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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _________________
COMMISSION FILE NUMBER 0-26686
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0465087
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
675 BERING DRIVE, SUITE 710
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 977-2600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
SHARES
OUTSTANDING AT
CLASS NOVEMBER 30, 1998
---------- ----------------------
COMMON STOCK-$.001 PAR VALUE 5,566,669
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<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
AND SUBSIDIARIES
FORM 10-Q
OCTOBER 31, 1998
TABLE OF CONTENTS
PAGE NO.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 30, 1998 and
October 31, 1998..................... 3
Consolidated Statements of Operations
for the Three Months
and Six Months Ended October 31, 1997
and 1998............................. 4
Consolidated Statement of
Shareholders' Equity for the Six
Months Ended October 31, 1998........ 5
Consolidated Statements of Cash Flows
for the Six Months Ended
October 31, 1997 and 1998............ 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 13
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..... 22
SIGNATURES................................... 22
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- APRIL 30, 1998 AND OCTOBER 31, 1998
APRIL 30, OCTOBER 31,
1998 1998
--------------- ------------
(UNAUDITED)
ASSETS
----------
Receivables Held for Investment,
net................................ $ 139,598,675 $159,169,248
Receivables Acquired for Investment,
net................................ -- 53,184,766
Investment in Trust Certificates..... -- 13,522,314
Cash and Short-Term Investments,
including restricted cash of
$3,215,540 and $6,834,004.......... 3,698,121 12,381,743
Other Receivables:
Due from servicer............... 10,229,975 12,632,862
Accrued interest................ 2,057,346 2,594,189
Assets Held for Sale................. 1,219,885 1,992,394
Other Assets:
Funds held under reinsurance
agreement..................... 2,016,682 2,155,463
Deferred financing costs and
other, net of accumulated
amortization and depreciation
of $846,250 and $1,204,285.... 1,638,947 4,751,887
Deferred income tax asset,
net........................... 298,235 452,138
Federal income tax receivable... 495,280 --
--------------- ------------
Total assets............... $ 161,253,146 $262,837,004
=============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------
Debt:
Secured credit facilities....... $ 130,813,078 $154,139,443
Unsecured credit facility....... 2,500,000 4,500,000
Acquisition term facility....... -- 74,420,743
Other Liabilities:
Due to dealers.................. 241,988 216,501
Accounts payable and accrued
liabilities................... 2,317,840 3,497,503
Current income taxes payable.... 219,770 198,483
--------------- ------------
Total liabilities.......... 136,092,676 236,972,673
--------------- ------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.001 par value,
10,000,000 shares authorized,
5,566,669 and 5,566,669,
shares issued and
outstanding................... 5,567 5,567
Additional paid-in capital...... 18,464,918 18,464,918
Retained earnings............... 6,689,985 7,393,846
--------------- ------------
Total shareholders'
equity..................... 25,160,470 25,864,331
--------------- ------------
Total liabilities and
shareholders' equity....... $ 161,253,146 $262,837,004
=============== ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------------- ----------------------------
1997 1998 1997 1998
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Interest Income...................... $ 4,951,665 $ 7,258,254 $ 9,804,962 $ 12,916,847
Interest Expense..................... 1,940,003 3,191,169 3,759,268 5,415,639
------------ ------------ ------------ --------------
Net interest income........ 3,011,662 4,067,085 6,045,694 7,501,208
Provision for Credit Losses.......... 628,276 1,200,000 1,339,276 2,150,000
------------ ------------ ------------ --------------
Net Interest Income After Provision
for Credit Losses.................. 2,383,386 2,867,085 4,706,418 5,351,208
------------ ------------ ------------ --------------
Other Income:
Servicing....................... -- 246,005 -- 246,005
Late fees and other............. 126,412 203,322 306,039 362,925
------------ ------------ ------------ --------------
Total other income......... 126,412 449,327 306,039 608,930
------------ ------------ ------------ --------------
Operating Expenses:
Servicing fees.................. 446,997 573,844 873,692 1,079,762
Salaries and benefits........... 609,743 1,129,191 1,265,902 1,985,025
Other........................... 618,744 1,000,971 1,117,373 1,786,909
------------ ------------ ------------ --------------
Total operating expenses... 1,675,484 2,704,006 3,256,967 4,851,696
------------ ------------ ------------ --------------
Income Before Provision for Income
Taxes.............................. 834,314 612,406 1,755,490 1,108,442
------------ ------------ ------------ --------------
Provision for Income Taxes:
Current......................... 211,522 322,735 632,788 558,484
Deferred........................ 93,003 (99,207) 7,966 (153,903)
------------ ------------ ------------ --------------
Total provision for income
taxes.................... 304,525 223,528 640,754 404,581
------------ ------------ ------------ --------------
Net Income........................... $ 529,789 $ 388,878 $ 1,114,736 $ 703,861
============ ============ ============ ==============
Basic and Diluted Net Income per
Common Share....................... $0.10 $0.07 $0.20 $0.13
============ ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Balance, April 30, 1998.............. $5,567 $ 18,464,918 $ 6,689,985 $ 25,160,470
Net income...................... -- -- 703,861 703,861
------- -------------- ------------ --------------
Balance, October 31, 1998............ $5,567 $ 18,464,918 $ 7,393,846 $ 25,864,331
======= ============== ============ ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997 AND 1998
(UNAUDITED)
1997 1998
--------------- ---------------
Cash Flows From Operating Activities:
Net income...................... $ 1,114,736 $ 703,861
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities --
Depreciation and
amortization expense..... 1,125,270 1,561,095
Provision for credit
losses................... 1,339,276 2,150,000
Charge-offs, net of
recoveries............... (1,266,424) (2,036,247)
(Increase) decrease in, net of
effects from the acquisition
of a business:
Accrued interest
receivable............... (138,448) (536,843)
Restricted cash............ 73,884 508,380
Deferred financing costs
and other................ (176,054) (1,076,152)
Funds held under
reinsurance agreement.... 907,474 (138,781)
Due from servicer.......... 1,305,129 (2,402,887)
Deferred income tax asset,
net...................... 7,966 (153,903)
Federal income tax
receivable............... -- 495,280
Increase (decrease) in, net of
effects from the acquisition
of a business:
Due to dealers............. (71,262) (25,487)
Accounts payable and
accrued liabilities...... (919,124) 321,467
Current income taxes
payable.................. (91,168) (21,287)
--------------- ---------------
Net cash provided by
(used in) operating
activities.......... 3,211,255 (651,504)
--------------- ---------------
Cash Flows From Investing Activities:
Purchase of receivables held for
investment.................... (35,214,648) (52,489,514)
Principal payments from
receivables held for
investment.................... 23,825,530 30,806,592
Principal payments from
receivables acquired for
investment.................... -- 1,830,764
Principal payments from trust
certificates.................. -- 2,744,510
Acquisition of a business, net
of cash acquired.............. -- (76,887,410)
Purchase of furniture and
equipment..................... (47,885) (35,387)
--------------- ---------------
Net cash used in
investing
activities.......... (11,437,003) (94,030,445)
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from advances on --
Secured debt............... 29,430,783 47,802,788
Unsecured debt............. -- 6,500,000
Acquisition debt........... -- 75,000,000
Principal payments made on --
Secured Debt............... (22,969,710) (24,476,423)
Unsecured debt............. -- (4,500,000)
Acquisition debt........... -- (579,257)
--------------- ---------------
Net cash provided by
financing
activities.......... 6,461,073 99,747,108
--------------- ---------------
Increase (Decrease) in Cash and
Short-Term Investments............. (1,764,675) 5,065,159
Cash and Short-Term Investments at
Beginning of Period................ 2,416,967 482,580
--------------- ---------------
Cash and Short-Term Investments at
End of Period...................... $ 652,292 $ 5,547,739
=============== ===============
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period
for --
Interest................... $ 3,754,048 $ 4,328,251
Income taxes............... 723,048 84,491
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997 AND 1998
1. THE COMPANY
ORGANIZATION. First Investors Financial Services Group, Inc. (First
Investors) together with its direct and indirect subsidiaries (collectively
referred to as the Company) is principally involved in the business of acquiring
and holding for investment retail installment contracts secured by new and used
automobiles and light trucks (receivables) originated by factory authorized
franchised dealers. As of October 31, 1998, approximately 41 percent of
receivables held for investment were located in Texas. The Company currently
originates loans from dealerships located in 23 states.
On October 2, 1998, the Company completed the acquisition of Auto Lenders
Acceptance Corporation (ALAC) from Fortis, Inc. Headquartered in Atlanta,
Georgia, ALAC is engaged in essentially the same business as the Company and
additionally performs servicing and collection activities on a portfolio of
receivables acquired for investment as well as on a portfolio of receivables
acquired and sold pursuant to two asset securitizations. As a result of the
acquisition, the Company increased the total dollar value of receivables held on
its balance sheet for investment, acquired an interest in certain trust
certificates related to the asset securitizations and acquired certain servicing
rights along with furniture, fixtures, equipment and technology to perform the
servicing and collection functions for the portfolio of receivables under
management. The Company performs servicing and collection functions on loans
originated from 30 states.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of First Investors and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The results for the interim periods are not necessarily indicative of the
results of operations that may be expected for the fiscal year. In the opinion
of management, the information furnished reflects all adjustments which are of a
normal recurring nature and are necessary for a fair presentation of the
Company's financial position as of October 31, 1998, and the results of its
operations for the three months and six months ended October 31, 1997 and 1998,
and its cash flows for the six months ended October 31, 1997 and 1998.
The consolidated financial statements for the interim periods have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information not misleading.
Certain reclassifications have been made to the 1997 amounts to conform
with the 1998 presentation.
RECEIVABLES ACQUIRED FOR INVESTMENT. In connection with loans that were
acquired in a portfolio purchase or in connection with the acquisition
activities of loan originators, the Company estimates the amount and timing of
undiscounted expected future principal and interest cash flows. For certain
purchased loans, the amount paid for a loan reflects the Company's determination
that it is probable the Company will be unable to collect all amounts due
according to the loan's contractual terms. Accordingly, at acquisition, the
Company recognizes the excess of the loan's scheduled contractual principal and
contractual interest payments over its expected cash flows as an amount that
should not be accreted. The remaining
7
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount, representing the excess of the loan's expected cash flows over the
amount paid, is accreted into interest income over the remaining life of the
loan.
Over the life of the loan, the Company continues to estimate expected cash
flows. The Company evaluates whether the present value of any decrease in the
loan's actual or expected cash flows should be recorded as a loss contingency
for the loan. For any material increases, the Company adjusts the amount of
accretable yield by reclassification from nonaccretable difference. The Company
then adjusts the amount of periodic accretion over the loan's remaining life.
INVESTMENT IN TRUST CERTIFICATE. Through the acquisition of ALAC, the
Company obtained interests in two securitizations of automobile receivables.
Automobile receivables were transferred to a trust (ALAC Automobile Receivables
Trust), which issued notes and certificates representing undivided ownership
interests in the trusts. The Company owns trust certificates and interest-only
residuals from each of these trusts which are classified as Investment in Trust
Certificates. Additionally, the Company owns spread accounts held by the trustee
for the benefit of the trust's noteholders. Such amounts are classified as
Restricted Cash.
Trust certificates are interests in the securitized receivables which are
subordinated to the noteholders interests. These certificates represent a credit
enhancement in order for the securitization to achieve a specific rating from
the credit rating agencies.
Interest-only residuals result from excess cash flows of the
securitizations. Interest-only residuals are computed as the differential
between the weighted average interest rate earned on the automobile receivables
securitized and the rate paid to the noteholders and certificateholders, net of
contractual servicing fees to be paid to the Company. The resulting differential
represents an asset in the period in which the automobile receivables are
securitized equal to the present value of estimated future excess interest cash
flows adjusted for anticipated prepayments and losses.
Trust certificates and interest-only residuals are valued as the present
value of expected future cash flows using discount rates that the Company
expects to yield. These discount rates are the result of the purchase price of
the interests and the expected future cash flows. Interests are recorded at
amortized cost. If actual cash flows are less than expected cash flows, the
Company will write down the values of the interests. If actual cash flows exceed
expected cash flows, additional yield will be recognized on a prospective basis.
EARNINGS PER SHARE. Earnings per share amounts are calculated based on net
income available to common shareholders divided by the weighted average number
of common shares outstanding. See Note 6.
3. RECEIVABLES HELD FOR INVESTMENT
Net receivables consisted of the following:
APRIL 30, OCTOBER 31,
1998 1998
--------------- ------------
Receivables.......................... $ 136,445,808 $155,871,135
Unamortized premium and deferred
fees............................... 4,351,412 4,610,411
Allowance for credit losses.......... (1,198,545) (1,312,298)
--------------- ------------
Net receivables................. $ 139,598,675 $159,169,248
=============== ============
8
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At October 31, 1998, the Company had investments in receivables pursuant to
the core program with an aggregate principal balance of $154,939,635.
Activity in the allowance for credit losses for the six months ended
October 31, 1998, was as follows:
Balance, beginning of period......... $ 1,198,545
Provision for credit losses.......... 2,150,000
Charge-offs, net of recoveries....... (2,036,247)
--------------
Balance, end of period............... $ 1,312,298
==============
At October 31, 1998, the Company had investments in receivables pursuant to
the dealer recourse program with an aggregate principal balance of $931,500 and
dealer reserves of $215,621.
4. RECEIVABLES ACQUIRED FOR INVESTMENT
Loans purchased at a discount relating to credit quality were included in
the balance sheet amounts of Receivables Acquired for Investment as follows as
of October 31, 1998:
Contractual payments receivable from
Receivables Acquired for Investment
purchased at a discount relating to
credit quality........................ $ 90,042,146
Nonaccretable difference................ (22,879,052)
Accretable yield........................ (13,978,328)
---------------
Receivables Acquired for Investment
purchased at a discount relating to
credit quality, net................... $ 53,184,766
===============
The carrying amount of Receivables Acquired for Investment are net of
accretable yield and nonaccretable difference. Nonaccretable difference
represents contractual principal and interest payments that the Company has
determined that it would be unable to collect.
ACCRETABLE NONACCRETABLE
YIELD DIFFERENCE
------------ -------------
Balance at July 31, 1998................ $ -- $ --
Additions.......................... 14,804,026 24,680,631
Accretion.......................... (825,698) --
Eliminations....................... -- (1,801,579)
------------ -------------
Balance at October 31, 1998............. $ 13,978,328 $ 22,879,052
============ =============
5. DEBT
Borrowings under the F.I.R.C., Inc. (FIRC) credit facility, First Investors
Auto Receivables Corporation (FIARC) commercial paper facility and First
Investors Auto Capital Corporation (FIACC) commercial paper facility were
$53,900,000, $84,553,421 and $15,686,022, respectively, at October 31, 1998, and
had weighted average interest rates, including the effect of facility fees,
program fees, dealer fees, and hedge instruments, as applicable, of 6.25
percent, 6.23 percent and 5.84 percent, respectively. The effect of the hedge
instrument on the weighted average interest rate is immaterial.
The Company, through its wholly-owned subsidiary, First Investors Financial
Services, Inc. (FIFS), also maintains a $6 million working capital facility with
NationsBank of Texas, N.A. as agent for the banks party thereto. The purpose of
the facility is to support the Company's working capital needs and for other
general corporate purposes. Under the terms of the facility,
9
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company may borrow, repay and reborrow up to the lesser of $6 million or a
borrowing base. The current term of the facility expires on February 5, 1999,
and is renewable at the option of the lenders. In the event that the lenders
elect not to renew, any borrowings outstanding at maturity will be converted to
a term loan which would amortize quarterly in equal increments to fully amortize
the balance within one year from the maturity date. At October 31, 1998, there
was $4,500,000 outstanding borrowings under this facility.
The document governing the working capital facility contains numerous
covenants governing the Company's business, the observance of certain covenants
and other matters. The Company serves as a guarantor of the indebtedness which
is additionally secured by the pledge of the outstanding stock of FIFS and two
of FIFS' primary subsidiaries. Under the terms of the guaranty, the Company is
prohibited from paying dividends to shareholders without the consent of the
banks.
On October 2, 1998, the Company, through its indirect, wholly-owned
subsidiary, FIFS Acquisition Funding Company LLC (FIFS Acquisition), entered
into a $75 million bridge financing facility with Variable Funding Capital
Corporation (VFCC), an affiliate of First Union National Bank, to finance the
Company's acquisition of ALAC. Contemporaneously with the Company's purchase of
ALAC, ALAC transferred certain assets to FIFS Acquisition, consisting primarily
of (i) all receivables owned by ALAC as of the acquisition date, (ii) ALAC's
ownership interest in certain trust certificates and subordinated spread or cash
reserve accounts related to two asset securitizations previously conducted by
ALAC; and, (iii) certain other financial assets, including charged-off accounts
owned by ALAC as of the acquisition date. These assets, along with a $1 million
cash reserve account funded at closing serve as the collateral for the bridge
facility. The facility bears interest at VFCC's commercial paper rate plus 2.35
percent and expires on April 2, 1999. Under the terms of the facility, all cash
collections from the receivables or cash distributions to the certificate holder
under the securitizations are first applied to pay ALAC a servicing fee in the
amount of 3 percent on the outstanding balance of all owned or managed
receivables and then to pay interest on the facility. Excess cash flow available
after servicing fees and interest payments are utilized to reduce the
outstanding principal balance on the indebtedness. In addition, 1 percent of the
servicing fee paid to ALAC is also utilized to reduce principal outstanding on
the indebtedness. Following the repayment of all outstanding indebtedness,
additional terms of the financing contemplate that VFCC will be entitled to a
portion of any remaining cash flow generated by the remaining receivables with
the remaining net cash flow being retained by the Company.
The Company's credit facilities bear interest at floating interest rates
which are reset on a short-term basis whereas its receivables bear interest at
fixed rates which are generally at the maximum rates allowable by law and do not
generally vary with change in interest rates. To manage the risk of fluctuation
in the interest rate environment, the Company enters into interest rate swaps
and caps to lock in what management believes to be an acceptable net interest
spread. However, the Company will be exposed to limited rate fluctuation risk to
the extent it cannot perfectly match the timing of net advances from its credit
facilities and acquisitions of additional interest rate protection agreements.
On October 2, 1998, in connection with the $75 million acquisition
facility, the Company, through FIFS Acquisition, entered into a series of
hedging instruments with First Union National Bank designed to hedge floating
rate borrowings under the acquisition facility against changes in market rates.
Accordingly, the Company entered into two interest rate swap agreements, the
first in the initial notional amount of $50.1 million (Swap A) pursuant to which
the Company's
10
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest rate is fixed at 4.81 percent; and, the second in the initial notional
amount of $24.9 million (Swap B) pursuant to which the Company's interest rate
is fixed at 5.50 percent. The notional amount outstanding under each swap
agreement amortizes based on an implied amortization of the hedged indebtedness.
Swap A has a final maturity of December 30, 2002 while Swap B has a final
maturity of February 20, 2000. The Company also purchased two interest rate caps
which protect the Company and the lender against any material increases in
interest rates which may adversely affect any outstanding indebtedness which is
not fully covered by the aggregate notional amount outstanding under the swaps.
The first cap agreement enables the Company to receive payments from the
counterparty in the event that the one-month commercial paper rate exceeds 4.81
percent on a notional amount that increases initially and then amortizes based
on the expected difference between the outstanding notional amount under Swap A
and the underlying indebtedness. The interest rate cap expires December 20, 2002
and the cost of the cap is amortized in interest expense for the period. The
second cap agreement enables the Company to receive payments from the
counterparty in the event that the one-month commercial paper rate exceeds 6
percent on a notional amount that increases initially and then amortizes based
on the expected difference between the outstanding notional amount under Swap B
and the underlying indebtedness. The interest rate cap expires February 20, 2002
and the cost of the cap is imbedded in the fixed rate applicable to Swap B.
6. EARNINGS PER SHARE
Earnings per share amounts are based on the weighted average number of
shares of common stock and potential dilutive common shares outstanding during
the period. The weighted average number of shares used to compute basic and
diluted earnings per share for the three months and six months ended October 31,
1997 and 1998, are as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
ENDED OCTOBER 31, OCTOBER 31,
------------------------ ------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average shares:
Weighted average shares outstanding
for basic earnings per share....... 5,566,669 5,566,669 5,566,669 5,566,669
Effect of dilutive stock options...... 2,450 -- 1,225 54
----------- ----------- ----------- -----------
Weighted average shares outstanding
for diluted earnings per share..... 5,569,119 5,566,669 5,567,894 5,566,723
=========== =========== =========== ===========
</TABLE>
For the three months and six months ended October 31, 1998, the Company had
138,000 and 137,946, respectively, of stock options which were not included in
the computation of diluted earnings per share because to do so would have been
antidilutive for the period presented.
7. BUSINESS COMBINATIONS
On October 2, 1998, the Company acquired all of the outstanding stock of
ALAC, a Delaware corporation and wholly-owned subsidiary of Fortis, Inc., for an
approximate purchase price of $74.8 million. ALAC's principal business activity
is the purchasing and servicing of retail automobile sales contracts. The
transaction was treated as a purchase for accounting purposes and results of
operations are included in the financial statements beginning on October 2,
1998. The book value of the assets exceeded the purchase price by $8.5 million
and as such a discount has been recorded in the Receivables Acquired for
Investment. The resulting discount, net of expenses, is being accreted over the
remaining life of the portfolio. The allocation of the purchase price is based
on preliminary estimates of fair values and may be revised at a later date.
11
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the acquisition, liabilities were assumed as follows:
Receivables acquired for
investment........................... $ 55,015,531
Investment in trust certificates..... 16,266,824
Fixed assets and other............... 7,463,251
Cash paid, net of cash acquired...... (76,887,410)
---------------
Liabilities assumed.................. $ 1,858,196
===============
The following unaudited pro forma summary presents information as if the
acquisition had occurred at the beginning of each fiscal year. The pro forma
information is provided for information purposes only. It is based on historical
information and does not necessarily reflect the actual results that would have
occurred nor is it necessarily indicative of future results of operations of the
combined business. In preparing the pro forma data, adjustments have been made
to (a) increase the yield on Receivables Acquired for Investment based on
discounted purchase price, (b) increase interest expense for the financing of
the acquisition, (c) eliminate intercompany costs, (d) eliminate costs incurred
in preparation of the sale of ALAC and (e) adjust the federal and state income
tax provisions based on the combined operations.
FOR THE SIX MONTHS ENDED OCTOBER
31,
--------------------------------
1998 1997
--------------- ---------------
(UNAUDITED) (UNAUDITED)
Interest Income......................... $ 25,561,595 $ 24,640,581
Net Loss................................ $ (464,758) $ (399,850)
Basic and Diluted Net Loss per common
share................................. $ (0.08) $ (0.07)
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Net income for the three months ended October 31, 1998, was $388,878, a
decrease of 27% from that reported for the comparable period in the preceding
year of $529,789. Net income for the six months ended October 31, 1998, was
$703,861, a decrease of 37% from that reported for the comparable period in the
preceding year of $1,114,736. Earnings per common share was $0.07 for the three
months ended October 31, 1998, compared to $0.10 per common share for the prior
period. Earnings per common share was $0.13 for the six months ended October 31,
1998, compared to $0.20 per common share for the prior period.
NET INTEREST INCOME
The continued profitability of the Company during these periods has been
achieved by the growth of the receivables portfolio and effective management of
net interest income. The following table summarizes the Company's growth in
receivables and net interest income (dollars in thousands):
AS OF OR FOR THE
SIX MONTHS ENDED
OCTOBER 31,
----------------------
1997 1998
---------- ----------
Receivables Held for Investment:
Number.......................... 11,338 14,089
Principal balance............... $ 123,299 $ 155,871
Average principal balance of
receivables outstanding during
the six month period.......... 119,796 144,014
Average principal balance of
receivables outstanding during
the three month period........ 121,898 148,337
Receivables Acquired for Investment:
Number.......................... -- 5,877
Principal balance............... -- $ 63,990
Receivables Managed:(1)
Number.......................... -- 7,729
Principal balance............... -- $ 77,283
- ------------
(1) Represents receivables previously owned by ALAC which were sold in
connection with two asset securitizations and on which the Company retains
the servicing rights to those receivables.
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------- --------------------
1997 1998(2) 1997 1998(2)
--------- --------- --------- ---------
Interest income(1)............. $ 4,952 $ 7,258 $ 9,805 $ 12,917
Interest expense............... 1,940 3,191 3,759 5,416
--------- --------- --------- ---------
Net interest income....... $ 3,012 $ 4,067 $ 6,046 $ 7,501
========= ========= ========= =========
- ------------
(1) Amounts shown are net of amortization of premium and deferred fees.
(2) The Receivables Acquired for Investment contributed $1,173 to interest
income, $798 to interest expense and $375 to net interest income to the
results for the three months and six months period.
13
<PAGE>
The following table sets forth information with regard to the Company's net
interest spread, which represents the difference between the effective yield on
receivables and the Company's average cost of debt, and its net interest margin
(averages based on month-end balances):
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------- --------------------
1997 1998 1997 1998
--------- --------- --------- ---------
Receivables Held for Investment:
Effective yield on
receivables(1)............. 16.2% 16.4% 16.4% 16.3%
Average cost of debt(2)...... 6.5 6.7 6.5 6.6
--------- --------- --------- ---------
Net interest spread(3)....... 9.7% 9.7% 9.9% 9.7%
========= ========= ========= =========
Net interest margin(4)....... 9.9% 10.0% 10.1% 9.9%
========= ========= ========= =========
- ------------
(1) Represents interest income as a percentage of average receivables
outstanding.
(2) Represents interest expense as a percentage of average debt outstanding.
(3) Represents yield on receivables less average cost of debt.
(4) Represents net interest income as a percentage of average receivables
outstanding.
Net interest income is the difference between interest earned from the
receivables portfolio and interest expense incurred on the credit facilities
used to acquire the receivables. Net interest income increased for the three
months and six months ended October 31, 1998 to $4.1 and $7.5 million from $3.0
and $6.0 million for the comparable periods in the preceding year. Net interest
income in 1998 represents increases of 35% and 24% from the same periods in
1997.
Changes in the principal amount and rate components associated with the
receivables and debt can be segregated to analyze the periodic changes in net
interest income. The following table analyzes the changes attributable to the
principal amount and rate components of net interest income (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, 1997 TO 1998 OCTOBER 31, 1997 TO 1998
--------------------------------- ---------------------------------
INCREASE DUE TO INCREASE DUE TO
CHANGE IN CHANGE IN
-------------------- --------------------
AVERAGE AVERAGE
PRINCIPAL AVERAGE TOTAL NET PRINCIPAL AVERAGE TOTAL NET
AMOUNT RATE INCREASE AMOUNT RATE INCREASE
--------- ------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Receivables Held for Investment:
Interest income................. $ 1,074 $ 59 $ 1,133 $ 1,982 $ (44 ) $ 1,938
Interest expense................ 413 40 453 734 124 858
--------- ------- --------- --------- ------- ---------
Net interest income............. $ 661 $ 19 $ 680 $ 1,248 $ (168 ) $ 1,080
========= ======= ========= ========= ======= =========
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1998 AND 1997 (DOLLARS IN
THOUSANDS)
INTEREST INCOME Interest income for the 1998 periods increased to $7,258
and $12,917 compared with $4,952 and $9,805 for the comparable periods in 1997
which reflects an increase of 47% and 32%. The increase in interest income is
due to (i) an increase in the average principal balance of receivables held for
investment of 22% and 20% from the 1997 to 1998 comparable periods; and, (ii)
the contribution to interest income made by the receivables acquired for
investment and the trust certificates acquired pursuant to the ALAC acquisition.
In addition, the interest income during the three month period was positively
influenced by a .2% increase in the effective yield. During the six month
period, the effective yield declined by .1%, which partially offset the increase
in average receivables held for investment. Management attributes the
14
<PAGE>
increase in yield during the three month period to a decrease in the percentage
of receivables on which rate participation is paid to dealers as incentive to
utilize the Company's financing programs.
INTEREST EXPENSE. Interest expense in 1998 increased to $3,191 and $5,416
as compared to $1,940 and $3,759 in 1997. The increase of 64% and 44% was due to
(i) an increse of 21% and 20% in the weighted average borrowings outstanding
under secured credit facilities; and, (ii) interest expense associated with the
$75 million acquisition facility including projected deferred financing costs
related to the excess cash flow sharing arrangement with VFCC. Weighted average
cost of debt for secured credit facilities increased .2% and .1% for the three
and six month periods and a result of a higher level of facility utilization.
NET INTEREST INCOME. Net interest income increased to $4,067 and $7,501, an
increase of 35% and 24%. The increase resulted primarily from (i) the growth in
receivables held for investment and, (ii) contributions to interest income from
the receivables acquired for investment and trust certificates. In addition,
during the three month period, an increase in effective yield on receivables
held for investment offset the increase in the average cost of debt, thereby
maintaining a net interest spread of 9.7% over the 1998 and 1997 periods. During
the six month period, a combination of a .1% decline in effective yield and an
increase in the average cost of debt resulted in a .2% decline in net interest
spread.
PROVISION FOR CREDIT LOSSES. The provision for credit losses for 1998
increased to $1,200 and $2,150 as compared to $628 and $1,339 in 1997. The
increase was the result of the growth of the Company's Receivables Held for
Investment portfolio and the related increase in net charge-offs.
SERVICING INCOME. Represents servicing income received on loan receivables
previously sold by ALAC in connection with two asset securitization
transactions. Under these transactions, ALAC, as servicer, is entitled to
receive a fee of 3% on the outstanding balance of the principal balance of
securitized receivables plus reimbursement for certain costs and expenses
incurred as a result of its collection activities. Under the terms of the
securitizations, the servicer may be removed upon breach of its obligations
under the servicing agreements, the deterioration of the underlying receivables
portfolios in violation of certain performance triggers or the deteriorating
financial condition of the servicer. For the period from October 2, 1998 to
October 31, 1998, servicing income totaled $246.
LATE FEES AND OTHER INCOME. Late fees and other income increased to $203
and $363 in 1998 from $126 and $306 in 1997 which primarily represents late fees
collected from customers on past due accounts and interest income earned on
short-term marketable securities and money market instruments.
SERVICING FEE EXPENSES. Servicing fee expenses increased to $574 and
$1,080 in 1998 from $447 and $874 in 1997. Since these costs vary with the
volume of receivables serviced, this increase was primarily attributable to the
growth in the number of receivables serviced in the Receivables Held for
Investment portfolio, which increased by 2,751 from 1997 to 1998.
SALARIES AND BENEFIT EXPENSES. Salaries and benefit costs increased to
$1,129 and $1,985 in 1998 from $610 and $1,266 in 1997. The increase is a result
of (i) expansion of the Company's operation as a result of an increase in its
receivables portfolio and expansion of its geographic territory; and, (ii) an
increase in staffing levels as a result of the acquisition of ALAC. As of
October 31, the Company had 139 employees as compared to 66 as of April 30,
1998.
OTHER EXPENSES. Other expenses increased to $1,001 and $1,787 in 1998 from
$619 and $1,117 in 1997. The increase is a result of (i) an expansion of the
Company's asset base and an increase in the volume of applications for credit
processed by the Company in the 1998 period versus the comparable period; and,
(ii) operating costs associated with the acquired company which were not
applicable to the prior year period.
15
<PAGE>
INCOME BEFORE PROVISION FOR INCOME TAXES. During 1998, income before
provision for income taxes decreased to $612 and $1,108 or 27% and 37% from the
comparable period in 1997. This change was a result of the increase in net
interest income after provision for credit losses of $484 and $645 offset by an
increase in operating expenses of $1,029 and $1,595.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH FLOWS. The Company's business requires
significant cash flow to support its operating activities. The principal cash
requirements include (i) amounts necessary to acquire receivables from dealers
and fund required reserve accounts, (ii) amounts necessary to fund premiums for
credit enhancement insurance, and (iii) amounts necessary to fund costs to
retain receivables, primarily interest expense and servicing fees. The Company
also requires a significant amount of cash flow for working capital to fund
fixed operating expenses, primarily salaries and benefits.
The Company's most significant cash flow requirement is the acquisition of
receivables from dealers. The Company funds the purchase price of the
receivables through the use of a $55 million warehouse credit facility provided
to F.I.R.C., Inc. ("FIRC") a wholly-owned special purpose financing subsidiary
of the Company. The current FIRC credit facility generally permits the Company
to draw advances up to the outstanding principal balance of qualified
receivables. The Company paid $30.1 million and $52.5 million for receivables
acquired for the three months and six months ended October 31, 1998, compared to
$16.9 million and $35.2 million paid in the comparable 1997 periods. Receivables
that have accumulated in the FIRC credit facility may be transferred to a
commercial paper conduit facility at the option of the Company. The commercial
paper facility provides additional liquidity of up to $105 million to fund the
Company's investment in the receivables portfolio. Credit enhancement for the
warehouse lenders is provided by an Auto Loan Protection ("ALPI") policy
issued by National Union Fire Insurance Company of Pittsburgh and reinsured by
the Company's captive insurance subsidiary.
The Company utilizes a $105 million commercial paper conduit financing
through Enterprise Funding Corporation, a commercial paper conduit administered
by NationsBank, N.A. as its primary source of permanent financing for
receivables held for investment. The financing was provided to a
special-purpose, wholly-owned subsidiary of the Company, First Investors Auto
Receivables Corporation ("FIARC"). Credit enhancement for the $105 million
facility is provided to the commercial paper investors by a surety bond issued
by MBIA Insurance Corporation.
Receivables originally purchased by the Company are financed with
borrowings under the FIRC credit facility. Once a sufficient amount of
receivables have been accumulated, the receivables are transferred from FIRC to
FIARC with advances under the FIARC commercial paper facility used to repay
borrowings under the FIRC credit facility. Once receivables are transferred to
the FIARC subsidiary and pledged as collateral for commercial paper borrowings,
the ALPI policy with respect to the transferred receivables is cancelled with
any unearned premiums returned to FIRC. FIARC may borrow up to 90% of the face
amount of the receivables being transferred. In addition, a cash reserve equal
to 1% of the outstanding borrowings under the FIARC commercial paper facility
must be maintained in a reserve account for the benefit of the creditors and
surety bond provider.
The current term of the FIRC credit facility expires on April 15, 1999, at
which time the outstanding balance will be payable in full, subject to certain
notification provisions allowing the Company a period of six months in order to
endeavor to refinance the facility in the event of termination. The term of the
facility has been extended on eight occasions since its inception in October
1992. The FIARC commercial paper facility was provided for a term of one year
and has been extended to February 18, 1999. If the facility was not extended,
receivables pledged as collateral would be allowed to amortize; however, no new
receivables would be allowed to be transferred from the FIRC credit facility.
Management considers its relationship with all of the
16
<PAGE>
Company's lenders to be satisfactory and has no reason to believe either the
FIRC credit facility or the FIARC commercial paper facility will not be renewed.
On January 1, 1998, the Company entered into a $25 million commercial paper
conduit financing through Variable Funding Capital Corporation ("VFCC"), a
commercial paper conduit administered by First Union National Bank. The
financing was provided to a special-purpose, wholly-owned subsidiary of the
Company, First Investors Auto Capital Corporation ("FIACC") to fund the
acquisition of additional receivables generated under certain of the Company's
financing programs.
FIACC acquires receivables from the Company and may borrow up to 88% of the
face amount of receivables which are pledged as collateral for the commercial
paper borrowings. In addition, a cash reserve equal to 2% of the outstanding
borrowings under the FIACC commercial paper facility must be maintained in a
reserve account for the benefit of the creditors.
The initial term of the FIACC commercial paper facility expires on December
31, 1998. If the facility was not extended, receivables pledged as collateral
would be allowed to amortize; however, no new receivables could be transferred
to the facility.
Substantially all of the Company's receivables are pledged to collateralize
the credit facilities.
