Exhibit 10.15
CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.
[**] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Execution Version
NINTH AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
dated as of September 29, 2020
among
AFC FUNDING CORPORATION,
as Seller,
AUTOMOTIVE FINANCE CORPORATION,
as Servicer,
The entities from time to time
parties hereto as Purchasers or Purchaser Agents hereunder
and
BANK OF MONTREAL,
as the Agent
ARTICLE I. AMOUNTS AND TERMS OF THE PURCHASES .....................…..….. 1
Section 1.1. Purchase Facility ......................................................................….. 1
Section 1.2. Making Purchases ...................................................................…... 2
Section 1.3. Participation Computation .........................................................… 4
Section 1.4. Settlement Procedures ..............................................................…. 4
Section 1.5. Fees ................................................................................................ 7
Section 1.6. Payments and Computations, Etc .................................................. 8
Section 1.7. Legal Final Maturity Date ............................................................. 8
Section 1.8. Increased Costs .............................................................................. 8
Section 1.9. Dilutions; Application of Payments ............................................. 10
Section 1.10. Requirements of Law ................................................................... 10
Section 1.11. Inability to Determine Eurodollar Rate ........................................ 11
Section 1.12. Additional and Replacement Purchasers, Increase in Maximum Amount .................................................................................. 11
ARTICLE II. REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS ...........................................................… 13
Section 2.1. Representations and Warranties; Covenants ..........................….. 13
Section 2.2. Termination Events ...................................................................... 13
ARTICLE III. INDEMNIFICATION............................................................................... 13
Section 3.1. Indemnities by the Seller .........................................................… 13
Section 3.2. Indemnities by AFC ..................................................................... 16
Section 3.3. Indemnities by Successor Servicer .............................................. 17
ARTICLE IV. ADMINISTRATION AND COLLECTIONS ......................................... 18
Section 4.1. Appointment of Servicer .............................................................. 18
Section 4.2. Duties of Servicer; Relationship to Backup Servicing Agreement .............................................................................. 19
Section 4.3. Deposit Accounts; Establishment and Use of Certain Accounts ................................................................................ 20
Section 4.4. Enforcement Rights ..................................................................... 22
Section 4.5. Responsibilities of the Seller ....................................................... 23
Section 4.6. Servicing Fee ............................................................................... 23
Section 4.7. Specified Ineligible Receivables .................................................. 23
Table of Contents
(continued)
Page
ARTICLE V. THE AGENTS ......................................................................................... 24
Section 5.1. Appointment and Authorization .................................................. 24
Section 5.2. Delegation of Duties .................................................................... 25
Section 5.3. Exculpatory Provisions ................................................................ 25
Section 5.4. Reliance by Agents ...................................................................... 25
Section 5.5. Notice of Termination Date ......................................................... 26
Section 5.6. Non-Reliance on Agent, Purchaser Agents and Other Purchasers .............................................................................. 26
Section 5.7. Agent, Purchaser Agents and Purchasers ..................................... 27
Section 5.8. Indemnification ............................................................................ 27
Section 5.9. Successor Agent ........................................................................... 27
ARTICLE VI. MISCELLANEOUS ................................................................................ 27
Section 6.1. Amendments, Etc ......................................................................... 27
Section 6.2. Notices, Etc .................................................................................. 28
Section 6.3. Assignability ................................................................................ 28
Section 6.4. Costs, Expenses and Taxes .......................................................... 29
Section 6.5. No Proceedings; Limitation on Payments ................................… 30
Section 6.6. Confidentiality ............................................................................. 31
Section 6.7. GOVERNING LAW AND JURISDICTION .............................. 31
Section 6.8. Execution in Counterparts ............................................................ 31
Section 6.9. Survival of Termination ............................................................... 31
Section 6.10. WAIVER OF JURY TRIAL ........................................................ 31
Section 6.11. Entire Agreement ......................................................................... 32
Section 6.12. Headings ...................................................................................... 32
Section 6.13. Liabilities of the Purchasers ......................................................... 32
Section 6.14. Tax Treatment .............................................................................. 32
Table of Contents
Page
EXHIBIT I DEFINITIONS .................................................................................. I-1
EXHIBIT II CONDITIONS OF PURCHASES ................................................... II-1
EXHIBIT III REPRESENTATIONS AND WARRANTIES .............................. III-1
EXHIBIT IV COVENANTS ................................................................................ IV-1
EXHIBIT V TERMINATION EVENTS ............................................................. V-1
EXHIBIT VI PORTFOLIO CERTIFICATE ....................................................... VI-1
EXHIBIT VII PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS ........................................................................ VII-1
SCHEDULE I [RESERVED]
SCHEDULE II DEPOSIT BANKS AND DEPOSIT ACCOUNTS ............. II-1
SCHEDULE III NET RECEIVABLES POOL BALANCE CALCULATION ...................................................................... III-1
SCHEDULE IV [RESERVED] ..................................................................... IV-1
SCHEDULE V TAX MATTERS ................................................................. V-1
SCHEDULE VI COMPETITOR FINANCIAL INSTITUTIONS ................ VI-1
ANNEX A FORM OF PURCHASE NOTICE
ANNEX B FORM OF SERVICER REPORT
ANNEX C FORM OF JOINDER AGREEMENT
-i-
NINTH AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
This NINTH AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, originally dated as of December 31, 1996, amended and restated as of May 31, 2002, as of June 15, 2004, as of April 20, 2007, as of April 26, 2011, as of June 21, 2013, as of June 16, 2015, as of December 20, 2016, as of December 18, 2018, and as of September 29, 2020 (as further amended, supplemented or otherwise modified from time to time, the “Agreement”) is entered into among AFC FUNDING CORPORATION, an Indiana corporation, as seller (the “Seller”), AUTOMOTIVE FINANCE CORPORATION, an Indiana corporation (“AFC”), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the “Servicer”), the entities from time to time parties hereto as Purchasers or Purchaser Agents and BANK OF MONTREAL, a Canadian chartered bank, as agent for the Purchasers (in such capacity, together with its successors and assigns in such capacity, the “Agent”).
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I to this Agreement. References in the Exhibits hereto to “the Agreement” refer to this Agreement, as amended, modified or supplemented from time to time.
Certain of the parties hereto are party to that certain Eighth Amended and Restated Receivables Purchase Agreement, dated as of December 18, 2018 (the “Prior Agreement”), pursuant to which the Seller has sold, transferred and assigned an undivided variable percentage interest in a pool of receivables to the Purchasers thereunder.
The parties hereto wish to amend and restate the Prior Agreement in its entirety in order to make certain changes set forth herein.
In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows.
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1Purchase Facility. (a) On the terms and conditions hereinafter set forth, each Purchaser hereby agrees to purchase and make reinvestments of undivided percentage ownership interests with regard to its Participation from the Seller from time to time prior to the Termination Date. Under no circumstances shall any Purchaser make any such purchase or reinvestment, if, after giving effect to such purchase or reinvestment, (A) the aggregate Investment of such Purchaser would exceed its Maximum Commitment; or (B) the aggregate outstanding Investment of all Purchasers would exceed the Maximum Amount.
(b)The Seller may, upon at least 30 days’ notice to the Agent, the Purchaser Agents, the Servicer and the Backup Servicer, terminate the purchase facility provided in Section 1.1(a) in whole or, from time to time, irrevocably reduce in part the unused portion of the Maximum Amount (for purposes of this calculation, any deferred purchase amounts which Purchasers are still obligated to fund prior to any applicable Deferred Purchase Date(s) under Section 1.2(a) shall be treated as funded); provided that each partial reduction shall be in the amount of at least $1,000,000, or an integral multiple of $500,000 in excess thereof and shall not reduce the Maximum Amount below $100,000,000. Any such reductions shall be applied to the Maximum Commitments of the Purchasers on a pro rata basis or as otherwise consented to by the Agent.
