any Noteholders, any Note Owner or any other Person if it
does so. Notwithstanding the above, if the Backup Servicer shall be legally
unable or unwilling to act as Servicer and an Insurer Default shall have
occurred and be continuing, the Backup Servicer, the Indenture Trustee, a
Note Majority or the Owner Trustee may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the
Servicer. Pending appointment pursuant to the preceding sentence, the Backup
Servicer shall act as successor Servicer unless it is legally unable to do
so, in which event the outgoing Servicer shall continue to act as Servicer
until a successor has been appointed and accepted such appointment. Subject
to Section 7.5, no provision of this Agreement shall be construed as
relieving the Backup Servicer of its obligation to succeed as successor
Servicer upon the termination of the Servicer pursuant to Section 8.2 or the
resignation of the Servicer pursuant to Section 7.5. If upon the termination
of the Servicer pursuant to Section 8.2 or the resignation of the Servicer
pursuant to Section 7.5, the Security Insurer appoints a successor Servicer
other than the Backup Servicer, the Backup Servicer shall not be relieved of
its duties as Backup Servicer hereunder.
(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
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reasonable transition expenses, not in excess of $100,000, incurred in acting
as successor Servicer. In addition, any successor Servicer shall be entitled
to reimbursement, as provided in the Spread Account Agreement, of reasonable
transition expenses incurred in acting as successor Servicer.
SECTION 8.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note Register.
SECTION 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer (or,
if an Insurer Default shall have occurred and be continuing, a Note Majority)
may, on behalf of all Holders of Notes, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
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
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value of any other property held as part of the Trust into the Collection
Account, and the Indenture Trustee shall distribute the amounts so deposited
in accordance with Section 4.6.
(b) Upon any sale of the assets of the Trust pursuant to Section
8.2 of the Trust Agreement, the Owner Trustee shall instruct the Indenture
Trustee in writing to deposit the proceeds from such sale after all payments
and reserves therefrom have been made (the "Insolvency Proceeds") in the
Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are
not so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Owner Trustee shall instruct the Indenture
Trustee in writing to make the following deposits (after the application on
such Distribution Date of the Available Funds) from the Insolvency Proceeds:
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into the
Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Class A-1
Prepayment Premium, Class A-2 Prepayment Premium and Class A-3 Prepayment
Premium (only to the extent of the amount of Liquidated Damages (as defined
in the Purchase Agreement) received by the Trust from the Seller); and
(iii) to the Note Distribution Account, the outstanding
principal balance of the Notes (after giving effect to the reduction in the
outstanding principal balance of the Notes to result from the deposits
otherwise made in the Note Distribution Account on such Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid, first, to the Security Insurer, to the extent of any amounts owing to
the Security Insurer under the Insurance Agreement and not paid, whether or
not AFL is obligated to pay such amounts, and second to the Collateral Agent
for deposit in the Spread Account.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee and the Indenture Trustee as soon as
practicable after the Servicer has received notice thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT.
(a) This Agreement may be amended by the Seller, the Servicer and the
Trust, with the prior written consent of the Indenture Trustee and the Security
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) but without the consent of any of the Noteholders, (i) to cure any
ambiguity, (ii) to correct or supplement any provisions in this
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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 or Class A-3 Interest Rate, (b) amend any provisions of Section 4.6 in
such a manner as to affect the priority of payment of interest, principal or
premium to Noteholders, or (c) reduce the aforesaid percentage required to
consent to any such amendment or any waiver hereunder, without the consent of
the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Indenture Trustee.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Indenture Trustee may
prescribe, including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement, the
Owner Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement, in addition to the Opinion of Counsel referred
to in Section 10.2(i). The Owner Trustee may, but shall not be
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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 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.
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(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.
(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
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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, 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 acknowledgment 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,
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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: 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
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Company be personally liable for the payment of any indebtedness or expenses
of the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under
this Agreement or any related documents.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Issuer, the Seller, AFL, the Servicer and
the Backup Servicer have caused this Sale and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1998-E
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee
By /s/ Emmett R. Harmon
------------------------------------------------
Name: Emmett R. Harmon
Title: 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 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.
S-A-1
<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
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.
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.
S-A-4
<PAGE>
27. FINAL SCHEDULED MATURITY DATE. No Receivable has a final
scheduled maturity later than February 28, 2006.