In addition to the $185 million in currently available debt facilities
utilized to fund the acquisition of receivables, the Company also maintains a $6
million working capital line of credit to be used for working capital and
general corporate purposes. The facility expires on February 5, 1999. If the
lenders elect not to renew, any outstandings will be amortized over a one year
period. There was $4.5 million outstanding under this facility at October 31,
1998.
On October 2, 1998, the Company, through its indirect, wholly-owned
subsidiary, FIFS Acquisition Funding Company LLC (FIFS Acquisition), entered
into a $75 million bridge financing facility with Variable Funding Capital
Corporation (VFCC), an affiliate of First Union National Bank, to finance the
Company's acquisition of ALAC. Contemporaneously with the Company's purchase of
ALAC, ALAC transferred certain assets to FIFS Acquisition, consisting primarily
of (i) all receivables owned by ALAC as of the acquisition date, (ii) ALAC's
ownership interest in certain trust certificates and subordinated spread or cash
reserve accounts related to two asset securitizations previously conducted by
ALAC; and, (iii) certain other financial assets, including charged-off accounts
owned by ALAC as of the acquisition date. These assets, along with a $1 million
cash reserve account funded at closing serve as the collateral for the bridge
facility. The facility bears interest at VFCC's commercial paper rate plus 2.35%
and expires on April 2, 1999. Under the terms of the facility, all cash
collections from the receivables or cash distributions to the certificate holder
under the securitizations are first applied to pay ALAC a servicing fee in the
amount of 3% on the outstanding balance of all owned or managed receivables and
then to pay interest on the facility. Excess cash flow available after servicing
fees and interest payments are utilized to reduce the outstanding principal
balance on the indebtedness. In addition, 1% of the servicing fee paid to ALAC
is also utilized to reduce principal outstanding on the indebtedness. Following
the repayment of all outstanding indebtedness, additional terms of the financing
contemplate that VFCC will be entitled to a portion of any remaining cash flow
generated by the remaining receivables with the remaining net cash flow being
retained by the Company.
The Company's most significant source of cash flow is the principal and
interest payments received from the receivables portfolios. The Company received
such payments in the amount of $41.9 million and $35.8 million for the six
months ended October 31, 1998 and 1997, respectively. Such cash flow funds
repayment of amounts borrowed under the FIRC credit and commercial paper
facilities and other holding costs, primarily interest expense and servicing and
17
<PAGE>
custodial fees. During the six months ended, the Company required net cash flow
of $21.7 million in 1998 and $11.4 million in 1997 (cash required to acquire
receivables net of principal payments on receivables) to fund the growth of its
receivables portfolio.
INTEREST RATE MANAGEMENT. The Company's credit facilities bear interest at
floating interest rates which are reset on a short-term basis whereas its
receivables bear interest at fixed rates which are generally at the maximum
rates allowable by law and do not generally vary with changes in interest rates.
To manage the risk of fluctuation in the interest rate environment, the Company
enters into interest rate swaps and caps with notional principal amounts which
approximate the balance of its debt outstanding to lock in what management
believes to be an acceptable net interest spread. However, the Company will be
exposed to limited rate fluctuation risk to the extent it cannot perfectly match
the timing of net advances from its credit facilities and acquisitions of
additional interest rate protection agreements. As of October 31, 1998 the
Company was party to a swap agreement with NationsBank of Texas, N.A. pursuant
to which the Company's interest rate is fixed at 5.565% on a notional amount of
$120 million. The swap agreement expires on January 12, 2000 and may be extended
to January 14, 2002 at the option of NationsBank. This swap was entered into on
January 12, 1998 and replaced three existing swaps having an aggregate notional
amount of $120 million and fixing the Company's weighted average interest rate
at 5.63%. Two of these swap agreements having a notional amount of $90 million
were set to expire in September, 1998; while the remaining swap, having a
notional amount of $30 million, was scheduled to expire in October, 1998. The
expiration of each swap could have been extended for an additional two years
from the initial expiration date at the option of NationsBank.
On October 2, 1998, in connection with the $75 million acquisition
facility, the Company, through FIFS Acquisition, entered into a series of
hedging instruments with First Union National Bank designed to hedge floating
rate borrowings under the acquisition facility against changes in market rates.
Accordingly, the Company entered into two interest rate swap agreements, the
first in the initial notional amount of $50.1 million (Swap A) pursuant to which
the Company's interest rate is fixed at 4.81%; and, the second in the initial
notional amount of $24.9 million (Swap B) pursuant to which the Company's
interest rate is fixed at 5.50%. The notional amount outstanding under each swap
agreement amortizes based on an implied amortization of the hedged indebtedness.
Swap A has a final maturity of December 20, 2002 while Swap B has a final
maturity of February 20, 2000. The Company also purchased two interest rate caps
which protect the Company and the lender against any material increases in
interest rates which may adversely affect any outstanding indebtedness which is
not fully covered by the aggregate notional amount outstanding under the swaps.
The first cap agreement enables the Company to receive payments from the
counterparty in the event that the one-month commercial paper rate exceeds 4.81%
on a notional amount that increases initially and then amortizes based on the
expected difference between the outstanding notional amount under Swap A and the
underlying indebtedness. The interest rate cap expires December 20, 2002 and the
cost of the cap is amortized in interest expense for the period. The second cap
agreement enables the Company to receive payments from the counterparty in the
event that the one-month commercial paper rate exceeds 6% on a notional amount
that increases initially and then amortizes based on the expected difference
between the outstanding notional amount under Swap B and the underlying
indebtedness. The interest rate cap expires February 20, 2002 and the cost of
the cap is imbedded in the fixed rate applicable to Swap B.
DELINQUENCY AND CREDIT LOSS EXPERIENCE
The Company's results of operations, financial condition and liquidity may
be adversely affected by nonperforming receivables. The Company seeks to manage
its risk of credit loss through (i) prudent credit evaluations and effective
collection procedures, (ii) providing recourse to dealers under its
participating program for a period of time and thereafter secured by cash
18
<PAGE>
reserves in the event of losses and (iii) insurance against certain losses from
independent third party insurers. As a result of its recourse programs and third
party insurance, the Company is not exposed to credit losses on its entire
receivables portfolio. The following table summarizes the credit loss exposure
of the Company (dollars in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------------------------------
1997 1998
--------------------- ---------------------
RECEIVABLES RESERVE RECEIVABLES RESERVE
BALANCE BALANCE BALANCE BALANCE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Receivables Held for Investment:
Core Program:
Insured by third party
insurer....................... $ 1,202 $ -- $ 333 $ --
Other receivables(1)............ 119,518 1,255 (3) 154,607 1,312 (3)
Participating Program(2)............. 2,579 267 (4) 931 216 (4)
----------- -----------
$ 123,299 $ 155,871
=========== ===========
Allowance for credit losses as a
percentage of other
receivables(1)..................... 1.1 % 0.9 %
Dealer reserves as a percentage of
participating program
receivables........................ 10.4 % 23.1 %
</TABLE>
- ------------
(1) Represents receivables reinsured by Company's insurance affiliate or
receivables on which no credit loss insurance exists.
(2) The dealer retains credit risk for a period of time. When the dealer's
participation is terminated, a portion of the reserve account is released to
the dealer and the balance is retained to fund credit losses until all
receivables are paid in full.
(3) Represents the balance of the Company's allowance for credit losses.
(4) Represents the balance of the dealer reserve accounts.
With respect to Receivables Acquired for Investment, the Company has
established a nonaccretable loss reserve to cover expected losses over the
remaining life of the receivables. As of October 31, 1998, the nonaccretable
loss reserve as a percentage of Receivables Acquired for Investment was 25.4%.
The nonaccretable portion represents, at acquisition, the excess of the loan's
scheduled contractual principal and contractual interest payments over its
expected cash flows.
The Company considers a loan to be delinquent when the borrower fails to
make a scheduled payment of principal and interest. Accrual of interest is
suspended when the payment from the borrower is over 60 days past due.
Generally, repossession procedures are initiated 60 to 90 days after the payment
default.
Under the core program, the Company retains the credit risk associated with
the receivables acquired. The Company purchases credit enhancement insurance
from third party insurers which covers the risk of loss upon default and certain
other risks. Until March 1994, such insurance absorbed substantially all credit
losses. In April 1994, the Company established a captive insurance subsidiary to
reinsure certain risks under the credit enhancement insurance coverage for all
receivables acquired in March 1994 and thereafter. In addition, receivables
financed under the FIARC and FIACC commercial paper facilities do not carry
default insurance. A provision for credit losses of $1,200,000 and $2,150,000
has been recorded for the three months and six months ended October 31, 1998,
for losses on receivables which are either uninsured or which are reinsured by
the Company's captive insurance subsidiary.
The allowance for credit losses represents management's estimate of losses
for receivables that may become uncollectable. In making this estimate,
management analyzes portfolio characteristics in the light of its underwriting
criteria, delinquency and repossession statistics, historical loss experience,
and size, quality and concentration of the receivables, as well as external
factors
19
<PAGE>
such as future economic outlooks. The allowance for credit losses is based on
estimates and qualitative evaluations and ultimate losses will vary from current
estimates. These estimates are reviewed periodically and as adjustments, either
positive or negative, become necessary, are reported in earnings in the period
they become known.
The following table summarizes the status and collection experience of
receivables by the Company (dollars in thousands):
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX MONTHS ENDED OCTOBER 31,
----------------------------------------------------
1997 1998
----------------------- -----------------------
NUMBER NUMBER
OF LOANS AMOUNT(1) OF LOANS AMOUNT(1)
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Receivables Held for Investment:
Delinquent amount outstanding:
30 - 59 days.................... 247 $ 3,557 255 $ 3,363
60 - 89 days.................... 79 1,229 57 932
90 days or more................. 129 1,932 100 1,501
--- --------- --- ---------
Total delinquencies.................. 455 $ 6,718 412 $ 5,796
=== ========= === =========
Total delinquencies as a percentage
of outstanding receivables......... 3.8% 3.9% 2.7% 2.6%
Net charge-offs as a percentage of
average receivables outstanding
during the
period(2)(3)....................... -- 2.2% -- 2.8%
</TABLE>
- ------------
(1) Amounts of delinquent receivables outstanding and total delinquencies as a
percent of outstanding receivables are based on gross receivables balances,
which include principal outstanding plus unearned interest income.
(2) Does not give effect to reimbursements under the Company's credit
enhancement insurance policies with respect to charged-off receivables. The
Company recognized no charge-offs prior to March 1994 since all credit
losses were reimbursed by third-party insurers. Subsequent to that time the
primary coverage has been reinsured by an affiliate of the Company under
arrangements whereby the Company bears the entire risk of credit losses, and
charge-offs have accordingly been recognized.
(3) The percentages have been annualized and are not necessarily indicative of
the results for a full year.
The total number of delinquent accounts (30 days or more) as a percentage
of the number of outstanding receivables for the Company's portfolio of
Receivables Acquired for Investment was 4.0% as of October 31, 1998.
YEAR 2000 ISSUE
The "Year 2000" issues involves computer programs and applications that
were written using two digits (instead of four) to describe the applicable year.
As the century date approaches, date-sensitive systems may recognize the Year
2000 as the year 1900, or not at all. The inability to recognize or properly
treat the Year 2000 may cause systems to process critical financial and
operational information incorrectly. Failure to successfully modify such
programs and applications to be Year 2000 compliant may have a material adverse
impact on the Company. Exposure arises not only from potential consequences
(e.g., business interruption) of certain of the Company's own applications not
being Year 2000 compliant, but also from non-compliance by significant
customers, vendors or other significant parties the Company does business with
(counterparties). Management has made inquiries of the software vendors of the
major applications the Company uses in-house and has received assertions, and in
some cases contractual representations, from each that such programs are
currently Year 2000 compliant. Management has also made inquiries of significant
counterparties with which the Company does business as to
20
<PAGE>
their state of readiness in addressing the Year 2000 issue. In the case of the
Company, these counterparties consist primarily of (i) a group of financial
institutions upon which the Company relies on for receipt and distribution of
cash collections on its receivables portfolios and certain other cash management
and treasury functions; and, (ii) GE Capital, which serves as servicing and
collection agent on the Company's portfolio of receivables held for investment.
At present, the Company does not believe these counterparties to be Year 2000
compliant, but has received assurances from each that significant resources have
been dedicated to insuring that their systems will be modified or replaced prior
to the Year 2000 in order to address any exposure areas. There can be no
assurance, however, that such systems are or will be Year 2000 compliant or that
such counterparties would not have a material adverse affect from other systems
upon which they rely. The Company's contingency plans regarding the Year 2000
issue include continuing to communicate with its significant counterparties and
software vendors and assessing the potential impact upon the Company of the Year
2000 issue in the event that the counterparties' operations are adversely
affected and taking the necessary steps as deemed appropriate to successfully
address any exposure areas. In addition, the Company intends to test its most
critical applications to assure Year 2000 readiness beyond the assurances given
by the software vendors. For each primary counterparty upon which the Company
relies, there are alternative providers of such services in the marketplace
including, in certain instances, the capability for the Company to perform those
functions in-house on systems that are Year 2000 compliant. At this point,
management does not believe that the cost to the Company to address any Year
2000 issue is material in that the majority of the compliance cost will be the
responsibility of its significant counterparties.
FORWARD LOOKING INFORMATION
Statements and financial discussion and anlysis included in this report
that are not historical are considered to be forward-looking in nature.
Forward-looking statements involve a number of risks and uncertainties that may
cause actual results to differ materially from anticipated results. Specific
factors that could cause such differences include unexpected fluctuations in
market interest rates; changes in economic conditions; or increases or changes
in the competition for loans. Although the Company believes that the
expectations reflected in the forward-looking statements presented herein are
reasonable, it can give no assurance that such expectations will prove to be
correct.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 10.51 -- Loan and Security Agreement dated as of October 2, 1998
between Variable Funding Capital Corporation, Auto Lenders
Acceptance Corporation, ALAC Receivables Corp. and FIFS
Acquisition Funding Company, L.L.C.
10.52 -- Custodial Agreement dated as of October 2, 1998 among
Variable Funding Capital Corporation, Norwest Bank
Minnesota, NA, and Auto Lenders Acceptance Corporation.
10.53 -- Contract Purchase Agreement dated as of October 2, 1998 by
and between Auto Lenders Acceptance Corporation and FIFS
Acquisition Funding Company, L.L.C.
10.54 -- NIM Collateral Purchase Agreement dated as of
October 2, 1998 by and between Auto Lenders Acceptance
Corporation, ALAC Receivables Corporation and FIFS
Acquisition Funding Company, L.L.C.
(b) Current Report on Form 8-K dated October 2, 1998, reporting the Company's
acquisition of all of the outstanding common stock of Auto Lenders
Acceptance Corporation, was filed on October 19, 1998. Amendment No. 1 to
Current Report on Form 8-K was filed on December 14, 1998.
SIGNATURES
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 thereunto duly authorized.
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
(Registrant)
Date: December 15, 1998 By: /s/ TOMMY A. MOORE, JR.
TOMMY A. MOORE, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: December 15, 1998 By: /s/ BENNIE H. DUCK
BENNIE H. DUCK
SECRETARY, TREASURER AND CHIEF FINANCIAL OFFICER
22
EXHIBIT 10.51
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- ------------------------------------------------------------------------------
EXECUTION COPY
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VARIABLE FUNDING CAPITAL CORPORATION,
as Lender
LOAN AND SECURITY AGREEMENT
dated as of October 2, 1998
AUTO LENDERS ACCEPTANCE CORPORATION,
as Servicer and a Seller
ALAC RECEIVABLES CORP.
as a Seller
FIFS ACQUISITION FUNDING COMPANY, L.L.C.,
as Borrower
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I....................................................................1
DEFINITIONS..................................................................1
SECTION 1.1 DEFINITIONS......................................................1
ARTICLE II..................................................................16
THE TERM LOAN...............................................................16
SECTION 2.1 THE TERM LOAN...................................................16
SECTION 2.2 USE OF PROCEEDS.................................................16
SECTION 2.3 TERM LOAN ACCOUNT...............................................16
SECTION 2.4 CONDITIONS PRECEDENT TO MAKING OF THE TERM LOAN.................17
ARTICLE III.................................................................17
INTEREST RATE...............................................................17
SECTION 3.1 INTEREST RATE...................................................17
SECTION 3.2 INTEREST PERIODS................................................17
SECTION 3.3 DEFAULT RATE....................................................17
SECTION 3.4 CALCULATION.....................................................18
SECTION 3.5 NOTE............................................................18
SECTION 3.6 BREAKAGE COSTS..................................................18
SECTION 3.7 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY...................18
SECTION 3.8 TAXES...........................................................20
ARTICLE IV..................................................................21
PAYMENTS AND FEES AND COLLECTION ACCOUNT....................................21
SECTION 4.1 THE COLLECTION ACCOUNT..........................................21
SECTION 4.2 INTEREST PAYMENTS ON THE TERM LOAN..............................22
SECTION 4.3 [RESERVED]......................................................22
SECTION 4.4 COLLECTIONS.....................................................22
SECTION 4.5 DISTRIBUTIONS FROM COLLECTION ACCOUNT...........................22
SECTION 4.6 PREPAYMENTS.....................................................23
SECTION 4.7 [RESERVED]......................................................24
SECTION 4.8 PAYMENT METHOD..................................................24
SECTION 4.9 FRAUDULENT OR PREFERENTIAL PAYMENTS.............................24
SECTION 4.10 LENDER'S RECORDS...............................................24
SECTION 4.11 RESERVE ACCOUNT................................................24
ARTICLE V...................................................................25
SECURITY....................................................................25
SECTION 5.1 SECURITY FOR INDEBTEDNESS.......................................25
SECTION 5.2 COMPUTER RECORDS; REMEDIES......................................26
SECTION 5.3 RELEASE OF LIENS................................................26
ARTICLE VI..................................................................27
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REPRESENTATIONS AND WARRANTIES..............................................27
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER..................27
SECTION 6.2 REPRESENTATIONS AND WARRANTIES RELATING TO THE CONTRACTS........30
SECTION 6.3 PURCHASE OF CONTRACTS UPON BREACH...............................33
SECTION 6.4 REPRESENTATIONS AND WARRANTIES OF THE SERVICER..................33
ARTICLE VII.................................................................34
COVENANTS...................................................................34
SECTION 7.1 COVENANTS OF THE BORROWER.......................................34
SECTION 7.2 YEAR 2000 COMPATIBILITY.........................................38
ARTICLE VIII................................................................38
ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS........................38
SECTION 8.1 [RESERVED]......................................................38
SECTION 8.2 QUARTERLY STATEMENTS............................................38
SECTION 8.3 MONTHLY REPORT..................................................39
SECTION 8.4 REQUESTED INFORMATION...........................................39
ARTICLE IX..................................................................39
SERVICING...................................................................39
SECTION 9.1 DUTIES OF SERVICER..............................................39
SECTION 9.2 COLLECTION OF CONTRACT PAYMENT..................................40
SECTION 9.3 POSSESSION OF CONTRACT FILES....................................40
SECTION 9.4 REALIZATION UPON CONTRACTS......................................41
SECTION 9.5 MAINTENANCE OF PHYSICAL DAMAGE INSURANCE POLICIES...............41
SECTION 9.6 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES..........41
SECTION 9.7 COVENANTS OF SERVICER...........................................42
SECTION 9.8 PURCHASE OF CONTRACTS UPON BREACH...............................42
SECTION 9.9 ANNUAL STATEMENT AS TO COMPLIANCE...............................42
SECTION 9.10 ANNUAL ACCOUNTANTS' REPORT.....................................43
SECTION 9.11 AMENDMENTS TO CONTRACT LIST....................................43
SECTION 9.12 LOAN SERVICING FEE.............................................43
SECTION 9.13 SUBSERVICERS...................................................43
SECTION 9.14 SERVICER TERMINATION EVENTS....................................43
SECTION 9.15 YEAR 2000 COMPATIBILITY........................................44
ARTICLE X...................................................................45
DEFAULTS AND REMEDIES.......................................................45
SECTION 10.1 EVENTS OF DEFAULT..............................................45
SECTION 10.2 REMEDIES UPON DEFAULT..........................................46
SECTION 10.3 INDEMNIFICATION................................................47
SECTION 10.4 POWER OF ATTORNEY..............................................47
ARTICLE XI THE DEAL AGENT..................................................48
SECTION 11.1 AUTHORIZATION AND ACTION.......................................48
SECTION 11.2 DELEGATION OF DUTIES...........................................48
SECTION 11.3 EXCULPATORY PROVISIONS.........................................48
SECTION 11.4 RELIANCE.......................................................49
SECTION 11.5 NON-RELIANCE ON DEAL AGENT.....................................49
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SECTION 11.6 DEAL AGENT IN ITS INDIVIDUAL CAPACITY..........................49
SECTION 11.7 SUCCESSOR DEAL AGENT...........................................49
ARTICLE XII.................................................................50
MISCELLANEOUS...............................................................50
SECTION 12.1 AGREEMENT CONSTITUTES SECURITY AGREEMENT.......................50
SECTION 12.2 ASSIGNMENT; PARTICIPATIONS.....................................50
SECTION 12.3 AMENDMENTS; REMEDIES CUMULATIVE................................50
SECTION 12.4 EFFECT OF INVALIDITY OF PROVISIONS.............................51
SECTION 12.5 ENTIRE AGREEMENT...............................................51
SECTION 12.6 CONSENT TO SERVICE.............................................51
SECTION 12.7 NOTICES........................................................51
SECTION 12.8 NO PROCEEDINGS.................................................51
SECTION 12.10 SUBMISSION TO JURISDICTION; WAIVER OF TRIAL BY JURY...........52
SECTION 12.11 CERTAIN FEES, COSTS AND EXPENSES..............................53
SECTION 12.12 COUNTERPARTS..................................................54
SECTION 12.13 LIMITATION ON LIABILITY.......................................54
SECTION 12.14 CONFIDENTIALITY...............................................54
EXHIBITS
Exhibit A Form of Note
Exhibit B Certificate of Incorporation
Exhibit C Form of Contract Purchase Agreement
Exhibit D Monthly Report
Exhibit E Form of NIM Collateral Purchase Agreement
Exhibit F Form of Hedging Agreement
Exhibit G Custodian Agreement
Exhibit H Contract List
Exhibit I Charged Off Receivables List
Exhibit J Future Delivery Contract List
SCHEDULES
Schedule I Lock-Box Banks and Lock-Box Accounts
Schedule 2.4 Conditions Precedent
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LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT (this "AGREEMENT") dated as of October
2, 1998 among:
(1) FIFS ACQUISITION FUNDING COMPANY, L.L.C., a Delaware limited liability
corporation, as borrower (the "BORROWER");
(2) AUTO LENDERS ACCEPTANCE CORPORATION, a Delaware corporation, as
servicer (the "SERVICER" and a "SELLER");
(3) ALAC RECEIVABLES CORP., a Delaware corporation, as a seller (a
"SELLER");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation ("VFCC");
(5) FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST SECURITIES,
INC. ("FCM"), as deal agent (the "DEAL AGENT") and as documentation agent (the
"DOCUMENTATION AGENT"); and
(6) FIRST UNION NATIONAL BANK ("FIRST UNION"), as liquidity agent (the
"LIQUIDITY AGENT").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
(a) In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:
ADJUSTED LIBOR RATE: For each Interest Period, a per annum interest rate equal
to the sum of (a) the quotient, expressed as a percentage and rounded upwards
(if necessary), to the nearest 1/100 of 1%, obtained by dividing (i) the LIBOR
Rate, as applicable, on such day by (ii) 100% minus the Eurodollar Reserve
Percentage on such day and (b) 2.35% per annum.
ADDITIONAL AMOUNT: As defined in Section 3.8(a).
AFFECTED PARTY: As defined in Section 3.7(a).
<PAGE>
AFFILIATE: As 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" or "controlled" have meanings
correlative to the foregoing.
AGENT'S ACCOUNT: A special account (account number 01 41 96 47) in the name of
the Deal Agent or, so long as VFCC is the sole Lender hereunder, in the name of
VFCC, at Bankers Trust Company.
ALAC: Auto Lenders Acceptance Corporation.
ALAC SECURITIZATIONS: The ALAC Automobile Receivables Trust 1997-1 and the
ALAC Automobile Receivables Trust 1998-1.
ALACRC: ALAC Receivables Corp.
ANNUAL PERCENTAGE RATE: The annual rate of interest applicable to each
Contract, as disclosed therein.
BACK UP SERVICER: Norwest Bank Minnesota, National Association
BANKRUPTCY CODE: The Federal Bankruptcy Code, as amended from time to time
(Title 11 of the United States Code).
BORROWER: FIFS Acquisition Funding Company L.L.C., together with its
respective successors and assigns.
BREAKAGE COSTS: As defined in Section 3.6(a).
BUSINESS DAY: Any day other than a Saturday, Sunday or a day on which banking
institutions in Charlotte, North Carolina and New York City are authorized or
obligated by law or executive order to be closed.
CERTIFICATE: A certificate issued pursuant to the terms of the ALAC
Securitizations.
CHANGE IN CONTROL: As to any Person, any change in ownership, whether in any one
or a series of transactions, resulting in a transfer of legal and/or beneficial
ownership of 51% or more of such Person's voting securities.
CHARGED OFF RECEIVABLE: Any Contract that, prior to the Closing Date, has been
charged-off by any Seller in accordance with the Credit and Collection Policy
and is listed on the Charged Off Receivables List.
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CHARGED OFF RECEIVABLES LIST: Collectively, all schedules, as the same may be
amended, modified or supplemented, of Charged Off Receivables delivered by the
Borrower to the Deal Agent, each such schedule identifying, in such detail as
agreed by the Borrower and the Deal Agent, the related Contract by the Obligor
and setting forth for each such Contract: (i) a number identifying the Contract
and (ii) the Contract Principal Balance. Such list shall be attached hereto as
Exhibit I.
CLIENT BANK: A bank that purchases retail installment sale contracts for the
automobiles or light trucks from dealers or funds purchase money loans for the
same to ALAC under Client Bank Agreements.
CLIENT BANK AGREEMENTS: Any agreement between ALAC and a Client Bank relating to
the acquisition of retail installment sale contracts for the automobiles or
light trucks and purchase money loans, including Contracts, from a Client Bank
by ALAC.
CLOSING DATE: October 2, 1998.
COLLATERAL: As defined in Section 5.1.
COLLECTION ACCOUNT: The account designated as such, established and
maintained pursuant to Section 4.1(a).
COLLECTION PERIOD: For any Distribution Date, the calendar month immediately
preceding the month in which such Distribution Date occurs.
COLLECTIONS: All amounts paid with respect to the Collateral, including the
Contracts, either by the Obligor thereon, or any other Person (including,
without limitation, Recoveries).
COMMERCIAL PAPER NOTES: On any day, any short-term promissory notes issued
by VFCC with respect to financing the Outstanding Principal Amount.
COMPUTER TAPE: The computer tapes or other electronic media furnished by ALAC or
any of its Affiliates to the Deal Agent describing certain characteristics of
the Contracts and the other Collateral.
CONTRACT: A retail installment sale contract for a Financed Vehicle that is
conveyed by a Seller to the Borrower pursuant to either of the Purchase
Agreements, and all rights and obligations thereunder.
CONTRACT FILE: With respect to each Contract, the following documents:
(a) the fully executed original of the Contract;
(b) where permitted by law, the original certificate of title (when
received by the Servicer) and otherwise such documents, if any, that the
Servicer keeps on file in accordance
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with its customary procedures and the Credit and Collection Policy indicating
that the Financed Vehicle is owned by the Obligor and subject to the security
interest of the Seller as first lienholder or secured party, which security
interest is assignable and has been validly assigned by the Seller to the
Borrower and then to the Secured Parties; and
(c) any and all other documents that the Servicer keeps on file (whether
as an original or in electronic or photographic form) in accordance with its
procedures relating to the individual Contract, Obligor or Financed Vehicle.
CONTRACT LIST: Collectively, all schedules, as the same may be amended, modified
or supplemented, of Contracts (other than Contracts constituting Charged Off
Receivables) delivered by the Borrower to the Deal Agent, each such schedule
identifying, in such detail as agreed by the Borrower and the Deal Agent, the
related Contract by the Obligor and setting forth for each such Contract: (i) a
number identifying the Contract, (ii) the Contract Principal Balance, (iii) the
Annual Percentage Rate, (iv) the original and remaining maturity of the Contract
term and (v) the amount of the Obligor's monthly payment. Such list shall be
attached hereto as Exhibit H.
CONTRACT PRINCIPAL BALANCE: For each Contract, on any date of calculation,
the outstanding principal balance of such Contract on such day.
CONTRACT PURCHASE AGREEMENT: The contract purchase agreement, dated October 2,
1998, by and between ALAC and the Borrower, in the form of Exhibit C hereto.
CP RATE: For any Interest Period, the per annum rate equivalent to the weighted
average of the per annum rates paid or payable by the Lender from time to time
as interest on or otherwise (by means of interest rate hedges or otherwise) in
respect of its Commercial Paper Notes that are allocated, in whole or in part,
by the Deal Agent (on behalf of the Lender) to fund or maintain the Outstanding
Principal Amount during such Interest Period, as determined by the Deal Agent
(on behalf of the Lender) and reported to the Borrower and the Servicer, which
rates shall reflect and give effect to the commissions of placement agents and
dealers in respect of such Commercial Paper Notes, to the extent such
commissions are allocated, in whole or in part, to such Commercial Paper Notes
by the Deal Agent (on behalf of the Lender); PROVIDED, HOWEVER, that if any
component of such rate is a discount rate, in calculating the "CP Rate" for such
Interest Period, the Deal Agent shall for such component use the rate resulting
from converting such discount rate to an interest bearing equivalent rate per
annum.
CUSTODIAL AGREEMENT: The Custodial Agreement dated as of October 2, 1998, among
VFCC, the Custodian and ALAC, a copy of which is attached hereto as Exhibit G.
CUSTODIAN: Norwest Bank Minnesota, National Association.
DEFAULTED CONTRACT: On any day, a Contract that is otherwise an Eligible
Contract (a) as to which the Obligor thereof has failed to make any payment, or
part thereof, required to be made thereunder for 90 days following the due date
thereof, or (b) with respect to which the Financed
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Vehicle has been repossessed or repossession efforts have been commenced, and
(c) which is not a Charged Off Receivable and which Contract is listed on the
Defaulted Contract List.
DEFAULTED CONTRACT LIST: A list provided by the Borrower on the Closing Date,
or, in the alternative, such portion of the Contract List attached hereto as
Exhibit H, identifying each Contract which is a Defaulted Contract.
DEFAULT RATE: As defined in Section 3.3.
DELINQUENT CONTRACT: On any day, a Contract that is otherwise an Eligible
Contract, other than a Defaulted Contract, (a) as to which the Obligor thereof
has failed to make any payment, or part thereof, required to made thereunder for
31 days or more following the due date thereof and (b) which is listed on the
Delinquent Contract List.
DELINQUENT CONTRACT LIST: A list provided by the Borrower on the Closing Date,
or, in the alternative, such portion of the Contract List attached hereto as
Exhibit H, identifying each Contract which is a Delinquent Contract.
DERIVATIVES: Any exchange-traded or over-the-counter (i) forward, future,
option, swap, cap, collar, floor, foreign exchange contract, any combination
thereof, whether for physical delivery or cash settlement, relating to any
interest rate, interest rate index, currency, currency exchange rate, currency
exchange rate index, debt instrument, debt price, debt index, depository
instrument, depository price, depository index, equity instrument, equity price,
equity index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security, or (iii) any
transaction, contract, instrument, undertaking or security containing any of the
foregoing.
DETERMINATION DATE: As defined in Section 8.3.
DISTRIBUTION DATE: The 20th calendar day of each month, or if such day is
not a Business Day, the next succeeding Business Day.
DOCUMENTS: This Agreement, the Note, the Contract Purchase Agreement, the NIM
Collateral Purchase Agreement, each Sale and Servicing Agreement, the Spread
Account Agreement and all other documents executed and delivered by the
Borrower, ALAC or any other Person pursuant to this Agreement which recites that
it is a Document and all amendments, modifications and amendment and
restatements of any thereof.
ELIGIBLE CONTRACT: On any given day, any Contract meeting each of the
following criteria:
(a) Such Contract was originated by an auto or light duty truck dealer for
the retail sale of a Financed Vehicle in the ordinary course of such dealer's
business, has been purchased by ALAC from (i) such dealer and has been validly
assigned by such dealer to ALAC in accordance with its terms or (ii) a Client
Bank pursuant to a Client Bank Agreement and, in
5
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either case, then validly assigned by ALAC to the Borrower without any fraud or
misrepresentation on the part of such dealer, Client Bank or ALAC in any case.
(b) Such Contract was fully and properly executed by the parties thereto.
(c) Such Contract creates a valid, subsisting, and enforceable first
priority perfected security interest in favor of the Seller in the Financed
Vehicle, which security interest has been validly assigned by the Seller to the
Borrower and by the Borrower to the Deal Agent, as agent for the Secured
Parties.
(d) Such Contract contains customary and enforceable provisions such that
the rights and remedies of the holder thereof are adequate for realization
against the collateral of the benefits of the security.
(e) Such Contract complies with 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 Moss-Magnuson
Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended, each applicable state 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) and the sale of the
related Financed Vehicle and the sale of any physical damage, credit life and
credit accident and health insurance and any extended service contracts complied
in all material respects with all applicable legal requirements.
(f) Such Contract represents the legal, valid, and binding payment
obligation in writing of the Obligor, enforceable by the holder thereof in
accordance with its terms, except as limited by bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium and other similar laws and
equitable principles affecting creditors' rights and remedies.
(g) Such Contract was originated in the United States, is payable in US
Dollars and the Obligor of such contract is not the government of the United
States or any State or any agency, department or instrumentality thereof.
(h) [RESERVED].
(i) Such Contract is in full force and effect and not satisfied,
subordinated or rescinded and no Financed Vehicle has been released from the
lien in favor of the Seller in whole or in part.
(j) No provision of such Contract has been waived in any manner that
causes or could cause the Contract to not qualify as an Eligible Contract.
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(k) No right of rescission, setoff, counterclaim, or defense has been
asserted or threatened with respect to such Contract.
(l) No liens or claims have been filed, including liens for work, labor,
or materials relating to the Financed Vehicle that are liens prior to, or equal
or coordinate with, the security interest in the Financed Vehicle granted by the
Contract, except for any such lien or claim (i) that has been satisfied or
released on or prior to the date such Contract is transferred to a Borrower and
(ii) for taxes not yet due or that are being contested in good faith by a
Borrower.
(m) Other than a Contract as to which any payment or portion thereof
required to be made by the Obligor thereof has not been made for less than 31
days following the due date thereof, no default, breach, violation, or event
permitting acceleration under the terms of such Contract has occurred; and no
continuing condition that with notice or the lapse of time would constitute a
default, breach, violation, or event permitting acceleration under the terms of
such Contract has arisen; and neither the Seller nor the Servicer has waived any
of the foregoing.
(n) The Obligor of such Contract is required to maintain physical damage
insurance covering the Financed Vehicle.
(o) Such Contract was not originated in, or subject to the laws of, any
jurisdiction under which the sale, transfer, and assignment of such Contract to
the Borrower would be unlawful, void, or voidable.
(p) All filings (including, without limitation, UCC filings) necessary in
any jurisdiction to give the Borrower a first priority perfected ownership
interest in such Contract have been made and all filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the Secured
Parties a first priority perfected security interest in such Contract have been
made.
(q) Such Contract constitutes chattel paper within the meaning of the
applicable UCC and there is only one original executed copy of such Contract.
(r) The Obligor of such Contract is not a Governmental Authority.
(s) The Financed Vehicle is a new or used automobile or light duty truck.
(t) The original maturity of such Contract provides for level monthly
payments (provided that the first payment and the last payment of the Contract
may be different from the normal period and level payment) which, if made when
due, shall fully amortize the Contract Principal Balance over the original term.