(c)On the date hereof, the Seller shall either (1) request a purchase hereunder from one or more of Fairway, Bank of Montreal and Chariot Funding, LLC (on a non-pro rata basis) and apply the proceeds thereof to solely realign the aggregate Investments of the Purchasers hereunder such that after giving effect to such payments the aggregate Investment is funded by all Purchaser Groups on a pro rata basis based on their Maximum Commitments as a percentage of the Maximum Amount or (2) request a purchase hereunder in the ordinary course but on a non-pro rata basis (to the extent necessary) from the Purchasers such that after giving effect thereto the aggregate Investments of the Purchasers hereunder shall be funded by all Purchaser Groups on a pro rata basis based on their Maximum Commitments as a percentage of the Maximum Amount.
Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment under Section 1.4(c)) of undivided ownership interests with regard to any Participation of any Purchaser hereunder shall be made upon the Seller’s irrevocable written notice in the form of Annex A (a “Purchase Notice”) delivered to the Agent and each Purchaser Agent in accordance with Section 6.2 (which notice must be received by such Purchaser Agents prior to 2:00 p.m., Chicago time) on the Business Day immediately preceding the date of such proposed purchase. Each such notice of any such proposed purchase shall specify the desired amount and date of such purchase. Notwithstanding the foregoing, any Purchaser may, in its sole discretion by written notice to the Seller, Servicer and Agent by 5:00 p.m. on the date of receipt of a Purchase Notice, elect to fund any requested purchase (but not reinvestment under Section 1.4(c)) no later than the [**] day following the requested purchase date (the “Deferred Purchase Date”), rather than on the requested purchase date. Upon receipt of any such notice, the Agent shall forward a copy thereof promptly to all Purchaser Agents. In the event that a Purchaser so elects to defer funding a purchase, subject to the adjustment of the purchase amount payable as described in clause (i) below, the Purchaser shall be obligated to fund such purchase no later than such Deferred Purchase Date so long as all applicable conditions to such purchase pursuant to Exhibit II were satisfied on the related requested purchase date (regardless of whether such conditions to funding are not satisfied thereafter or on the Deferred Purchase Date). A Purchaser which has elected a Deferred Purchase Date and which has not yet funded such purchase in full or otherwise had such unfulfilled purchase reduced to zero pursuant to clause (i) below (a “Deferring Purchaser”) may (in its sole discretion) fund such purchase on any Business Day prior to such Deferred Purchase Date. Subject to the adjustment of the purchase amount payable as described in clause (i) below, the Seller shall be obligated to accept the proceeds of any such purchase on the date funded by the applicable Deferring Purchaser in accordance with this
paragraph). No non-Deferring Purchaser shall be obligated to fund any amounts required to be funded by a Deferring Purchaser. In addition, if there is a Deferring Purchaser:
(i)all repayments of Investment shall be made on a pro rata basis across all Purchasers (based on each such Purchaser’s Investment (including, for purposes of this calculation, any deferred purchase amounts which such Purchaser is still obligated to fund prior to the applicable Deferred Purchase Date(s)) as a percentage of the aggregate Investment for all Purchasers (including the aggregate of all outstanding deferred purchase amounts); provided, that amounts allocated to any Deferring Purchaser shall first be applied to reduce any applicable unfulfilled purchase amounts of that Deferring Purchaser (starting with the most recently deferred purchase) without the payment of cash and then, after all such Deferring Purchaser’s unfulfilled purchase amounts have been reduced to zero, applied to reduce such Deferring Purchaser’s Investment through the payment of cash; and
(ii)future purchase requests and reports shall be calculated on a pro forma basis including the unfulfilled purchase of any Deferring Purchasers (e.g., the calculation of the Participation shall include such unfulfilled purchases). For the avoidance of doubt, no unfulfilled purchase shall accrue Discount or be included in the calculation of fees hereunder until funded.
(b)On the date of each purchase (but not reinvestment under Section 1.4(c)) of undivided ownership interests with regard to the Participation of any Purchaser, each Purchaser shall, subject to Sections 1.1(a) and 1.2(a) and the satisfaction of the applicable conditions set forth in Exhibit II hereto, make available to its Purchaser Agent, in same day funds, an amount equal to its pro rata share (based on the Maximum Commitment of such Purchaser as a percentage of the Maximum Amount) of the amount of such purchase. Upon receipt of such funds, each such Purchaser Agent shall make such funds immediately available to the Seller pursuant to the wire instructions provided on the Purchase Notice. Notwithstanding the foregoing, with respect to any Purchaser Group, each Note Issuer in such Purchaser Group may, in its sole discretion, make available to its Purchaser Agent all or a portion of the pro rata share of such purchase allocated to such Note Issuer’s Purchaser Group. If a Note Issuer elects not to fund its Purchaser Group’s portion in full, such Note Issuer’s related Purchasers with Maximum Commitments shall, subject to Sections 1.1(a) and 1.2(a) and the satisfaction of the applicable conditions set forth in Exhibit II hereto, make available any such shortfall on such date of purchase.
(c)The Seller hereby sells and assigns to the Agent, for the benefit of the Purchasers, an undivided percentage ownership interest equal to the Aggregate Participation in (i) each Pool Receivable then existing and thereafter arising, (ii) Seller’s right, title and interest in, to and under all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security.
(d)To secure all of the Seller’s obligations (monetary or otherwise) under the Transaction Documents to which it is a party, whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or contingent, including to secure the obligation of
the Servicer to apply Collections as provided in this Agreement, the Seller hereby grants to the Agent, for the benefit of the Secured Parties, a security interest in all of the Seller’s right, title and interest in, to and under all of the following, whether now or hereafter owned, existing or arising: (A) all Pool Receivables, (B) all Related Security with respect to each such Pool Receivable, (C) all Collections with respect to such Pool Receivables and Related Security, (D) the Deposit Accounts, the Liquidation Account and the Cash Reserve Account and all certificates and instruments, if any, from time to time evidencing the Deposit Accounts, the Liquidation Account and the Cash Reserve Account, all amounts on deposit therein, all investments (including any investment property) made with such funds, all claims thereunder or in connection therewith, and all interest, dividends, moneys, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing, (E) all rights of the Seller under the Purchase and Sale Agreement, and (F) all proceeds of, and all amounts received or receivable under any or all of, the foregoing. The Agent, for the benefit of the Secured Parties, shall have, with respect to the property described in this Section 1.2(d), and in addition to all the other rights and remedies available under this Agreement, all the rights and remedies of a secured party under any applicable UCC.
Section 1.3.Participation Computation. Each Participation shall be automatically recomputed (or deemed to be recomputed) on each Business Day other than a Termination Day. Each Participation shall remain constant as computed (or deemed recomputed) as of the day immediately preceding the Termination Date until such date that the aggregate Investment and Discount thereon shall have been paid in full, all the amounts owed by the Seller hereunder and under any other Transaction Document to the Purchasers, the Purchaser Agents, the Agent, and any other Indemnified Party or Affected Person are paid in full and the Servicer shall have received the accrued Servicing Fee.
Section 1.4.Settlement Procedures. (a) Collection of the Pool Receivables shall be administered by the Servicer in accordance with the terms of this Agreement. The Seller shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the occurrence of any Termination Date or Paydown Day and current computations of the Participations. The Servicer shall segregate and hold all Collections in trust for the benefit of the Seller, the Purchasers and the other Secured Parties and, within one Business Day of the receipt of Collections of Pool Receivables by the Seller or Servicer, deposit such Collections into a Deposit Account. On each day that is not a Termination Day, the Servicer shall remit to the Liquidation Account from the Deposit Accounts (other than those amounts identified as “cash collateral” with respect to the Deposit Accounts held at [**] (numbered [**] and [**])) an amount at least equal to the amount needed to make the payments set forth in clause (c) below.