28. CERTAIN CHARACTERISTICS. (A) Each Initial Receivable had
a remaining maturity, as of the Initial Cutoff Date, of at least 3 months but
not more than 84 months; (B) each Initial Receivable had an original maturity
of at least 6 months but not more than 84 months; (C) each Initial Receivable
had an original principal balance of at least $3,104.80 and not more than
$50,853.05; (D) each Initial Receivable had a remaining Principal Balance as
of the Initial Cutoff Date of at least $547.78 and not more than $50,853.05;
(E) each Initial Receivable has an Annual Percentage Rate of at least 7.74%
and not more than 23.45%; (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 March
1, 1999; (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) 13.07% 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 86.93% of the Initial Receivables was
attributable to loans for the purchase of used Financed Vehicles; (K) not
more than 2.51% of the Principal Balance of the Initial Receivables as of the
Initial Cutoff Date had an Annual Percentage Rate in excess of 21.00%; (L)
0.03% of such Receivables represented loans in excess of $50,000.00; (M) not
more than 0.31% of the Aggregate Principal Balance of such Receivables
represented loans with original terms greater than 72 months; and (N) not
more than 2.76% 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-5
<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;
(c) Pending insurance claim - verifiable; or
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<PAGE>
(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.
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<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].
(3) "Service" of the Writ of Execution is handled by the Sheriff or
an Attorney.
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<PAGE>
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
between
ARCADIA RECEIVABLES FINANCE CORP.
Purchaser
and
ARCADIA FINANCIAL LTD.
Seller
dated as of
December 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <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. . . . . . . . . . . . . . . . . . 5
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 . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE VI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.1. Liability of AFL . . . . . . . . . . . . . . . . . . 17
SECTION 6.2. Failure of AFL to Sell Subsequent Receivables. . . . 17
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 . . . . . . . . . . . . . . . 20
SECTION 6.9. Severability of Provisions . . . . . . . . . . . . . 20
SECTION 6.10. Intention of the Parties . . . . . . . . . . . . . . 20
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 . . . . 21
SECTION 6.14. Nonpetition Covenant . . . . . . . . . . . . . . . . 21
</TABLE>
SCHEDULES
Schedule A -- Schedule of Initial Receivables
Schedule B -- Representations and Warranties of AFL
-ii-
<PAGE>
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of
December 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 an Amended and Restated Receivables
Purchase Agreement and Assignment, dated as of July 21, 1998, between ARFC
and AFL (the "BOA 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
December 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-E (as Issuer) (the "Trust") and Norwest Bank
Minnesota, National Association, a national banking association (as Backup
Servicer).
<PAGE>
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 December 22, 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 December 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 December 22, 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 and the Class A-3
Prepayment Premium.
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<PAGE>
"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 December 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-E, 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.
-3-
<PAGE>
"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 business on such day. All references to the last day of a
Monthly Period shall refer to the close of business on such day.
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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 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.
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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 $161,911,854.77 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 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;
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(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 16.14%, (2) the weighted average remaining term of
such Receivables will not be more than 67 nor less than 60 months, (3) not
more than 90% of the Aggregate Principal Balance of such Receivables will
represent used Financed Vehicles, (4) not more than 3% of the Aggregate
Principal Balance of such Receivables will be attributable to Receivables
with an Annual Percentage Rate in excess of 21%, (5) 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, (6) not more than 3% of the
Aggregate Principal Balance of such Receivables will represent loans with
original terms greater than 72 months and (7) not more than 2.0% 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;
(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;
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(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
$62,080,545.25; 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 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
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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 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,
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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
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
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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
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
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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 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
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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
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.
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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 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
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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 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
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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 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
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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.
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
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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 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
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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 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
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applicable, or (b) in case of ARFC, to Arcadia Receivables Finance Corp.,
7825 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
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.
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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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SCHEDULE A
SCHEDULE OF INITIAL RECEIVABLES
[Available in transactional files.]
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF 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 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
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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, as applicable, AFL 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 Sale and Servicing
Agreement.
10. COMPUTER TAPE. The Computer Tape made available by AFL to
ARFC, the Owner Trustee and the Indenture 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 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
Financed Vehicle, or copies
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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 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 ARFC; immediately prior
to the conveyance of the Receivables to ARFC pursuant to this Agreement or
any Subsequent Purchase Agreement, as applicable, ARFC or AFL had good and
indefeasible title thereto, free and clear of any Lien, and immediately upon
the transfer thereof, ARFC shall have good and indefeasible title to and will
be the sole owner of each Receivable, free of any Lien. No Dealer has a
participation in, or other right to receive, proceeds of any Receivable. AFL
has not 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 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 ARFC pursuant to this Agreement or any Subsequent Purchase
Agreement, as applicable. Immediately after the sale, transfer and
assignment thereof by ARFC 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
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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 Other Conveyed Property have been made, taken or performed.
20. NO IMPAIRMENT. AFL has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under a Receivable or otherwise to impair the rights of ARFC, the Trust, the
Indenture Trustee, the Security Insurer 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 AFL 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 Cutoff Date or any Subsequent Transfer
Date, as applicable, no Financed Vehicle had been repossessed.
24. INSURANCE. As of the date hereof or as of the date of any
Subsequent Purchase Agreement, 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 relate 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
B-4
<PAGE>
under a policy of Force-Placed Insurance on the Initial Cutoff Date or any
Subsequent Cutoff Date, as applicable.