(u) Such Contract is neither a Defaulted Contract nor a Delinquent
Contract and no funds have been advanced by ALAC, the Servicer, any dealer, or
anyone acting on behalf of any of them in order to cause such Contract to
qualify under this subclause (u).
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(v) At the time of origination of each such Contract, the proceeds of such
Contract were fully disbursed, there is no requirement for future advances
thereunder, and all fees and expenses in connection with the origination of such
receivable have been paid.
(w) The collection practices used with respect to each such Contract have
been in all material respects legal and customary in the automobile installment
sales contract or installment loan servicing business.
(x) Such Contract is not a Charged Off Receivable.
ELIGIBLE DEPOSIT ACCOUNT: Either (i) a segregated account with an Eligible
Institution or (ii) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating acceptable to the
Lender.
ELIGIBLE INSTITUTION: A depository institution organized under the laws of the
United States of America or any one of the States thereof or the District of
Columbia (or any domestic branch of a foreign bank), (A) which has either (1) a
long-term unsecured debt rating of at least Baa3 by Moody's Investors Services,
Inc. ("MOODY'S") or otherwise acceptable to the Lender or (2) a short-term
unsecured debt rating or certificate of deposit rating of at least A-1 by
Standard & Poor's Ratings Services and P-1 by Moody's or otherwise acceptable to
the Lender.
ELIGIBLE INVESTMENTS: Any one or more of the following types of investments:
(a) marketable obligations of the United States, the full and timely
payment of which are backed by the full faith and credit of the United States
and which have a maturity of not more than 270 days from the date of
acquisition;
(b) marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United States
and which have a maturity of not more than 270 days from the date of
acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody's;
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by Moody's; and,
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(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States or any state
thereof (or domestic branches of any foreign bank) and subject to supervision
and examination by federal or state banking or depository institution
authorities; PROVIDED, HOWEVER that at the time such investment, or the
commitment to make such investment, is entered into, the short-term debt rating
of such depository institution or trust company shall be at least A-1 by S&P and
P-1 by Moody's.
EURODOLLAR DISRUPTION EVENT: The occurrence of any of the following: (a) a
determination by the Lender that it would be contrary to law or to the directive
of any central bank or other governmental authority (whether or not having the
force of law) to obtain United States dollars in the London interbank market to
fund or maintain any portion or all of the Outstanding Principal Amount; (b) the
inability of the Lender to obtain timely information for purposes of determining
the Adjusted LIBOR Rate; or (c) the inability of the Lender to obtain United
States dollars in the London interbank market to fund or maintain any portion or
all of the Outstanding Principal Amount.
EURODOLLAR RESERVE PERCENTAGE: On any day, the then applicable percentage
(expressed as a decimal) prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining reserve requirements
applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any other
then applicable regulation of the Board of Governors (or any successor) that
prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
presently defined in Regulation D.
EVENT OF DEFAULT: As defined in Section 10.1.
FCM: First Union Capital Markets, a division of Wheat First Securities, Inc.
FEE LETTER: The fee letter by and among First Investors Financial Services,
Inc. and the Deal Agent, dated October 2, 1998.
FINANCED VEHICLE: An automobile or light duty truck, together with all
accessories thereto, securing an Obligor's indebtedness under a Contract.
FUTURE DELIVERY CONTRACT: As defined in Section 9.3(b).
FUTURE DELIVERY CONTRACT LIST: As defined in Section 9.3(b).
GOVERNMENTAL AUTHORITY: Any nation or government, any state or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
court or arbitrator having jurisdiction over such Person.
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HEDGE BREAKAGE COSTS: For any Hedge Transaction, any amount payable by the
Borrower for the early termination of that Hedge Transaction or any portion
thereof.
HEDGE COUNTERPARTY: Any entity which (a) on the date of entering into any Hedge
Transaction (i) is an interest rate swap dealer that is either a Lender or an
Affiliate of a Lender, or has been approved in writing by the Deal Agent (which
approval shall not be unreasonably withheld), and (ii) has a long-term unsecured
debt rating of not less than "A" by S&P and not less than "A-2" by Moody's
("LONG-TERM RATING REQUIREMENT") and a short-term unsecured debt rating of not
less than "A-1" by S&P and not less than "P-1" by Moody's ("SHORT-TERM RATING
REQUIREMENT"), and (b) in a Hedging Agreement (i) consents to the assignment of
the Borrower's rights under the Hedging Agreement to the Deal Agent pursuant to
Section 7.1(x) (a) and (iii) agrees that in the event that Moody's or S&P
reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, it shall transfer its rights and obligations under each Hedge
Transaction to another entity that meets the requirements of clause (a) and (b)
hereof and has entered onto a Hedging Agreement with the Borrower on or prior to
the date of such transfer.
HEDGE TRANSACTION: Each transaction between the Borrower and a Hedge
Counterparty which is entered into pursuant to Section 7.1(x) and is governed
by a Hedging Agreement.
HEDGING AGREEMENT: Each agreement between the Borrower and a Hedge Counterparty
which governs one or more Hedge Transactions entered into pursuant to Section
7.1(x) which agreement shall consist of a "Master Agreement" in a form published
by the International Swaps and Derivatives Association, Inc., together with a
"Schedule" thereto substantially in the form of Exhibit F hereto or such other
form as the Deal Agent shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.
INCREASED COSTS: Any amounts required to be paid by the Borrower to an
Affected Party pursuant to Section 3.7.
INDEBTEDNESS: With respect to any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital loans, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (e) all indebtedness, obligations or liabilities of that Person in respect
of Derivatives.
INITIAL PRINCIPAL AMOUNT: $75,000,000.
INSOLVENCY EVENT: With respect to a specified Person, (a) the filing of a decree
or 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 Insolvency Law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
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official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency 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.
INSOLVENCY LAWS: The Bankruptcy Code and any other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, or similar debtor relief
laws from time to time in effect affecting the rights of creditors generally.
INSURANCE POLICY: With respect to a Contract, any insurance policy covering
physical damage, theft or similar event with respect to the related Financed
Vehicle or loss of such Financed Vehicle or credit life or credit disability
insurance with respect to payments due on such Contract.
INTEREST PERIOD: As defined in Section 3.2.
INVESTMENT EARNINGS: Investment earnings on funds deposited in the
Collection Account or the Reserve Account (as the context may require), net
of losses and investment expenses.
LENDER: Variable Funding Capital Corporation, together with its respective
successors and assigns.
LIBOR RATE: For any Interest Period, the average (rounded upward to the nearest
one-sixteenth (1/16) of one percent) per annum rate of interest determined by
the Lender at its the principal office in Charlotte, North Carolina, as its
LIBOR Rate (each such determination, absent manifest error, to be conclusive and
binding) as of two Business Days prior to the first day of such Interest Period,
as the rate at which deposits in immediately available funds in U.S. dollars are
being, have been, or would be offered or quoted by the Lender to major banks in
the applicable interbank market for eurodollar deposits at or about 11:00 a.m.
(Charlotte, North Carolina, Eastern Standard Time) on the Business Day which is
the second Business Day immediately preceding the first day of such Interest
Period, for delivery on the first day of such Interest Period, for a term
comparable to such Interest Period and in an amount approximately equal to the
Term Loan. If no such offers or quotes are generally available for such amount,
then the LIBOR Rate shall be the rate appearing on the Telerate Page 3750 as of
11:00 A.M. (London time) on the Business Day which is the second Business Day
immediately preceding the first day of such Interest Period.
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LIEN: Any lien, mortgage, security interest, pledge, hypothecation, charge,
equity, encumbrance or right of any kind whatsoever.
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 that 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.
LOAN SERVICING FEE: As defined in Section 9.12.
LOCK-BOX: A post office box to which Collections related to the Eligible
Contacts are remitted for retrieval by a Lock-Box Bank and deposited by such
Lock-Box Bank into a Lock-Box Account.
LOCK-BOX ACCOUNT: An account maintained at a Lock-Box Bank for the purpose of
receiving Collections of Eligible Contracts, which account is identified on
Schedule I hereto.
LOCK-BOX BANK: Any of the banks or other financial institutions holding one or
more Lock-Box Accounts, which bank or financial institution is identified on
Schedule I hereto.
MATURITY DATE: April 2, 1999.
MONTHLY REPORT: As defined in Section 8.3.
NIM COLLATERAL: Any Seller's right, title and interest in and to (i) the
Certificates, (ii) all distributions to such Seller and its affiliates made in
respect of the Series Collateral, (iii) all distributions to such Seller and its
affiliates made from the Spread Accounts, (iv) the Charged Off Receivables and
(v) any distributions of cash to such Seller pursuant to the terms of the ALAC
Securitizations.
NIM COLLATERAL PURCHASE AGREEMENT: The NIM collateral purchase agreement, dated
October 2, 1998, by and among ALAC, ALACRC, and the Borrower, in the form of
Exhibit E hereto.
NOTE: The promissory note evidencing the Indebtedness of the Borrower in
respect of the Term Loan and in the form attached hereto as Exhibit A.
OBLIGATIONS: All loans, advances, debts, liabilities and obligations, for
monetary amounts owing by the Borrower to the Lender, the Deal Agent or any of
their assigns, as the case may be, whether due or to become due, matured or
unmatured, liquidated or unliquidated, contingent or non-contingent, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, arising under or in respect of any of the Documents or any Hedging
Agreement, as amended or supplemented from time to time, whether or not
evidenced by any separate note, agreement or other instrument. This term
includes, without limitation, all
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principal, interest (including interest that accrues after the commencement
against the Borrower of any action under the Bankruptcy Code), Breakage Costs,
Hedge Breakage Costs, fees, including, without limitation, any and all
arrangement fees, loan fees, facility fees, and any and all other fees,
expenses, costs or other sums (including attorney costs) chargeable to the
Borrower under any of the Documents or under any Hedging Agreement.
OBLIGOR: Any obligor under any Contract, whose recourse obligations thereunder
constitute a principal source of payments under any Contract, including any
guarantor of such obligations.
OFFICER'S CERTIFICATE: A certificate signed by any officer of the Borrower or
the Servicer, as the case may be, and delivered to the Deal Agent.
OUTSTANDING PRINCIPAL AMOUNT: On any day, the Initial Principal Amount
reduced by all payments received by the Lender in respect of the repayment of
the Initial Principal Amount.
PERSON: An individual, a partnership, a corporation, a business trust, a joint
stock company, a trust, an association, a joint venture, a governmental
authority, limited liability company or partnership or other entity of whatever
nature.
PRIME RATE: The per annum rate of interest established from time to time by the
Lender at its principal office in Charlotte, North Carolina, as its Prime Rate.
Any change in the interest rate resulting from a change in the Prime Rate shall
become effective as of 12:01 a.m. of the Business Day on which each change in
the Prime Rate is announced by the Lender. The Prime Rate is a reference rate
used by the Lender in determining interest rates on certain loans and is not
intended to be the lowest rate of interest charged on any extension of credit to
any debtor.
PURCHASE AGREEMENT: As the context may require, the Contract Purchase
Agreement and/or the NIM Collateral Purchase Agreement.
RATING AGENCY: Each of S&P, Moody's and any other rating agency that has been
requested to issue a rating with respect to the commercial paper notes issued by
the Lender.
RECOVERIES: With respect to any Determination Date, the aggregate amount of all
cash received by the Borrower during the calendar month immediately preceding
such Determination Date in respect of any Defaulted Contract including the sale
or other disposition of the related Financed Vehicle, proceeds of Insurance
Policies with respect to the related Financed Vehicle, or payments made by or on
behalf of the Obligor.
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.
RESERVE ACCOUNT: As defined in Section 4.11.
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RESERVE ACCOUNT AMOUNT: As of any date of determination an amount equal to the
amount on deposit in the Reserve Account (exclusive of Investment Earnings) on
such date, after giving effect to all deposits, transfers and withdrawals from
the Reserve Account on such date.
RESERVE ACCOUNT DEPOSIT AMOUNT: $1,000,000.
RESERVE ACCOUNT REQUIRED AMOUNT: On any day, the Reserve Account Deposit
Amount.
RESERVE ACCOUNT SURPLUS: On any Distribution Date the excess of the Reserve
Account Amount over the Reserve Account Required Amount.
RESPONSIBLE OFFICER: As to any Person, any officer of such Person with direct
responsibility for the administration of this Agreement and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
RETAINED POOL SERVICING STRIP: The right of ALAC to receive pursuant to the
terms and conditions of this Agreement, a portion of the Loan Servicing Fee to
the extent of 1.00% of the aggregate Contract Principal Balance of all Eligible
Contracts, Delinquent Contracts and Defaulted Contracts.
SALE AND SERVICING AGREEMENTS: (i) The Sale and Servicing Agreement dated as of
September 25, 1997 among the ALAC Automobile Receivables Trust 1997-1, ALACRC,
Auto Lenders Acceptance Corporation and Norwest Bank, Minnesota, National
Association and (ii) the Sale and Servicing Agreement dated as of January 3,
1998 among the ALAC Automobile Receivables Trust 1998-1, ALACRC, Auto Lenders
Acceptance Corporation and Norwest Bank Minnesota, National Association.
SCHEDULED PAYMENT: With respect to a date on which a payment is due under a
Contract, the periodic payment (exclusive of any amounts in respect of insurance
or taxes and reflecting any adjustment for any partial prepayment) set forth in
such Contract as due from the Obligor.
SECURED PARTIES: (i) The Lender and (ii) each Hedge Counterparty that is either
the Lender or an Affiliate of the Lender, if that Affiliate executes a
counterpart of this Agreement agreeing to be bound by the terms of this
Agreement applicable to a Secured Party.
SELLER: Auto Lenders Acceptance Corporation and its Affiliates, including
ALACRC, that are parties to either of the Purchase Agreements.
SERIES COLLATERAL: Each of (i) the Series 1997-1 Collateral, as defined in
the Spread Account Agreement and (ii) the Series 1998-1 Collateral, as
defined in the Spread Account Agreement.
SERVICER: Auto Lenders Acceptance Corporation.
SERVICER TERMINATION EVENT: As defined in Section 9.14(a).
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SERVICING FEE RATE: The rate set forth in the Fee Letter or, if the Back Up
Servicer is the Servicer, the Back Up Servicer Fee Rate (as defined in the
Custodial Agreement).
SERVICING STRIPS: The right of ALAC to receive, pursuant to the terms and
conditions of each of the Sale and Servicing Agreements, (i) the Servicing Fee
(as defined in each Sale and Servicing Agreement) payable on each Distribution
Date (as defined in each Sale and Servicing Agreement) under each Sale and
Servicing Agreement, in an amount equal to 1.00% of the Pool Balance (as defined
in each Sale and Servicing Agreement) and (ii) the Retained Pool Servicing
Strip.
SPREAD ACCOUNT AGREEMENT: The Master Spread Account Agreement dated as of
September 25, 1997 among ALACRC, Norwest Bank, Minnesota, National
Association and Financial Security Assurance Inc., as supplemented by the
Series 1998-1 Supplement to Master Spread Account Agreement, dated as of
February 2, 1998.
SPREAD ACCOUNTS: Each of (i) the Series 1997-1 Spread Account, as defined in the
Spread Account Agreement and (ii) the Series 1998-1 Spread Account, as defined
in the Spread Account Agreement.
STRUCTURING AGENT: FCM, together with its respective successors and assigns.
STRUCTURING FEE: The structuring fee described in the Fee Letter.
SUBSIDIARY: As to any Person, a corporation of which shares of stock having
ordinary voting power (other than a stock having such power only by reason of
the happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, directly or
indirectly, through one or more intermediaries, or both, by such Person.
TAXES: Any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any Government Authority.
TERM LOAN: The loan, in the principal amount equal to the Initial Principal
Amount made by the Lender to the Borrower in accordance with the provisions of
this Agreement.
TERM LOAN ACCOUNT: The account designated to the Lender by the Borrower,
into which the Initial Principal Amount shall be deposited on the Closing
Date.
UCC: The Uniform Commercial Code as in effect in the applicable jurisdiction.
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YIELD RATE: On any day:
(i) for the portion of the Outstanding Principal Amount that the Lender is
funding on such day through the issuance (on or prior to such date) of its
Commercial Paper Notes, the CP Rate, plus 2.35% per annum;
(ii) for the portion of the Outstanding Principal Amount that the Lender
is not funding on such day through the issuance (on or prior to such date) of
its Commercial Paper Notes, the Adjusted LIBOR Rate; and
(iii) for the entire Outstanding Principal Amount and all other amounts
then due and owing, following the occurrence of an Event of Default, the Default
Rate.
SECTION 1.2 INTERPRETATION.
(a) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(b) Capitalized terms used herein shall be equally applicable to both the
singular and plural forms of such terms.
ARTICLE II
THE TERM LOAN
SECTION 2.1 THE TERM LOAN.
Upon the satisfaction of the conditions set forth in Section 2.4 and
subject all other terms and conditions hereof, the Lender will make available to
the Borrower, at the Term Loan Account, the Initial Principal Amount.
SECTION 2.2 USE OF PROCEEDS.
The Borrower agrees to use the proceeds of the Term Loan solely for the
purchase of the Collateral and expenses related thereto.
SECTION 2.3 TERM LOAN ACCOUNT.
The Lender shall, before 3:00 p.m. (Charlotte, North Carolina time) on the
Closing Date, make available, upon fulfillment of the applicable conditions set
forth in Section 2.4, such funds to the Borrower in the Term Loan Account. The
Term Loan shall accrue interest hereunder from and after the Closing Date.
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SECTION 2.4 CONDITIONS PRECEDENT TO MAKING OF THE TERM LOAN.
The Lender's obligation hereunder to make the Initial Principal Amount of
the Term Loan available to the Borrower is subject to the conditions precedent
listed in SCHEDULE 2.4, each of which shall have been satisfied or waived, in
the Deal Agent's sole discretion, on or before the Closing Date (unless
otherwise indicated), in form and substance satisfactory to the Deal Agent.
ARTICLE III
INTEREST RATE
SECTION 3.1 INTEREST RATE.
(a) The Outstanding Principal Amount will accrue interest from and
including the Closing Date until Maturity Date at the Yield Rate.
(b) If the Lender determines (which determination shall be conclusive and
binding on the parties hereto in the absence of manifest error) that an
Eurodollar Disruption Event has occurred, then the Lender shall forthwith give
notice thereof to the Borrower, whereupon the then Outstanding Principal Amount
together with interest thereon, on the last day of the then current Interest
Period shall thereafter accrue interest at the Prime Rate.
SECTION 3.2 INTEREST PERIODS.
As used herein, "INTEREST PERIOD" means each successive period used to
determine the rate of interest applicable to the Outstanding Principal Amount,
beginning on and including the third Business Day prior to a Distribution Date
and ending on and including the fourth Business Day prior to the next succeeding
Distribution Date, with the initial period to begin on and include the Closing
Date and to end on and include third Business Day prior to the Distribution Date
occurring in the calendar month following the month in which the Closing Date
occurs; PROVIDED, HOWEVER, that if the last Interest Period does not end prior
to the Maturity Date, it shall end on the Maturity Date which, if not falling on
a Business Day, shall be adjusted to fall on the immediately preceding Business
Day and such last Interest Period shall be shortened accordingly.
SECTION 3.3 DEFAULT RATE.
Interest will accrue and be payable after the occurrence of an Event of
Default at twenty-five percent (25%) per annum, compounded daily (the "DEFAULT
RATE"). Any judgment obtained on the Outstanding Principal Amount hereunder will
accrue interest at the Default Rate.
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SECTION 3.4 CALCULATION.
All computations of interest hereunder shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed.
SECTION 3.5 NOTE.
The Term Loan shall be evidenced by, and repaid in accordance with, the
Note attached hereto as Exhibit A, duly completed, in the aggregate principal
amount equal to the Initial Principal Amount, payable to the Deal Agent as agent
for the Lender and its successors and assigns and maturing on the Maturity Date.
The Lender and its respective successors and assigns are hereby authorized by
the Borrower to endorse on the Schedule attached to the Note each payment of
principal received by the Lender hereunder, which endorsement shall, in the
absence of manifest error, be conclusive as to the Outstanding Principal Amount;
PROVIDED, HOWEVER, that the failure to make such notation with respect to any
payment shall not limit or otherwise affect the obligations of the Borrower
under this Agreement or the Note.
SECTION 3.6 BREAKAGE COSTS.
(a) The Borrower shall pay to the Deal Agent for the account of the
Lender, upon the request of the Deal Agent, such amount or amounts as shall
compensate the Lenders for any loss, cost or expense incurred by the Lender (as
reasonably determined by the Deal Agent) as a result of any repayment of any of
the Outstanding Principal Amount (and interest thereon) other than on the
maturity date of the Commercial Paper Notes allocated by the Deal Agent to the
funding of such Outstanding Principal Amount, such compensation to include,
without limitation, any loss or expense suffered by the Lender during the period
from the date of receipt of repayment to (but excluding) the maturity date of
such Commercial Paper Notes, if the rate of interest obtainable by the Lender
upon redeployment of an amount of funds equal to the amount of such repayment is
less than the interest rate applicable to such Commercial Paper Notes (the
"BREAKAGE COSTS"). The determination by the Lender of the amount of any such
loss or expense shall be set forth in a written notice to the Borrower and shall
be conclusive absent manifest error.
(b) Anything herein to the contrary notwithstanding, no Breakage Costs
will be payable by the Borrower under this Section 3.6 if (i) the repayment of
any portion of the Outstanding Principal Amount is made upon thirty (30) days
prior written notice by the Borrower to the Deal Agent or (ii) the repayment of
any portion of the Outstanding Principal Amount is made upon four (4) Business
Days prior written notice by the Borrower to the Deal Agent and no more than 20%
of the Outstanding Principal Amount is repaid.
SECTION 3.7 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by
the Lender or any Affiliate thereof (each of
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which, an "AFFECTED PARTY") with any guideline or request from any central bank
or other governmental agency or authority (whether or not having the force of
law), (A) shall subject an Affected Party to any Tax (except for Taxes on the
overall net income of such Affected Party), duty or other charge with respect to
the Term Loan, or on any payment made hereunder or (B) shall impose, modify or
deem applicable any reserve requirement (including, without limitation, any
reserve requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any reserve requirement, if any, included in the
determination of interest on the Outstanding Principal Amount), special deposit
or similar requirement against assets of, deposits with or for the amount of, or
credit extended by, any Affected Party or (C) shall impose any other condition
affecting the Term Loan or the Lender's rights hereunder, the result of which is
to increase the cost to any Affected Party or to reduce the amount of any sum
received or receivable by an Affected Party under this Agreement, then within
ten days after demand by such Affected Party (which demand shall be accompanied
by a statement setting forth the basis for such demand), the Borrower shall pay
directly to such Affected Party such additional amount or amounts as will
compensate such Affected Party for such additional or increased cost incurred or
such reduction suffered.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request or
(ii) compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request from any central bank or other governmental authority or
agency (whether or not having the force of law), including, without limitation,
compliance by an Affected Party with any request or directive regarding capital
adequacy, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which any such Affected
Party could have achieved but for such introduction, change or compliance
(taking into consideration the policies of such Affected Party with respect to
capital adequacy) by an amount deemed by such Affected Party to be material,
then from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Borrower shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.
(c) If as a result of any event or circumstance similar to those described
in clauses (a) or (b) of this Section 3.7, any Affected Party is required to
compensate a bank or other financial institution providing liquidity support,
credit enhancement or other similar support to such Affected Party in connection
with this Agreement or the funding or maintenance of the Term Loan hereunder,
then within ten days after demand by such Affected Party, the Borrower shall pay
to such Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any such amounts paid by it.
(d) In determining any amount provided for in this section, the Affected
Party may use any reasonable averaging and attribution methods. Any Affected
Party making a claim under this section shall submit to the Borrower a
certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error.
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SECTION 3.8 TAXES.
(a) All payments made by the Borrower in respect of the Outstanding
Principal Amount and all payments made by the Borrower under this Agreement will
be made free and clear of and without deduction or withholding for or on account
of any Taxes, unless such withholding or deduction is required by law. In such
event, the Borrower shall pay to the appropriate taxing authority any such Taxes
required to be deducted or withheld and the amount payable to the Lender or the
Deal Agent (as the case may be) will be increased (such increase, the
"ADDITIONAL AMOUNT") such that every net payment made under this Agreement after
deduction or withholding for or on account of any Taxes (including, without
limitation, any Taxes on such increase) is not less than the amount that would
have been paid had no such deduction or withholding been deducted or withheld.
The foregoing obligation to pay Additional Amounts, however, will not apply with
respect to net income or franchise taxes imposed on the Lender or the Deal
Agent, respectively, with respect to payments required to be made by the
Borrower or Servicer under this Agreement, by a taxing jurisdiction in which the
Lender or Deal Agent is organized, conducts business or is paying taxes as of
the Closing Date (as the case may be). If the Lender or the Deal Agent pays any
Taxes in respect of which the Borrower is obligated to pay Additional Amounts
under this Section 3.8(a), the Borrower shall promptly reimburse the Lender or
Deal Agent in full.
(b) The Borrower will indemnify the Lender and the Deal Agent for the full
amount of Taxes in respect of which the Borrower is required to pay Additional
Amounts (including, without limitation, any Taxes imposed by any jurisdiction on
such Additional Amounts) paid by the Lender or the Deal Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto; PROVIDED, HOWEVER, that such Lender or the
Deal Agent, as appropriate, making a demand for indemnity payment, shall provide
the Borrower, at its address set forth under its name on the signature pages
hereof, with a certificate from the relevant taxing authority or from a
Responsible Officer of the Lender or the Deal Agent stating or otherwise
evidencing that such Lender or the Deal Agent has made payment of such Taxes and
will provide a copy of or extract from documentation, if available, furnished by
such taxing authority evidencing assertion or payment of such Taxes. This
indemnification shall be made within ten days from the date the Lender or the
Deal Agent (as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Borrower of any
Taxes, the Borrower will furnish to the Deal Agent, at its address set forth
under its name on the signature pages hereof, appropriate evidence of payment
thereof.
(d) Within 30 days of the written request of the Borrower therefor, the
Deal Agent and the Lender, as appropriate, shall execute and deliver to the
Borrower such certificates, forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Borrower in applying for refunds of Taxes remitted hereunder; PROVIDED, HOWEVER,
that the Deal Agent and the Lender shall not be required to deliver such
certificates forms or other documents if in their respective sole discretion it
is determined that the deliverance of such certificate, form or other document
would have a material adverse affect on
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the Deal Agent or the Lender and PROVIDED FURTHER, HOWEVER, that the Borrower
shall reimburse the Deal Agent or Lender for any reasonable expenses incurred in
the delivery of such certificate, form or other document.
(e) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the Lender in
connection with this Agreement or the funding or maintenance of the Outstanding
Principal Amount hereunder, the Lender is required to compensate a bank or other
financial institution in respect of Taxes under circumstances similar to those
described in this section then within ten days after demand by the Lender, the
Borrower shall pay to the Lender such additional amount or amounts as may be
necessary to reimburse the Lender for any amounts paid by them.
ARTICLE IV
PAYMENTS AND FEES AND COLLECTION ACCOUNT.
SECTION 4.1 THE COLLECTION ACCOUNT.
(a) The Servicer, for the benefit of the Secured Parties, shall establish
and maintain in the name of the Secured Parties an Eligible Deposit Account
known as the collection account (the "COLLECTION ACCOUNT"), bearing an
additional designation clearly indicating that the funds deposited therein are
held for the benefit of the Secured Parties.
(b) The Collection Account shall be initially established with First Union
National Bank. The Collection Account shall at all times be an Eligible Deposit
Account. All amounts held in such account shall, to the extent permitted by
applicable laws, rules and regulations, be invested at the written direction of
the Borrower, by the bank or trust company maintaining the Collection Account in
Eligible Investments. Should the Collection Account no longer be an Eligible
Deposit Account, then the Servicer shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which the Secured Parties shall
consent), with such bank's or trust company's assistance as necessary, cause the
Collection Account to be moved to a bank or trust company such that the
Collection Account will be an Eligible Deposit Account. Investment Earnings on
funds deposited in the Collection Account shall be remitted to the Borrower as
provided in Section 4.5(c) to the extent such Investment Earnings are not
necessary to pay current interest and principal with respect to the Term Loan
and so long as no Event of Default shall have occurred and be continuing.
(c) The Servicer shall have the power, revocable at any time by the
Secured Parties following a material adverse change in the financial condition
of the Servicer, to make withdrawals and payments from the Collection Account
for the purpose of permitting the Servicer to carry out its duties as servicer
hereunder.
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SECTION 4.2 INTEREST PAYMENTS ON THE TERM LOAN.
Interest accrued on the Outstanding Principal Amount for each Interest
Period shall be paid on the Distribution Date following the end of each such
Interest Period. The Lender shall provide the Borrower with notice of the amount
of interest due not later than the Business Day immediately preceding the
applicable Distribution Date. Notwithstanding the foregoing, interest shall also
be due and payable to the extent the Interest Period relating to the Term Loan
is terminated prior to its maturity.
SECTION 4.3 [RESERVED]
SECTION 4.4 COLLECTIONS.
(a) On or before the Closing Date, the Servicer shall have instructed all
Obligors to make all payments in respect of the Contracts to a Lock-Box or
directly to a Lock-Box Account.
(b) The Servicer shall transfer, or cause to be transferred, all
Collections on deposit in the form of available funds in the Lock Box Account to
the Collection Account by the close of business on the Business Day such
Collections are received in the Lock Box Account. The Servicer shall promptly
(but in no event later than two Business Days after the receipt thereof) deposit
all Collections received directly by it in the Collection Account. The Servicer
shall make such deposits or payments on the date indicated therein by electronic
funds transfer by wire transfer, in immediately available funds.
(c) Following the identification by either the Borrower, the Deal Agent or
the Lender of any particular Contract identified as an Eligible Contract that
breaches one or more of the representations, warranties or covenants set forth
in Sections 6.2 or 7.1, the Borrower shall have thirty (30) days to cure such
breach; PROVIDED that, in the reasonable opinion of the Deal Agent, cure is not
impossible. In the event that such breach is not cured within thirty (30) days
or, in the reasonable opinion of the Deal Agent, is not reasonably capable of
being cured within such thirty-day period, then the Borrower shall, within five
(5) Business Days, deposit into the Collection Account an amount equal to the
remaining unpaid Contract Principal Balance of each such disqualified Contract,
together with interest accrued thereon through the date of such payment by the
Borrower at the Annual Percentage Rate set forth in such Contract.
SECTION 4.5 DISTRIBUTIONS FROM COLLECTION ACCOUNT.
(a) On each Distribution Date, or if such day is not a Business Day, then
the next succeeding Business Day, the Servicer shall make the following
distributions from Collections received for the related Collection Period and
amounts withdrawn from the Reserve Account in accordance with Section 4.11(c) in
the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge Transaction(s),
for the payment thereof;
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(ii) SECOND, to the Servicer, the Loan Servicing Fee (net of the
Retained Pool Servicing Strip);
(iii) THIRD, to the Deal Agent, on behalf of the Lender, to pay
interest accrued during the related Interest Period; and
(iv) FOURTH, to the Deal Agent, in the amount of unpaid Increased
Costs and/or Taxes (if any), for payment to the Lenders in respect
thereof;
(v) FIFTH, to the Deal Agent, on behalf of the Lender, any amounts
remaining after giving effect to the distributions to be made in
subclauses (i) through (iv) of this Section 4.5(a), to the reduction to
zero of the Outstanding Principal Amount; and
(vi) SIXTH, to the Borrower, any amounts remaining after giving
effect to the distributions to be made in subclauses (i) through (v) of
this Section 4.5(a).
(b) On the date of any prepayment made pursuant to Section 4.6, the
Servicer shall make a distribution to the Deal Agent for the account of the
Lender, from the Collection Account of an amount equal to the Outstanding
Principal Amount plus accrued interest (to, but excluding, such day) on the
amount of such prepayment. The Servicer shall also pay all Breakage Costs and
Hedge Breakage Costs on such day.
(c) So long as no Event of Default shall have occurred and be continuing,
the Servicer may, on each Distribution Date, cause any and all Investment
Earnings and any other amounts then held in the Collection Account after first
giving effect to the distributions listed in Section 4.5(a) above, to be
distributed to the Borrower.
SECTION 4.6 PREPAYMENTS.
(a) Borrower may prepay the Term Loan, in whole, but not in part (except
pursuant to Section 4.5(a)(v), on any Business Day upon payment of the
Outstanding Principal Amount, together with all interest thereon accrued and
unpaid to, but excluding such date of prepayment; provided, however, any such
prepayment shall include all Breakage Costs.
(b) Any payments of principal on the Term Loan made pursuant to Section
4.5(a)(v), which payments exceed 20% of the Outstanding Principal Amount, shall
constitute prepayments of the Term Loan pursuant to this Section 4.6.
(c) Prepayment of the Term Loan shall be permitted only if the Borrower
has complied with the terms of any Hedging Agreement requiring that one or more
Hedge Transactions be terminated in whole or in part as the result of any such
prepayment of the Outstanding Principal Amount, and the Borrower has paid all
Hedge Breakage Costs owing to the relevant Hedge Counterparty for any such
termination.
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SECTION 4.7 [RESERVED]
SECTION 4.8 PAYMENT METHOD.
Borrower shall make all payments due hereunder to the Deal Agent on behalf
of the Lender directly to the Agent's Account. All payments are to be made in
immediately available funds.
SECTION 4.9 FRAUDULENT OR PREFERENTIAL PAYMENTS.
The Borrower agrees that, to the extent the Borrower makes a payment or
payments and such payment or payments, or any part thereof, is, for any reason,
subsequently invalidated, declared to be fraudulent or preferential, set aside
or are required to be repaid to a trustee, receiver, or any other party under
any bankruptcy act, state or federal law, common law or equitable cause, then to
the extent of such payment or payments, the obligations or part thereof
hereunder intended to be satisfied shall be revived and continued in full force
and effect as if such payment or payments had not been made.
SECTION 4.10 LENDER'S RECORDS.
The Lender's records of all payments received with respect to the Term
Loan made hereunder and the applicable interest rates shall be conclusive,
absent manifest error.
SECTION 4.11 RESERVE ACCOUNT.
(a) On the Closing Date, the Servicer shall establish and maintain with
First Union National Bank, in the name of the Deal Agent, for the benefit of the
Secured Parties, a segregated account (the "RESERVE ACCOUNT") bearing a
designation clearly indicating that the funds on deposit therein are held for
the benefit of the Deal Agent for the benefit of the Secured Parties under this
Agreement. Except as otherwise provided in this Agreement, the Deal Agent shall
possess all right, title and interest in all funds on deposit from time to time
in the Reserve Account and in all proceeds thereof.
(b) Funds on deposit in the Reserve Account shall be invested at the
written direction of the Deal Agent (or, if the Deal Agent shall so elect, the
Servicer) by the holder of the Reserve Account in Eligible Investments. Funds on
deposit in the Reserve Account on any day, after giving effect to any
withdrawals from and deposits to the Reserve Account on such day, shall be
invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the next following Distribution Date.
The holder of the Reserve Account shall maintain for the benefit of the Deal
Agent possession of the negotiable instruments or securities, if any evidencing
the investment of funds in the Reserve Account in Eligible Investments. On each
Distribution Date, after giving effect to any withdrawals from the Reserve
Account on such Distribution Date, the Investment Earnings, if any, on deposit
in the Reserve Account shall be paid to the Borrower by the holder of the
Reserve Account.