(b)Allocation of Seller’s Share of Collections Prior to Termination Date. If such day is not a Termination Day, the Servicer shall allocate out of the Seller’s Share of Collections and pay or otherwise deposit into the Cash Reserve Account as set forth below the following amounts in the following order:
(1)first, to the Servicer any accrued and unpaid Servicing Fees;
(2)second, deposit into the Cash Reserve Account an amount up to the excess of the Cash Reserve over the amount on deposit in the Cash Reserve Account; and
(3)third, (i) to the extent any Enhancement Build Trigger is in effect, then either, as specified by the Seller or Servicer, (x) to be retained in the Deposit Accounts or Liquidation Account until the following Business Day for distribution pursuant to this Section 1.4(b) or Section 1.4(e), as applicable, on such following Business Day, (y) to be distributed to repay the Investment of the Participation of the Purchasers pursuant to Section 1.4(f) or (z) to the Seller to acquire Eligible Receivables under the Purchase and Sale Agreement (provided that portion of the purchase price paid in cash by the Seller for such Eligible Receivables shall not exceed [**] of the par amount of such Receivables) or (ii) if no Enhancement Build Trigger is in effect, to the Seller.
(c)Daily Purchaser Share Allocation. On each Business Day that is not a Termination Day, the Servicer shall allocate from the Purchasers’ Share of Collections and set aside in the Liquidation Account (unless otherwise specified below) the following amounts in the following order:
(1)first, to the Servicer and the Backup Servicer, the Unaffiliated Servicing Fees and Backup Servicing Fees and Transition Expenses accrued through such day and not previously set aside in the Liquidation Account;
(2)second, to each Purchaser, any applicable Discount and Program Fees accrued through such day and not previously set aside in the Liquidation Account;
(3)third, to the Cash Reserve Account, an amount, if any, sufficient to increase the amount on deposit therein to equal the Cash Reserve;
(4)fourth, if a voluntary paydown of Investment is being made, for application in reduction of the Investment in accordance with Section 1.4(f);
(5)fifth, if the Aggregate Participation exceeds 100% or if such day is Paydown Day, for application in reduction of the Investment in accordance with Section 1.4(g);
(6)sixth, to any Indemnified Party, ratably in proportion to the respective amounts owed to each such Person, any amounts owed to such Indemnified Party;
(7)seventh, to the Backup Servicer, any accrued and unpaid Backup Servicing Fees, after giving effect to the distribution in clause (1) above;
(8)eighth, to the Servicer, any accrued and unpaid Servicing Fees, which in the Servicer’s discretion may be netted monthly from Collections, after giving effect to the distribution in clause (1) above;
(9)ninth, to the reinvestment in Pool Receivables and Related Security; provided that if any Enhancement Build Trigger is in effect, that portion of the purchase price paid in cash by the Seller for such Eligible Receivables shall not exceed [**] of the par amount of such Receivables; and
(10)tenth, (i) to the extent any Enhancement Build Trigger is in effect, then either, as specified by the Seller or Servicer, or (x) to be retained in the Deposit Accounts or Liquidation Account until the following Business Day for distribution pursuant to this Section 1.4(c) or Section 1.4(e), as applicable, on such following Business Day, (y) to be distributed to repay the Investment of the Participation of the Purchasers pursuant to Section 1.4(f) or (ii) if no Enhancement Build Trigger is in effect, to the Seller but only to the extent no Paydown Day exists or would result from such distribution.
(d)Distributions from Liquidation Account. Funds set aside and held on deposit in the Liquidation Account pursuant to Section 1.4(c) above shall be distributed as follows:
(1)Distribution of Discount, Program Fees and Investment Prior to Termination Date. On each Settlement Date that is not a Termination Day, amounts set aside in the Liquidation Account for a particular Purchaser with respect to Discount, Program Fees and Investment shall be paid to the applicable Purchaser’s Account of such Purchaser;
(2)Distributions of Indemnified Amounts. On each Settlement Date, Collections held on deposit in the Liquidation Account for the benefit of an Indemnified Party shall be paid to the applicable Indemnified Party as directed by such Indemnified Party;
(3)Distributions of Servicing Fees. On each Settlement Date, Collections held on deposit in the Liquidation Account for the benefit of the Servicer, if any, shall be paid to the Servicer as the Servicer shall direct; and
(4)Distribution of Backup Servicing Fees and Transition Expenses. On each Settlement Date, Collections held on deposit in the Liquidation Account for the benefit of the Backup Servicer shall be paid to the Backup Servicer as the Backup Servicer shall direct.
(e)Settlement Following Termination Date. On each Settlement Date on and after the Termination Date, all Collections (including the Seller’s Share) in the Deposit Accounts (other than those amounts identified as “cash collateral” with respect to the Deposit Accounts held at [**] (numbered [**] and [**])) shall be transferred into the Liquidation Account and applied as follows:
(1)first, to the Servicer (if not AFC or an Affiliate thereof) and the Backup Servicer (ratably in proportion to the respective amounts owed to each) the sum of accrued and unpaid Unaffiliated Servicing Fees and Backup Servicing Fees and Transition Expenses for the prior calendar month;
(2)second, to the Agent an amount equal to any accrued and unpaid Enforcement Costs (provided that the amount payable pursuant to this clause (2) shall not exceed $200,000 in the aggregate);
(3)third, pro rata (based on amounts due) to each Purchaser’s Account an amount equal to all accrued and unpaid Discount and Program Fees;
(4)fourth, on a pro rata basis in accordance with the provisions of Section 1.2(a)(i), to the applicable Purchaser’s Account until the aggregate Investment is reduced to zero;
(5)fifth, to the Backup Servicer or any applicable successor Servicer, an amount equal to the sum of the invoiced but unpaid Transition Expenses (if any) and any Backup Servicing Fees (if any) for the prior calendar month to the extent not paid pursuant to clause (1) above;
(6)sixth, (i) first, to the Agent an amount equal to any accrued and unpaid Enforcement Costs to the extent not paid pursuant to clause (2) above and (ii) second, to any Indemnified Party, ratably in proportion to the respective amounts owed to each such Person, any amounts owed to such Indemnified Party;
(7)seventh, to the Servicer any accrued and unpaid Servicing Fees due to the Servicer; and
(8)eighth, to the Seller.
(f)Voluntary Paydown of Investment. If at any time the Seller shall wish to cause the reduction of the aggregate of the Investment of the Participations of the Purchasers, the Seller shall give each Purchaser Agent, the Agent, the Servicer and the Backup Servicer at least two Business Days’ prior written notice thereof (including the amount of such proposed reduction and the proposed date on which such reduction will commence). Following the delivery of such notice, on the proposed date of commencement of such reduction and on each day thereafter, the Servicer shall cause the remainder of the Purchasers’ Share of Collections (after giving effect to allocations of more senior priority items under Section 1.4(c) above) to be transferred to the Liquidation Account and the Agent shall hold therein such amounts for the benefit of the Purchasers until the aggregate amount thereof not so reinvested shall equal the desired amount of reduction, at which time such amount shall be allocated to repay the outstanding Investment of the Purchasers ratably, with such reduction to be applied to the Investment of the Purchasers (on a pro rata basis in accordance with the provisions of Section 1.2(a)(i)); provided, that upon the occurrence of the Termination Date, all such Collections set aside shall instead be held for distribution in accordance with Section 1.4(e); and provided, further, that, unless otherwise agreed by the Agent, the amount of any such reduction with respect to each Purchaser shall be not less than $1,000,000 and shall be an integral multiple of $100,000, and the entire Investment (if any) of the Participation after giving effect to such reduction shall be not less than $100,000,000.