25. PAST DUE. At the 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
maturity later than February 28, 2006.
28. CERTAIN CHARACTERISTICS. (A) Each Initial Receivable had a
remaining maturity, as of the Initial Cutoff Date, of at least 3 months but
not more than 84 months; (B) each Initial Receivable had an original maturity
of at least 6 months but not more than 84 months; (C) each Initial Receivable
had an original principal balance of at least $3,104.80 and not more than
$50,853.05; (D) each Initial Receivable had a remaining Principal Balance as
of the Initial Cutoff Date of at least $547.78 and not more than $50,853.05;
(E) each Initial Receivable has an Annual Percentage Rate of at least 7.74%
and not more than 23.45%; (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 March
1, 1999; (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) 13.07% 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 86.93% of the Initial Receivables was
attributable to loans for the purchase of used Financed Vehicles; (K) not
more than 2.51% of the Principal Balance of the Initial Receivables as of the
Initial Cutoff Date had an Annual Percentage Rate in excess of 21.00%; (L)
0.03% of such Receivables represented loans in excess of $50,000.00; (M) not
more than 0.31% of the Aggregate Principal Balance of such Receivables
represented loans with original terms greater than 72 months; and (N) not
more than 2.76% 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.
B-5
<PAGE>
FINANCIAL GUARANTY
INSURANCE POLICY
<TABLE>
<S><C>
Obligor: Arcadia Automobile Receivables Trust, 1998-E Policy No.: 50761-N
Obligations: $225,000,000 Automobile Receivables-Backed Notes, as described in Date of Issuance: 12/22/98
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-E
OBLIGATIONS: $64,000,000 5.429% Class A-1 Automobile Receivables-Backed Notes
$100,000,000 5.600% Class A-2 Automobile Receivables-Backed Notes
$61,000,000 5.750% Class A-3 Automobile Receivables-Backed Notes
Policy No.: 50761-N
Date of Issuance: December 22, 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 December 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.
"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
<PAGE>
Policy No. 50761-N Date of Issuance: December 22, 1998
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; 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.
2
<PAGE>
Policy No. 50761-N Date of Issuance: December 22, 1998
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; PROVIDED, HOWEVER,
that by the acceptance of this Policy the Trustee agrees to provide, upon
request by Financial Security, a notice and certificate in respect of any such
payment by Financial Security. 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.
3
<PAGE>
Policy No. 50761-N Date of Issuance: December 22, 1998
5. FISCAL AGENT. At any time during the Term Of This Policy, Financial
Security may 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 - Transaction Oversight
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>
Policy No. 50761-N Date of Issuance: December 22, 1998
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>
Policy No. 50761-N Date of Issuance: December 22, 1998
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-E
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. 50761-N dated December 22, 1998 (the "Policy") issued by
Financial Security in respect of the $64,000,000 5.429% Class A-1 Automobile
Receivables-Backed Notes, the $100,000,000 5.600% Class A-2 Automobile
Receivables-Backed Notes and the $61,000,000 5.750% Class A-3 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.
(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
A-7
<PAGE>
Policy No. 50761-N Date of Issuance: December 22, 1998
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-8
<PAGE>
Policy No. 50761-N Date of Issuance: December 22, 1998
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-9
<PAGE>
[LETTERHEAD]
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 December 11, 1998, and related Prospectus, dated June 10, 1998
(together, the "Prospectus") relating to the offering and sale of $64,000,000
aggregate principal amount of Class A-1 Automobile Receivables-Backed Notes
(the "Class A-1 Notes"), $100,000,000 aggregate principal balance of Class
A-2 Automobile Receivables-Backed Notes (the "Class A-2 Notes") and
$61,000,000 aggregate principal amount of Class A-3 Automobile
Receivables-Backed Notes (the "Class A-3 Notes" and, together with the Class
A-1 Notes and the Class A-2 Notes, the "Notes") to be issued by Arcadia
Automobile Receivables Trust, 1998-E (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
December 1, 1998, between the Trust and Norwest Bank Minnesota, National
Association, as Indenture Trustee and 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"),
<PAGE>
DORSEY & WHITNEY LLP
Arcadia Receivables Finance Corp.
December 22, 1998
Page 2
dated as of December 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 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
<PAGE>
DORSEY & WHITNEY LLP
Arcadia Receivables Finance Corp.
December 22, 1998
Page 3
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.
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.
<PAGE>
DORSEY & WHITNEY LLP
Arcadia Receivables Finance Corp.
December 22, 1998
Page 4
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: December 22, 1998
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
[LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
-------------
We consent to the incorporation by reference in the Prospectus Supplement of
Arcadia Receivables Finance Corp. relating to Arcadia Automobile Receivables
Trust, 1998-E 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
December 15, 1998