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(c) If, on any Distribution Date, the aggregate amount available for
distribution pursuant to Section 4.5(a) or (b) is less than the aggregate amount
required to be distributed pursuant to subsections 4.5(a)(i) through (iv) or
4.5(b), as the case may be, the Deal Agent shall direct the holder of the
Reserve Account to withdraw the amount of such deficiency, up to the amount
available in the Reserve Account, from the Reserve Account and apply such amount
in the order of priority and in the manner set forth in subsections 4.5(a)(i)
through (iv) or 4.5(b). If on any Distribution Date prior to the occurrence of
an Event of Default, after giving effect to all withdrawals from the Reserve
Account, the amount on deposit in the Reserve Account would exceed the Reserve
Account Required Amount, the Deal Agent shall direct the holder of the Reserve
Account to release to the Borrower the Reserve Account Surplus on such date. On
the date on which the Outstanding Principal Amount, all accrued and unpaid
interest thereon and all other amounts due and owing to the Lender, the Deal
Agent and any Affected Party have been paid in full, and each Hedge Transaction
has been terminated and each Hedge Counterparty has received all amounts owing
to it under its respective Hedging Agreement, the Deal Agent shall direct the
holder of the Reserve Account to withdraw all amounts then remaining in the
Reserve Account and pay such amounts to the Borrower or on any Distribution Date
after the occurrence of an Event of Default, the Deal Agent, in its sole
discretion, may direct the holder of the Reserve Account to withdraw any amount
up to the total amount on deposit in the Reserve Account and apply such amount
to the payment of principal or interest at the sole discretion of the Deal
Agent.
ARTICLE V
SECURITY
SECTION 5.1 SECURITY FOR INDEBTEDNESS.
As security for the payment of all obligations, liabilities and
indebtedness of the Borrower to the Secured Parties, whether now or hereafter
owing or existing, including all obligations hereunder and under each Hedging
Agreement, and for the payment, performance and discharge of all other
obligations or undertakings now or hereafter made for the benefit of the Secured
Parties under this Agreement, the Note or under any other agreement, promissory
note or undertaking now existing or hereafter entered into by the Borrower with
or to the Secured Parties pursuant to the terms hereof, or otherwise, including
any guaranty or surety obligations of Borrower owed to the Secured Parties, the
Borrower and each Seller, as the case may be, hereby grants to the Secured
Parties a first priority security interest in and Lien upon, their respective
right, title and interest in and to, and hereby assigns, transfer and pledges to
Secured Parties all of the following, whether now owned or hereafter acquired
(the "COLLATERAL"):
(a) all Contracts (as the same may be amended, modified, supplemented,
restated or replaced from time to time);
(b) all Contract Files, Charged Off Receivable Lists and Contract Lists,
and all right, title and interest of the Borrower in and to the documents,
agreements and instruments included
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in the Contract Files, including, without limitation, rights of recourse of the
Borrower against the Seller;
(c) all Insurance Policies and all rights of the Borrower in all Insurance
Policies;
(d) all security interests, Liens, guaranties, mortgages and other
encumbrances in favor of or assigned or transferred to the Borrower in and to
Contracts and Financed Vehicles, and all accessions thereto and replacements
thereof;
(e) the NIM Collateral;
(f) the Servicing Strips;
(g) all deposit accounts (including, without limitation, the Reserve
Account), moneys, deposits, funds, accounts and instruments relating to the
foregoing;
(h) the Contract Purchase Agreement, the NIM Collateral Purchase
Agreement, and all rights of the Borrower thereunder;
(i) Hedge Transactions, and
(j) all products and proceeds of or related to the foregoing.
The above-described security interests shall not be rendered void by the
fact that no obligations, liabilities or indebtedness secured by the Collateral
exists as of any particular date, but shall continue in full force and effect
until the filing of termination statements or statements of partial release
signed by Lender with respect to the Collateral.
SECTION 5.2 COMPUTER RECORDS; REMEDIES.
In connection with the security interest granted herein, on or prior to
the Closing Date, the Servicer shall mark the computer records relating to each
Contract and all other Collateral for which the Term Loan was made on such
Closing Date to clearly indicate that such Contract and other Collateral has
been sold to the Borrower and thereby pledged to secure the debt of Borrower to
the Secured Parties. The security interests granted herein are enforceable in
accordance with the UCC and this Agreement, including without limitation, all
rights remedies of secured parties and otherwise as provided therein. The
Borrower hereby agrees to permit the Deal Agent to inspect the Collateral, at
Borrower's sole expense, upon the Deal Agent's request at any time with
reasonable notice.
SECTION 5.3 RELEASE OF LIENS.
To the extent that (i) the Borrower shows, to the satisfaction of the Deal
Agent, that the Contract Principal Balance of a specified Eligible Contract has
been deposited in the Collection Account pursuant to Section 4.4(b) or 9.8, or
(ii) the Borrower shows, to the satisfaction of the
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Deal Agent, that the purchase price or other payment received in connection with
the sale or transfer of a specified Charged Off Receivable has been deposited in
the NIM Collateral Collection Account, then upon receipt of a written request
from the Borrower to the Deal Agent, the Deal Agent on behalf of the Secured
Parties shall take such actions, at the Borrower's sole expense, as are
necessary to release or cause the Lien of the Deal Agent on behalf of the
Secured Parties on such Eligible Contract or Charged Off Receivable to be
released. Upon payment in full of all Indebtedness owed hereunder, and
expiration or termination of this Agreement, termination of each Hedge
Transaction and payment of all amounts owing to each Hedge Counterparty under
its respective Hedging Agreement, the Deal Agent on behalf of the Secured
Parties shall take such actions, at the Borrower's sole expense, as are
necessary to release or cause the Lien of the Deal Agent on behalf of the
Secured Parties on the Collateral to be released and to cause the Contract Files
then held by the Servicer to be returned to the Borrower. Any release executed
by the Deal Agent on behalf of the Secured Parties shall release the Lien
created hereby and shall be made without recourse, representation or warranty.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower hereby represents and warrants to the Secured Parties on the
Closing Date as follows:
(a) ORGANIZATION. The Borrower is a bankruptcy remote limited liability
company, duly organized and validly existing in good standing under the laws of
the state of Delaware, with full corporate power and authority to own its
properties and to conduct its business as presently conducted.
(b) L.L.C. AGREEMENT. The Borrower's limited liability company agreement
includes (or within 30 days after date hereof will include) substantially the
provisions set forth on Exhibit B hereto, and the owners of the Borrower's
membership interests have severally confirmed to the Borrower that they will not
cause the Borrower to file a voluntary petition under the Bankruptcy Code or any
other bankruptcy or insolvency laws during the period beginning on the Closing
Date and ending on the date that is one year and one day following the Maturity
Date.
(c) FOREIGN QUALIFICATION. The Borrower is duly qualified to do business
as a foreign limited liability company and is in good standing, and has obtained
all necessary licenses and approvals in all states in which the ownership or
lease of property or the conduct of its business requires the qualification.
(d) AUTHORITY. The Borrower has the power and authority to execute and
deliver this Agreement, the Note and the other Documents and to carry out its
respective terms and it has duly authorized the execution, delivery and
performance of the of the Documents and the grant of a security interest in the
Collateral to the Secured Parties by all necessary corporate action.
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(e) PURCHASE AGREEMENTS. The Purchase Agreements are the only agreements
pursuant to which it purchases Contracts and the NIM Collateral; it has
furnished to the Deal Agent a true, correct and complete copy of each of the
Purchase Agreements; and each of the Purchase Agreements is in full force and
effect and no event or circumstance has occurred that would constitute an Event
of Default.
(f) SOLVENCY. The Borrower is solvent; at the time of (and immediately
after) the transfer by the Seller to the Borrower under the Purchase Agreements,
the Borrower shall have been solvent.
(g) TRUE SALES. The Borrower accounts for the transfers to it from the
Seller of interests in Contracts, the other Collateral and all Collections under
each Purchase Agreement as sales thereof in its books, records and financial
statements, in the case consistent with GAAP and with the requirements set forth
herein.
(h) NATURE OF BUSINESS. The Borrower is primarily engaged in the business
of purchasing Contracts and other Collateral pursuant to the Purchase Agreements
for its own account and for the financing thereof.
(i) SEPARATE ENTITY. The Borrower is operated as an entity with assets and
liabilities distinct from those of the Seller and any Affiliates thereof (other
than the Borrower), and the Borrower hereby acknowledges that the Lender is
entering into the transactions contemplated by this Agreement in reliance upon
the Borrower's identity as a separate legal entity from the Seller and from the
other Affiliate of the Seller.
(j) FINANCIAL STATEMENTS. All financial statements or certificates of the
Borrower or any of its officers furnished to the Deal Agent fairly present the
financial condition and results of operations of the Borrower at the dates. All
the financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied.
(k) ENFORCEABILITY. The Documents constitute legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
its respective terms, except as limited by bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium and other similar laws and
equitable principles affecting creditors' rights and remedies.
(l) NO CONFLICTS. The consummation of the transactions contemplated by the
fulfillment of the terms of the Documents will not conflict with, result in any
other of any of the terms and provisions of, or constitute (with or without
notice, lapse of time or both) a default under the limited liability company
agreement of the Borrower, or any material indenture, agreement, mortgage, deed
of trust or other instrument to which the Borrower 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 the indenture, agreement, mortgage, deed of
trust or other the instrument, other than the Documents, or violate any law,
rule, regulation or any order applicable
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to the Borrower of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Borrower or any of its properties.
(m) LEGAL PROCEEDINGS. There are no proceedings or investigations to which
the Borrower is a party pending, or, to the best knowledge of the Borrower,
threatened, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality (a) asserting the invalidity of the
Documents, (b) seeking to prevent the consummation of any of the transactions
contemplated by the Documents, (c) seeking any determination or ruling that
would materially and adversely affect the performance by the Borrower of its
obligations under, or the validity or enforceability of, the Documents or (d)
which would have a material adverse effect on the ability of the Seller to
perform its obligations under the Documents.
(n) CONSENTS AND APPROVALS. All approvals, authorizations, consents,
orders or other actions of any Person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection with
the execution, delivery and performance of the Documents, have been received or
taken, as the case may be.
(o) INVESTMENT COMPANY ACT OF 1940. The Borrower is not subject to the
Investment Company Act of 1940, as amended. In addition, the Borrower is not an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, and is not controlled by the a
company.
(p) COLLATERAL. The Borrower hereby represents and warrants to the Secured
Parties that it has good and marketable title (or its equivalent under
applicable law) to the Collateral, free from Liens and the claims of any third
party, except for the Deal Agent for the benefit of the Secured Parties.
(q) SECURITY INTEREST. The Borrower has granted to the Deal Agent for the
benefit of the Secured Parties a security interest (as defined in the UCC) in
the Collateral, which is enforceable in accordance with the UCC upon execution
and delivery of this Agreement. Upon the filing of UCC-1 financing statements
naming the Deal Agent as agent for the Secured Parties and the Borrower as
debtor, the Deal Agent, as agent for the Secured Parties, shall have a first
priority perfected security interest in the Collateral. All filings (including,
without limitation, the UCC filings) as are necessary in any jurisdiction to
perfect the interest of the Deal Agent, as agent for the Secured Parties, in the
Collateral have been (or prior to the Closing Date will be) made.
(r) TAX STATUS. The Borrower has filed all tax returns which it is
required to file and has paid, or made provision for the payment of, all taxes
which have been or may be shown to be due pursuant to the returns or pursuant to
any assessment received by it, except the taxes, if any, as are being contested
in good faith and as to which adequate reserves have been provided. The tax
returns are complete and accurate in all respects.
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(s) ADDRESSES. During the four (4) months prior to the Closing Date, the
Borrower has not been known by any other names and has not been located at any
addresses other than its current address.
(t) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representation or
warranty by the Borrower contained herein or in any certificate or other
document furnished by the Borrower pursuant hereto or in connection herewith is
true and correct in all material respects.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES RELATING TO THE CONTRACTS.
Each of the Borrower, ALAC and ALACRC hereby represents and warrants to
the Secured Parties on the Closing Date as follows:
(a) MARKING OF RECORDS. It has caused the portions of its records relating
to the Contracts to be clearly and unambiguously identified to show that the
Collateral has been sold to the Seller by ALAC and resold by the Seller to the
Trust in accordance with the terms of the Sale and Servicing Agreement.
(b) COMPUTER TAPE. The Computer Tape made available to the Deal Agent was
complete and accurate as of the date thereof and includes a description of the
same Contracts as those described in the Contract List and of the Collateral.
(c) [RESERVED].
(d) CONTRACT FILES COMPLETE. There exists a Contract File pertaining to
each Contract and such Contract File contains, without limitation, (a) a fully
executed original of the Contract, (b) a certificate of insurance, application
form for insurance signed by the Obligor, or a signed representation letter from
the Obligor named in the Contract pursuant to which the Obligor has agreed to
obtain physical damage insurance for the related Financed Vehicle, (c) the
original Lien Certificate or application therefor and (d) an original credit
application (which may be in electronic form) by the Obligor. 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 described in clauses
(a), (b), (c) and (d) above have been properly filled in and each form has
otherwise been correctly prepared. Notwithstanding the above, a copy of the
complete Contract File for each Contract (other than a Future Delivery
Contract), listed on the related Contract List is in the possession of the
Custodian.
(e) LAWFUL ASSIGNMENT. No Contract 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 Contract under either of the
Purchase Agreements or this Agreement. It has not entered into any agreement
with any Obligor that prohibits, restricts or conditions the assignment of any
portion of the Contracts.
(f) GOOD TITLE. No portion of the Collateral has been sold, transferred,
assigned or pledged by it to any Person other than the Borrower. Immediately
prior to the conveyance of the
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Collateral to the Borrower pursuant to this Agreement, it was the sole owner
thereof and had good and indefeasible title thereto, free of any Lien and, upon
the transfer thereof by it pursuant to the Purchase Agreements, the relevant
Seller had good and indefeasible title to and will be the sole owner of such
portion of the Collateral transferred by it pursuant to a Purchase Agreement,
free of any Lien. No dealer or Client Bank has a participation in, or other
right to receive, proceeds of any Contract. No Seller as 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 Policy or the related dealer
agreements or the Client Bank Agreements or to payments due under such
Contracts.
(g) SECURITY INTERESTS IN FINANCED VEHICLE. Each Contract creates a valid,
binding and enforceable first priority security interest in favor of ALAC in the
related Financed Vehicle. With respect to any Contract originated in a state in
which a notation of security interest on the title document of the Financed
Vehicle securing such Contract is required or permitted to perfect such security
interest, 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 no later than December 31, 1998 and will show ALAC or the applicable
Client Bank named as the original secured party under each Contract as the
holder of a first priority security interest in such Financed Vehicle and with
respect to any Contract that was originated in a jurisdiction in which the
filing of a financing statement under the UCC is required to perfect a security
interest in motor vehicles, such filings or recordings have been duly made and
show ALAC named as the original secured party under such Contract, and in either
case, the Deal Agent has the same rights as such secured party under such
Contract, and in either case, the Deal Agent has the same rights as such secured
party has or would have (if such secured party were still the owner of the
Contract) against all parties claiming an interest in such Financed Vehicle.
With respect to each Contract for which the Lien Certificate has not yet been
returned from the Registrar of Titles, ALAC has received written evidence from
the related dealer that such Lien Certificate showing ALAC or the applicable
Client Bank as first lienholder has been applied for and (i) ALAC's security
interest has been validly assigned to the Borrower pursuant to the Contract
Purchase Agreement and (ii) the Borrower's security interest has been validly
assigned by the Borrower to the Deal Agent pursuant to this Agreement.
Immediately after the sale, transfer and assignment thereof by the Borrower to
the Deal Agent, as agent for the Secured Parties, each Contract will be secured
by an enforceable and perfect first priority security interest in the Financed
Vehicle in favor of the Deal Agent, as agent for the Secured Parties, 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 arising subsequent to the Closing Date).
(h) 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 Deal Agent, as agent for
the Secured Parties, a first priority perfected lien on, or ownership interest
in, the Collateral and the proceeds thereof have been made, taken or performed.
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(i) NO IMPAIRMENT. It has not done anything to convey any right to any
Person that would result in such Person having a right to payments due under any
portion or all of the Collateral or otherwise to impair the rights of the
Borrower, the Lender, the Deal Agent or any Secured Party in any portion or all
of the Collateral or the proceeds thereof.
(j) CONTACTS NOT ASSUMABLE. No Contract is assumable by another Person in
a manner which would release the Obligor thereof from such Obligor's obligations
with respect to such Contract.
(k) NO DEFENSES. No portion of the Collateral is subject to any right of
recession, setoff, counterclaim or defense and no such right has been asserted
or threatened with respect to any portion or all of the Collateral.
(l) NO DEFAULT. There has been no default, breach, violation or event
permitting acceleration under the terms of any of the Sale and Servicing
Agreements, the Spread Account Agreement or any other Document, 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 of the Sale and Servicing Agreements, the
Spread Account Agreement or any other Document, and there has been no waiver of
any of the foregoing.
(m) INSURANCE. At the time of origination of each Contract, the related
Financed Vehicle was required to be 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 Contract, (ii) naming ALAC or the applicable Client Bank and their
successors and assigns 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 Contract requires the Obligor to
maintain physical loss and damage insurance, naming ALAC or the applicable
Client Bank and their successors.
(n) ELIGIBLE CONTRACTS. All Contracts identified as Eligible Contracts in
a Contract File is, as of the Closing Date, an Eligible Contract.
(o) CHARGED OFF RECEIVABLES. All Contracts identified as Charged-Off
Receivables in the Charged Off Receivables List are, as of the Closing Date,
Charged Off Receivables.
(p) DEFAULTED CONTRACTS. Each Contract identified as a Defaulted
Contract in the Defaulted Contract List is, as of the Closing Date, a
Defaulted Contract.
(q) DELINQUENT CONTRACTS. Each Contract identified as a Delinquent
Contract, in the Delinquent Contract List is, as of the Closing Date, a
Delinquent Contract.
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SECTION 6.3 PURCHASE OF CONTRACTS UPON BREACH.
Upon discovery by the Deal Agent, the Servicer, a Seller or the Borrower
of a breach of any of any of the representations and warranties of the Borrower
or a Seller set forth in Section 6.2 that adversely affects the interests of the
Deal Agent as agent for the Secured Parties or the Secured Parties in a
Contract, the party discovering such breach shall give prompt written notice to
the others. Within sixty (60) Business Days of such notice being given the party
who breached such representation or warranty (the "REPURCHASING PARTY"), shall
repurchase such Contract from the Borrower. The Repurchasing Party will deposit
an amount equal to the Contract Principal Balance, together with all accrued and
unpaid interest thereon through the date of such repurchase in the Collection
Account.
SECTION 6.4 REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
The Servicer represents and warrants to the Secured Parties on the Closing
Date as follows:
(a) CORPORATE EXISTENCE. The Servicer is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware and is duly
qualified to do business, and is in good standing in every jurisdiction in which
the nature of its business requires it to be so qualified.
(b) CORPORATE POWER; AUTHORIZATION; NON-CONTRAVENTION. The execution,
delivery and performance by the Servicer of this Agreement and all the other
Documents to be delivered by it hereunder, and the transactions contemplated
hereby and thereby, are within the Servicer's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Servicer's charter or by-laws, (ii) any law, rule or regulation applicable to
the Servicer, (iii) any contractual restriction contained in any material
indenture, loan or credit agreement, lease, mortgage, security agreement, bond,
note, or other agreement or instrument binding on or affecting the Servicer or
its property or (iv) any order, writ, judgment, award, injunction or decree
binding on or affecting the Servicer or its property, and do not result in or
require the creation of any Lien upon or with respect to any of its properties
(other than Liens, as created hereunder, on the Contracts). This Agreement has
been duly executed and delivered on behalf of the Servicer.
(c) ENFORCEABLE OBLIGATION. This Agreement and the other Documents to
which it is a party are the legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(d) SOLVENCY. The Servicer is not insolvent, nor is the Servicer aware of
any pending insolvency.
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ARTICLE VII
COVENANTS
SECTION 7.1 COVENANTS OF THE BORROWER.
The Borrower hereby covenants for the benefit of the Secured Parties as
follows:
(a) PAYMENT OF PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE. The Borrower
will pay when due all amounts of principal and interest on the Term Loan and all
other amounts payable by it hereunder.
(b) MERGER, ETC. The Borrower will not merge or consolidate with, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions), all or substantially all of its assets (whether
now owned or hereafter acquired), or acquire all or substantially all of the
assets or capital stock or other ownership interest of any Person, other than,
with respect to asset dispositions, in connection herewith.
(c) ACCOUNTING OF PURCHASES. The Borrower will not account for or treat
(whether in financial statements or otherwise) the transactions contemplated by
the Purchase Agreements in any manner other than the sale of Contracts and other
Collateral by the Seller to it.
(d) NATURE OF BUSINESS. The Borrower will engage in no business other than
the purchase of Contracts and other Collateral from the Seller, the financing
and/or resale of such Contracts and other Collateral and the other transactions
permitted or contemplated by this Agreement and related transactions.
(e) CONTRACTS. With respect to each Contract acquired by it from the
Seller, the Borrower will (i) acquire such Contract pursuant to and in
accordance with the terms of the respective Purchase Agreement, (ii) take all
action necessary to perfect, protect and more fully evidence its ownership of
such Contract, including, without limitation, (A) filing and maintaining
effective financing statements (Form UCC-1) against the Seller in all necessary
or appropriate filing offices, and filing continuation statements, amendments or
assignments with respect thereto in such filing offices and (B) executing or
causing to be executed such other instruments or notices as may be necessary or
appropriate and (iii) take all additional action that the Lender may reasonably
request to perfect, protect and more fully evidence the respective interests of
the parties to this Agreement in the Contracts and the other Collateral.
(f) SALES OF CONTRACTS; LIENS. Except for the conveyances hereunder,
without the prior written consent of the Secured Parties, the Borrower will not
sell, pledge, assign or transfer to any other Person, or grant, create, incur,
or assume any Lien on any Contract now existing or hereafter created, or any
interest therein while this Agreement is in effect. The Borrower shall, or shall
cause the Servicer to, in the normal course of its or the Servicer's business,
cause any such Lien to be removed or released.
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(g) MAINTENANCE OF SEPARATE EXISTENCE. The Borrower will do all things
necessary to maintain its corporate existence separate and apart from the Seller
and all other Affiliates of the Seller, including, without limitation, (i)
practicing and adhering to corporate formalities, such as maintaining
appropriate corporate books and records; (ii) having a sole manager which is a
corporation having a board of directors at least one member of which is not an
officer, director or employee of any of its Affiliates; (iii) refraining from
holding itself out as responsible for debts of any of its Affiliates or for
decisions or actions with respect to the affairs of any of its Affiliates; (iv)
maintaining all of its deposit and other bank accounts and all of its assets
separate from those of any other Person; (v) maintaining all of its financial
records separate and apart from those of any other Person and ensuring the
Seller's consolidated financial statements relating to the Borrower and its
Affiliates on a consolidated basis contain appropriate disclosures concerning
the Borrower's separate existence; (vi) accounting for and managing all of its
liabilities separately from those of any of its Affiliates; (vii) refraining
from filing or otherwise initiating or supporting the filing of a motion in any
bankruptcy or other insolvency proceeding involving the Borrower, the Seller or
any other Affiliate of the Borrower to substantively consolidate assets and
liabilities of the Borrower with the assets and liabilities of any such Person
or any other Affiliate of the Borrower; (viii) maintaining adequate
capitalization in light of its business and purpose; and (ix) conducting all of
its business (whether written or oral) solely in its own name.
(h) TRANSACTIONS WITH AFFILIATES. The Borrower will not enter into, or be
a party to, any transaction with any of its Affiliates, except the transactions
permitted or contemplated by this Agreement and a Purchase Agreement.
(i) CHANGE IN A PURCHASE AGREEMENT. The Borrower will not materially
amend, modify, waive or terminate any terms or conditions of any Purchase
Agreement without the consent of the Secured Parties.
(j) AMENDMENT TO L.L.C. AGREEMENT. The Borrower will not amend, modify or
otherwise make any change to its limited liability company agreement to delete
or otherwise nullify or circumvent the provisions set forth on Exhibit B hereto.
(k) COMPLIANCE WITH LAWS. The Borrower will comply, in all material
respects, with all laws, acts, rules, regulations, orders, decrees and
directions of any governmental authority applicable to the Contracts or any part
thereof; PROVIDED, HOWEVER, that the Borrower may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not materially
and adversely affect the rights of the Lender in the Contracts and the related
Financed Vehicles. The Borrower will comply, in all material respects, with all
requirements of laws, acts, rules, regulations, orders, decrees and directions
of any governmental authority applicable to the Borrower. At no time shall the
Borrower be subject to the Investment Company Act of 1940, as amended.
(l) FINANCING STATEMENTS. The Borrower shall execute and file such
continuation statements and any other documents requested by the Deal Agent or
which may be required by law or deemed necessary or advisable by the Deal Agent
to fully preserve and protect the interest
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of the Deal Agent as agent for the Secured Parties or any of its respective
successors or assigns in the Collateral.
(m) LOCATION OF OFFICES; CORPORATE NAME. The Borrower will not, without
providing 30 days prior written notice to the Lender and without filing such
amendments to any previously filed financing statements as the Secured Parties
may require (a) change the location of its principal executive office, or (b)
change its name, identity or corporate structure in any manner which would make
any financing statement or continuation statement filed by the Borrower in
accordance with this Agreement misleading within the meaning of Article 9-402(7)
of any applicable enactment of the UCC. The Borrower shall at all times maintain
each office in which it holds or services Contracts and its principal executive
office within the United States of America.
(n) LOCK-BOXES. The names and addresses of all the Lock-Box Banks,
together, with the account numbers of the Lock-Box Accounts of the Borrower at
such Lock-Box Banks and the names, addresses and account numbers of all accounts
to which Collections on the Contracts prior to the Closing Date hereunder have
been sent, are specified in Schedule I (which shall be deemed to be amended in
respect of terminating or adding any Lock-Box Account or Lock-Box Bank upon
satisfaction of the notice and other requirements specified in respect thereof).
(o) FURTHER ASSURANCES. The Borrower will make, execute or endorse,
acknowledge, and file or deliver to the Deal Agent on behalf of the Secured
Parties from time to time such schedules, confirmatory assignments, conveyances,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such further steps relating to the Deal
Agent, as the Deal Agent may request.
(p) MAINTENANCE OF BOOKS AND RECORDS; INSPECTIONS. The Borrower shall
maintain its books and records separate from the books and records of any other
entity. The officers of the Deal Agent, or such employees of the Deal Agent as
the Deal Agent may designate, with reasonable notice, may visit and inspect any
of the properties of the Borrower, examine (either by the Deal Agent or the Deal
Agent's agents or employees) any of the Collateral, or other assets of the
Borrower, including the books of account of the Borrower, and discuss the
affairs, finances and accounts of the Borrower with its officers and with its
independent accountants, at such times as they may reasonably desire.
The Deal Agent may conduct at any time, with reasonable notice, and from
time to time, and the Borrower will fully cooperate with, field examinations and
audits of the inventory, Contracts and business affairs of the Borrower. Such
examination will be conducted no more than twice per year, except upon the
occurrence of any material adverse change in the financial condition of a
Borrower. The Borrower shall reimburse the Deal Agent for all out-of-pocket
costs and expenses in connection with such examinations.
(q) NO COMMINGLING. The Borrower shall maintain separate bank accounts and
no funds of the Borrower shall be commingled with funds of any other entity.
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(r) [RESERVED].
(s) INVESTMENTS. Except as permitted by this Agreement, the Borrower will
not own any subsidiary or lend or advance any moneys to, or make an investment
in, or make any capital contributions or expenditures in or related to any
Person without the prior written consent of the Deal Agent.
(t) PAYMENT OF TAXES. The Borrower will pay or cause to be paid when due
all taxes, assessments, governmental charges or levies imposed upon it or its
income, profits, payroll or any property belonging to it, including without
limitation all withholding taxes, and all claims for labor, materials and
supplies which, if unpaid, might become a material Lien or charge upon any of
its properties or assets; PROVIDED that it shall not be required to pay any such
tax, assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings promptly initiated and
diligently conducted by it, and neither execution nor foreclosure sale or
similar proceedings shall have been commenced in respect thereof (or such
proceedings shall have been stayed pending the disposition of such contest of
validity), and it shall have set aside on its books, adequate reserves with
respect thereto.
(u) NOTICES. The Borrower will notify the Deal Agent, as soon as possible,
and in any event within five (5) days after notice to the Borrower, of (a) the
occurrence of any Event of Default, (b) any fact, condition or event which, with
the giving of notice or the passage of time or both, could become an Event of
Default, (c) the failure of the Borrower or any Affiliate of the Borrower to
observe any of its material undertakings under the Documents, or (d) any change
in the status or condition of the Borrower or the Collateral that would
materially adversely affect the Borrower's ability to perform its obligations
under the Documents.
(v) INDEBTEDNESS. The Borrower will not create, incur or suffer to exist
any Indebtedness other than that exists under, or is permitted by, this
Agreement or the other Documents, any Indebtedness incurred in connection with
this Agreement or the other Documents and as otherwise consented to by the Deal
Agent in writing prior to its incurrence.
(w) NO AMENDMENTS, MODIFICATIONS OR WAIVERS. The Borrower will not agree,
and will not permit any party to any Purchase Agreement, to make any amendment,
modification, waiver, restatement, replacement or other change to any Document
without the prior written consent of the Deal Agent.
(x) HEDGE REQUIREMENTS. The Borrower shall enter into one or more Hedge
Transactions for the purpose of hedging its obligations under this Agreement,
provided that each such Hedge Transaction shall be entered into with a Hedge
Counterparty and governed by a Hedging Agreement and all payments made by the
Hedge Counterparty with respect to each such Hedge Transaction shall be made to
the Collection Account. As additional security hereunder, Borrower hereby
assigns to the Secured Parties all right, title and interest of Borrower in each
Hedging Agreement, each Hedge Transaction, and all present and future amounts
payable by a Hedge Counterparty to Borrower under or in connection with the
respective Hedging Agreement and Hedge Transaction(s) with that Hedge
Counterparty ("HEDGE COLLATERAL"), and grants a
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security interest to the Secured Parties in the Hedge Collateral. Borrower
acknowledges that, as a result of that assignment, Borrower may not, without the
prior written consent of the Lender, exercise any rights under any Hedging
Agreement or Hedge Transaction, except for Borrower's right under any Hedging
Agreement to enter into Hedge Transactions in order to meet the Borrower's
obligations under this Section 7.1(x). Nothing herein shall have the effect of
releasing the Borrower from any of its obligations under any Hedging Agreement
or any Hedge Transaction, nor be construed as requiring the consent of any
Secured Party to the performance by the Borrower of any such obligations.
SECTION 7.2 YEAR 2000 COMPATIBILITY.
The Borrower shall take all action necessary to assure that, prior to
January 1, 2000, the Borrower's computer system is able to operate and
effectively process data including dates on and after January 1, 2000. At the
request of the Deal Agent, the Borrower shall provide assurance acceptable to
the Deal Agent of the Borrower's Year 2000 compatibility.
ARTICLE VIII
ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS
The Servicer and the Borrower will deliver to the Deal Agent the
following:
SECTION 8.1 [RESERVED].
SECTION 8.2 QUARTERLY STATEMENTS.
As soon as available and in any event within forty-five (45) days after
the end of each fiscal quarter (other than the fourth) of the Servicer and of
the Borrower:
(a) its income statements for such quarter, and
(b) its balance sheet as of the end of such quarter,
setting forth in comparative form the corresponding figures as at the end of the
corresponding quarter of the previous fiscal year (if applicable), all in
reasonable detail, subject to year-end adjustments, and certified by the Chief
Executive Officer, President, Chief Financial Officer, Treasurer or any
Assistant Treasurer of the Servicer or Borrower , as the case may be, to be
accurate and to have been prepared in accordance with the books and records of
the Servicer or Borrower, as the case may be, and in accordance with generally
accepted accounting principles, consistently applied; PROVIDED, HOWEVER that if
in any quarter for which quarterly statements are required pursuant this Section
8.2 the Borrower is part of a consolidated financial group, quarterly statements
for such consolidated financial group will satisfy the Borrower's quarterly
statement requirement hereunder.
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SECTION 8.3 MONTHLY REPORT.
On or before the 17th day of each calendar month (or, if such day is not a
Business Day, then on the next succeeding Business Day) (each such date, a
"DETERMINATION DATE"), the Servicer will deliver a report for the Borrower,
substantially in the form of Exhibit D attached hereto (the "MONTHLY REPORT").
SECTION 8.4 REQUESTED INFORMATION.
With reasonable promptness, all such other data and information in respect
of the condition, operation and affairs of the Borrower as the Deal Agent may
reasonably request from time to time.
ARTICLE IX
SERVICING
SECTION 9.1 DUTIES OF SERVICER.
The Servicer, as agent for the Borrower, shall manage, service, administer
and make collections on and in respect of the Collateral with reasonable care,
using that degree of skill and attention that a prudent person would use
comparable assets. The Servicer's duties shall include collecting and posting of
all payments received on all of the Collateral, arranging for the sale or other
liquidation of the Charged Off Contracts, responding to inquiries of Obligors or
by federal, state or local government authorities with respect to the Contracts,
investigating delinquencies, sending payment coupons to Obligors, reporting tax
information to Obligors in accordance with its customary practices, policing the
Collateral, accounting for Collections and furnishing monthly and annual
statements to the Deal Agent and the Borrower with respect to distributions,
generating federal income tax information and performing the other duties
specified herein. 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 in accordance with the above
described servicing standard. Without limiting the generality of the foregoing,
the Servicer shall be authorized and empowered by the Borrower and the Lender to
execute and deliver, on behalf of itself or the Borrower or Lender, 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 Contracts
and the Financed Vehicles. The Servicer is hereby authorized to commence, in its
own name or in the name of the Borrower, a legal proceeding to enforce a
Defaulted Contract or Charged Off Receivable pursuant to Section 9.4 or to
commence or participate in a legal proceeding (including without limitation a
bankruptcy proceeding) relating to or involving a Contract, including a
Defaulted Contract or a Charged Off Contract. If the Servicer commences or
participates in such a legal proceeding in its own name, the Borrower shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection on behalf of the party retaining an interest in such Contract, such
Contract to the Servicer for purposes of commencing or participating in any such
proceeding as a party or claimant, and the
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Servicer is authorized and empowered by the Borrower 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. If in any enforcement suit or legal proceeding it shall be held that
the Servicer may not enforce a Contract on the grounds that it shall not be a
real party in interest or a holder entitled to enforce such Contract, the
Borrower and the Lender shall, at the Servicer's expense and direction, take
steps to enforce such Contract, including bring suit in the appropriate
Borrower's name. The Borrower and the Lender shall furnish the Servicer with any
powers of attorney and other documents 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 the Agreement.
SECTION 9.2 COLLECTION OF CONTRACT PAYMENT.
The Servicer shall make reasonable efforts to collect all payments called
for under each item of Collateral as and when the same shall become due, and
shall follow such collection procedures as it follows with respect to all
comparable Collateral, including, with respect to the Contracts, automobile and
light duty truck receivables that it services for itself or others. The Servicer
shall be authorized to grant extensions, rebates or adjustments on a Contract
without the prior consent of the Borrower; PROVIDED that extensions or
modifications of the payment schedule of a Contract can be made only in
accordance with the customary servicing procedures of the Servicer, provided
that the amount of any extension fee charged in connection with the extension of
a Contract is deposited into the Collection Account by the Servicer within two
Business Days of receipt. The Servicer may, in accordance with its customary
servicing procedures, waive any prepayment charge, late payment charge or any
other fees that may be collected in the ordinary course of servicing the
Contracts.
SECTION 9.3 POSSESSION OF CONTRACT FILES.
(a) The Servicer, while acting as agent for the Borrower in connection
with performing its activities as Servicer on behalf of the Borrower, shall hold
all Contracts and Contract Files in its possession which have been pledged to
the Secured Parties to secure the Indebtedness described in Section 5.1 above,
solely as the agent of, and for the benefit of, the Secured Parties, and the
Servicer shall act only on the direction or authorization of the Lender on
behalf of the Secured Parties with regard to such pledged Contracts.