(g)Distributions of Investment Upon Paydown Day. On each Paydown Day (including on any day the Aggregate Participation exceeds 100%), the remainder of the Purchasers’ Share of any remaining Collections (after giving effect to allocations of more senior priority items in Section 1.4(c)), shall be transferred by the Servicer from the Deposit Accounts to the Liquidation Account and held therein by the Agent and allocated to repay the outstanding Investment of the Purchasers (with such reduction to be applied to the Investment of the Purchasers on a pro rata basis in accordance with the provisions of Section 1.2(a)(i); provided, that on the first day that is not a Paydown Day or a Termination Day, the Agent shall hold all funds allocated to repay Investment pursuant to this subsection for distribution in accordance with the priorities set forth in Section 1.4(c); and, provided, further, that upon the occurrence of the Termination Date, all Collections allocated to repay Investment pursuant to this subsection shall instead be held for distribution in accordance with Section 1.4(e).
(h)Withdrawals from Cash Reserve Account. If on any Settlement Date (A) insufficient funds are on deposit in the Liquidation Account to make in full all required distributions of Discount and fees and (B) since the prior Settlement Date funds have been released to the Seller and not used by the Seller to acquire Receivables, the Seller shall deposit into the Liquidation Account on or before such Settlement Date the lesser of the shortfall described in clause (A) and the amount described in clause (B) above for the benefit of the applicable Purchasers. If on any Settlement Date insufficient funds are on deposit in the Liquidation Account (after giving effect to any deposits made by the Seller as described in the preceding sentence) to make in full all required distributions of Discount and fees for such Settlement Date, the Agent shall distribute funds from the Cash Reserve Account in payment of such Discount and fees as if such funds were funds on deposit in the Liquidation Account held for the benefit of the applicable Purchaser. On any Termination Day, to the extent directed by the Majority Purchasers, the Agent shall distribute funds from the Cash Reserve Account pursuant to Section 1.4(e) as if such funds were funds on deposit in the Liquidation Account held for the benefit of the applicable Purchasers and, following the payment in full of all outstanding Investment, any remaining amounts on deposit in the Cash Reserve Account shall be distributed as Collections pursuant to Section 1.4(e). If on any Business Day other than a Termination Day, after giving effect to all distributions on such day pursuant to Section 1.4, the amount on deposit in the Cash Reserve Account exceeds the Cash Reserve, such excess shall be released from the Cash Reserve Account and treated as Collections for purposes of Section 1.4 for the following Business Day.
Section 1.5. Fees. (a) The Seller shall pay to the Purchaser Agents certain fees in the amounts and on the dates set forth in a letter dated September 29, 2020 between the Seller, AFC and the Purchaser Agents, as such letter agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof (the “Fee Letter”).
(b)The Seller shall pay to the Backup Servicer the Backup Servicing Fees and any Transition Expenses in the amounts and on the dates set forth in the Backup Servicing Agreement or the Backup Servicing Fee Letter, as the same may be amended, supplemented or otherwise modified from time to time with the prior written consent of the Agent.
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Servicer to, or for the benefit of, any Purchaser Agent, any Purchaser, the Agent or the Backup Servicer hereunder shall be paid or deposited no later than 12:00 noon (Chicago time) on the day when due in same day funds to the Liquidation Account. All amounts received after noon (Chicago time) will be deemed to have been received on the immediately succeeding Business Day.
(b)The Seller, AFC or Servicer (as applicable) shall, to the extent permitted by law, pay interest on any amount not paid by the respective party to the applicable Person when due hereunder, at an interest rate equal to 2.0% per annum above the Base Rate, payable on demand.
(c)All computations of interest under subsection (b) above and all computations of Discount, fees and other amounts hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made no later than the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.
Section 1.7. Legal Final Maturity Date. All obligations of the Seller hereunder shall be due and payable in full on the Legal Final Maturity Date (unless due and payable earlier than such date in accordance with the provisions hereof).
Section 1.8. Increased Costs. (a) If any Purchaser Agent, any Purchaser, the Agent, any Liquidity Bank, any other Program Support Provider or any of their respective Affiliates (each an “Affected Person”) determines that the existence of or compliance with (i) any law or regulation or any change therein or in the administration, interpretation, application or implementation thereof by any Governmental Authority or Official Body, in each case adopted, issued, taking effect or occurring after the date hereof or (ii) any request, rule, guideline or directive from any central bank or other Official Body (whether or not having the force of law) issued, occurring or first applied after the date of this Agreement (each, a “Regulatory Change”) (A) affects or would affect the amount of capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in Pool Receivables related to this Agreement or any related liquidity facility or credit enhancement facility and other commitments of the same type, or (B) imposes, modifies or deems applicable any reserve, assessment, fee, tax, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or liabilities of any Affected Person, or credit extended by an Affected Person pursuant to this Agreement or any Liquidity Agreement or Program Support Agreement, the result of which is to increase the cost to an Affected Person of performing its obligations under this Agreement or any Liquidity Agreement or Program Support Agreement, or to reduce the rate of return on an Affected Person’s capital or assets as a consequence of its obligations under this Agreement or any Liquidity Agreement or Program Support Agreement, or to reduce the amount of any sum received or receivable by an Affected Person under this Agreement or any Liquidity Agreement or Program Support Agreement, or to require any payment calculated by reference to the amount
of interests or loans held or interest received by it, under this Agreement or any Liquidity Agreement or Program Support Agreement, then, upon written demand by such Affected Person (with a copy to the Agent and the applicable Purchaser Agent (if any)), the Seller shall immediately pay to the Agent, for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital, increase in costs or reduction in sum received or receivable to be allocable to the existence of any of such commitments or maintenance of its investment in the Pool Receivables and such Affected Person requires such compensation from substantially all similarly situated sellers, borrowers or other recipients of credit; provided that within 30 days of an Affected Person’s knowledge of any such circumstance and intent to seek indemnification therefor such Affected Person shall notify the Seller in writing of the same and whether such Affected Person will request that the Seller indemnify it for such circumstance (and the Seller shall not be obligated to indemnify any Affected Person for any period in excess of 30 days prior to receipt of such notice). A certificate as to such amounts shall be submitted to the Seller, the Agent and the applicable Purchaser Agent (if any) by such Affected Person and shall be conclusive and binding for all purposes, absent manifest error. Notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all rules and regulations promulgated thereunder or issued in connection therewith and (ii) all requests, rules, guidelines and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, shall in each case be deemed to have been introduced as of the date after the date hereof, thereby constituting a Regulatory Change hereunder, regardless of the date enacted, adopted or issued.
(b)If, due to Regulatory Change, there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of the related Participation(s) in respect of which Discount is computed by reference to the Eurodollar Rate, then, upon written demand by such Affected Person, the Seller shall immediately pay to the Agent, for the account of such Affected Person, from time to time as specified, additional amounts sufficient to compensate such Affected Person for such increased costs; provided that within 30 days of an Affected Person’s knowledge of any such circumstance and intent to seek indemnification therefor such Affected Person shall notify the Seller in writing of the same and whether such Affected Person will request that the Seller indemnify it for such circumstance (and the Seller shall not be obligated to indemnify any Affected Person for any period in excess of 30 days prior to receipt of such notice). A certificate as to such amounts shall be submitted to the Seller, the Agent and the applicable Purchaser Agent (if any), by such Affected Person and shall be conclusive and binding for all purposes, absent manifest error.
Section 1.9. Dilutions; Application of Payments.
(a)If on any day
(i)the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any discount, rebate or other adjustment made by the Originator, Seller or
Servicer, or any setoff or dispute between the Seller, Originator or the Servicer and an Obligor, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment; or
(ii)any of the representations or warranties in paragraphs A.(g) or A.(o) of Exhibit III is not true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full;
then any such deemed Collections shall be deposited by the Seller into the Liquidation Account on the first Business Day of the calendar week following deemed receipt thereof.
(b)Except as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivable shall be applied in accordance with the Contract with such Obligor and the Credit and Collection Policy.
(c)If and to the extent any Secured Party shall be required for any reason to pay over to an Obligor (or any trustee, receiver, custodian or similar official in any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the Seller and, accordingly, such Secured Party shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof.
Section 1.10. Requirements of Law. In the event that any Affected Person determines that the existence of or compliance with (i) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement:
(i)does or shall subject such Affected Person to any tax of any kind whatsoever with respect to this Agreement, any increase in the applicable Participation(s) or in the amount of Investment relating thereto, or does or shall change the basis of taxation of payments to such Affected Person on account of Collections, Discount or any other amounts payable hereunder (excluding taxes imposed on the overall net income of such Affected Person, and franchise taxes imposed on such Affected Person, by the jurisdiction under the laws of which such Affected Person is organized or doing business or a political subdivision thereof);
(ii)does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Affected Person which are not otherwise included in the determination of the Eurodollar Rate or the Base Rate hereunder; or
(iii)does or shall impose on such Affected Person any other condition;
and the result of any of the foregoing is (x) to increase the cost to such Affected Person of acting as a Purchaser Agent or Agent or of agreeing to purchase or purchasing or maintaining the ownership of undivided ownership interests with regard to the applicable Participation or any Investment (or interests therein) in respect of which Discount is computed by reference to the Eurodollar Rate or the Base Rate or (y) to reduce any amount receivable hereunder (whether directly or indirectly) funded or maintained by reference to the Eurodollar Rate or the Base Rate, then, in any such case, upon written demand by such Affected Person the Seller shall pay the Agent, for the account of such Affected Person, any additional amounts necessary to compensate such Affected Person for such additional cost or reduced amount receivable. All such amounts shall be payable as incurred. A certificate from such Affected Person to the Seller certifying, in reasonably specific detail, the basis for, calculation of, and amount of such additional costs or reduced amount receivable shall be conclusive in the absence of manifest error; provided, however, that no Affected Person shall be required to disclose any confidential or tax planning information in any such certificate.
Section 1.11. [Reserved].
Section 1.12. Additional and Replacement Purchasers, Increase in Maximum Amount. (a) Subject to Section 6.1, the Seller shall have the right, at any time and from time to time, with the prior written consent of the Agent to add any entity as a Purchaser hereunder (which addition may increase the Maximum Amount if a Purchaser is added) or increase the Maximum Commitment of any existing Purchaser. No increase in the Maximum Commitment of a Purchaser hereunder shall be effective unless, if the increasing Purchaser is a Note Issuer that requires confirmation by the Rating Agencies, such Note Issuer shall have received written confirmation by its related Rating Agencies that such action shall not cause the rating on the then outstanding Notes of such Note Issuer to be downgraded or withdrawn. Each such addition of a new Purchaser hereunder shall be effected by delivery to the Seller, the Servicer, the Agent and each Purchaser Agent, of a Joinder Agreement executed by the Seller, the Servicer, the Agent, such new Purchaser and its Purchaser Agent (if different from the Purchaser) in substantially the form of Annex C hereto. Upon receipt of a Joinder Agreement, if such Joinder Agreement has been fully executed and completed and is substantially in the form of Annex C, the Servicer shall, not less than five (5) Business Days prior to the effectiveness of such Joinder Agreement give prompt written notice to all Purchaser Agents, the Agent and Purchasers as to (i) the name, identity and address for receiving notices of the new Purchaser(s) and Purchaser Agent(s) becoming party hereto, (ii) the Maximum Commitment of such new Purchaser, (iii) the change in the Maximum Amount and (iv) the effective date of such Joinder Agreement. Immediately upon the effectiveness of such Joinder Agreement, such additional Purchaser shall purchase, by wire transfer of immediately available funds its Participation. Effective with the payment of such amounts, such new Purchaser and its Purchaser Agent designated in the applicable Joinder Agreement shall each become parties hereto.
(b)By executing and delivering a Joinder Agreement, each new Purchaser and Purchaser Agent confirms to and agrees with the Agent and each other Purchaser and Purchaser Agent party hereto as follows: (A) such new Purchaser has received a copy of this Agreement, and the Purchase and Sale Agreement, together with copies of such financial statements and
other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Joinder Agreement; (B) such new Purchaser has made and will continue to make, independently and without reliance upon the Agent, any Purchaser Agent or any other Purchaser and based on such documents and information as it shall deem appropriate at the time, its own credit decisions in taking or not taking action under this Agreement; (C) such new Purchaser appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (D) such new Purchaser and its Purchaser Agent agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Purchaser or Purchaser Agent.
(c)In addition to the foregoing, in the event that any Purchaser or Purchaser Agent (i) does not consent to an amendment of clause (ii) of the definition of Termination Date to which the Seller and the Servicer have otherwise consented; or (ii) does not consent to any amendment or modification of this Agreement agreed to by the Seller, the Servicer and the Majority Purchasers but which requires the consent of such Purchaser, then, in any such event, the Seller shall have the right, with the prior written consent of the Agent, to require such Purchaser to assign its interests in its Participation and the Pool Receivables and all of its rights and obligations under this Agreement to a replacement Purchaser acceptable to the Agent and the Seller. Any such assignment shall be without recourse, representation or warranty of any kind on the part of the assigning Purchaser, except that such assignment is free and clear of any Adverse Claims created by such Purchaser, and shall be consummated pursuant to documentation reasonably satisfactory to the assignor and assignee on not less than ten days’ prior written notice, at a purchase price equal to the sum of (w) the aggregate outstanding Investment of the Purchaser being so replaced; (x) all accrued and unpaid Discount on such Investment; (y) all accrued and unpaid Program Fees owed to or on behalf of such Purchaser; and (z) all other accrued and unpaid expenses, indemnities and other amounts owing under this Agreement to such Purchaser, including any Termination Fees caused by the above-described assignment. Concurrently with any such assignment, the Seller, the Servicer, such replacement Purchaser and its Purchaser Agent (if different from the Purchaser) shall execute a Joinder Agreement to evidence the terms and conditions under which such replacement Purchaser has agreed to become a Purchaser hereunder.
Section 1.13. Interest Rates; Eurodollar Rate Notification. Upon the occurrence of a Benchmark Transition Event or an Early Opt-In Election, Section 1.14 provides a mechanism for determining an alternative rate of interest. The Agent will promptly notify the Seller pursuant to Section 1.14, of any change to the reference rate upon which the interest rate on a Participation is based. However, the Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definitions of “Bank Rate” or “Eurodollar Rate” or with respect to any alternative or successor rate thereto, or replacement rate thereof (including, without limitation any such alternative, successor or replacement rate implemented pursuant to Section 1.14, whether upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election), including, without limitation, whether the composition or characteristics
of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the Eurodollar Rate or have the same volume or liquidity as did the London interbank offered rate prior to its discontinuance or unavailability.
Section 1.14. Alternate Rate of Interest.