(b) On or prior to the thirtieth day following the Closing Date the
Servicer, on behalf of the Borrower shall cause (i) each Contract and related
Contract File that, as of the Closing Date, is in the possession of a Seller
(each such Contract a "FUTURE DELIVERY CONTRACT") to be delivered to the
Custodian and (ii) the Custodian to deliver to the Deal Agent a certificate
evidencing the possession of the Custodian of all Future Delivery Contracts
pursuant to the Custodian Agreement. On or prior to the Closing Date the
Servicer, on behalf of the Borrower, shall deliver to the Deal Agent a list (the
"FUTURE DELIVERY CONTRACT LIST") setting forth (x) the Contract number of each
such Future Delivery Contract, (y) the name of the Obligor of each such Future
Delivery Contract and (z) the Contract Principal Balance of each such Future
Delivery Contract.
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SECTION 9.4 REALIZATION UPON CONTRACTS.
The Servicer shall use its best efforts, consistent with its customary
servicing procedures, to repossess or otherwise comparably convert the ownership
of any Financed Vehicle that it has reasonably determined should be repossessed
or otherwise converted following a default under the Contract secured by the
Financed Vehicle. The Servicer shall follow such practices and procedures as it
shall deem necessary or advisable and as shall be customary and usual in its
servicing of automobile and light duty truck receivables, which practices and
procedures may include reasonable efforts to realize upon any recourse to
dealers, selling the related Financed Vehicle at public or private sale and
other actions by the Servicer in order to realize upon such a Contract and
selling the Charged Off Receivables. The Servicer shall be entitled to recover
its reasonable expenses with respect to each Defaulted Contract. All Recoveries
realized in connection with any such action with respect to a Contract shall be
deposited by the Servicer in the Collection Account. The foregoing is subject to
the proviso 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
Recoveries of the related Contract by an amount greater than the amount of such
expenses.
SECTION 9.5 MAINTENANCE OF PHYSICAL DAMAGE INSURANCE POLICIES.
The Servicer shall, in accordance with its customary servicing procedures,
require that each Obligor shall have obtained physical damage insurance covering
each Financed Vehicle as of the origination of the related Contract. The
Servicer shall deposit in the Collection Account, all amounts received by the
Servicer in respect of or as proceeds of any Insurance Policy. To the extent
Servicer maintains any Insurance Policy with respect to any Collateral
hereunder, the Secured Parties shall be named in such policy as loss payee.
SECTION 9.6 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES.
The Servicer shall, in accordance with its customary servicing procedures
and at its own expense, take such steps as are necessary to maintain perfection
of the security interest created by each Contract in the related Financed
Vehicle. The Borrower hereby authorizes the Servicer, and the Servicer hereby
agrees, to take such steps as are necessary to reperfect such security interest
on behalf of the Secured Parties in the event of the relocation of a Financed
Vehicle or for any other reason. In the event that the assignment of a Contract
to the Secured Parties is insufficient, without a notation on the related
Financed Vehicle's certificate of title, to grant to Deal Agent as agent for the
Secured Parties a first priority perfected security interest in the related
Financed Vehicle, the Servicer hereby agrees to serve as the agent of the
Secured Parties for the purpose of perfecting the security interest of the
Secured Parties in such Financed Vehicle and agrees that the Servicer's listing
as the secured party on the certificate of title is in this capacity as agent of
the Secured Parties. It is understood by the parties hereto that the Servicer
will not retitle Financed Vehicles or note any security interest on the titles
thereto.
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SECTION 9.7 COVENANTS OF SERVICER.
The Servicer hereby covenants for the benefit of the Secured Parties as
follows:
(a) LIENS IN FORCE. Except as contemplated by this Agreement, the Servicer
shall not release in whole or in part any Financed Vehicle from the security
interest securing the related Contract.
(b) NO IMPAIRMENT. The Servicer shall do nothing to impair the rights of
the Secured Parties in the Contracts.
(c) NO AMENDMENTS. Subject to Section 9.2, the Servicer shall not amend or
otherwise modify any Contract.
(d) SERVICING AND COLLECTION POLICY. The Servicer shall develop within 30
Business Days of the Closing Date, a servicing and collection policy which shall
be reasonably acceptable to the Deal Agent, PROVIDED, HOWEVER, that the Servicer
shall not amend, modify, change, supplement or rescind any servicing and
collection policy in place as of the Closing Date if such amendment,
modification, change, supplement or rescindment shall adversely affect the
collectability of any Contract.
(e) CONTRACT FILES. The Servicer shall deliver the Contract Files to the
Custodian in accordance with Section 2 of the Custodial Agreement.
SECTION 9.8 PURCHASE OF CONTRACTS UPON BREACH.
Upon discovery by the Deal Agent, the Servicer or the Borrower of a breach
of any of the covenants of the Servicer set forth in Section 9.7 that materially
and adversely affects the interests of the Deal Agent as agent for the Secured
Parties, the Secured Parties or the Borrower in a Contract, the party
discovering such breach shall give prompt written notice to the others. Within
sixty (60) Business Days of such notice being given to the Servicer, the
Servicer shall, unless such breach or impropriety shall have been cured in all
material respects, purchase such Contract from the Borrower. The Servicer will
deposit an amount equal to the Contract Principal Balance, together with all
accrued and unpaid interest thereon through the date of such purchase in the
Collection Account.
SECTION 9.9 ANNUAL STATEMENT AS TO COMPLIANCE.
The Servicer shall deliver to the Deal Agent, within 60 days following the
end of each calendar year, beginning with December 31, 1998, an officer's
certificate of the Servicer, stating that (i) a review of activities of the
Servicer from the Closing Date to the date of such certificate and of its
performance under the Agreement has been made, and (ii) to such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under the 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.
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SECTION 9.10 ANNUAL ACCOUNTANTS' REPORT.
The Servicer shall cause a firm of independent accountants (who may also
render other services to the Servicer or to the Seller) to deliver to the
Borrower within 60 days following the end of each calendar year, beginning with
December 31, 1998, a report to the effect that such accountants have examined
certain records and documents relating to the servicing of retail sale contracts
similar to the Contracts and that such examination (1) was performed in
accordance with standards established by the American Institute of Certified
Public Accountants, and (2) included necessary procedures relating to automotive
loans serviced for others. Such report shall also indicate that the firm is
independent with respect to the Seller and the Servicer within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants.
SECTION 9.11 AMENDMENTS TO CONTRACT LIST.
The Servicer will provide to the Lender a written amendment to the
Contract List or the Charged Off Receivables List (i) at any time necessary to
make such list true and correct in all material respects and (ii) in any event,
promptly upon the removal of any Contract.
SECTION 9.12 LOAN SERVICING FEE.
On each Distribution Date, the Servicer shall, unless waived by the
Servicer, be entitled (i) to collect a servicing fee, in arrears, in an amount
equal to the lesser of (A) the product of (x) one-twelfth of the Servicing Fee
Rate and (y) the aggregate Contract Principal Balance of Eligible Contracts,
Defaulted Contracts and Delinquent Contracts owned by the Borrower as of the
last day of the immediately preceding calendar month and (B) the amount of
Collections received in respect of the Eligible Contracts, Delinquent Contracts
and Defaulted Contracts during the calendar month preceding such Distribution
Date (the "LOAN SERVICING FEE"), and (ii) unless otherwise provided herein, to
keep all late fees, prepayment charges and other administrative fees.
SECTION 9.13 SUBSERVICERS.
The Servicer shall be permitted to appoint any of its Affiliates as a
subservicer under this Agreement; PROVIDED that the Servicer shall remain
ultimately liable for all servicing obligations.
SECTION 9.14 SERVICER TERMINATION EVENTS.
(a) Each of the following events shall constitute a "SERVICER TERMINATION
EVENT"):
(i) Any failure by the Servicer to make any payment under this
Agreement required to be made by the Servicer when due and such failure
continues for a period of two (2) Business Days.
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(ii) Failure on the part of the Servicer duly to observe or to
perform in any material respect any other covenants or agreements of the
Servicer set forth in Document, which failure shall continue unremedied
for a period of 30 days (if such failure can be remedied) after the
earlier to occur of (A) the date on which written notice of such failure
is given, or (B) the date of actual knowledge thereof by an officer of the
Servicer.
(iii) (a) Any representation or warranty of the Servicer in any of
the Documents is discovered to be untrue in any material respect or any
statement or certificate furnished by the Servicer pursuant hereto is
discovered to be untrue in any material respect on the date as of which
the facts therein set forth or certified were deemed to have been made and
(b) such representation, warranty, statement or certificate shall remain
uncured for a period of thirty (30) days from the earliest to occur of (A)
the date on which written notice of such misrepresentation is given, or
(B) the date of actual knowledge of such misrepresentation by an officer
of the Borrower or the Deal Agent, as the case may be.
(iv) A bankruptcy, insolvency or similar event occurs with respect
to the Servicer.
(v) On or after the Closing Date, any Change in Control of the
Servicer occurs without the prior written consent of the Deal Agent.
(b) Upon the occurrence of one or more Servicer Termination Events, the
Deal Agent may and upon instruction from the Lender shall (i) collect and
receive all further payments made on the Collateral, (ii) instruct the Obligors
to make payments to a lock-box or other location designated by the Lender, (iii)
control deposits to and disbursements from the Collection Account, (iv) require
any payments received by the Servicer or the Borrower to be paid promptly over
to the Agent's Account or (v) terminate the rights of the Servicer and appoint a
successor Servicer satisfactory to the Deal Agent (in the Deal Agent's sole
discretion).
SECTION 9.15 YEAR 2000 COMPATIBILITY.
The Servicer shall take all action necessary to assure that, prior to
January 1, 2000, the Servicer's computer system is able to operate and
effectively process data including dates on and after January 1, 2000. At the
request of the Deal Agent, the Servicer shall provide assurance acceptable to
the Deal Agent of the Servicer's Year 2000 compatibility.
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ARTICLE X
DEFAULTS AND REMEDIES
SECTION 10.1 EVENTS OF DEFAULT.
Each of the following shall constitute an "Event of Default" hereunder:
(a) Failure of the Borrower to make any payment of interest or principal
which is or has become due under the terms of the Documents and such failure has
not been remedied within two (2) Business Days following the date such payment
is due; PROVIDED, HOWEVER, that payments due as a result of the acceleration of
the maturity of the obligations hereunder shall be immediately due and payable
and not subject to any grace period hereunder.
(b) Failure on the part of the Borrower duly to observe or to perform in
any material respect any other covenants or agreements of the Borrower set forth
in any Document, which failure shall continue unremedied for a period of 30 days
(if such failure can be remedied) after the earlier to occur of (A) the date on
which written notice of such failure is given, or (B) the date of actual
knowledge thereof by an officer of the Borrower or the Seller, as the case may
be.
(c) Any representation or warranty of the Borrower in any of the Documents
is discovered to be untrue in any material respect or any statement or
certificate furnished by the Borrower pursuant hereto is discovered to be untrue
in any material respect as of the date as of which the facts therein set forth
above stated or certified.
(d) If the Borrower (i) shall generally not pay, or shall be unable to
pay, or shall admit in writing its inability to pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of creditors, or
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or for a substantial part of its assets; or (iii) shall
commence any proceeding under any bankruptcy, reorganization, arrangements,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction whether now or hereafter in effect; or (iv) shall have had any such
action or application filed or any such proceeding commenced against it in which
an order for relief is requested or entered or an adjudication or appointment is
made (which application or proceeding is not dismissed within sixty (60) days of
filing); or (v) shall indicate, by any act or omission, its consent to, approval
of, or acquiescence in any such petition, application, proceeding, or order for
relief or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (vi) shall suffer any such custodianship,
receivership, or trusteeship or the occurrence of any event or existence of any
condition which could be the ground, basis or cause for any action, application,
proceeding or petition described in this Section 10.1(d).
(e) The Borrower voluntarily or involuntarily is dissolved, terminates or
is terminated.
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(f) The entry of a final judgment for the payment of money in excess of
$20,000 against the Borrower which, within thirty (30) days after such entry,
shall not have been vacated, discharged or stayed or bonded pending appeal.
(g) The occurrence of a Servicer Termination Event.
(h) The assignment or attempted assignment by the Borrower of any of its
rights under any of the Documents, or delegation or attempted delegation by the
Borrower of any of its obligations under any of the Documents, without first
obtaining the specific written consent of the Secured Parties, or the granting
by the Borrower of any Lien on any Collateral to a Person other than the Deal
Agent as agent for the Secured Parties.
(i) On or after the Closing Date, any Change in Control shall occur as to
the Borrower.
SECTION 10.2 REMEDIES UPON DEFAULT.
(a) Upon the occurrence of one or more Events of Default (other than
Section 10.1(d)), the Deal Agent may, and upon instruction of the Lender shall,
immediately declare all or any portion of the Outstanding Principal Amount to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under any of the Documents. Upon such declaration, the
Outstanding Principal Amount shall become immediately due and payable without
presentation, demand or further notice of any kind to the Borrower. Upon the
occurrence of an Event of Default specified in Section 10.1(d), the principal of
the Note then outstanding shall automatically become due and payable, without
any further action of the Deal Agent.
(b) Upon the occurrence of one or more Events of Default, the Deal Agent
shall have the right to obtain physical possession of all files of the Borrower
relating to the Collateral and all documents relating to the Collateral which
are then or may thereafter come into the possession of the Borrower or any third
party acting for the Borrower.
(c) Upon the occurrence of one or more Events of Default, the Deal Agent
on behalf of the Secured Parties shall have the right to dispose of the
Collateral as provided herein, or as provided in the other documents executed in
connection herewith, or in any commercially reasonable manner, or as provided by
law. Without limiting the rights of the Deal Agent hereunder, the Deal Agent as
agent for the Secured Parties shall be entitled, without limitation, to place
the Contracts which it recovers after any default in a pool for issuance of
automobile loan receivable-backed securities at the then prevailing price for
such securities and to sell such securities for such prevailing price in the
open market as a commercially reasonable disposition of collateral subject to
the applicable requirements of the UCC. The Deal Agent as agent for the Secured
Parties shall also be entitled to sell any or all of such Contracts individually
for the prevailing price as a commercially reasonable disposition of collateral
subject to the applicable requirements of the UCC. The specification in this
Section 10.2 of manners of disposition of collateral as being commercially
reasonable shall not preclude the use of other commercially reasonable methods
(as contemplated by the UCC) at the option of the Deal Agent.
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SECTION 10.3 INDEMNIFICATION.
The Borrower agrees to hold the Deal Agent and each of the Secured Parties
harmless from and indemnifies the Deal Agent and each of the Secured Parties
against all liabilities, losses, damages, judgments, costs, and expenses of any
kind which may be imposed on, incurred by, or asserted against the Deal Agent
and each of the Secured Parties relating to or arising out of (i) any Event of
Default or the breach by Borrower of any of its representations, warranties and
covenants contained in this Agreement or any transaction contemplated hereby
(including without limitation any failure of the Borrower to pay when due (at
maturity, by acceleration or otherwise) principal, interest, fees or any other
amounts due under this Agreement or the Documents) resulting from anything other
than the Deal Agent's or a Secured Party's willful misconduct or negligence, or
(ii) any product liability claims relating to any Contract, any Obligor or any
Financed Vehicle whatsoever. The Borrower also agrees to reimburse the Deal
Agent and each of the Secured Parties for all reasonable expenses in connection
with the enforcement of any or all of the Documents, including this
indemnification provision and including without limitation the reasonable fees
and disbursements of counsel. If the Deal Agent or any of the Secured Parties
sustains or incurs any such loss or expense it will from time to time promptly
notify Borrower in writing of the claim giving rise to a request for
indemnification and the amount determined in good faith by the Deal Agent or the
Secured Party seeking indemnification to be necessary to indemnify such Person
for such loss or expense; PROVIDED, HOWEVER, that failure to give such notice
shall not limit or affect the Borrower' indemnification obligations hereunder.
The amount owed by the Borrower hereunder will be paid promptly by Borrower to
the Person seeking indemnification hereunder after presentation by such Person
of a statement setting forth an explanation of its calculation of such amount.
The Borrower's agreements in this Section 10.3 shall survive the payment in full
of the Note and the expiration or termination of this Agreement. The Borrower
hereby acknowledges that, notwithstanding the fact that the Note is secured by
the Collateral, the obligations of the Borrower under the Note, including any
deficiencies resulting from sale of the Collateral pursuant to Section 10.2, are
recourse obligations of the Borrower.
SECTION 10.4 POWER OF ATTORNEY.
The Borrower hereby authorizes the Deal Agent, on behalf of the Secured
Parties, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Deal Agent at its option may deem appropriate, and appoints the Deal
Agent as the Borrower's attorney-in-fact (but without requiring the Deal Agent
to act) to execute any such financing statement or statements in the Borrower's
name and to perform all other acts which the Deal Agent deems appropriate to
perfect and continue the security interest granted hereby and to protect,
preserve and realize upon the Collateral, including, but not limited to, the
right to endorse notes, complete blanks in documents and sign assignments on
behalf of the Borrower as its attorney-in-fact. This power of attorney is
coupled with an interest and is irrevocable without the Deal Agent's consent.
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ARTICLE XI
THE DEAL AGENT
SECTION 11.1 AUTHORIZATION AND ACTION.
Each Secured Party hereby designates and appoints the Deal Agent as Deal
Agent hereunder, and authorizes the Deal Agent to take such actions as agent on
its behalf and to exercise such powers as are delegated to the Deal Agent by the
terms of this Agreement together with such powers as are reasonably incidental
thereto. The Deal Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Deal Agent shall be read into this Agreement or
otherwise exist for the Deal Agent. In performing its functions and duties
hereunder, the Deal Agent shall act solely as agent for the Secured Parties and
does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for the Borrower or any of its
successors or assigns. The Deal Agent shall not be required to take any action
which exposes the Deal Agent to personal liability or which is contrary to this
Agreement or applicable law. The appointment and authority of the Deal Agent
hereunder shall terminate at the indefeasible payment in full of the
Obligations.
SECTION 11.2 DELEGATION OF DUTIES.
The Deal Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Deal Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 11.3 EXCULPATORY PROVISIONS.
Neither the Deal Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Borrower
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document furnished
in connection herewith, or for any failure of the Borrower to perform its
obligations hereunder, or for the satisfaction of any condition specified in
Article III. The Deal Agent shall not be under any obligation to any Secured
Party to ascertain or to inquire as to the observance or performance of any of
the agreements or covenants contained in, or conditions of, this Agreement, or
to inspect the properties, books or records of the Borrower. The Deal Agent
shall not be deemed to have
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knowledge of any Event of Default unless the Deal Agent has received notice from
the Borrower or a Secured Party.
SECTION 11.4 RELIANCE.
The Deal Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Deal Agent. The Deal Agent shall in all cases be fully justified
in failing or refusing to take any action under this Agreement or any other
document furnished in connection herewith unless it shall first receive such
advice or concurrence of VFCC or all of the Secured Parties, as applicable, as
it deems appropriate or it shall first be indemnified to its satisfaction by the
Secured Parties; PROVIDED, THAT, unless and until the Deal Agent shall have
received such advice, the Deal Agent may take or refrain from taking any action,
as the Deal Agent shall deem advisable and in the best interests of the Secured
Parties. The Deal Agent shall in all cases be fully protected in acting, or in
refraining from acting, in accordance with a request of VFCC and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Secured Parties.
SECTION 11.5 NON-RELIANCE ON DEAL AGENT.
Each Secured Party expressly acknowledges that neither the Deal Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Deal Agent hereafter taken, including, without limitation, any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Deal Agent. Each Secured Party represents and warrants to the
Deal Agent that it has and will, independently and without reliance upon the
Deal Agent or any other Secured Party and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Borrower and made its own decision
to enter into this Agreement.
SECTION 11.6 DEAL AGENT IN ITS INDIVIDUAL CAPACITY.
The Deal Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any Affiliate
of the Borrower as though the Deal Agent, were not the Deal Agent hereunder.
SECTION 11.7 SUCCESSOR DEAL AGENT.
The Deal Agent may, upon 5 days' notice to the Secured Parties, and the
Deal Agent will, upon the direction of the Lender, resign as Deal Agent. If the
Deal Agent shall resign, then the Lender shall, during such 5-day period,
appoint a successor Deal Agent. If for any reason no successor Deal Agent is
appointed by the Lender during such 5-day period, then effective upon
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the expiration of such 5-day period, the Lender shall perform all of the duties
of the Deal Agent hereunder and the Borrower shall make all payments in respect
of the Obligations to the Lender and the Secured Parties directly to the Lender
and the Secured Parties and for all purposes shall deal directly with the
Secured Parties. After any retiring Deal Agent's resignation hereunder as Deal
Agent, the provisions of Article VIII and Article IX shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Deal Agent
under this Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 AGREEMENT CONSTITUTES SECURITY AGREEMENT.
This Agreement is intended by the parties hereto to be governed by Georgia
law, and to constitute a security agreement within the meaning of the UCC.
SECTION 12.2 ASSIGNMENT; PARTICIPATIONS.
The rights of the Deal Agent and the Secured Parties under this Agreement,
the Note, the Collateral and all other rights hereunder and thereunder may be
assigned to any Person without the consent of the Borrower. The Documents shall
inure to the benefit of and be binding on the respective successors and assigns
of the parties hereto. This Agreement may not be assigned by the Borrower
without the prior written consent of the Deal Agent (which consent shall be
granted in the Deal Agent's sole discretion).
SECTION 12.3 AMENDMENTS; REMEDIES CUMULATIVE.
This Agreement may be amended or modified from time to time only by
written agreement of the Deal Agent, the Lender and the Borrower. Any
forbearance, failure, or delay by a party (including any Hedge Counterparty) in
exercising any right, power, or remedy hereunder shall not be deemed to be a
waiver thereof, and any single or partial exercise by a party (including any
Hedge Counterparty) of any right, power or remedy hereunder shall not preclude
the further exercise thereof. Every right, power and remedy of a party
(including any Hedge Counterparty) shall continue in full force and effect until
specifically waived by it in writing. No right, power or remedy shall be
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred hereby or
hereafter available at law or in equity or by statute or otherwise. No
amendment, waiver or other modification effecting the rights or obligations of
any Hedge Counterparty shall be effective against such Hedge Counterparty
without the written agreement of such Hedge Counterparty.
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SECTION 12.4 EFFECT OF INVALIDITY OF PROVISIONS.
In case any one or more of the provisions contained in this Agreement
should be or become invalid, illegal or unenforceable, the remaining provisions
contained herein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 12.5 ENTIRE AGREEMENT.
This Agreement and the Documents hereto contain the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersede all
prior and contemporaneous agreements between them, oral or written, of any
nature whatsoever with respect to the subject matter hereof.
SECTION 12.6 CONSENT TO SERVICE.
Each party irrevocably consents to the service of process by registered or
certified mail, postage prepaid, to it at its address given pursuant to Section
12.7 hereof.
SECTION 12.7 NOTICES.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such notices and
communications shall be effective, upon receipt, or in the case of (a) notice by
mail, five days after being deposited in the United States mail, first class
postage prepaid, (b) notice by telex, when telexed against receipt of answer
back, or (c) notice by facsimile copy, when verbal communication of receipt is
obtained.
SECTION 12.8 NO PROCEEDINGS.
Each of the Borrower, the Deal Agent and the Secured Parties hereby agrees
that it will not institute against, or join any other Person in instituting
against VFCC any Insolvency Proceeding so long as any commercial paper issued by
VFCC shall be outstanding and there shall not have elapsed one year and one day
since the last day on which any such commercial paper notes issued by VFCC shall
have been outstanding.
SECTION 12.9 RECOURSE AGAINST CERTAIN PARTIES.
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Secured Party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any manager or administrator of such
Secured Party or any incorporator, affiliate, stockholder, officer, employee
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or director of such Secured Party or of any such manager or administrator, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise; IT BEING EXPRESSLY AGREED AND
UNDERSTOOD that the agreements of such Secured Party contained in this Agreement
and all of the other agreements, instruments and documents entered into by it
pursuant hereto or in connection herewith are, in each case, solely the
corporate obligations of such Secured Party, and that no personal liability
whatsoever shall attach to or be incurred by any manager or administrator of
such Secured Party or any incorporator, stockholder, affiliate, officer,
employee or director of such Secured Party or of any such manager or
administrator, as such, or any other of them, under or by reason of any of the
obligations, covenants or agreements of such Secured Party contained in this
Agreement or in any other such instruments, documents or agreements, or which
are implied therefrom, and that any and all personal liability of every such
manager or administrator of such Secured Party and each incorporator,
stockholder, affiliate, officer, employee or director of such Secured Party or
of any such administrator, or any of them, for breaches by such Secured Party of
any such obligations, covenants or agreements, which liability may arise either
at common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement.
(b) Notwithstanding anything in this Agreement or any other Document to
the contrary, VFCC shall have no obligation to pay any amount required to be
paid by it hereunder or thereunder in excess of any amount available to VFCC
after paying or making provision for the payment of its Commercial Paper Notes.
All payment obligations of VFCC hereunder are contingent upon the availability
of funds in excess of the amounts necessary to pay Commercial Paper Notes; and
each of the Borrower, the Servicer, the Deal Agent and the Secured Parties
agrees that they shall not have a claim under Section 101(5) of the Bankruptcy
Code if and to the extent that any such payment obligation exceeds the amount
available to VFCC to pay such amounts after paying or making provision for the
payment of its commercial paper notes.
(c) The provisions of this Section 12.9 shall survive the termination of
this Agreement.
SECTION 12.10 SUBMISSION TO JURISDICTION; WAIVER OF TRIAL BY JURY.
With respect to any claim arising out of this Agreement, to the fullest
extent permitted by law:
(a) each party and each Hedge Counterparty irrevocably submits to the
non-exclusive jurisdiction of the state courts of , and the federal courts
located within, the State of Georgia, and
(b) each party and each Hedge Counterparty irrevocably waives any
objection which it may have at any time to the laying of venue of any suit,
action or proceeding arising out of or relating hereto brought in any such
court, irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum and further
irrevocably waives the right to object, with respect to such claim, suit, action
or proceeding brought in any such court, that such court does not have
jurisdiction over such party.
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(c) THE LENDER, THE DEAL AGENT, THE HEDGE COUNTERPARTIES AND THE BORROWER
EACH IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER
ARISING HEREUNDER.
SECTION 12.11 CERTAIN FEES, COSTS AND EXPENSES.
In addition to costs and expenses described elsewhere in this Agreement,
Borrower agrees to pay on demand all reasonable costs and expenses of the Deal
Agent and each Secured Party, including without limitation:
(a) all costs and expenses in connection with the preparation, review,
negotiation, execution and delivery of any waiver, amendment, restatement,
replacement or modification of the Documents, and the other documents to be
delivered in connection therewith (excluding any Hedging Agreement), or any
amendments, extensions and increases to any of the foregoing (including, without
limitation, with respect to the preparation, review, negotiation, execution and
delivery of any waiver, amendment, restatement, replacement or modification of
the Documents, reasonable attorneys' fees and reasonable out-of-pocket
expenses), PROVIDED, however, that the Deal Agent shall be responsible for all
of the costs and expenses incurred by it and VFCC in connection with the
preparation, review, negotiation, execution and delivery of this Agreement and
the Purchase Agreements;
(b) all losses, costs and expenses in connection with the enforcement,
protection and preservation of the rights or remedies of the Secured Parties
under the Documents and any Hedging Agreement, or any other agreement relating
thereto, or in connection with legal advice relating to the rights or
responsibilities of the Secured Parties (including without limitation court
costs, reasonable attorneys' fees and expenses of accountants and appraisers);
and
(c) any and all stamp and other taxes payable or determined to be payable
in connection with the execution and delivery of the Documents, and all
liabilities to which Lender may become subject as the result of delay in paying
or omission to pay such taxes.
In the event Borrower shall fail to pay taxes, insurance, assessments,
costs or expenses which it is required to pay hereunder, or fails to keep the
Collateral free from security interests or Liens (except as expressly permitted
herein), or fails to maintain the Collateral as required hereby, Lender in its
discretion, may make expenditures for such purposes and the amount so expended
(including reasonable attorneys' fees and expenses, filing fees and other
charges) shall be payable by Borrower on demand and shall constitute part of the
Indebtedness owing hereunder.
Borrower shall promptly pay all amounts required to be paid under this
Section 12.11. Borrower' obligations under this Section shall survive
termination of this Agreement.
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SECTION 12.12 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which shall constitute but
one and the same instrument.
SECTION 12.13 LIMITATION ON LIABILITY.
Borrower shall be responsible for and the Deal Agent and each Secured
Party is hereby released from any claim or liability in connection with (a)
safekeeping any Collateral; (b) any loss or damage to any Collateral; or (c) any
diminution in value of the Collateral.
SECTION 12.14 CONFIDENTIALITY.
(a) Each of the Deal Agent, the Secured Parties and the Borrower shall
maintain and shall cause each of its employees and officers to maintain the
confidentiality of the Agreement and the other confidential proprietary
information with respect to the other parties hereto and their respective
businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose this Agreement
and/or such information to its external accountants and attorneys and as
required by an applicable law, rule or regulation or order of any judicial or
administrative proceeding, (ii) disclose the existence of this Agreement, but
not the financial terms thereof and (iii) disclose the Agreement and such
information in any suit, action, proceeding or investigation (whether in law or
in equity or pursuant to arbitration) involving and of the Documents or any
Hedging Agreement for the purpose of defending itself, reducing its liability,
or protecting or exercising any of its claims, rights, remedies, or interests
under or in connection with any of the Documents or any Hedging Agreement.
(b) Anything herein to the contrary notwithstanding, the Borrower hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to the Deal Agent and its Affiliates and the Secured Parties by each other, (ii)
by the Deal Agent and its Affiliates or any of the Secured Parties to any
prospective or actual assignee or participant of any of them or (iii) by the
Deal Agent or any of the Secured Parties to any Rating Agency, commercial paper
dealer or provider of a surety, guaranty or credit or liquidity enhancement to a
Secured Party and to any officers, directors, employees, outside accountants and
attorneys of any of the foregoing, provided each such Person is informed of the
confidential nature of such information and agree to be bound hereby. In
addition, the Secured Parties and the Deal Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation, direction, request or order
of any judicial, administrative or regulatory authority or proceedings.
[SIGNATURE PAGES TO FOLLOW]
54
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BORROWER: FIFS ACQUISITION FUNDING COMPANY, L.L.C.
By FIALAC Holdings, Inc., as Manager
By:______________________________________
Name: Bennie H. Duck
Title: Vice President of FIALAC
Holdings, Inc.
FIFS Acquisition Funding Company, L.L.C.
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.:
Confirmation No.:
SERVICER AND SELLER: AUTO LENDERS ACCEPTANCE CORPORATION
By______________________________________
Name:___________________________________
Title:__________________________________
Auto Lenders Acceptance Corporation
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.:
Confirmation No.:
<PAGE>
SELLER: ALAC RECEIVABLES CORP.
By______________________________________
Name:___________________________________
Title:__________________________________
ALAC Receivables Corp.
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.:
Confirmation No.:
LENDER: VARIABLE FUNDING CAPITAL CORPORATION
By First Union Capital Markets, a division of
Wheat First Securities, Inc., as
attorney-in-fact
By:___________________________________________
Name:___________________________________
Title:__________________________________
Variable Funding Capital Corporation
c/o First Union Capital Markets
One First Union Center, TW-6
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
With a copy to:
Lord Securities Corp.
Attention:
Facsimile No.: (____) __________
Confirmation No.: (____) __________
<PAGE>
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS, a
division of WHEAT FIRST SECURITIES, INC.
By___________________________________
Title:
First Union Capital Markets
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Telephone No.: (704) 383-9343
<PAGE>
Exhibit A
to
Loan and Security
Agreement
$75,000,000 October 2, 1998
NOTE
FOR VALUE RECEIVED, the undersigned, FIFS ACQUISITION FUNDING COMPANY,
L.L.C. (the "BORROWER") unconditionally promises to pay to the order of VARIABLE
FUNDING CAPITAL CORPORATION (the "LENDER") on the Maturity Date (such
capitalized term and all other capitalized terms used herein without definition
to have the meanings ascribed to such terms in the Loan Agreement hereinafter
referred to) as may be extended the principal amount equal to the lesser of (a)
SEVENTY FIVE MILLION DOLLARS ($75,000,000) or (b) the Outstanding Principal
Amount, pursuant to the Loan and Security Agreement dated as of October 2, 1998
(together with all amendments, supplements, and amendment and restatements and
other modifications, if any, thereafter from time to time made thereto, the
"LOAN AGREEMENT") among the Borrower, the Lender, Auto Lenders Acceptance
Corporation, ALAC Receivables Corp., First Union National Bank and First Union
Capital Markets, a division of Wheat First Securities, Inc. The Borrower hereby
irrevocably authorizes the Lender to make (or cause to be made) appropriate
notations on the grid (or a continuation of such grid) attached to this Note and
made a part hereof, which notations, if made, shall evidence, INTER ALIA, the
date of, the outstanding principal of, the interest rate applicable and interest
period applicable from time to time to the Term Loan evidenced hereby. Any such
notations by the Lender on the grid (and on any such continuation) indicating
the outstanding principal amount of the Term Loan shall be, absent manifest
error, conclusive as to the principal amount thereof owing and unpaid, but the
failure to record any such amount on such grid (or on such continuation) shall
not, however, limit or otherwise affect the obligations of the Borrower
hereunder or under the Loan Agreement to make payments of principal of or
interest on this Note when due.
The Borrower agrees to pay interest on the principal amount of this Note,
from time to time unpaid, prior to and at maturity (whether by required
prepayment, declaration or otherwise) and thereafter as provided in the Loan
Agreement.
All payments by the Borrower of principal of, or interest on, this Note
shall be made without set-off, deduction, or counterclaim on the date due in
same day or immediately available funds, to the Lender pursuant to the Loan
Agreement. Whenever any payment to be made shall be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing interest, if any, in
connection with such payment.
<PAGE>
This note is the Note referred to in, and evidences indebtedness incurred
under, the Loan Agreement, to which reference is made for a description of the
security for this Note and for a statement of the terms and conditions on which
the Borrower is permitted and required to make payments and prepayments of
principal of the indebtedness evidenced by this Note and on which such
indebtedness may be declared to be, or shall become, immediately due and
payable.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Georgia.
FIFS ACQUISITION FUNDING COMPANY, L.L.C.
By FIALAC Holdings, Inc., as Manager
By:___________________________________________
Name: Bennie H. Duck
Title: Vice President of FIALAC Holdings, Inc.
<PAGE>
STATE OF ______________________
COUNTY OF _____________________
I, ___________________________________, a Notary Public of the County and
State aforesaid, certify that __________________, personally came before me this
day and acknowledged that (s)he is _________ of ______________________, a
_______ corporation, and that by authority duly given and as the act of the
association, the foregoing instrument was signed in its name by its
_______________.
WITNESS my hand and official stamp or seal, this _____ day of ___________,
199_.
---------------------------------
Notary Public
My Commission Expires:
- ----------------------
(Notary Seal)
<PAGE>
Schedule 2.4
to
Loan and Security Agreement
The obligation of the Lender to make available to the Borrower the Initial
Principal Amount of the Term Loan shall be subject to the following conditions
precedent:
(a) The Deal Agent shall have received:
(i) Copies of resolutions of the Borrower approving the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby, certified by the Manager of the Borrower;
(ii) A copy of an officially certified document dated not more than
30 days prior to the Closing Date and confirmed on the Business Day prior
to such date by telegram, telephone or other similar means, evidencing the
due formation and good standing of the Borrower;
(iii) Copies of the Limited Liability Company Agreement of the
Borrower certified by the Manager of the Borrower;
(iv) UCC-1 financing statements in each jurisdiction in which
required by applicable law, executed by the Borrower as debtor, naming the
FCM, as Deal Agent, as secured party, naming the Contracts and the other
Collateral, whether now existing or hereafter acquired, as collateral,
meeting the requirements of the laws of each such jurisdiction and in such
manner as is necessary to perfect the pledge of the Collateral to the Deal
Agent. The Borrower shall deliver a file-stamped copy, or other evidence
satisfactory to the Deal Agent, of such filing, to the Deal Agent on or
prior to the Closing Date or as soon as practicable thereafter; and
(v) Such other documents as the Deal Agent may reasonably request.