(a)If prior to the commencement of any Yield Period for a Participation:
(i)the Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Bank Rate or the Eurodollar Rate, as applicable (including because the Eurodollar Screen Rate is not available or published on a current basis), for U.S dollars for such Yield Period; provided that no Benchmark Transition Event shall have occurred at such time; or
(ii)the Agent is advised by the Majority Purchasers that the Bank Rate for such Yield Period will not adequately and fairly reflect the cost to such Purchasers of making or maintaining their Participations (or its Participation) included in the Participations for such Yield Period;
then the Agent shall give notice thereof to the Seller and the Purchaser Agents by telephone or electronic mail as promptly as practicable thereafter. Thereafter, the obligation of the Purchasers to make or maintain a Participation at the Bank Rate shall be suspended until the Agent (upon the instruction of the Majority Purchasers) revokes such notice. Upon receipt of such notice, the Seller may revoke any pending request for a Participation, or failing that, Participations shall be computed by reference to the Base Rate in the amount specified therein.
(b)Notwithstanding anything to the contrary herein or in any other Transaction Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Agent and the Seller may amend this Agreement to replace the Bank Rate with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Agent has posted such proposed amendment to all Purchaser Agents and the Seller, so long as the Agent has not received, by such time, written notice of objection to such proposed amendment from any Purchaser Agent; provided that, with respect to any proposed amendment containing any SOFR-Based Rate, the Purchaser Agents shall be entitled to object only to the Benchmark Replacement Adjustment contained therein. Any such amendment with respect to an Early Opt-in Election will become effective on the date that all Purchaser Agents have delivered to the Agent written notice that such Purchaser Agents accept such amendment. No replacement of Bank Rate with a Benchmark Replacement will occur prior to the applicable Benchmark Transition Start Date.
(c)In connection with the implementation of a Benchmark Replacement, the Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
(d)The Agent will promptly notify the Seller and the Purchaser Agents of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Agent or the Purchaser Agents pursuant to this Section 1.14, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 1.14.
(e)Upon the Seller’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Seller may revoke any pending request for a Participation, or failing that, the Participations shall be calculated by reference to the Base Rate in the amount specified therein.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the Seller and the Servicer hereby makes the representations and warranties, and hereby agrees to perform and observe the covenants of such Person, set forth in Exhibits III, IV and VII, respectively hereto.
Section 2.2. Termination Events. If any of the Termination Events set forth in Exhibit V hereto shall occur, the Majority Purchasers may, by notice to the Seller, each Purchaser Agent, the Agent and the Backup Servicer, declare the Termination Date to have occurred (in which case the Termination Date shall be deemed to have occurred); provided that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in subsection (g), (h), (k) or (m) of Exhibit V, the Termination Date shall occur automatically (without any required delivery of notice). Upon any such declaration, the occurrence or the deemed occurrence of the Termination Date, the Agent (at the direction of the Majority Purchasers) shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. The Agent shall obtain confirmation of the then-current rating of the Facility and any Notes (if required, as determined by the related Purchaser Agent) from the Rating Agencies rating the Facility or rating the Notes of any Purchaser prior to waiving the occurrence of any Termination Event of the type described in clause (j) of Exhibit V hereto.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other rights that the Agent, the Purchaser Agents, the Purchasers, the Backup Servicer or any of their respective
Affiliates, employees, agents, successors, transferees or assigns (each, an “Indemnified Party”) may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, damages, expenses, losses and liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as “Indemnified Amounts”) arising out of or resulting from this Agreement or other Transaction Documents (whether directly or indirectly) or the use of proceeds of purchases or reinvestments or the ownership of any Participation, or any interest therein, or in respect of any Receivable or any Contract regardless of whether any such Indemnified Amounts result from an Indemnified Party’s negligence or strict liability or other acts or omissions of an Indemnified Party, excluding, however, (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, (b) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables to be written off consistent with the Credit and Collection Policy or (c) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof. Without limiting or being limited by the foregoing, and subject to the exclusions set forth in the preceding sentence, the Seller shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following:
(i)the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable to be an Eligible Receivable, the failure of any information contained in a Servicer Report or a Portfolio Certificate to be true and correct, or the failure of any other information provided to any Purchaser, any Purchaser Agent or the Agent with respect to Receivables or this Agreement to be true and correct;
(ii)the failure of any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement to have been true and correct in all respects when made;
(iii)the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract; or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation;
(iv)the failure (A) to vest in the Agent (for the benefit of the Secured Parties) a valid and enforceable perfected undivided percentage ownership interest, to the extent of the Aggregate Participation, in the Pool Receivables and Collections with respect thereto and in Seller’s right, title and interest in, to and under the Related Security, and (B) to vest in the Agent (for the benefit of the Secured Parties) a first priority perfected security interest in all of Seller’s right, title and interest in, to and under the items described in Section 1.2(d)(A) – (F), in each case, free and clear of any Adverse Claim;
(v)the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Pool Receivables and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time;
(vi)any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Pool Receivables (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from or relating to the transaction giving rise to such Receivable or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Servicer or by any agent or independent contractor retained by the Seller or any of its Affiliates);
(vii)any failure of the Seller to perform its duties or obligations in accordance with the provisions hereof;
(viii)any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with goods, insurance or services that are the subject of or secure any Contract;
(ix)the commingling of Collections of Pool Receivables at any time with other funds;
(x)any investigation, litigation or proceeding related to this Agreement or the use of proceeds of purchases or reinvestments or the ownership of any Participation or in respect of any Receivable, Related Security or Contract;
(xi)any reduction in Investment as a result of the distribution of Collections pursuant to Section 1.4, in the event that all or a portion of such distributions shall thereafter be rescinded or otherwise must be returned for any reason;
(xii)any tax or governmental fee or charge (other than any tax upon or measured by net income or gross receipts), all interest and penalties thereon or with respect thereto, and all reasonable out-of-pocket costs and expenses, including the reasonable fees and expenses of counsel in defending against the same, which may arise by reason of the purchase or ownership of any Participation or other interests in the Pool Receivables or in any Related Security or Contract;
(xiii)the failure by the Seller or the Servicer to pay when due any taxes payable by it, including, without limitation, the franchise taxes and sales, excise or personal property taxes payable in connection with the Receivables;
(xiv)the failure by the Seller or the Servicer to be duly qualified to do business, to be in good standing or to have filed appropriate fictitious or assumed name registration documents in any jurisdiction; or
(xv)the failure of any Deposit Bank to remit any amounts held in its Deposit Account pursuant to the instructions of the Servicer whether by reason of the exercise of setoff rights or otherwise.
If for any reason the indemnification provided above in this Section 3.1 is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless, then the Seller shall contribute to such Indemnified Party the amount otherwise payable by such Indemnified Party as a result of such loss, claim, damage or liability to the maximum extent permitted under applicable law (but subject to the exclusions set forth in clauses (a) through (c) above).
The obligations of the Seller under this Section 3.1 are limited recourse obligations payable solely from the Collections, the Receivables and Related Security in accordance with the priority of payments set forth in Section 1.4.
Section 3.2 Indemnities by AFC. Without limiting any other rights that the Agent, any Purchaser, any Purchaser Agent or any other Indemnified Party may have hereunder or under applicable law, AFC hereby agrees to indemnify each Indemnified Party, forthwith on demand, from and against any and all Indemnified Amounts, awarded against or incurred by any of them, regardless of whether any such Indemnified Amounts result from an Indemnified Party’s negligence or strict liability or other acts or omissions of an Indemnified Party excluding, however, (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, (b) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables to be written off consistent with the Credit and Collection Policy or (c) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof, arising out of or relating to:
(i)the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable at any time to be an Eligible Receivable at such time, the failure of any information contained in a Servicer Report or a Portfolio Certificate to be true and correct, or the failure of any other information provided (directly or indirectly) by AFC or the Seller to the Purchasers, the Agent, the Backup Servicer or any Purchaser Agent with respect to Receivables or this Agreement to be true and correct;
(ii)any representation or warranty made by AFC under or in connection with any Transaction Document in its capacity as Servicer or any information or report delivered by or on behalf of AFC in its capacity as Servicer pursuant hereto, which shall have been false, incorrect or misleading in any material respect when made or deemed made;
(iii)the failure by AFC, in its capacity as Servicer, to comply with any applicable law, rule or regulation (including truth in lending, fair credit billing, usury, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) with respect to any Pool Receivable or other related contract;
(iv)any failure of AFC to perform its duties, covenants and obligations in accordance with the applicable provisions of this Agreement or to perform its duties or obligations, if any, under the Contracts;
(v)any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Pool Receivable resulting from or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Servicer or by any agent or independent contractor retained by the Seller or any of its Affiliates);
(vi)the commingling of Collections of Pool Receivables at any time with other funds; or
(vii)any investigation, litigation or proceeding related to AFC’s activities as Servicer under this Agreement.
If for any reason the indemnification provided above in this Section 3.2 is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless, then AFC shall contribute to such Indemnified Party the amount otherwise payable by such Indemnified Party as a result of such loss, claim, damage or liability to the maximum extent permitted under applicable law (but subject to the exclusions set forth in clauses (a) through (c) above).
Section 3.3. Indemnities by Successor Servicer. Without limiting any other rights that the Agent, any Purchaser, any Purchaser Agent or any other Indemnified Party may have hereunder under applicable law, each successor Servicer hereby agrees to indemnify each Indemnified Party, forthwith on demand, from and against any and all Indemnified Amounts, other than Indemnified Amounts resulting from gross negligence or willful misconduct on the part of such Indemnified Party, awarded against or incurred by any of them arising out of or relating to:
(i)any representation or warranty made by such successor Servicer under or in connection with any Transaction Document in its capacity as Servicer or any information or report delivered by such successor Servicer pursuant hereto, which shall have been false, incorrect or misleading in any material respect when made or deemed made;
(ii)the failure by such successor Servicer to comply with any applicable law, rule or regulation (including truth in lending, fair credit billing, usury, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) with respect to any Pool Receivable or other related contract;
(iii)any failure of such successor Servicer to perform its duties, covenants and obligations in accordance with the applicable provisions of this Agreement;
(iv)any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Pool Receivables resulting from or
relating to collection activities with respect to such Receivable (if such collection activities were performed by such successor Servicer or by any agent or independent contractor retained by such successor Servicer); or
(v)any investigation, litigation or proceeding related to such successor Servicer’s activities as Servicer under this Agreement.
If for any reason the indemnification provided above in this Section 3.3 is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless, then such successor Servicer shall contribute to such Indemnified Party the amount otherwise payable by such Indemnified Party as a result of such loss, claim, damage or liability to the maximum extent permitted under applicable law.
Notwithstanding anything to the contrary herein, in no event shall any successor Servicer be liable to any Person for any act or omission of any predecessor Servicer.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of Servicer. (a) The servicing, administering and collection of the Pool Receivables shall be conducted by the Person so designated from time to time as Servicer in accordance with this Section 4.1. Until the Majority Purchasers give notice to the Seller, the Agent and the Servicer (in accordance with the following sentence) of the designation of a new Servicer, AFC is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination Event, the Majority Purchasers may designate the Backup Servicer or any other Person (including the Agent) to succeed the Servicer, on the condition that any such Person so designated (other than the Backup Servicer, except to the extent specified in the Backup Servicing Agreement) shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof unless otherwise consented to by the Majority Purchasers.
(b)Upon the designation of a successor Servicer as set forth in Section 4.1(a) hereof, the Servicer agrees that it will terminate its activities as Servicer hereunder in a manner which the Agent determines will facilitate the transition of the performance of such activities to the new Servicer, and the Servicer shall cooperate with and assist such new Servicer. Such cooperation shall include (without limitation) access to and transfer of all records and use by the new Servicer of all licenses, hardware or software necessary or desirable to collect the Pool Receivables and the Related Security. Without limiting the foregoing, the Servicer agrees that, at any time following the occurrence of a Termination Event, the Servicer shall, at the request of the Agent (i) promptly identify all branch offices, loan processing offices or other locations at which the Pool Receivable Documents are then being held, (ii) allow the Agent or its designee full access to all such locations and all Pool Receivable Documents, (iii) promptly arrange, at the Servicer’s expense, the transfer of possession of all such Pool Receivable Documents to the Backup Servicer, any successor Servicer or other third-party custodian specified by the Agent and (iv) instruct the Servicer’s agents and any person with whom the Servicer or its agents have
contracted to hold any such Pool Receivable Documents to provide full access to, and/or transfer possession of, any Pool Receivable Documents held by such agent or contractor. The Servicer agrees to take no action which would impede or impair the ability of the Agent or its designees to gain access to the Pool Receivable Documents or to obtain possession thereof in accordance with the provisions hereof. The parties hereto agree that the covenants contained in the foregoing sentence are reasonable and necessary for the protection of the legitimate interests of the Secured Parties in the Pool Receivables. Accordingly, in addition to other remedies provided at law or equity, upon any breach by the Servicer of the covenants contained in the second preceding sentence, the Agent shall be entitled to seek specific performance and injunctive relief by and against the Servicer prohibiting any further breach of such covenants, without the necessity of proving irreparable injury or posting bond.
(c)The Servicer acknowledges that, in making its decision to execute and deliver this Agreement, the Purchaser Agents, the Agent and the Purchasers have relied on the Servicer’s agreement to act as Servicer hereunder. Accordingly, the Servicer agrees that it will not voluntarily resign as Servicer.
(d)The Servicer may delegate its duties and obligations hereunder to any subservicer (each, a “Sub-Servicer”); provided that, in each such delegation, (i) such Sub-Servicer shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer shall remain primarily liable to the Secured Parties for the performance of the duties and obligations so delegated, (iii) the Secured Parties shall have the right to look solely to the Servicer for such performance and (iv) the terms of any agreement with any Sub-Servicer shall provide that the Majority Purchasers may terminate such agreement upon the termination of the Servicer hereunder in accordance with Section 4.1(a) above by giving notice of its desire to terminate such agreement to the Servicer (and the Servicer shall provide appropriate notice to such Sub-Servicer); provided further, no such delegation shall be effective without the prior written consent of the Majority Purchasers.