The foregoing documents, opinions, certificates and other instruments
shall be in form and substance satisfactory to the Deal Agent's counsel.
(b) The Deal Agent shall have received an Manager's Certificate from the
Borrower dated the Closing Date of the Term Loan, executed by the President,
Chief Executive Officer, any Executive Vice President, the Chief Financial
Officer, Treasurer or any Assistant Treasurer of the Manager of the Borrower
certifying that (i) the representations, warranties and covenants of the
Borrower contained in this Agreement, and the statements contained in any
certificate furnished hereunder by the Borrower were true and correct as of the
Closing Date and are true and correct as of the date thereof as if made on and
as of the Closing Date; (ii) the Borrower has performed all agreements contained
in this Agreement to be performed on its part at or prior to the date thereof;
(iii) no Event of Default has occurred and is continuing and no fact, condition
or
<PAGE>
event exists or has occurred which would, upon the giving of notice or the
passage of time or both, constitute such an Event of Default; and (iv) no
proceeding is pending which would prohibit consummation of the transactions
contemplated hereby.
(c) On the Closing Date, the Borrower shall have certified:
(i) The representations and warranties made by it in the Agreement
are true and correct on and as of such date, before and after giving
effect to such borrowing and to the application of the proceeds therefrom,
as though made on and as of such date;
(ii) No event has occurred, or would result from Term Loan or from
the application of the proceeds therefrom, which constitutes an Event of
Default; and
(iii) The Borrower is in compliance with each of its covenants set
forth herein.
(d) On the Closing Date, the Servicer shall have certified:
(i) The representations and warranties made by it in the Agreement
are true and correct on and as of such date, before and after giving
effect to such borrowing and to the application of the proceeds therefrom,
as though made on and as of such date;
(ii) No event has occurred, or would result from Term Loan or from
the application of the proceeds therefrom, which constitutes an Event of
Default; and
(iii) It is in compliance with each of its covenants set forth
herein.
(e) The Note has been executed by the Borrower.
(f) The Contract Purchase Agreement has been executed by the parties
thereto.
(g) The NIM Collateral Purchase Agreement has been executed by the parties
thereto.
(h) The Sale and Servicing Agreements are in full force and effect.
(i) No Servicer Termination Event, Insurer Default, or Insurance Agreement
Event of Default has occurred under any Sale and Servicing Agreement.
(j) No Trigger Event has occurred under the Spread Account Agreement.
(k) No claim has been asserted or proceeding commenced challenging any of
the Contract Purchase Agreement, the NIM Collateral Purchase Agreement, any
Contract, any of the Collateral, the Agreement or the transactions contemplated
thereby.
<PAGE>
(l) There shall have been no material adverse change in the condition
(financial or otherwise), business, operations, results of operations, or
properties of ALAC or the Borrower since July 23, 1998.
(m) ALAC and Borrower shall have taken such other action, including
delivery of approvals, consents, opinions, documents, and instruments to the
Lender and the Deal Agent as each may reasonably request.
(n) Buck, Keenan & Owens LLP, counsel to the Borrower shall have delivered
to the Deal Agent on behalf of the Lender a favorable opinion in form and
substance satisfactory to the Deal Agent.
(o) Buck, Keenan & Owens LLP, counsel to ALAC and ALACRC shall have
delivered to the Deal Agent on behalf of the Lender a favorable opinion in form
and substance satisfactory to the Deal Agent.
(p) The Deal Agent shall have received a copy of each of the Contract
List, the Future Delivery Contract List and the Charged Off Contract List.
(q) The Deal Agent shall have received, in immediately available funds, on
or before the Closing Date, the Structuring Fee.
(r) The Deal Agent shall have received evidence that the Borrower has
complied with the provisions of Section 7.1(x) relating to the Hedging
Agreements.
EXHIBIT 10.52
<PAGE>
- ------------------------------------------------------------------------------
EXECUTION COPY
- ------------------------------------------------------------------------------
CUSTODIAL AGREEMENT
CUSTODIAL AGREEMENT, dated as of October 2, 1998 (as amended or
otherwise modified from time to time, this "AGREEMENT"), among VARIABLE FUNDING
CAPITAL CORPORATION (the "LENDER"), NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association having an address at Sixth Street
and Marquette Avenue, Minneapolis, Minnesota 55479-0070 ("NORWEST"), in the
capacity of custodian (the "CUSTODIAN") and backup servicer (the "BACKUP
SERVICER") and AUTO LENDERS ACCEPTANCE CORPORATION, a Delaware corporation
having an address at 300 Interstate North Parkway, Atlanta, Georgia 30339 (the
"SERVICER").
The parties, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement or in the Loan and Security Agreement, the following terms shall have
the following meanings when used in this Agreement:
"Authorized Representatives" shall have the meaning set forth in
Section 19.
"Auto Loan" means automobile and light duty truck loans and
installment sale contracts delivered to the Custodian pursuant to the Loan and
Security Agreement.
"Auto Loan Schedule" means the schedule of Auto Loans to be
delivered to the Custodian on the date of delivery to the Custodian of the
Custodian's Auto Loan Files, in both hard copy and floppy disk, to be annexed
hereto as Exhibit 9, such schedule setting forth the following information with
respect to each Auto Loan:
(i) the loan number and name of the related Obligor;
(ii) the original principal amount;
(iii) the Cut-Off Date;
(iv) the principal outstanding as of the related Cut-Off Date;
(v) the interest rate (APR);
(vi) the original term to maturity;
(vii) the remaining term to maturity as of the Cut-Off Date;
<PAGE>
(viii) the day of the month on which the scheduled monthly payment
of principal and interest are required to be made;
(ix) [reserved];
(x) the contractual delinquency of the loan; and
(xi) any assumption, consolidation, extension, modification or
waiver of the loan.
"Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in New York City or Minneapolis, Minnesota are
authorized or obligated by law or executive order to be closed.
"Certification" shall have the meaning set forth in Section 3.
"Collateral" shall have the meaning set forth in the Recitals
hereto.
"Contract" shall have the meaning set forth in Section 2(a).
"Custodian's Auto Loan Files" means, with respect to an Auto Loan,
those documents listed in Section 2 of this Agreement that are delivered to the
Custodian and all documents subsequently delivered to the Custodian pursuant to
the last sentence of Section 2.
"Cut-Off Date" means, as of any date, the date as of which
information is effective, which date shall be the close of business on the date
set forth on the related Auto Loan Schedule. In no event shall the Cut-Off Date
precede by more than two weeks the date on which the related Auto Loan Schedule
is delivered.
"Deficiency" means a failure of a document to correspond to the
information on the Auto Loan Schedule or the absence of a required document from
a Custodian's Auto Loan File pursuant to Section 2.
"Deposit Account" means the account of the Servicer with First Union
National Bank, as described in the Deposit Account Agreement.
"Deposit Account Agreement" means the Deposit Account Agreement
among the Servicer, the Lender and First Union National Bank dated the date
hereof.
"Financed Vehicle" means the automobile or light-duty truck financed
under an Auto Loan.
"Insurance Policy" means with respect to a Financed Vehicle, any
insurance policy required to be maintained by the Obligor pursuant to the
related Auto Loan that covers
2
<PAGE>
physical damage to and theft of the Financed Vehicle (including policies
procured by the Servicer on behalf of the Obligor) or any liability arising out
of the use of such Financed Vehicle.
"Loan and Security Agreement" means, the Loan and Security
Agreement, dated as of October 2, 1998, among FIFS Acquisition Funding, L.L.C.,
as borrower, Auto Lenders Acceptance Corporation, as a servicer and a seller,
ALAC Receivables Corp. as a seller, VFCC, FCM, as deal agent and as
documentation agent, and First Union as liquidity agent, as such agreement may
be amended or supplemented from time to time.
"Maturity Date" means the date specified as the maturity date in the
Loan and Security Agreement, as such Maturity Date may be extended by the
Lender, pursuant to the terms thereof (with a copy thereof to be delivered to
the Custodian).
"Obligor" means the obligor on an Auto Loan.
"Person" means any association, business trust, company,
corporation, estate, governmental authority, joint venture, natural person,
trust or other entity.
2. DELIVERY OF CUSTODIAN'S AUTO LOAN FILES. The Servicer hereby
certifies that it shall deliver and release to the Custodian as custodian for,
and bailee of, the Lender the following documents pertaining to each of the Auto
Loans identified in an Auto Loan Schedule, a copy of which Auto Loan Schedule
shall be provided to the Custodian, in a form reasonably acceptable to the
Custodian, on computer readable disk or via electronic transfer by the Servicer.
(a) The executed original counterpart of the installment sale
contract loan and security agreement or promissory note, as applicable (the
"CONTRACT"), relating to such Auto Loan; and
(b) The original certificate of title or, if not yet received,
evidence that an application therefor has been submitted with the appropriate
authority, a guaranty of title from a dealer or such other document (as used in
the applicable jurisdiction) that the Servicer shall keep on File as listed on
Exhibit 10 hereto, evidencing the security interest of the Servicer in the
Financed Vehicle.
The Custodian shall be entitled to rely upon each Auto Loan Schedule
provided by the Servicer as the conclusive schedule in its review, pursuant to
Sections 3 and 17(b) hereof, of the Custodians Auto Loan Files delivered to it
by the Servicer.
3. CERTIFICATION. Within four (4) Business Days of receipt by the
Custodian of a list of Contracts from the Servicer, the Custodian shall certify
to the Servicer whether such Contracts constitute a portion of the Custodian's
Auto Loan Files. Within (i) two (2) Business Days, in the case of the delivery
of loan files relating to less than 400 Auto Loans, (ii) three (3) Business
Days, in the case of the delivery of loan files relating to greater than or
equal to 400 and less than 1000 Auto Loans or (iii) four (4) Business Days, in
the case of the delivery of loan files relating to greater than or equal to 1000
Auto Loans, after the delivery to the Custodian of the
3
<PAGE>
Custodian's Auto Loan Files (or within such shorter period of time as the
Custodian shall agree), the Custodian shall deliver to the Lender (and a copy to
the Servicer) a certification (the "CERTIFICATION") in substantially the form
annexed as Exhibit 1, to the effect that (except as described on the attached
exception report) the Custodian has received a Custodian's Auto Loan File for
each Auto Loan listed on the related Auto Loan Schedule and it has received (i)
all documents required to be delivered to it pursuant to Sections 2(a) and (b)
of this Agreement are in its possession, (ii) such documents have been reviewed
by it and have not been mutilated, damaged, torn or otherwise physically altered
and relate to such Auto Loan identified on the Auto Loan Schedule, (iii) based
on its examination and only as to the foregoing documents, (A) the information
set forth in item (i) of the definition of Auto Loan Schedule respecting such
Auto Loan accurately reflects the information on the Auto Loan Schedule and (B)
the information set forth in items (ii), (v) and (vi) of the definition of Auto
Loan Schedule respecting such Auto Loan accurately reflects the information on
the Auto Loan Schedule and (iv) based on its examination, the Contract is an
executed original counterpart. The Custodian shall include in the Certification
any Deficiencies revealed in such review attached as an exception report to the
Certification. For purposes of this Section 3, (i) both the Custodian's Auto
Loan Files and the electronic transmission of the Auto Loan Schedule must be
received by the Custodian by 2:30 p.m. in order to be deemed to be delivered on
such Business Day and (ii) the Custodian shall have until 12:01 p.m. of the
applicable Business Day to deliver the Certification to the Lender. The
Custodian shall not be required to review the content (except to the extent
necessary to certify to its presence or absence) of any such document in order
to deliver the Certification. The Custodian shall be under no duty or obligation
to inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable, or appropriate for
the represented purpose or that they are other than what they purport to be on
their face.
4. DEFICIENCIES IN CUSTODIAN'S AUTO LOAN FILES. (a) If the
Certification discloses that any of the documents enumerated in Section 2 are
missing or discloses any Deficiencies in the documents included in any
Custodian's Auto Loan Files delivered to the Custodian, then the Deal Agent, if
the Lender has funded against such deficient Auto Loans, shall promptly notify
the Custodian (with a copy to the Servicer), in the form of Exhibit 7, that (1)
the Servicer shall deliver the missing documents noted in the Certification to
the Custodian within five (5) Business Days of the date of such notice, (2) the
Lender has waived the Deficiencies noted in the Certification, or (3) the
Servicer shall cure the Deficiencies within five (5) Business Days of the date
of such notice.
(b) If the Lender's notice pursuant to Section 4(a) above states
that the Servicer shall take either of the actions specified in clauses (1) or
(3) of subsection (a) above and the Servicer fails to take such actions within
five (5) Business Days of the date of such notice, then the Custodian shall
notify the Lender and the Servicer of such failure and release or retain the
deficient Custodian's Auto Loan File in accordance with the written instructions
of the Lender in the form of Exhibit 7.
(c) [reserved].
4
<PAGE>
(d) Within five (5) Business Days after receipt by the Custodian of
any additional documents pursuant to Section 4(a), the Custodian shall review
such documents and deliver to the Lender and the Servicer an exception report
listing any Deficiencies with respect to such documents. If the notification
shall indicate any remaining Deficiencies with respect to such additional
documents, the provisions of this Section 4 shall again be followed.
(e) Within two (2) Business Days of the last Business Day of each
calendar month, the Custodian shall deliver to the Lender and the Servicer a
revised cumulative exception report with respect to all of the Custodian's Auto
Loan Files. If the revised cumulative exception report shall indicate any
remaining Deficiencies in any of the Custodian's Auto Loan Files, the provisions
of this Section 4 shall again be followed.
5A. DEFAULT; SUCCESSOR SERVICER. (a) If an Event of Default under
the Loan and Security Agreement shall occur and be continuing (a "DEFAULT")
then, and in each and every case, so long as the Default shall not have been
remedied, the Lender, by notice then given in writing to the Servicer may cause
the servicing of the Auto Loans to be transferred to the Backup Servicer
("Servicing Termination Notice"). The duties and obligations set forth in this
Agreement relating to the successor Servicer shall only be effective on and
after a Servicing Termination Notice is given to the Servicer. The Lender will
notify the Backup Servicer promptly upon the occurrence of any Servicer Default.
The Servicer shall cooperate with the Backup Servicer in effecting the transfer
of servicing to the Backup Servicer. The Servicer will deposit all cash amounts
that shall at the time be held by the Servicer, or shall thereafter be received
by it with respect to any Auto Loan in the Deposit Account. At such times as the
Backup Servicer is the successor Servicer, the Lender will provide the Backup
Servicer with all collection information, on a daily basis. All reasonable costs
and expenses (including attorneys' fees) incurred in connection with
transferring the Auto Loan Files to the Backup Servicer and amending this
Agreement to reflect such succession as successor Servicer pursuant to this
Section shall be paid by the Servicer upon presentation of reasonable
documentation of such costs and expenses. If the Servicer fails to so pay, the
Lender shall direct that any such amounts shall be payable from the Deposit
Account prior to any distributions to the Lender or otherwise.
(b) Upon the Servicer's receipt of a Servicing Termination Notice,
the Servicer shall continue to service the Auto Loans, only until the date
specified in such Servicing Termination Notice or, if no such date is specified,
until receipt of such notice. In the event of the Servicer's replacement as
servicer of the Auto Loans hereunder, the Lender shall appoint the Backup
Servicer or such other entity acceptable to the Lender as successor Servicer,
and the Backup Servicer or such other entity acceptable to the Lender shall
accept its appointment by a written assumption in form acceptable to the Lender;
PROVIDED, HOWEVER, that the Backup Servicer shall not be required to assume the
duties of the Servicer if the Servicer has not complied with Section 9.15 of the
Loan and Security Agreement as of the date that the Backup Servicer is required
to assume the obligations of the Servicer. Notwithstanding the above, if the
Backup Servicer is legally unable to act as successor Servicer, the Lender will
appoint a successor Servicer to act as successor Servicer. Upon acceptance of
its appointment in accordance with the second preceding sentence, the successor
Servicer shall service the Auto Loans in accordance with the provisions of this
Agreement.
5
<PAGE>
(c) The successor Servicer shall be liable only for the obligations
of the successor Servicer set forth in Section 5B hereof following receipt by
the successor Servicer of a Servicer Termination Notice.
(d) The Deal Agent, on behalf of the Lender, in its sole and
unreviewable discretion may terminate the appointment of any successor Servicer
as successor Servicer and appoint a different entity as successor Servicer
hereunder.
(e) The successor Servicer undertakes to perform only such duties
and obligations as are specifically set forth in this Agreement, it being
expressly understood by the Lender and the Servicer that there are no implied
duties or obligations under this Agreement.
(f) Neither the successor Servicer nor any of its officers,
directors, employees or agents shall be under any liability for any action taken
or for refraining from the taking of any action in its capacity as successor
Servicer, PROVIDED, HOWEVER, that this provision will not protect the successor
Servicer against any liability which would otherwise be imposed by reason of
willful misconduct, bad faith or negligence in the performance of its duties
hereunder.
(g) As compensation for acting as successor Servicer, the successor
Servicer will be entitled to receive the Servicing Fee. The "Servicing Fee"
shall equal the sum of for each calendar month the greater of (i) the product of
(a) one-twelfth of 2.50% (such percentage, the "BACK UP SERVICER FEE RATE") and
(b) the outstanding principal balance of the Auto Loans as of the first day of
such calendar month and (ii) the then current "market rate" for servicing
comparable assets. The determination of the "market rate" for servicing as set
forth in the preceding sentence shall be determined based on the average of
three, servicing bids received from three independent servicers selected by the
Backup Servicer and approved by the Deal Agent for the Lender. The successor
Servicer shall also be entitled to any late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
the Auto Loans, collected (from whatever source) on the Auto Loans. The Lender
shall direct that the Servicing Fee shall be paid from the Deposit Account prior
to any other distributions to the Lender or otherwise.
5B. DUTIES OF THE SUCCESSOR SERVICER. (a) The successor Servicer,
for the benefit of the Lender and the Servicer (to the extent provided herein)
shall manage, service, administer and make collections on the Auto Loans using
that degree of skill and attention that the successor Servicer ordinarily
exercises with respect to all comparable automotive receivables that it services
for itself or others. The successor Servicer's duties shall include collection
and posting of all payments (which posting shall be delegated to the Deposit
Account), responding to inquiries of Obligors on such Auto Loans, investigating
delinquencies, sending billing statements to Obligors, accounting for
collections, and furnishing monthly statements to the Servicer and the Lender
with respect to distributions and the Auto Loans. Subject to the provisions of
Section 5B(b), the successor Servicer shall follow its customary standards,
policies and procedures in performing its duties as successor Servicer. Subject
to the terms hereof, the successor Servicer shall have full power and authority,
acting in its sole discretion, to take any and all actions in
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connection with such managing, servicing, administration, enforcement,
collection and such sale of the Auto Loans that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the successor
Servicer is authorized and empowered to execute and deliver, on behalf of
itself, the Servicer and the Lender or any of them, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Auto Loan or to the Financed
Vehicles securing such Auto Loans. If the successor Servicer shall commence a
legal proceeding to enforce an Auto Loan, the Servicer and the Lender shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection, such Auto Loan to the successor Servicer. If in any enforcement suit
or legal proceeding it shall be held that the successor Servicer may not enforce
an Auto Loan on the ground that it shall not be a real party in interest or a
holder entitled to enforce such Auto Loan, the Lender shall, at the successor
Servicer's expense and written direction, take steps to enforce such Auto Loan,
including bringing suit in its name. The Servicer and the Lender shall upon the
written request of the successor Servicer furnish the successor Servicer with
any powers of attorney and other documents reasonably necessary or appropriate
to enable the successor Servicer to carry out its servicing and administrative
duties hereunder.
(b) The successor Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Auto Loans as and
when the same shall become due and shall follow such collection procedures as it
follows with respect to all comparable automotive receivables that it services
for itself or others. The successor Servicer may grant extensions, rebates or
adjustments on an Auto Loan or arrange with the Obligor to extend or modify the
payment schedule, which actions shall not, for the purposes of this Agreement,
modify the original due dates or the amounts of the originally scheduled
payments of interest on the Auto Loans. To the extent that the successor
Servicer modifies the payment schedule of an Auto Loan, the successor Servicer
shall first collect one full scheduled payment from the Obligor. The successor
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing an Auto Loan. The
successor Servicer shall not agree to any alteration of the original scheduled
payments on the Auto Loan.
(c) On behalf of the Borrower and the Lender the successor Servicer
shall use reasonable efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of and liquidate the
Financed Vehicle securing any Auto Loan as to which the successor Servicer shall
have determined eventual payment in full is unlikely. The successor Servicer
shall follow such customary and usual practices and procedures as it shall deem
necessary or advisable in its servicing of automotive receivables, which may
include reasonable efforts to realize upon any recourse to dealers and selling
the Financed Vehicle at public or private sale. The foregoing shall be subject
to the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the successor Servicer shall not expend funds in connection
with the repair or the repossession of such Financed Vehicle unless it shall
determine in its discretion that such repair and/or repossession will increase
the liquidation proceeds by an amount greater than the amount of such expenses.
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(d) The successor Servicer shall, in accordance with its customary
servicing procedures, take such steps as are necessary to maintain perfection of
the security interest created by each Auto Loan in the related Financed Vehicle.
The successor Servicer is hereby authorized to take such steps as are necessary
to reperfect such security interest on behalf of the Servicer in the event of
the relocation of a Financed Vehicle or for any other reason.
(e) The successor Servicer shall not release the Financed Vehicle
securing any Auto Loan from the security interest granted by such Auto Loan in
whole or in part except in the event of payment in full by the Obligor
thereunder or repossession, nor shall the successor Servicer impair the rights
of the Lender or the Servicer in such Auto Loan, nor shall the successor
Servicer increase the number of scheduled payments due under an Auto Loan.
(f) The successor Servicer shall not have any authority to amend the
Deposit Account Agreement.
(g) [reserved]
(h) The successor Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder, including licensing
fees of the successor Servicer, fees and disbursements of independent
accountants, income taxes imposed on the successor Servicer and expenses
incurred in connection with distributions and reports to the Lender and the
Servicer.
(i) The successor Servicer may at any time appoint a subservicer to
perform all or any portion of its obligations as successor Servicer hereunder,
PROVIDED, HOWEVER, that the subservicer is acceptable to the Lender and
PROVIDED, FURTHER that the successor Servicer shall remain obligated and be
liable to the Lender and the Servicer for the servicing and administering of the
Auto Loans in accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of such subservicer and to
the same extent and under the same terms and conditions as if the successor
Servicer alone were servicing and administering the Auto Loans. The fees and
expenses of the subservicer shall be as agreed between the successor Servicer
and its subservicer from time to time, and none of the Lender or the Servicer
shall have any responsibility therefor.
(j) The Backup Servicer shall accept and store, but shall not be
required to examine, the information delivered to the Backup Servicer by the
Servicer pursuant to Section 5C(a). The Backup Servicer will not be responsible
for delays attributable to the Servicer's failure to deliver information,
defects in the information supplied by the Servicer or other circumstances
beyond the control of the Backup Servicer. The Backup Servicer shall remain
solely liable for any delays caused by the Backup Servicer.
(k) The Backup Servicer shall perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Backup Servicer.
The Backup Servicer shall be entitled to
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receive and rely upon instructions from the Lender in connection with its duties
as successor Servicer.
(l) The Backup Servicer shall have no obligation to supervise,
verify, monitor or administer the performance of the Servicer, as servicer of
the Auto Loans. The Backup Servicer shall have no liability for any actions
taken or omitted by the Servicer, as servicer of the Auto Loans.
(m) In the absence of bad faith or negligence on its part, the
Backup Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed in certificates or opinions furnished to
the Backup Servicer, conforming to the requirements of this Agreement.
(n) The Backup Servicer shall not be required to expend or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
5C. OBLIGATIONS OF THE SERVICER (a) Commencing on the date of
execution of this Agreement and continuing until the earlier of (i) the
termination or expiration of the Loan and Security Agreement and (ii) the
appointment of the Backup Servicer as successor Servicer under this Agreement,
the Servicer shall, on the last day of each calendar month, deliver to the
Backup Servicer in the electronic format acceptable to the Backup Servicer, the
information required to be delivered to the Lender pursuant to Section 9 of the
Loan and Security Agreement.
(b) At its own expense, the Servicer will, within 30 days of the end
of each of its fiscal years, provide the Backup Servicer with proof of its fully
paid errors and omissions insurance policy.
(c) The Servicer, at its own expense, will deliver to the Backup
Servicer, on or before the end of each calendar quarter, beginning October 2,
1998, an officer's certificate stating that to the best of such officer's
knowledge, the Servicer his fulfilled all its obligations under the Loan and
Security Agreement, or, if there has been a default in the fulfillment of any
such obligations, specifying each such default known to such officer and the
nature and status thereof including the steps being taken by the Servicer to
remedy such default.
(d) The Servicer, at its own expense, shall deliver to the Backup
Servicer its (or for any period during which the Servicer is required under GAAP
to be consolidated with any other entities, such consolidated group's) annual
audited balance sheet, income statement and cash flow statement within 90 days
of the end of its fiscal year, beginning with the fiscal year ending April 30,
1999. The Servicer, at its own expense, shall deliver to the Backup Servicer
within 45 days after the end of each of the fiscal quarters of each fiscal year,
its (or for any period during which the Servicer is required under GAAP to be
consolidated with any other entities,
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such consolidated group's) unaudited balance sheets and income statements (or
Form 10-Q) using generally accepted accounting principles, beginning October 31,
1998.
(e) If a Servicer Termination Event has occurred, from time to time
upon reasonable notice, the Servicer shall give the Backup Servicer and its
counsel, accountants, agents, examiners and other representatives reasonable
access, during normal business hours and without charge, to all of the
Servicer's files, books and records (including computer records) relating solely
to the servicing of the Auto Loans; provided however, that the Backup Servicer
and its representatives shall not be denied access to such information in the
event that such information is commingled with other information not relating to
the servicing of the Auto Loans.
(f) After the delivery of a Servicing Termination Notice pursuant to
Section 5A(a), the Servicer shall deliver to the Backup Servicer (i) within one
Business Day of demand therefor 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 Auto Loans and (ii) within
three Business Days of demand therefor a copy of its records relating to
collections on the Auto Loans.
5D. REPRESENTATIONS AND COVENANTS OF NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION. (a) Subject to the provisions of Section 5D(c), Norwest
Bank Minnesota, National Association shall not resign from the obligations and
duties hereby imposed on it as Backup Servicer under this Agreement except upon
a determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of Norwest Bank Minnesota, National Association shall
be communicated to the Lender and the Servicer at the earliest practicable time
(and, if such communication is not in writing, shall be confirmed in writing at
the earliest practicable time) and any such determination shall be evidenced by
an opinion of counsel to such effect delivered to the Lender and the Servicer
concurrently with or promptly after such notice. Such resignation shall become
effective unless the Lender advises the Backup Servicer to perform its duties
other than those duties not permissible under applicable law.
(b) The Backup Servicer makes the following representations and
covenants. The representations and covenants speak as of the execution and
delivery of this Agreement and shall survive the pledge of the Auto Loans to the
Lender pursuant to the Loan and Security Agreement.
(i) ORGANIZATION AND GOOD STANDING. The Backup Servicer is
duly organized and validly existing as a national banking association in
good standing under the laws of the jurisdiction of its formation, with
the corporate power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire, own, sell and service the
Auto Loans.
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(ii) DUE QUALIFICATION. The Backup Servicer will be duly
qualified to do business as a foreign corporation in good standing, and
will have 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 Auto Loans as required by
this Agreement) shall require such qualifications within sixty days of a
Servicing Termination Notice or will appoint a subservicer with respect to
the Auto Loans in any jurisdiction in which it is not so qualified.
(iii) POWER AND AUTHORITY. The Backup Servicer has the
corporate power and authority to execute and deliver this Agreement and to
carry out its terms; and the execution, delivery and performance of this
Agreement have been duly authorized by the Backup Servicer by all
necessary corporate action.
(iv) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Backup Servicer enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization and similar laws now or
hereafter in effect relating to creditors' rights generally and subject to
general principles of equity (whether applied in a proceeding at law or in
equity).
(c) Any Person (a) into which the Backup Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Backup Servicer shall be a party, (c) which may succeed to the properties and
assets of the Backup Servicer substantially as a whole or (d) with respect to
the Backup Servicer's obligations hereunder, shall be the successor to the
Backup Servicer under this Agreement without further action on the part of any
of the parties to this Agreement
6. OBLIGATIONS OF THE CUSTODIAN. (a) The Custodian shall segregate
and maintain continuous custody of all items constituting the Custodian's Auto
Loan Files in secure, fireproof facilities in accordance with its customary
standards for such custody. The Custodian makes no representations as to and
shall not be responsible to verify (i) the validity, legality, enforceability,
sufficiency, due authorization or genuineness of any document in each
Custodian's Auto Loan File or of any of the Auto Loans or (ii) the
collectability, insurability, effectiveness or suitability of any Auto Loan.
(b) With respect to the documents constituting each Custodian's Auto
Loan File that are delivered to the Custodian, the Custodian shall act
exclusively as the custodian for, and the bailee of, the Lender, (ii) hold all
documents constituting such Custodian's Auto Loan File received by it for the
exclusive use and benefit of the Lender, and (iii) make disposition thereof only
in accordance with the terms of this Agreement or with written instructions
finished by the Lender.
(c) The Deal Agent, upon the release of the Auto Loans from the lien
of the Loan and Security Agreement, shall, upon written request of the Borrower,
notify the Custodian (with a copy to the Servicer) in writing in the form of
Exhibit 8 with respect to such release, and
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the Custodian shall then deliver the Custodian's Auto Loan Files relating to the
released Auto Loans to the Servicer or the Servicer's designee.
(d) In the event that (i) the Lender, the Servicer or the Custodian
shall be served by a third party with any type of levy, attachment, writ or
court order with respect to any Custodian's Auto Loan File or a document
included within a Custodian's Auto Loan File or (ii) a third party shall
institute any court proceeding by which any Custodian's Auto Loan File or a
document included within a Custodian's Auto Loan File shall be required to be
delivered otherwise than in accordance with the provisions of this Agreement,
the party or parties receiving such service shall promptly deliver or cause to
be delivered to the other parties to this Agreement copies of all court papers,
orders, documents and other materials concerning such proceedings. The Custodian
shall continue to hold and maintain all the Custodian's Auto Loan Files that are
the subject of such proceedings pending a final order of a court of competent
jurisdiction permitting or directing disposition thereof. Upon final
determination of such court, the Custodian shall dispose of such Custodian's
Auto Loan File or a document included within such Custodian's Auto Loan File as
directed by such determination or, if no such determination is made, in
accordance with the provisions of this Agreement Expenses of the Custodian
incurred as a result of such proceedings shall be borne by the Servicer.
7. RELEASE OF CUSTODIAN'S AUTO LOAN FILE. From time to time and as
appropriate for the foreclosure or servicing of any of the Auto Loans, the
Custodian is hereby authorized, upon receipt by a responsible officer of the
Custodian of a written request and receipt of the Servicer (with a copy
delivered to the Deal Agent) in substantially the form annexed as Exhibit 2 (a
"REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS"), to release to the Servicer by
the close of Business on the Business Day following such request, the related
Custodian's Auto Loan File or the documents from a Custodian's Auto Loan File
set forth in such request and receipt. All documents so released to the Servicer
shall be held by the Servicer in trust for the benefit of the Lender in
accordance with the Loan and Security Agreement. The Servicer shall return to
the Custodian each and every document previously requested from the Custodian's
Auto Loan File when the Servicer's need therefore in connection with such
foreclosure or servicing no longer exists, unless the Auto Loan shall be
liquidated, in which case, upon receipt of a certification to this effect from
the Servicer to the Custodian acknowledged to by the Lender in substantially the
form annexed as Exhibit 2, the Servicer's prior receipt shall be returned by the
Custodian to the Servicer. The Lender agrees to acknowledge, within one Business
Day of receipt, any Request for Release and Receipt of Documents properly
completed and submitted by the Servicer, and not unreasonably to withhold any
such acknowledgment.
8. RELEASE UPON REDELIVERY OR PAYMENT. Upon the redelivery of any
Auto Loan pursuant to the Loan and Security Agreement or the payment in full of
any Auto Loan, which shall be evidenced by the delivery to the Custodian of a
Request for Release and Receipt of Documents executed by the Servicer and
acknowledged by the Lender, the Custodian shall promptly, but in no event in
more than two Business Days after such acknowledgment by the Lender, release the
Custodian's Auto Loan File to the Servicer.
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9. FEES AND EXPENSES OF THE CUSTODIAN. It is understood that the
Custodian will charge the Servicer such fees for its services, and shall be
entitled to reimbursement from the Servicer for expenses, under this Agreement
as are set forth on Exhibit 11 attached hereto and made a part hereof.
10. EXAMINATION OF CUSTODIAN'S AUTO LOAN FILES. Upon reasonable
prior written notice to the Custodian (but no less than one Business Day), (a)
the Lender and its authorized representatives and (b) the Servicer and its
authorized representatives will be permitted during the Custodian's normal
business hours to examine the Custodian's Auto Loan Files, documents, records
and other papers in the possession, or under the control, of the Custodian
relating to any or all of the Auto Loans.
11. TRANSFER OF CUSTODIAN'S AUTO LOAN FILES UPON TERMINATION. (a) If
the Custodian is furnished with written notice and satisfactory evidence from
the Lender that the Loan and Security Agreement has been terminated, as to any
or all of the Auto Loans, and the Secured Note has been canceled, the Custodian
shall, upon written request of the Servicer release to such Persons as the
Lender shall designate such Custodian's Auto Loan Files relating to such Auto
Loan as the Servicer shall request and the Custodian shall endorse the notes
relating to the Auto Loans (the "Auto Notes") only as, and if, the Servicer
shall request in writing.
(b) If the Custodian is finished with written notice and
satisfactory evidence from the Lender that the Loan and Security Agreement has
been terminated, but has not received notice from the Lender that the Secured
Note has been canceled, as to any or all of the Auto Loans, the Custodian shall,
upon written request of the Lender release to such Persons as the Lender shall
designate such Custodian's Auto Loan Files relating to such Auto Loans as the
Lender shall request and the Custodian shall endorse the related Auto Notes only
as, and if, the Lender shall request in writing.
12. INSURANCE OF THE CUSTODIAN. The Custodian shall, at its own
expense, maintain at all times during the term of this Agreement and keep in
full force and effect (a) fidelity insurance (b) theft of documents insurance,
and (c) forgery insurance. All such insurance shall be in amounts, with standard
coverage and subject to deductibles, as are customary for similar insurance
typically maintained by banks that act as custodian in similar transactions.
13. PERIODIC STATEMENTS. The Custodian shall provide monthly to the
Deal Agent and the Servicer a list of all the Auto Loans for which the Custodian
holds a Custodian's Auto Loan File pursuant to this Agreement. Such list shall
include the loan number and name of the related Obligor and may be in the form
of a copy of the Auto Loan Schedule with manual deletions to specifically denote
any Auto Loans redelivered since the date of this Agreement.
14. COPIES OF DOCUMENTS. Within ten days after the written request
and at the expense of the Lender, the Custodian shall provide the Deal Agent
with copies of the documents in the Custodian's Auto Loan Files.
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15. RESIGNATION BY AND REMOVAL OF THE CUSTODIAN: SUCCESSOR
CUSTODIAN. (a) The Custodian may at any time resign and terminate its
obligations as custodian under this Agreement upon at least 45 days prior
written notice to the Servicer and Deal Agent. Promptly after receipt of notice
of the Custodian's resignation, the Servicer shall appoint, by written
instrument, a successor custodian, subject to prior written approval by the
Lender. If the Servicer fails to appoint a successor within 30 days, the Lender
shall appoint a successor custodian. If both the Servicer and the Lender fail to
appoint a successor custodian pursuant to the terms hereof, the Custodian may
petition a court of competent jurisdiction to appoint a successor custodian. One
original counterpart of such instrument of appointment shall be delivered to the
Servicer, the Custodian and the successor custodian.
(b) The Lender, with or without cause, upon at least 30 days'
written notice to the Custodian and with the prior written consent of the
Servicer, which consent shall not be unreasonably withheld, may remove and
discharge the Custodian (or any successor custodian thereafter appointed) from
the performance of its obligations under this Agreement. A copy of such notice
shall be delivered to the Servicer. Promptly after the giving of notice of
removal of the Custodian, the Lender shall appoint, by written instrument, a
successor custodian which shall be reasonably acceptable to the Servicer. The
compensation payable to such successor custodian shall be on terms not more
favorable to such successor custodian than pursuant to Section 9 hereof. One
original counterpart of such instrument of appointment shall be delivered to
each of the Servicer, and to each of the Custodian and the successor custodian.
(c) No resignation or removal of the Custodian and no appointment of
a successor custodian under this Section 15 shall become effective until the
acceptance of a successor custodian hereunder.
(d) In the event of any such resignation or removal, the Custodian
shall promptly transfer to the successor custodian, as directed in writing by
the Lender, all of the Custodian's Auto Loan Files being administered pursuant
to this Agreement and, to the extent (if any, required by the Loan and Security
Agreement) and in the manner directed by the Lender, the Custodian shall
complete the endorsements on the Auto Notes at the expense of the Servicer.
16. INDEMNITY. The Servicer agrees to indemnify and hold harmless
Norwest against any and all claims, losses, liabilities, damages or reasonable
expenses (including, but not limited to, attorneys' fees, court costs and costs
of investigation) of any kind or nature whatsoever arising out of or in
connection with this Agreement that may be imposed upon, incurred by or asserted
against the Norwest; PROVIDED, HOWEVER, that this Section shall not relieve
Norwest from liability for its willful misfeasance, bad faith or gross
negligence. The provisions of this Section 16 shall survive the resignation or
removal of Norwest and the termination of this Agreement. Promptly after receipt
by Norwest of written notice of the commencement of any action arising out of or
in connection with this Agreement, Norwest will notify the Servicer of the
commencement thereof. In case any such action is brought against Norwest, the
Servicer will be entitled to participate therein.
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17. LIMITATION OF LIABILITY. (a) Norwest shall not be liable to the
Servicer, the Lender, or any other Person with respect to any action taken or
not taken by it in good faith in the performance of its obligations under this
Agreement. The obligations of Norwest shall be determined solely by the express
provisions of this Agreement. No representation, warranty, covenant, agreement,
obligation or duty of Norwest shall be implied with respect to this Agreement or
Norwest's services hereunder.
(b) In the Custodian's review of documents pursuant to Section 3 of
this Agreement, the Custodian shall be under no duty or obligation to inspect,
review or examine the Custodian's Auto Loan Files to determine that the contents
thereof are genuine, enforceable or appropriate for the represented purpose or
that they have been actually recorded or that they are other than what they
purport to be on their face.
(c) The Custodian may rely, and shall be protected in acting or
refraining to act, upon and need not verify the accuracy of, any (i) written
instructions from any Persons the Custodian reasonably believes to be authorized
to give such instructions, who shall only be, with respect to the Servicer and
to the Lender, Persons the Custodian reasonably believes in good faith to be
Authorized Representatives, and (ii) any written instruction, notice, order,
request, direction, certificate, opinion or other instrument or document
believed by the Custodian to be genuine and to have been signed and presented by
the proper party or parties, which, with respect to the Servicer and to the
Lender, shall mean signature and presentation by Authorized Representatives
whether such presentation is by personal delivery, express delivery or
facsimile.
(d) The Custodian may consult with counsel nationally recognized in
the area of commercial transactions acceptable to the Lender, which acceptance
shall not be unreasonably withheld, with regard to legal questions arising out
of or in connection with this Agreement, and the advice or opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, omitted or suffered by the Custodian in reasonable reliance,
in good faith, and in accordance therewith.
(e) No provision of this Agreement shall require the Custodian to
expend or risk its own funds or otherwise incur financial liability in the
performance of its duties under this Agreement if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity is not
reasonably assured to it.
(f) The Custodian shall not be responsible or liable for, and makes
no representation or warranty with respect to, the validity, adequacy or
perfection of any lien upon, or security interest in, any Auto Loans or
Custodian's Auto Loan Files purported to be granted at any time to the Lender.
18. TERM OF AGREEMENT. This Agreement shall be terminated upon (a)
the final payment or other liquidation (or advance with respect thereto) of the
last Auto Loan in the Custodian's Auto Loan Files or (b) the disposition of all
property acquired upon foreclosure of any Auto Loan in the Custodian's Auto Loan
Files, and the final remittance of all funds due the Lender under all Loan and
Security Agreements.
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If either of the circumstances described in clause (a) or clause (b)
of this Section 18 shall occur, promptly after written notice from the Servicer
and the Lender to the Custodian to such effect, all documents remaining in the
Custodian's Auto Loan Files shall be delivered to, or at the direction of, the
Servicer.
19. AUTHORIZED REPRESENTATIVES. The names of the officers of the
Servicer and of the Lender who are authorized to give and receive notices,
requests and instructions and to deliver certificates and documents in
connection with this Agreement on behalf of the Servicer and on behalf of the
Lender ("AUTHORIZED REPRESENTATIVES") are set forth on Exhibit 3, along with the
specimen signature of each such officer. From time to time, the Servicer and the
Lender may, by delivering to the Custodian a revised exhibit, change the
information previously given, but the Custodian shall be entitled to rely
conclusively on the last exhibit until receipt of a superseding exhibit.
20. NOTICES. All demands, notices and communications relating to
this Agreement shall be in writing and shall be deemed to have been duly given
if mailed, by registered or certified mail, return receipt requested, or by
overnight courier, or, if by other means, when received by the other party or
parties at the address shown below, or such other address as may hereafter be
furnished to the other party or parties by like notice. Any such demand, notice
or communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the
case of registered or certified mail, by the date noted on the return receipt).
If to the Servicer:
Auto Lenders Acceptance Corporation
300 Interstate North Parkway, 8th Floor
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Phone Number: (770) 956-3800
Fax Number: (770) 956-3825
With a copy to (other than with respect to notices pursuant to
Section 4(e) or Section 13):
First Investors Financial Services, Inc.
Attention: 675 Bering Drive, Suite 710
Houston, Texas 77057
Attention: Bennie H. Duck
Phone Number: (713) 977-2600
Fax Number: (713) 260-0028
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If to the Custodian:
Norwest Bank Minnesota, National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset Backed
Administration
Phone Number: (612) 667 -1117
Fax Number: (612) 667-3539
If to the Lender:
Variable Funding Capital Corporation
c/o First Union Capital Markets
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: John Foxgrover/Bennett Cole
Telephone: (704) 383-8437
Fax Number: (704) 374-3254
With a copy to (other than with respect to notices pursuant to
Section 4(e) or Section 13):
Lord Securities Corp.
2 Wall Street, 19th Floor
New York, New York 10005
Attention: Richard Taiano
21. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to conflict of laws applied in the State of New York.
22. ASSIGNMENT. No party to this Agreement may assign its rights or
delegate its obligations under this Assignment without the express written
consent of the other parties, except as otherwise set forth in this Agreement.
23. 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 shall be deemed to
be an original and together shall constitute and be one and the same instrument.
24. HEADINGS. The Section headings are not part of this Agreement
and shall not be used in its interpretation.
25. USE OF WORDS. The definitions set forth in this Agreement
include both the singular and plural.
17
<PAGE>
26. TRANSMISSION OF CUSTODIAN'S AUTO LOAN FILES. Written
instructions as to the method of shipment and shipper(s) the Custodian is
directed to utilize in connection with transmission of auto loan files and loan
documents in the performance of the Custodian's duties hereunder shall be
delivered by the Servicer to the Custodian prior to any shipment of any auto
loan files and loan documents hereunder. The Servicer will arrange for the
provision of such services at its sole cost and expense (or, at the Custodian's
option, reimburse the Custodian for all costs and expenses incurred by the
Custodian consistent with such instructions) and will maintain such insurance
against loss or damage to auto loan files and loan documents as the Servicer
deems appropriate. Without limiting the generality of the provisions of Sections
16 and 17 above, it is expressly agreed that in no event shall the Custodian
have any liability for any losses or damages to any Person, including, without
limitation, the Servicer or the Lender, arising out of actions of the Custodian
consistent with instructions of the Servicer or the Lender.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
AUTO LENDERS ACCEPTANCE CORPORATION,
as Servicer
By:_________________________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Custodian and Back-Up Servicer
By:_________________________________________
Name:
Title:
VARIABLE FUNDING CAPITAL CORPORATION,
as Lender
By: First Union Capital Markets, a division
of Wheat First Securities, Inc., as
attorney-in-fact
By:_________________________________________
Name:
Title:
<PAGE>
EXHIBIT 1
CERTIFICATION
___________, 1998
Variable Funding Capital Corporation
c/o First Union Capital Markets
One First Union Center, TW-6
Charlotte, NC 28202
Attn: Mr. Bennett Cole
Re: Custodial Agreement (the "Custodial Agreement") dated as of
October 2, 1998, among Variable Funding Capital Corporation
("LENDER"), Auto Lenders Acceptance Corporation ("SERVICER") and
Norwest Bank Minnesota, National Association ("CUSTODIAN" AND
`BACKUP
SERVICER")
Ladies and Gentlemen:
In accordance with the provisions of Section 3 of the
above-referenced Custodial Agreement, the undersigned, as the Custodian, hereby
certifies that as to each Auto Loan listed on the Auto Loan Schedule (other than
any Auto Loan paid in full or any Auto Loan listed on the exception report
attached hereto) it has reviewed the Custodian's Auto Loan Files and has
determined that (i) all documents required to be delivered to it pursuant to
Sections 2(a) and (b) of the Custodial Agreement are in its possession; (ii)
such documents have been reviewed by it and have not been mutilated, damaged,
tom or otherwise physically altered and relate to such Auto Loan identified on
the Auto Loan Schedule; (iii) (A) based on its examination and only as to the
foregoing documents, the information set forth in item (i) of the definition of
Auto Loan Schedule respecting such Auto Loan accurately reflects the information
on the Auto Loan Schedule and (B) the information set forth in items (ii), (v)
and (vi) of the definition of Auto Loan Schedule respecting such Auto Loan
accurately reflects the information on the Auto Loan Schedule; and (iv) based on
its examination, the Contract is an executed original counterpart. The Custodian
makes no representations as to and shall not be responsible to verify (i) the
validity, legality, enforceability, sufficiency, due authorization or
genuineness of any of the documents contained in each Custodian's Auto Loan File
or of any of the Auto Loans or (ii) the collectability, insurability,
effectiveness or suitability of any such Auto Loan.
<PAGE>
Capitalized words used herein shall have the respective meanings
assigned to them in the above-captioned Custodial Agreement.
Norwest Bank Minnesota, National
Association, as Custodian
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
Exception Report
<PAGE>
EXHIBIT 2
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
Norwest Bank Minnesota,
National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset Backed Administration
Re: Custodial Agreement (the "Custodial Agreement") dated as of October
2, 1998, among Variable Funding Capital Corporation ("Lender"), Auto
Lenders Acceptance Corporation ("Servicer") and Norwest Bank
Minnesota, National ASSOCIATION ("CUSTODIAN")
In connection with the administration of the Auto Loans held by you
as the Custodian for the Lender, we request the release of the (Custodian's Auto
Loan File/specify documents) for the Auto Loan described below, for the reason
indicated.
OBLIGOR'S NAME, ADDRESS & ZIP CODE:
AUTO LOAN NUMBER:
REASON FOR REQUESTING DOCUMENTS (check one)
____1. Auto Loan Paid in Full
____2. Auto Loan Redelivered Pursuant to Section 8 of the Custodial
Agreement
____3. Auto Loan Liquidated by ______________________________________
____4. Auto Loan in Foreclosure
____5. Auto Loan substituted with alternate Auto Loan to be delivered to
the Custodian with a revised Auto Schedule indicating
substitutions
____6. Other (explain)______________________________________________
If item 1, 2 or 3 above is checked, and if all or part of the
Custodian's Auto Loan File was previously released to us, please release to us
our previous receipt on file with you, as well as any additional documents in
your possession relating to the above specified Auto Loan.
<PAGE>
If Item 4 or 6 above is checked, upon our return of all of the above
document to you as the Custodian, please acknowledge your receipt by signing the
space indicated below, and returning this form.
AUTO LENDERS ACCEPTANCE
CORPORATION
By:
Print Name:__________________________
Title:_______________________________
Date:________________________________
ACKNOWLEDGED:
VARIABLE FUNDING CAPITAL
CORPORATION, as Lender
By:___________________________________________
Print Name:___________________________________
Title:________________________________________
Date:_________________________________________
<PAGE>
DOCUMENTS RETURNED TO THE CUSTODIAN
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Custodian
By:
Print Name:
Title:
Date:
<PAGE>
EXHIBIT 3
Authorized Representatives
a) of Auto Lenders Acceptance Corporation
NAME SPECIMEN SIGNATURE
1. _______________ ____________________________________
2. _______________ ____________________________________
3. _______________ ____________________________________
4. _______________ ____________________________________
b) of First Union Capital Markets, as agent for Variable
Funding Capital Corporation
NAME SPECIMEN SIGNATURE
1. Bennett Cole ____________________________________
2. John Foxgrover ____________________________________
3. Darrell Baber ____________________________________
4. ____________________________________
<PAGE>
CERTIFICATE AS TO AUTHORIZED SIGNATURES
Re:_____________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Account Number(s) ______________________________________________________________
The specimen signatures shown below are the specimen signatures of the
individuals authorized to initiate and approve transactions of all types for the
above-mentioned bond issue:
Name/Title Specimen Signature
____________________________ _________________________________
(Name and Title) (Signature)
____________________________ _________________________________
(Name and Title) (Signature)
____________________________ _________________________________
(Name and Title) (Signature)
Dated:______________________
<PAGE>
EXHIBIT 7
NOTIFICATION IN EVENT OF DEFICIENCY
IN CUSTODIAN'S AUTO LOAN FILES
TO: Norwest Bank Minnesota,
National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services Asset Backed Administration
Re: Custodial Agreement (the "Custodial Agreement") dated as of
October 2, 1998, among Variable Funding Capital Corporation
("Lender"), Auto Lenders Acceptance Corporation ("Servicer")
and Norwest Bank MINNESOTA, NATIONAL ASSOCIATION ("CUSTODIAN")
The undersigned, in accordance with Section 4 of the Custodial Agreement, hereby
notifies the Custodian that:
|_| The Servicer shall deliver the following documents to the Custodian within
five (5) Business Days from the date hereof.
[list of documents]
|_| The Lender has waived the Deficiencies noted in the Certification.
|_| The Servicer shall cure the Deficiencies within five (5) Business Days
from the date hereof.
|_| The Servicer shall substitute another Auto Loan for the deficient Auto
Loan and shall deliver to the Custodian the Custodian's Auto Loan File
with respect to the substituted Auto Loan within five (5) Business Days of
the date hereof
|_| The Custodian shall release the deficient Custodian's Auto Loan File to
the Servicer.
|_| The Custodian shall retain the deficient Custodian's Auto Loan File.
Capitalized words used herein shall have the respective meanings assigned
to them in the above-captioned Custodial Agreement.
<PAGE>
VARIABLE FUNDING CAPITAL CORPORATION
By:_________________________________
Name:
Title:
Date:
<PAGE>
EXHIBIT 8
RELEASE OF AUTO LOANS
TO: Norwest Bank Minnesota,
National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset Backed Administration
The undersigned, in accordance with Section 6(c) of the Custodial
Agreement dated as of October 2, 1998, among Variable Funding Capital
Corporation, Auto Lenders Acceptance Corporation and Norwest Bank Minnesota,
National Association, hereby releases all of its lien and interest in the Auto
Loans and related Custodian's Auto Loan Files identified in Schedule A to this
Release of Auto Loans.
VARIABLE FUNDING CAPITAL CORPORATION
By:_________________________________
Name:
Title:
Date:
<PAGE>
EXHIBIT 9
AUTO LOAN SCHEDULE
<PAGE>
EXHIBIT 10
CONTENTS OF CUSTODIAN AUTO LOAN FILE
Original Promissory Note, Installment Sales Contract, Loan and Security
Agreement, original credit application, title, or applicable document evidencing
Servicer's perfected security interest in the applicable motor vehicle
<PAGE>
EXHIBIT 11
NORWEST BANK MINNESOTA, N.A.
Schedule of Fees
for
AUTO LENDERS ACCEPTANCE CORPORATION
Warehouse Facility
I. ACCOUNT ACCEPTANCE FEE: $___________
This fee covers all initial services including
the examination of the Warehouse Facility
documents, supporting documents, and
establishment of the necessary records. Fee
payable at closing.
II. MONTHLY ADMINISTRATION AND BACK-UP SERVICING FEE: __ BASIS POINTS
(MINIMUM $_______)
An annual fee for the ordinary administration of the
Warehouse facility will be charged monthly as indicated
above. It will be based on the average loan amount
funded per month. The minimum monthly fee is $1,000. The
Back-Up Servicer will establish preliminary procedures
for the transfer of servicing responsibilities to
Norwest should circumstances warrant.
III. COUNSEL FEE: $_____________
OUT OF POCKET
Fees for counsel are guaranteed not to exceed the above
amount and covers the review of both draft and final
documentation. Fee includes only an enforceability
opinion. Should other opinions be required, notice will
be given in advance concerning the billing of additional
amounts. Any out-of-pockets will be billed in addition
to the above.
IV. LOAN FILE CUSTODIAN: $___ PER FILE CHECK-IN
$___ QUARTERLY FILE
HOLDING CHARGE
Fee for Loan File Custodial services. Responsibilities
include loan file safekeeping and substitution services
for all loan files. In addition to the above, the
Servicer is responsible for all delivery fees pertaining
to the initial shipment of the loan files to Norwest
Bank.
<PAGE>
V. MISCELLANEOUS:
The fees set forth above are subject to the review and
acceptance of final documentation and are subject to
change should circumstances warrant. Additional
out-of-pocket expenses may be billed in addition to the
above which can include, but are not limited to, travel
expenses for trust officers attending out-of-town
closings and due diligence visit. Any fees charged for
services not specifically covered in this proposal will
be assessed in amounts commensurate with the services
rendered.
EXHIBIT 10.53
<PAGE>
- ------------------------------------------------------------------------------
EXECUTION COPY
- ------------------------------------------------------------------------------
CONTRACT PURCHASE AGREEMENT
CONTRACT PURCHASE AGREEMENT, dated as of October 2, 1998, by and between
AUTO LENDERS ACCEPTANCE CORPORATION, a Delaware corporation (the "SELLER"), and
FIFS ACQUISITION FUNDING COMPANY, L.L.C, a Delaware corporation (the
"PURCHASER").
WHEREAS, the Seller and the Purchaser desire to set forth their agreement
pursuant to which certain installment sales contracts are to be sold and
transferred by the Seller to the Purchaser;
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration, and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
All capitalized terms used but not otherwise defined herein shall have the
meanings given to such terms in the Loan Agreement (as defined below). As used
in this Agreement, the following terms shall, unless the context otherwise
requires, have the following meanings (such meanings to be equally applicable to
the singular and plural forms of the terms defined).
AGREEMENT: This Purchase Agreement as such agreement may be amended,
modified and/or restated.
ASSIGNMENT: The document of assignment substantially in the form attached to
this Agreement as Exhibit A.
CONTRACT: A retail installment sale contract for a Financed Vehicle which
contract is, immediately prior to the transfer by the Seller hereunder, owned by
the Seller free and clear of all liens.
DISPOSITION: The transfer or other disposition by the Purchaser of the Purchased
Receivables in connection with the issuance and sale of securities secured by a
pledge, or the creation of an interest in, all of the Purchaser's right, title
and interest in and to the Purchased Receivables.
<PAGE>
DISPOSITION PARTICIPANT: With respect to a Disposition, the trustee, custodian,
the rating agencies, the underwriter, the placement agent, the credit enhancer,
the purchaser of securities and/or any other party necessary or, in the good
faith belief of any of the foregoing, desirable to effect a Disposition.
LOAN AGREEMENT: That certain Loan and Security Agreement dated as of October 2,
1998 among the Purchaser, as Borrower, First Union Capital Markets, a division
of Wheat First Securities, Inc., as Deal Agent and Documentation Agent, Auto
Lenders Acceptance Corporation, as Servicer, First Union National Bank, as
Liquidity Agent and the Seller, as such agreement may be amended or supplemented
in accordance with the terms thereof.
PURCHASE PRICE: $53,000,000.
PURCHASED RECEIVABLE: Any Contract, any interest in which is transferred by the
Seller to the Purchaser under this Agreement, together with the Related Security
related to such Contract.
RELATED SECURITY: As to any Contract, (i) the interest of the Seller in all
security interests and liens in or on the Financed Vehicle and any accessions
thereto granted by an Obligor pursuant to such Contract; (ii) the interest of
the Seller in any proceeds from claims on all insurance policies covering such
Financed Vehicle or Obligor; (iii) the interest of the Seller in all rebates or
premiums and other amounts relating to insurance policies and other items
financed under such Contracts as of the Closing Date.
SELLER: Auto Lenders Acceptance Corporation, a Delaware corporation.
UCC: Shall have the meaning ascribed to it in the Loan Agreement.
ARTICLE II
PURCHASE AND SALE OF CONTRACTS
2.1 TRANSFER OF CONTRACTS.
The Seller hereby sells, transfers, assigns and otherwise conveys to the
Purchaser on the Closing Date, without recourse (i) all right, title and
interest of the Seller in and to each Contract listed on Schedule A hereto, and
all monies paid thereon, and due thereon, at or after the Closing Date, as
applicable, whether such amounts are considered accounts, general intangibles or
other property; (ii) all Related Security; and (iii) the proceeds of any and all
of the foregoing.
2.2 PAYMENT FOR CONTRACTS.
The Purchaser shall purchase and pay for the Contracts by causing the
Purchase Price thereof to be paid to the Seller in cash.
ARTICLE III
2
<PAGE>
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Seller as of the date
hereof:
(a) ORGANIZATION, ETC. the Purchaser has been duly incorporated and is
validly existing as a limited liability company in good standing under the laws
of the State of Delaware, and has full corporate power and authority to execute
and deliver this Agreement and to perform the terms and provisions hereof.
(b) DUE AUTHORIZATION AND NO VIOLATION. This Agreement has been duly
authorized, executed and delivered by the Purchaser, and is the valid, binding
and enforceable obligation of the Purchaser except as the same may be limited by
insolvency, bankruptcy, reorganization or other laws relating to or affecting
the enforcement of creditors' rights or by general equity principles. The
consummation of the transactions contemplated by this Agreement, and the
fulfillment of the terms thereof, will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under (in each
case material to the Purchaser), or (except as contemplated by the Loan
Agreement) result in the creation or imposition of any Lien, charge or
encumbrance (in each case material to the Purchaser) upon any of the property or
assets of the Purchaser pursuant to the terms of any indenture, mortgage, deed
of trust, loan agreement, guarantee, lease financing agreement or similar
agreement or instrument under which the Purchaser is a debtor or guarantor, nor
will such action result in any violation of the provisions of the Limited
Liability Company Agreement of the Purchaser.
(c) NO LITIGATION. No legal or governmental proceedings are pending to
which the Purchaser is a party or of which any property of the Purchaser is the
subject, and no such proceedings are threatened or contemplated by governmental
authorities or threatened by others other than such proceedings which will not
have a material adverse effect upon the general affairs, financial position, net
worth or results of operations (on an annual basis) of the Purchaser and will
not materially and adversely affect the performance by the Purchaser of its
obligations under, or the validity and enforceability of, this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
(a) The Seller hereby represents and warrants to the Purchaser as of the
date hereof:
(i) ORGANIZATION, ETC. The Seller has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or
the ownership of its property requires such qualification.
(ii) POWER AND AUTHORITY. The Seller has full power and authority to
sell and assign the property to be sold and assigned to the Purchaser
hereunder and has duly
3
<PAGE>
authorized such sale and assignment to the Purchaser by all necessary
corporate action. This Agreement has been duly authorized, executed and
delivered by the Seller and shall constitute the legal, valid and binding
obligation of the Seller except as the same may be limited by insolvency,
bankruptcy, reorganization or other laws relating to or affecting the
enforcement of creditors' rights or by general equity principles.
(iii) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement, and the fulfillment of the terms thereof,
will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under (in each case material to the
Seller and its subsidiaries considered as a whole), or result in the
creation or imposition of any adverse claim, charge or encumbrance (in
each case material to the Seller and its subsidiaries considered as a
whole) upon any of the property or assets of the Seller pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement,
guarantee, lease financing agreement or similar agreement or instrument
under which the Seller is a debtor or guarantor, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Seller.
(iv) NO PROCEEDINGS. No legal or governmental proceedings are
pending to which the Seller is a party or of which any property of the
Seller is the subject, and no such proceedings are threatened or
contemplated by governmental authorities or threatened by others, other
than such proceedings which will not have a material adverse effect upon
the validity or collectability of the Contracts, or upon the general
affairs, financial position, net worth or results of operations (on an
annual basis) of the Seller and its subsidiaries considered as a whole and
will not materially and adversely affect the performance by the Seller of
its obligations under, or the validity and enforceability of, this
Agreement.
(v) NO ADVERSE EVENTS. No event has occurred that would have a
material adverse effect on the Contracts, the ability of the Seller to
collect the Contracts or to perform its obligations hereunder or the
ability of the Purchaser to collect the Contracts.
(b) The Seller makes the following representations and warranties as to
the Contracts on which the Purchaser relies in purchasing the Contracts. Such
representations and warranties speak as of the execution and delivery of this
Agreement, and as of the Closing Date with respect to each Contract, but shall
survive the sale, transfer, and assignment of the Contracts to the Purchaser:
(i) On the Closing Date the Seller had a valid and enforceable first
priority security interest in the related Financed Vehicle, and such
security interest had been duly perfected and was prior to all other
present and future liens and security interests (except future tax liens
and liens that, by statute, may be granted priority over previously
perfected security interests) that now exist or may hereafter arise, and
the Seller had the full right to assign such security interest to the
Purchaser.
4
<PAGE>
(ii) On and after the Closing Date, there shall exist under such
Contract a valid, subsisting, and enforceable first priority perfected
security interest in the related Financed Vehicle (other than, as to the
priority of such security interest, any statutory lien arising by
operation of law after the Closing Date which is prior to such interest)
and, following the grant of all of the Seller's right, title and interest
in and to such security interest to the Purchaser, at such time as
enforcement of such security interest is sought there shall exist in favor
of the Purchaser a valid, subsisting, and enforceable first priority
perfected security interest (other than, as to the priority of such
security interest, any statutory lien arising by operation of law after
the Closing Date which is prior to such interest) in the related Financed
Vehicle.
(iii) If such Contract was originated in a state in which notation
of a security interest on the title document for the Financed Vehicle
securing such Contract is required or permitted to perfect such security
interest, the title document for such Financed Vehicle shows, or if a new
or replacement title document is being applied for with respect to such
Financed Vehicle the title document will show, the Seller as the sole
holder of a security interest in such Financed Vehicle. If such Contract
was originated in a state in which the filing of a financing statement
under the UCC is required to perfect a security interest in motor
vehicles, such filings or recordings have been duly made and show the
Seller as the sole holder of a first priority security interest in such
Financed Vehicle, and in either case the Purchaser has the same rights as
the Seller has or would have (if the Seller were still the owner of a
Purchased Receivable) against the Obligor and all creditors of the Obligor
claiming an interest in such Financed Vehicle.
(iv) Immediately prior to the Closing Date: (i) such Contract had
not been sold, assigned, or pledged by the Seller to any Person; (ii) the
Seller had good and marketable title thereto free and clear of any
encumbrance, equity, pledge, charge, claim or security interest; (iii) the
Seller was the sole owner thereof and had full right to sell the Contract
to the Purchaser and upon the sale thereof to the Purchaser, the Purchaser
will have good and marketable title thereto and will own such Contracts
free and clear of any encumbrances. Such Contract was acquired by the
Seller, from an automobile or light truck dealer (a "DEALER") with which
the Seller does business, pursuant to a written agreement between the
Seller and such Dealer. Such Dealer had full right to assign to the Seller
such Contract and the security interest in the related Financed Vehicle.
The Seller has full right to sell to the Purchaser such Contract and the
security interest in the related Financed Vehicle.
(v) As of the Closing Date, there is no lien against the related
Financed Vehicle for delinquent taxes.
(vi) Such Contract, and the sale of the Financed Vehicle securing
such Contract, where applicable, complied, at the time it was made, and
now complies, in all material respects with applicable state and federal
laws (and regulations thereunder), including, without limitation, usury,
disclosure and consumer protection laws, equal credit opportunity, fair
credit reporting, truth-in-lending or other similar laws, the Federal
5
<PAGE>
Trade Commission Act, and applicable state laws regulating retail
installment sales contracts in general and motor vehicle retail
installment sales contracts and loans in particular, and the receipt of
interest on, and the ownership of, such Contract by the Purchaser will not
violate any such laws and the related Obligor has no right of rescission
or cancellation, claims or defenses, set-offs, or counterclaims of any
kind whatsoever as to or against the contract evidencing a related
Contract.
(vii) The Contract constitutes the entire agreement between the
Seller (as assignee of the related originator) and the related Obligor.
(viii) At the time of origination of such Contract, the proceeds of
such Contract were fully disbursed, and there is no requirement for future
advances thereunder, and all fees and expenses in connection with the
origination of such Contract have been paid.
(ix) As of the Closing Date, other than a Contract as to which any
payment or portion thereof required to be made by the Obligor thereof has
not been made for less than 31 days following the due date thereof and any
Contract that constitutes a Delinquent Contract or Defaulted Contract,
there is no default, breach, violation or event of acceleration existing
under any such Contract and no event which, with the passage of time or
with notice or with both, would constitute a default, breach, violation or
event of acceleration under any such Contract. The Seller has not, other
than as to any Contract that constitutes a Delinquent Contract or
Defaulted Contract, waived any such default, breach, violation or event of
acceleration.
(x) In connection with the Seller's acquisition of such Contract,
the Seller required the related Obligor to furnish evidence that the
related Financed Vehicle was covered by a comprehensive and collision
insurance policy naming the Seller as loss payee and insuring against loss
and damage due to fire, theft, transportation, collision and other risks
generally covered by comprehensive and collision coverage in an amount
equal to the actual cash value of the related Financed Vehicle.
(xi) Such Contract contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate
for the realization against the related Financed Vehicle of the benefits
of the security.
(xii) The collection practices used with respect to such Contract
have been in all material respects legal, proper, prudent and customary in
the automobile installment sales contract or installment loan servicing
business as applied with respect to obligors with credit standings
comparable to that of the Obligor.
(xiii) [reserved].
(xiv) [reserved].
6
<PAGE>
(xv) [reserved].
(xvi) [reserved].
(xvii) The Seller has provided to the Servicer the sole original
counterpart of such Contract, as amended, and the related title document
or the application for title document, previously in the possession of the
Seller.
(xviii) Such Contract constitutes "chattel paper" for purposes of
Section 9-105(a)(ii) and 9-308 of the UCC. The Seller's electronic ledgers
have been marked as provided in the Loan Agreement with respect to such
Contract.
(xix) Such Contract was not originated in, nor is it subject to the
law of, any jurisdiction, the laws of which would make unlawful the sale,
transfer or assignment of such Contract, under this Agreement, including
any repurchase in accordance with this Agreement.
(xx) Such Contract is in full force and effect in accordance with
its respective terms and neither the Seller nor the related Obligor has
suspended or reduced any payments or obligations due or to become due
thereunder by reason of a default by the other party to such Contract;;
and there are no proceedings pending, or to the best of the Seller's
knowledge, threatened, wherein the related Obligor or any governmental
agency has alleged that such Contract is illegal or unenforceable.
(xxi) Each contract evidencing a Contract being acquired by the
Purchaser is substantially similar to one of the Seller's standard form
contracts except for immaterial modifications or deviations therefrom in
accordance with state law which will not have a material adverse effect on
the Purchaser or any pledgee from the Purchaser and will not reduce the
scheduled payments thereunder or other payments due under the Contracts.
(xxii) The Seller has duly fulfilled all obligations to be fulfilled
on the Seller's part under or in connection with the origination,
acquisition and disposition of such Contract, including, without
limitation, giving any notices or consents necessary to effect the
acquisition of such Contracts by the Purchaser, and has done nothing to
impair the rights of the Secured Parties in such Contracts or payments
with respect thereto. The Seller has obtained all necessary licenses,
permits and charters required to be obtained by the Seller, which failure
to obtain would render any Contract, this Agreement, the Note, or the Loan
Agreement unenforceable and would have a material adverse effect on the
Purchaser or any pledgees of the Purchaser.
(xxiii) [reserved].
(xxiv) The contract securing such Contract arose from a bona fide
sale in the ordinary course of the Dealer's business.
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(xxv) Such Contract represents the sale of goods described in the
contract evidencing the Contract.
(xxvi) Such Contract is exclusive and contains all the terms and
conditions of the related contract.
(xxvii) To the best of the Seller's knowledge, all signatures,
names, addresses, telephone numbers, figures and other statements of fact
set forth in the contract evidencing the Contract are genuine, true and
correct.
(xxviii) To the best of the Seller's knowledge, no part of the down
payment, or any installment, has been loaned by the originator to the
related Obligor.
(xxix) To the best of the Seller's knowledge, all credit information
provided to the Purchaser is true and correct and reported as received
from the Obligor.
(xxx) To the best of the Seller's knowledge, the Obligor is in fact
the primary or sole operator of the related Financed Vehicle.
(xxxi) Each Contract listed on the Contract List constitutes an
Eligible Contract.
(xxxii) Each Contract listed on the Delinquent Contract List is a
Delinquent Contract.
(xxxiii) Each Contract listed on the Defaulted Contract List is a
Defaulted Contract.
(xxxiv) The sale of any extended service agreement to the related
Obligor complied at the time of such sale with all applicable state and
federal laws (and regulations thereunder), including without limitation,
insurance, usury, disclosure and consumer protection laws, equal credit
opportunity, fair credit reporting, truth-in-lending or other similar
laws, the Federal Trade Commission Act, and applicable state laws
regulating extended service agreements and insurance, and the ownership of
any such extended service agreement will not violate any such laws.
(xxxv) [reserved].
(xxxvi) [reserved].
(xxxvii) The Deal Agent will be entitled to receive all amounts due
to an Obligor or lienholder upon cancellation by an Obligor of an extended
service agreement or any credit life insurance policy and accident and
health insurance policy relating to a Financed Vehicle or an Obligor.
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(xxxviii) All rights (but not obligations) of the Seller under each
extended service agreement and each credit life insurance policy and
accident and health insurance policy relating to a Financed Vehicle or an
Obligor have been assigned by the Seller to the Purchaser.
(xxxix) No Contract has been satisfied, subordinated, or rescinded,
nor has any Financed Vehicle been released, in whole or in part, from the
lien granted by the related Contract.
(xxxx) It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement constitutes a sale of the
related Contracts from the Seller to the Purchaser and that the beneficial
interest in and title to the Contracts 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.
ARTICLE IV
CONDITIONS
4.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
The obligation of the Purchaser to purchase the Contracts is subject to
the satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Seller hereunder shall be true and correct at the Closing Date
with respect to each Contract, with the same effect as if then made.
(b) DOCUMENTS TO BE DELIVERED BY THE SELLER.
(i) THE ASSIGNMENT. As provided herein, the Seller shall have
executed and delivered an Assignment, which shall be substantially in the
form of Exhibit A hereto.
(ii) EVIDENCE OF UCC FILING. The Seller shall have recorded and
filed, at its own expense, a UCC-1 financing statement in each
jurisdiction in which filing is required by applicable law, executed by
the Seller, as seller of the Contracts, and naming the Purchaser, as
purchaser of the Contracts, and the Deal Agent, as assignee, describing
the Contracts and the other property conveyed hereunder, meeting the
requirements of the laws of each jurisdiction and in such manner as is
necessary to perfect the sale, transfer, assignment and conveyance of such
Contracts to the Purchaser. The Seller shall deliver to the Purchaser, the
Documentation Agent and the Deal Agent a file-stamped copy, or other
evidence satisfactory to the Purchaser, the Documentation Agent and the
Deal Agent of such filing.
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(iii) OTHER DOCUMENTS. All other documents in the possession of the
Seller relating to the Contracts and any other document requested by the
Deal Agent to be delivered shall have been delivered by the Seller.
4.2 CONDITIONS TO OBLIGATIONS OF THE SELLER.
The obligation of the Seller to sell the Contracts to the Purchaser is
subject to the satisfaction of the following conditions:
(a) REPRESENTATION AND WARRANTIES TRUE. The representations and warranties
of the Purchaser hereunder shall be true and correct at the Closing Date with
the same effect as if then made.
(b) CONTRACTS PURCHASE PRICE. At the Closing Date with respect to each
Contract, the Purchaser shall have delivered to the Seller the Purchase Price.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows:
5.1 PROTECTION OF RIGHT, TITLE AND INTEREST.
(a) The Seller shall execute and file such financing statements and cause
to be executed and filed such continuation statements and any required
documentation all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the ownership interest of the Purchaser
in the Purchased Receivables and in the proceeds thereof. The Seller shall
deliver (or cause to be delivered) to the Purchaser and the Deal Agent
filed-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) The Seller 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 the Seller in accordance with paragraph (a)
above seriously misleading within the meaning of Section 9-402 of the UCC,
unless it shall have given the Purchaser, the Documentation Agent and the Deal
Agent at least thirty days' prior written notice thereof and shall have filed
appropriate amendments to all previously filed financing statements or
continuation statements prior to such changes.
(c) The Seller shall give the Purchaser, the Deal Agent and the
Documentation Agent at least thirty 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
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statement and shall file any such amendment prior to any such relocation. The
Seller shall at all times maintain its principal executive office within the
United States of America.
(d) The Seller shall maintain its computer systems so that, from and after
the time of sale hereunder of the Contracts to the Purchaser, the Seller's
master computer records (including any back-up archives) that refer to a
Purchased Receivable shall indicate clearly the interest of the Purchaser in
such Purchased Receivable and that such Purchased Receivable is owned by the
Purchaser. Indication of the Purchaser's ownership of a Purchased Receivable
shall be deleted from or modified on the Seller's computer systems when, and
only when, the Purchased Receivable shall have been paid in full or repurchased.
(e) If at any time the Seller shall propose to sell, grant a security
interest in, or otherwise transfer any interest in automotive installment sale
contracts to any prospective purchaser, lender, or other transferee, the Seller
shall give to such prospective purchaser, lender, or other transferee computer
tapes, records, or print-outs (including any restored from back-up archives)
that, if they shall refer in any manner whatsoever to any Purchased Receivable,
the same shall indicate clearly that such Purchased Receivable has been sold to
and is owned by the Purchaser.
(f) Upon the written request of the Deal Agent, upon written request from
the Secured Parties, the Seller shall cause the following notation to be stamped
on the face of the retail installments sales contract evidencing such Contract:
AUTO LENDERS ACCEPTANCE CORPORATION HAS SOLD AND ASSIGNED ALL RIGHT, TITLE AND
INTEREST IN THIS CONTRACT TO FIFS ACQUISITION FUNDING COMPANY, L.L.C., WHICH HAS
GRANTED A SECURITY INTEREST IN THIS CONTRACT TO FIRST UNION CAPITAL MARKETS, A
DIVISION OF WHEAT FIRST SECURITIES INC., AS DEAL AGENT FOR CERTAIN SECURED
PARTIES."
(g) Upon the written request of the Deal Agent, upon written request from
the Secured Parties, the Seller shall give written notice by regular mail,
addressed to the Obligor under such Contract, in form acceptable to the
Purchaser, to the effect that such Purchased Receivable has been sold and
assigned to the Purchaser.
(h) The Seller shall permit the Purchaser and its agents and the Deal
Agent and its agents at any time during normal business hours to inspect, audit,
and make copies of and abstracts from the Seller's records regarding any
Purchased Receivable.
(i) The Seller shall, or shall cause the Servicer to, provide a list to
the Deal Agent of all outstanding Purchased Receivables, such list to be
delivered to the Deal Agent, as of the end of each month, on the fifteenth
Business Day after the end of each such month, beginning with October, 1998.
Upon request, the Seller shall furnish to the Purchaser and the Deal Agent,
within five Business Days, a list of all Purchased Receivables (by contract
number and name of Obligor) previously sold to the Purchaser pursuant to this
Agreement.
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(j) The Seller will not amend, and shall not permit any amendment to any
extended service agreement relating to the Financed Vehicles related to the
Purchased Receivables which would adversely affect its ability and right to
receive refunds under such contracts, or which would adversely affect the rights
of any of the Deal Agent, the Liquidity Agent, the Secured Parties, or the
Purchaser.
(k) The Seller agrees, for the benefit of the Deal Agent, to take all
reasonable measures to enforce any right to a refund due to it under any
extended service agreement related to the Purchased Receivables.
5.2 OTHER LIENS OR INTERESTS.
Except for the conveyances hereunder, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any adverse claim on any interest in the Purchased Receivables,
and the Seller shall defend the right, title, and interest of the Purchaser in,
to and under the Purchased Receivables against all claims of third parties
claiming through or under the Seller.
5.3 COSTS AND EXPENSES.
The Seller agrees to pay all reasonable costs and disbursements in
connection with the perfection, as against all third parties, of the Purchaser's
right, title and interest in and to the Purchased Receivables, including,
without limitation, Financed Vehicles and the Seller shall take, at its expense,
any additional action required by the Purchaser or the Deal Agent in order to
protect the Purchaser's and the Deal Agent's (on behalf of the Secured Parties)
interests in the Purchased Receivables, including, without limitation, the
Financed Vehicles and, in connection therewith, shall execute and file such
financing statements, or amendments thereto, continuation statements, and such
other instruments, documents, or notices as may be requested by the Purchaser or
the Deal Agent.
5.4 INDEMNIFICATION.
The Seller shall indemnify the Purchaser, the Deal Agent and each Secured
Party under the Loan Agreement for any liability as a result of the failure of a
Purchased Receivable to be originated in compliance with all requirements of law
and for any breach of any of its representations and warranties contained
herein. These indemnity obligations shall be in addition to any obligation that
the Seller may otherwise have.
5.5 SALE.
Seller agrees to treat this conveyance for all purposes (including without
limitation tax and financial accounting purposes) as a sale on all relevant
books, records, tax returns, financial statements and other applicable
documents.
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5.6 SELLER'S RECEIPT OF PAYMENT.
Seller agrees that any amounts received by Seller in respect of any of the
Purchased Receivables after the Closing Date applicable thereto shall be
received in trust for the benefit of the Purchaser, shall be segregated from
other funds of the Seller and shall immediately be paid over to the Collection
Account in the same form as so received (with any necessary endorsement).
5.7 THE SELLER TO COOPERATE WITH DISPOSITION OF PURCHASED
Receivables.
In consideration of the Purchase Price and other consideration received
hereunder, the Seller hereby agrees and covenants that in connection with each
Disposition in which the Purchaser disposes of any of the Purchased Receivables
sold to it by the Seller, the Seller shall:
(a) make such representations and warranties concerning the Purchased
Receivables as of the initial transfer date of the related Disposition to such
Disposition Participants as may be reasonably requested in connection with the
Disposition; PROVIDED that the Seller shall not be required to make any
representations or warranties that would increase the scope or substance of such
representations and warranties beyond the substance of those set forth herein;
(b) negotiate in good faith with the Purchaser and other Disposition
Participants to provide such additional representations and warranties
concerning the Purchased Receivables that may be reasonably requested in the
future by Disposition Participants;
(c) supply, at the Purchaser's sole cost and expense, such information,
opinions of counsel, letters from law and/or accounting firms and other
documentation and certificates regarding the origination and servicing of the
Purchased Receivables as the Purchaser or any Disposition Participant shall
reasonably request to effect a Disposition;
(d) make itself available for and engage in good faith consultation with
the Purchaser and Disposition Participants concerning information to be
contained in any document, agreement, private placement memorandum, or filing
with the Securities and Exchange Commission relating to the Seller or the
Purchased Receivables in connection with a Disposition and shall use reasonable
efforts, at the Purchaser's sole cost and expense, to compile any information
and prepare any reports and certificates, into a form, whether written or
electronic, suitable for inclusion in such documentation; and
(e) take such further actions as may be reasonably requested of or deemed
appropriate by the Purchaser or a Disposition Participant in order to effect a
Disposition, including without limitation, delivery of any additional documents
to the Custodian for inclusion with the Contract Files;
PROVIDED that notwithstanding anything in this Agreement to the contrary, (a)
the Seller shall have no liability for the Purchased Receivables arising from or
relating to the ongoing ability or willingness of Obligor under any Purchased
Receivable to pay under the Purchased Receivables,
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(b) none of the indemnities hereunder shall constitute a guarantee by the Seller
of the collectibility of the loans, (c) the Seller shall have no obligation with
respect to the inability or unwillingness of a Obligor under any Purchased
Receivable to pay principal, interest or other amount owing by such obligor
under the Loans, and (d) the Seller shall only be required to enter into
documentation in connection with Dispositions that is consistent with industry
practice with respect to Dispositions among similarly situated third party
sellers.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 OBLIGATION OF SELLER.
The obligations of the Seller under this Agreement shall not be affected
by reason of the invalidity, illegality or irregularity of any Contract.
6.2 REPURCHASE EVENT.
The Seller hereby covenants and agrees with the Purchaser (for the benefit
of the Deal Agent, for the benefit of the Secured Parties), that the Seller
shall promptly repurchase from the Purchaser any Purchased Receivable, for an
amount equal to the Contract Principal Balance thereof, together with accrued
interest thereon through the date of repurchase in cash, with respect to which
the following event ("REPURCHASE EVENT") shall have occurred: any representation
and warranty of the Seller contained in Section 3.2(b) shall have been breached
with respect to such Purchased Receivable as of the Closing Date. This
repurchase obligation of the Seller shall constitute the sole remedy of the
Purchaser and the Deal Agent under the Loan Agreement against the Seller with
respect to any Repurchase Event. With respect to all Purchased Receivables
repurchased by the Seller pursuant to this Agreement, the Purchaser shall
assign, without recourse, representation or warranty, to the Seller all of the
Purchaser's right, title and interest in and to such Purchased Receivables, and
all security and documents relating thereto.
6.3 TERMINATION.
The obligations of the Seller hereunder shall terminate at such time as
all amounts due and payable by the Purchaser under the Loan Agreement are paid
in full.
6.4 AMENDMENT.
This Agreement may be amended from time to time by a written instrument
duly executed and delivered by the Seller and the Purchaser; PROVIDED, however,
that no such amendment shall be effective without a prior written consent of the
Deal Agent.
6.5 COLLATERAL ASSIGNMENT.
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Notwithstanding anything to the contrary contained herein, the Seller (i)
acknowledges and consents that the Purchaser has assigned its rights hereunder
and its interest herein as collateral pursuant to the Loan Agreement for the
benefit of the Secured Parties, and (ii) agrees to attorn to the Deal Agent in
the event of its succession to the rights and interest of the Purchaser
hereunder by reason of foreclosure or otherwise.
6.6 POWER OF ATTORNEY.
The parties recognize that, notwithstanding the sale and assignment of a
Contract to the Purchaser pursuant to this Agreement, it may not be practicable
under applicable state recordation procedures to substitute the Purchaser for
the Seller as the lienholder identified on the certificate of title or similarly
recorded instrument pertaining to the related Financed Vehicle. Accordingly,
with respect to each Purchased Receivable, the Seller hereby grants to the
Purchaser, and to any servicing agent who may service such Purchased Receivable
for the Purchaser, an irrevocable power of attorney, coupled with interest, to
enforce, in the name, place and stead of the Seller, all rights and remedies of
the holder of such Purchased Receivable and of the security interests in the
related Financed Vehicle. The Seller agrees to provide, promptly upon the
request of the Purchaser or such servicer, any additional documentation which
they may reasonably require to evidence, or otherwise to more perfectly vest,
the irrevocable power of attorney granted hereby.
6.7 WAIVERS.
No failure or delay on the part of any party in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any power, right or remedy preclude any
other further exercise thereof or the exercise of any other power, right or
remedy.
6.8 NOTICES.
All communications and notices directed to either party pursuant to this
Agreement shall be in writing addressed or delivered to it at its address set
forth under its name on the signature pages hereof and to the Deal Agent at:
First Union Capital Markets, a division of Wheat First Securities, Inc., One
First Union Center, TW-6, Charlotte, North Carolina 28288, Attn: Conduit
Administration or at such other address as may be designated by it by notice to
other party and, if mailed or transmitted by facsimile transmission, shall be
deemed given when mailed or transmitted.
6.9 COSTS AND EXPENSES.
The Seller will pay all expenses incident to the performance of its
obligations under this Agreement and the Seller agrees to pay all reasonable
out-of-pocket costs and expenses of the Purchaser, in connection with the
perfection as against third parties of the Purchaser's right, title and interest
in and to the Purchased Receivables and the enforcement of any obligation of the
Seller hereunder.
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6.10 HEADINGS AND CROSS REFERENCES.
The various headings in this Agreement are included for convenience only
and shall not affect the meaning or interpretation of any provisions of this
Agreement.
6.11 GOVERNING LAW.
This Agreement and the Assignment shall be governed by and construed in
accordance with the laws of the State of Georgia.
6.12 COUNTERPARTS.
This Agreement may be executed in two or more counterparts and by
different parties on separate counterparts, each of which shall be an original,
but all of which together shall constitute one and the same instrument.
6.13 NO PROCEEDINGS.
The Seller agrees that it will not file any involuntary petition or
otherwise institute any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceeding under any federal or state bankruptcy
or similar law against the Purchaser.
6.14 THIRD PARTY BENEFICIARY.
Each of the parties hereto agree that the Deal Agent, as agent, is a third
party beneficiary of this Agreement.
6.15 ASSIGNMENT.
This Agreement may not be assigned by either party hereto without the
prior written consent of the Deal Agent.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunder to duly authorized as of the
date and year first above written.
AUTO LENDERS ACCEPTANCE CORPORATION
By______________________________________
Name:___________________________________
Title:__________________________________
Auto Lenders Acceptance Corporation
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.: (770) 956-3800
Confirmation No.: (770) 956-3825
FIFS ACQUISITION FUNDING COMPANY, L.L.C.
By FIALAC Holdings, Inc., as Manager
By:____________________________________
Name: Bennie H. Duck
Title: Vice President of FIALAC Holdings,
Inc.
FIFS Acquisition Funding Company, L.L.C.
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.: (770) 956-3800
Confirmation No.: (770) 956-3825
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CLTLIB01 497690.6
Exhibit A
Assignment
FOR VALUE RECEIVED, in accordance with the Contract Purchase Agreement
dated as of October 2, 1998 (the "PURCHASE AGREEMENT") between the undersigned
and the Purchaser (the "PURCHASER"), the undersigned does hereby sell, assign,
transfer and otherwise convey unto the Purchaser, without recourse, all right,
title and interest of the undersigned in and to:
(A) all motor vehicle installment sales contracts, any interest in which
the undersigned has transferred to the Purchaser under the Purchase Agreement
(the "PURCHASED RECEIVABLE") and all monies paid thereon, and due thereon, at or
after the Closing Date as applicable, whether such amounts are considered
accounts, general intangibles or other property;
(B) together with (i) the interest of the undersigned in all security
interests and liens in or on the Financed Vehicle and any accessions thereto
granted by an Obligor pursuant to the Purchased Receivables, and all monies paid
thereon, and due thereon, at or after the Closing Date, as applicable whether
such amounts are considered accounts, general intangibles or other property,
(ii) the interest of the undersigned in any proceeds from claims on any physical
damage, credit life, credit disability, credit insurance or other insurance
policies covering such Financed Vehicle or Obligor, (iii) the interest of the
undersigned in all rebates of premiums and other amounts relating to insurance
policies and other items financed under the Purchased Receivables as of the
Closing Date, and (iv) the proceeds of any and all of the foregoing.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Purchase Agreement and is to be governed by the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed, effective as of the Closing Date.
AUTO LENDERS ACCEPTANCE CORPORATION
By:___________________________________
Name:_________________________
Title:_________________________
<PAGE>
SCHEDULE A
Contract List
EXHIBIT 10.54
<PAGE>
- ------------------------------------------------------------------------------
EXECUTION COPY
- ------------------------------------------------------------------------------
NIM COLLATERAL PURCHASE AGREEMENT
NIM COLLATERAL PURCHASE AGREEMENT, dated as of October 2, 1998, by and
between AUTO LENDERS ACCEPTANCE CORPORATION ("ALAC" or a "SELLER") and ALAC
RECEIVABLES CORP. ("ALACRC" or a "SELLER" and together with ALAC, the "Sellers")
and FIFS ACQUISITION FUNDING COMPANY, L.L.C. (the "PURCHASER").
WHEREAS, ALACRC is the owner of certain beneficial ownership interests
(the "CERTIFICATES") in the owner trusts (the "TRUSTS") issued pursuant to the
Trust Agreements identified in Appendix I attached hereto (the "TRUST
AGREEMENTS");
WHEREAS, ALACRC is the owner of certain rights in certain spread accounts
(the "SPREAD ACCOUNTS") and all monies, checks, securities, investments and
other documents related thereto (collectively, with the Spread Accounts, the
"SPREAD ACCOUNT COLLATERAL") created and described in the Master Spread Account
Agreement.
WHEREAS, ALACRC is the owner of certain rights to receive distributions in
respect of the Spread Accounts pursuant to Section 3.03(b) of the Master Spread
Account Agreement;
WHEREAS, ALAC is the owner of certain Charged Off Receivables (as
defined herein);
WHEREAS, ALAC is the servicer under the ALAC Securitizations and entitled
to receive from time to time under each of the Sale and Servicing Agreement
identified in Appendix I hereto (the "SALE AND SERVICING Agreements") the
Servicing Fee (as defined in each of the Sale and Servicing Agreements;
NOW THEREFORE, in consideration of the foregoing, other good and valuable
consideration, and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
All capitalized terms used but not otherwise defined herein shall have the
meanings given to such terms in the Loan Agreement (as defined below). As used
in this Agreement, the following terms shall, unless the context otherwise
requires, have the following meanings (such meanings to be equally applicable to
the singular and plural forms of the terms defined).
<PAGE>
AGREEMENT: This NIM Collateral Purchase Agreement as such agreement may be
amended, modified and/or restated.
ALAC SECURITIZATION DOCUMENT: Any document delivered in connection with the
ALAC Securitizations and to which any Seller, as the case may be, is a party.
CHARGED OFF RECEIVABLE: Any Contract that, prior to the Closing Date, has been
charged-off by ALAC in accordance with its credit and collection policy and is
listed on the Charged Off Receivables List.
CHARGED OFF RECEIVABLES LIST: Collectively, all schedules, as the same may be
amended, modified or supplemented, of Charged Off Receivables delivered by ALAC
to the Purchaser and to the Deal Agent, each such schedule identifying, in such
detail as agreed by ALAC and the Deal Agent, the related Contract by the Obligor
and setting forth for each such Contract: (i) a number identifying the Contract
and (ii) the Contract Principal Balance. Such list shall be attached hereto as
Exhibit A.
CONTRACT: A retail installment sale contract for a Financed Vehicle and all
rights and obligations thereunder.
FINANCED VEHICLE: An automobile or light duty truck, together with all
accessories thereto, securing an Obligor's indebtedness under a Contract.
LOAN AGREEMENT: That certain Loan and Security Agreement dated as of October 2,
1998 among the Purchaser, as borrower, First Union Capital Markets, a division
of Wheat First Securities, as Deal Agent and Custodian, Auto Lenders Acceptance
Corporation, as Servicer, First Union National Bank, as Liquidity Agent and the
Sellers, as such agreement may be amended or supplemented in accordance with the
terms thereof.
MASTER SPREAD ACCOUNT AGREEMENT: The Master Spread Account Agreement, dated
as of September 25, 1997 among ALACRC, Financial Security Assurance Inc. and
Norwest Bank Minnesota, National Association, as amended, supplemented,
modified or restated.
OBLIGOR: Any obligor under any Contract, whose recourse obligations thereunder
constitute a principal source of payments under any Contract, including any
guarantor of such obligations.
PURCHASE PRICE: With respect to the Certificates, $16,610,000, with respect to
the Spread Account Collateral, $3,100,000, with respect to the Servicing Strips,
$10,000 and with respect to the Charged Off Receivables, $10,000.
SELLERS: ALAC and ALACRC, as the case may be.
SERVICING STRIPS: The rights of ALAC to receive, pursuant to the terms and
conditions of each of the Sale and Servicing Agreements, the Servicing Fee (as
defined in each Sale and Servicing
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Agreement) payable on each Distribution Date (as defined in each Sale and
Servicing Agreement) under each Sale and Servicing Agreement, to the extent of
an amount equal to 1.00% of the Pool Balance (as defined in each Sale and
Servicing Agreement).
UCC: Shall have the meaning ascribed to it in the Loan Agreement.
ARTICLE II
PURCHASE AND SALE OF NIM COLLATERAL
Each Seller hereby sells, transfers and conveys to the Purchaser all of
such Seller's right, title and interest in and to the NIM Collateral owned by
such Purchaser on the Closing Date. The Purchaser shall purchase and pay the
Purchase Price for such NIM Collateral on the Closing Date in cash.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Sellers as of the date
hereof:
(a) ORGANIZATION, ETC. The Purchaser has been duly incorporated and is
validly existing as a limited liability company in good standing under the laws
of the State of Delaware, and has full corporate power and authority to execute
and deliver this Agreement and to perform the terms and provisions hereof.
(b) DUE AUTHORIZATION AND NO VIOLATION. This Agreement has been duly
authorized, executed and delivered by the Purchaser, and is the valid, binding
and enforceable obligation of the Purchaser except as the same may be limited by
insolvency, bankruptcy, reorganization or other laws relating to or affecting
the enforcement of creditors' rights or by general equity principles. The
consummation of the transactions contemplated by this Agreement, and the
fulfillment of the terms thereof, will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under (in each
case material to the Purchaser), or (except as contemplated by the Loan
Agreement) result in the creation or imposition of any Lien, charge or
encumbrance (in each case material to the Purchaser) upon any of the property or
assets of the Purchaser pursuant to the terms of any indenture, mortgage, deed
of trust, loan agreement, guarantee, lease financing agreement or similar
agreement or instrument under which the Purchaser is a debtor or guarantor, nor
will such action result in any violation of the provisions of the Limited
Liability Company Agreement of the Purchaser.
(c) NO LITIGATION. No legal or governmental proceedings are pending to
which the Purchaser is a party or of which any property of the Purchaser is the
subject, and no such proceedings are threatened or contemplated by governmental
authorities or threatened by others
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<PAGE>
other than such proceedings which will not have a material adverse effect upon
the general affairs, financial position, net worth or results of operations (on
an annual basis) of the Purchaser and will not materially and adversely affect
the performance by the Purchaser of its obligations under, or the validity and
enforceability of, this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
(a) Each Seller hereby represents and warrants to the Purchaser as of the
date hereof:
(i) ORGANIZATION, ETC. It has been duly incorporated and is validly
existing under the laws of the jurisdiction of its incorporation and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership of its
property requires such qualification.
(ii) POWER AND AUTHORITY. It has full power and authority to sell
and assign the property to be sold and assigned to the Purchaser hereunder
and has duly authorized such sale and assignment to the Purchaser by all
necessary corporate action. This Agreement has been duly authorized,
executed and delivered by such Seller and shall constitute the legal,
valid and binding obligation of such Seller except as the same may be
limited by insolvency, bankruptcy, reorganization or other laws relating
to or affecting the enforcement of creditors' rights or by general equity
principles.
(iii) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement, and the fulfillment of the terms thereof,
will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under (in each case material to
such Seller and its respective subsidiaries considered as a whole), or
result in the creation or imposition of any adverse claim, charge or
encumbrance (in each case material to such Seller and its respective
subsidiaries considered as a whole) upon any of the property or assets of
such Seller pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, guarantee, lease financing agreement or similar
agreement or instrument under which such Seller is a debtor or guarantor,
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or the By-laws of such Seller.
(iv) NO PROCEEDINGS. No legal or governmental proceedings are
pending to which such Seller is a party or of which any property of such
Seller is the subject, and no such proceedings are threatened or
contemplated by governmental authorities or threatened by others, other
than such proceedings which will not have a material adverse effect upon
the validity or collectability of the portion of the NIM Collateral
transferred by it hereunder, or upon the general affairs, financial
position, net worth or results of operations (on an annual basis) of such
Seller and its subsidiaries considered as a whole and will not materially
and adversely affect the performance by such Seller of its obligations
under, or the validity and enforceability of, this Agreement.
4
<PAGE>
(v) Immediately prior to the Closing Date: (i) none of the NIM
Collateral had been sold, assigned, or pledged by the Seller owning such
NIM Collateral to any Person; (ii) each Seller had good and marketable
title thereto free and clear of any encumbrance, equity, pledge, charge,
claim or security interest; (iii) each Seller was the sole owner thereof
and had full right to sell the portion of the NIM Collateral transferred
by it hereunder to the Purchaser and upon the sale thereof to the
Purchaser, the Purchaser will have good and marketable title thereto and
will own such NIM Collateral free and clear of any encumbrances.
ARTICLE IV
CONDITIONS
4.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
The obligation of the Purchaser to purchase the NIM Collateral is subject
to the satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Sellers hereunder shall be true and correct as of the Closing
Date.
(b) DOCUMENTS TO BE DELIVERED BY THE SELLERS.
(i) EVIDENCE OF UCC FILING. Each Seller shall have recorded and
filed, at its own expense, a UCC-1 financing statement in each
jurisdiction in which filing is required by applicable law, executed by
such Seller and naming the Purchaser as purchaser of the NIM Collateral
transferred by such Seller, and the Deal Agent, as assignee, describing
the NIM Collateral transferred by such Seller and the other property
conveyed hereunder, meeting the requirements of the laws of each
jurisdiction and in such manner as is necessary to perfect the sale,
transfer, assignment and conveyance of such Contracts to the Purchaser.
The Sellers shall deliver to the Purchaser and the Deal Agent a
file-stamped copy, or other evidence satisfactory to the Purchaser and the
Deal Agent of such filing.
(ii) OTHER DOCUMENTS. All other documents in the possession of the
Sellers relating to the Contracts and any other document requested by the
Deal Agent to be delivered shall have been delivered by the Sellers.
4.2 CONDITIONS TO OBLIGATIONS OF THE SELLERS.
The obligation of the Sellers to sell the NIM Collateral to the Purchaser
is subject to the satisfaction of the following conditions:
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<PAGE>
(a) REPRESENTATION AND WARRANTIES TRUE. The representations and warranties
of the Purchaser hereunder shall be true and correct as of the Closing Date.
(b) CONTRACTS PURCHASE PRICE. At the Closing Date, the Purchaser shall
have delivered to the Sellers the Purchase Price.
ARTICLE V
COVENANTS OF THE SELLER
5.1 DISTRIBUTIONS.
Each Seller agrees that it shall promptly (but in no event later than two
Business Days) deposit any funds distributed to it with respect to the NIM
Collateral to the Collection Account.
5.2 PROTECTION OF RIGHT, TITLE AND INTEREST.
(a) Each of the Sellers shall execute and file such financing statements
and cause to be executed and filed such continuation statements and any required
documentation all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the ownership interest of the Purchaser
in the NIM Collateral and in the proceeds thereof. The Sellers shall deliver (or
cause to be delivered) to the Purchaser and the Deal Agent filed-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) None of the Sellers 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 Sellers in accordance with paragraph (a)
above seriously misleading within the meaning of Section 9-402 of the UCC,
unless it shall have given the Purchaser and the Deal Agent at least thirty
days' prior written notice thereof and shall have filed appropriate amendments
to all previously filed financing statements or continuation statements prior to
such changes.
(c) Each of the Sellers shall give the Purchaser and the Deal Agent at
least thirty 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 and shall
file any such amendment prior to any such relocation. Each of the Sellers shall
at all times maintain its principal executive office within the United States of
America.
(d) The Sellers will not amend, and shall not permit any amendment to any
ALAC Securitization Document or the Master Spread Account Agreement relating to
the NIM Collateral which would adversely affect their respective ability and
right to receive refunds with respect thereto, or which would adversely affect
the rights of any of the Deal Agent, the Liquidity Agent, the Secured Parties,
or the Purchaser.
6
<PAGE>
5.3 OTHER LIENS OR INTERESTS.
Except for the conveyances hereunder, the Sellers will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any adverse claim on any interest in the NIM Collateral, and the
Sellers shall defend the right, title, and interest of the Purchaser in, to and
under the NIM Collateral against all claims of third parties claiming through or
under the Sellers.
5.4 COSTS AND EXPENSES.
The Sellers agree to take, at their joint and several expense, any
additional action required by the Purchaser or the Deal Agent in order to
protect the Purchaser's and the Deal Agent's (on behalf of the Secured Parties)
interests in the NIM Collateral.
5.5 INDEMNIFICATION.
The Sellers shall jointly and severally indemnify the Purchaser, the Deal
Agent and each Secured Party under the Loan Agreement for any liability as a
result of the failure by any Seller to fully perform hereunder and pursuant to
the terms of the Sale and Servicing Agreements, the Spread Account Agreements
and each other ALAC Securitization Document. These indemnity obligations shall
be in addition to any obligation that the Sellers may otherwise have.
5.6 SERVICING OBLIGATIONS.
ALAC agrees to continue to act as Servicer under each of the ALAC
Securitizations, to provide reports with respect thereto and to enter into
further agreements with the Purchaser or its assignees relating to such
servicing obligations as may be reasonably requested.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 OBLIGATION OF SELLERS.
The obligations of the Sellers under this Agreement shall not be affected
by reason of the invalidity, illegality or irregularity of any ALAC
Securitization Document.
6.2 [RESERVED].
6.3 TERMINATION.
The obligations of the Sellers to sell any right, title or interest in the
NIM Collateral to the Purchaser, and of the Purchaser to purchase such right,
title or interest from the Sellers, pursuant to this Agreement shall terminate
at such time as all amounts due and payable by the Purchaser under the Loan
Agreement are paid in full.
7
<PAGE>
6.4 AMENDMENT.
This Agreement may be amended from time to time by a written instrument
duly executed and delivered by the Sellers and the Purchaser; PROVIDED, HOWEVER,
that no such amendment shall be effective without a prior written consent of the
Deal Agent.
6.5 COLLATERAL ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, the Sellers (i)
acknowledges and consents that the Purchaser has assigned its rights hereunder
and its interest herein as collateral pursuant to the Loan Agreement for the
benefit of the Secured Parties, and (ii) agrees to attorn to the Deal Agent in
the event of its succession to the rights and interest of the Purchaser
hereunder by reason of foreclosure or otherwise.
6.6 [RESERVED].
6.7 WAIVERS.
No failure or delay on the part of any party in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any power, right or remedy preclude any
other further exercise thereof or the exercise of any other power, right or
remedy.
6.8 NOTICES.
All communications and notices directed to either party pursuant to this
Agreement shall be in writing addressed or delivered to it at its address set
forth under its name on the signature pages hereof and to the Deal Agent at:
First Union Capital Markets, a division of Wheat First Securities, Inc., One
First Union Center, TW-6, Charlotte, North Carolina 28288, Attn: Conduit
Administration or at such other address as may be designated by it by notice to
other party and, if mailed or transmitted by facsimile transmission, shall be
deemed given when mailed or transmitted.
6.9 COSTS AND EXPENSES.
The Sellers will pay all expenses incident to the performance of their
obligations under this Agreement and the Sellers agrees to pay all reasonable
out-of-pocket costs and expenses of the Purchaser, in connection with the
perfection as against third parties of the Purchaser's right, title and interest
in and to the NIM Collateral and the enforcement of any obligation of the
Sellers hereunder.
6.10 HEADINGS AND CROSS REFERENCES.
8
<PAGE>
The various headings in this Agreement are included for convenience only
and shall not affect the meaning or interpretation of any provisions of this
Agreement.
6.11 GOVERNING LAW.
This Agreement and the Assignment shall be governed by and construed in
accordance with the laws of the State of Georgia.
6.12 COUNTERPARTS.
This Agreement may be executed in two or more counterparts and by
different parties on separate counterparts, each of which shall be an original,
but all of which together shall constitute one and the same instrument.
6.13 NO PROCEEDINGS.
For so long as the Term Loan shall remain outstanding, each Seller agrees
that it will not file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other proceeding under any federal or state bankruptcy or similar law against
the Purchaser.
6.14 THIRD PARTY BENEFICIARY.
Each of the parties hereto agree that the Deal Agent, as agent, is a third
party beneficiary of this Agreement.
6.15 ASSIGNMENT.
This Agreement may not be assigned by either party hereto without the
prior written consent of the Deal Agent.
[remainder of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunder to duly authorized as of the
date and year first above written.
SELLER: AUTO LENDERS ACCEPTANCE CORPORATION
By_______________________________________
Name:____________________________________
Title:___________________________________
Auto Lenders Acceptance Corporation
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.:
Confirmation No.:
SELLER: ALAC RECEIVABLES CORP.
By_______________________________________
Name:____________________________________
Title:___________________________________
ALAC Receivables Corp.
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.:
Confirmation No.:
10
<PAGE>
PURCHASER: FIFS ACQUISITION FUNDING COMPANY, L.L.C.
By FIALAC Holdings, Inc., as Manager
By_______________________________________
Name: Bennie H. Duck
Title: Vice President of FIALAC
Holdings, Inc.
FIFS Acquisition Funding Company, L.L.C.
300 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Bennie H. Duck
Facsimile No.:
Confirmation No.:
11
<PAGE>
Exhibit A
Charge Off Receivables List
<PAGE>
Appendix I
The Trust Agreements
1. Amended and Restated Trust Agreement, dated as of September 25, 1997,
between ALAC Receivables Corp., ALAC, LLC and Bankers Trust (Delaware).
2. Amended and Restated Trust Agreement, dated as of January 13, 1998,
between ALAC Receivables Corp., ALAC, LLC and Bankers Trust (Delaware).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 12,381,743
<SECURITIES> 0
<RECEIVABLES> 160,481,546
<ALLOWANCES> 1,312,298
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 262,837,004
<CURRENT-LIABILITIES> 0
<BONDS> 228,560,186
0
0
<COMMON> 5,567
<OTHER-SE> 25,858,764
<TOTAL-LIABILITY-AND-EQUITY> 262,837,004
<SALES> 12,916,847
<TOTAL-REVENUES> 12,916,847
<CGS> 5,415,639
<TOTAL-COSTS> 5,415,639
<OTHER-EXPENSES> 4,851,696
<LOSS-PROVISION> 2,150,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,108,442
<INCOME-TAX> 404,581
<INCOME-CONTINUING> 703,861
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 703,861
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
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