Section 4.2. Duties of Servicer; Relationship to Backup Servicing Agreement. (a) The Servicer shall take or cause to be taken all such action as may be necessary or advisable to collect each Pool Receivable from time to time, all in accordance with this Agreement, accepted industry standards and all applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. Servicer may sue to collect upon Pool Receivables or enforce or recover Related Security, in its own name, if possible. If Servicer elects to commence a legal proceeding to collect a Pool Receivable or enforce or recover Related Security, the act of commencement shall be deemed to be an automatic assignment of the Pool Receivable or Seller’s and Purchasers’ rights in, to and under the Related Security to Servicer, for purposes of collection only. The Servicer shall set aside for the accounts of the Seller, the Backup Servicer and the Purchasers the amount of the Collections to which each is entitled in accordance with Section 1.4. The Seller shall deliver to the Servicer and the Servicer shall hold for the benefit of the Secured Parties in accordance with their respective interests, all records and documents (including without limitation computer tapes or disks) with respect to each Pool Receivable and all Pool Receivable Documents. During such period as a Backup Servicer is required to be maintained hereunder, the Servicer agrees to provide the
Backup Servicer with an electronic (scanned) copy of each Contract related to a Pool Receivable and with monthly updates thereafter upon receipt of which the Backup Servicer shall perform a reconciliation of the Receivables data and recalculate the Servicer Report. Notwithstanding anything to the contrary contained herein, the Agent may direct the Servicer to commence or settle any legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess any Related Security; provided, however, that no such direction may be given unless a Termination Event has occurred. AFC is hereby appointed the custodian of the Pool Receivable Documents for the benefit of the Agent on behalf of the Secured Parties; provided, however, that such appointment may be terminated pursuant to the terms hereof. AFC, or an affiliate on its behalf, will maintain fidelity and forgery insurance and adequate insurance to replace all Pool Receivable Documents due to casualty loss or theft of such documents. In performing its duties as servicer and custodian, AFC shall act with reasonable care, using that degree of skill and attention that AFC exercises with respect to the files relating to all comparable contracts that AFC owns or services for itself or others. AFC shall (i) maintain the Pool Receivable Documents in such a manner as shall enable the Agent and the Purchaser Agents to verify the accuracy of AFC’s recordkeeping; and (ii) promptly report to the Agent and the Purchaser Agents any failure on its part or the part of its agents to hold the Pool Receivable Documents and promptly take appropriate action to remedy any such failure. Upon termination of AFC’s appointment as custodian hereunder and the delivery of the Pool Receivable Documents to the successor custodian, the successor custodian shall review such documents to determine whether it is missing any documents, and AFC shall cooperate with the successor custodian and use its best efforts to assist the successor custodian to obtain the missing documents. AFC shall maintain continuous custody of the Pool Receivable Documents in secure facilities in accordance with customary standards for such custody.
(b)In the event the Backup Servicer becomes the successor Servicer hereunder, any applicable terms and conditions of the Backup Servicing Agreement relating to its performance as successor Servicer shall be deemed to be incorporated herein, and the obligations and liabilities of the successor Servicer (as such obligations and liabilities apply to the Backup Servicer acting in such capacity) shall be deemed to be modified in accordance with the provisions thereof. To the extent that any conflict exists between the terms of this Agreement and the Backup Servicing Agreement, the terms of the Backup Servicing Agreement shall control.
(c)The Servicer’s obligations hereunder shall terminate on the Final Payout Date. After such termination, the Servicer shall promptly deliver to the Seller all books, records and related materials that the Seller previously provided to the Servicer in connection with this Agreement.
(d)During such period as a Backup Servicer is required to be maintained hereunder, the Servicer shall provide to the Backup Servicer and the Agent and each Purchaser Agent (if requested) all such information (by the times and in the form) specified to be delivered by the Servicer under the Backup Servicing Agreement.
(e)Following the occurrence and during the continuation of a Termination Event, an Enhancement Build Trigger or a Level One Trigger, the Servicer shall provide to the Agent and each Purchaser Agent (in each case, if requested) on a daily basis a Portfolio Certificate (including information with respect to all Collections received and all Receivables acquired by the Seller).
Section 4.3. Deposit Accounts; Establishment and Use of Certain Accounts.
(i)Deposit Accounts. On or prior to the date hereof, the Servicer agrees to transfer ownership and control of each Deposit Account to the Seller. Seller has granted a valid security interest in each Deposit Account to the Agent (for the benefit of the Secured Parties) pursuant to Section 1.2(d) and shall take all actions reasonably requested by the Agent to cause the security interest to be perfected under the applicable UCC.
(ii)Cash Reserve Account. The Agent has established and will maintain in existence the Cash Reserve Account. The Cash Reserve Account shall be used to hold the Cash Reserve and for such other purposes described in the Transaction Documents.
(iii)Liquidation Account. The Agent has established and will maintain in existence the Liquidation Account. The Liquidation Account shall be used to receive Collections from the Deposit Accounts pursuant to Section 1.4(b) and to hold amounts set aside for the Purchasers, the Backup Servicer and (if the Servicer is not AFC or an Affiliate of AFC) the Servicer out of the Collections of Pool Receivables prior to the applicable Settlement Dates and for such other purposes described in the Transaction Documents. No funds other than those transferred in accordance with Section 1.4 shall be intentionally transferred into the Liquidation Account.
(iv)Permitted Investments. Any amounts in the Liquidation Account or the Cash Reserve Account, as the case may be, may be invested by the Liquidation Account Bank or the Cash Reserve Account Bank, respectively, prior to the occurrence of a Termination Event at the Servicer’s direction and following the occurrence of a Termination Event at the Agent’s direction, in Permitted Investments, so long as the Agent’s interest (for the benefit of the Secured Parties) in such Permitted Investments is perfected in a manner satisfactory to the Agent and such Permitted Investments are subject to no Adverse Claims other than those of the Agent provided hereunder.
(v)Control of Accounts. The Agent may (with written notice to the Purchaser Agents) and shall (at the direction of the Majority Purchasers) following any Termination Event (or an Unmatured Termination Event of the type described in paragraph (g) of Exhibit V) at any time give notice to any Deposit Bank that the Agent is exercising its rights under the applicable Deposit Account Agreement to do any or all of the following: (i) to have the exclusive ownership and control of such Deposit Account transferred to the Agent (or such other party designated by the Majority Purchasers) and to exercise exclusive dominion and control over the funds deposited therein and (ii) to take any or all other actions permitted under the applicable Deposit Account Agreement. The Seller hereby agrees that if the Agent (or such other party designated by the Majority Purchasers) at any time takes any action set forth in the preceding sentence, the Agent (or such other party designated by the Majority Purchasers) shall have
exclusive control of the proceeds (including Collections) of all Pool Receivables and the Seller hereby further agrees to take any other action that the Majority Purchasers may reasonably request to transfer such control. Any proceeds of Pool Receivables received by the Seller, the Servicer or AFC (as Servicer or otherwise), thereafter shall be sent immediately to an account designated by the Majority Purchasers and held by the Agent (or such other party designated by the Majority Purchasers) for the benefit of the Secured Parties.
(vi)Location of Liquidation Account and Cash Reserve Account. If at any time BMO Harris Bank is rated below A-1 by S&P or P-1 by Moody’s, the Agent shall promptly establish a new Liquidation Account and a new Cash Reserve Account at a financial institution which is rated at least A-1 by S&P and P-1 by Moody’s and transfer all amounts on deposit in such accounts at BMO Harris Bank to such new accounts at such financial institution, until such time as BMO Harris Bank is rated at least A-1 by S&P and P-1 by Moody’s.
Section 4.4. Enforcement Rights. (a) At any time following the occurrence of a Termination Event:
(i)the Majority Purchasers may (with the consent of the Agent) direct the Obligors that payment of all amounts payable under any Pool Receivable be made directly to the Backup Servicer or such other party designated by the Majority Purchasers, in each case, for the benefit of the Secured Parties;
(ii)the Majority Purchasers may with the consent of the Agent instruct the Seller or the Servicer to give notice of the Agent’s interest (for the benefit of the Secured Parties) in Pool Receivables to each Obligor, which notice shall direct that payments be made directly to the Backup Servicer or such other party designated by the Majority Purchasers (for the benefit of the Secured Parties), and upon such instruction from the Majority Purchasers, the Seller or the Servicer, as applicable, shall give such notice at the expense of the Seller; provided, that if the Seller or the Servicer fails to so notify each Obligor, the Agent or its designee may so notify the Obligors; and
(iii)the Majority Purchasers may with the consent of the Agent request the Seller or the Servicer to, and upon such request the Seller or the Servicer, as applicable, shall, (A) assemble all of the records necessary or desirable to collect the Pool Receivables and the Related Security and all Pool Receivable Documents, and transfer or license to any new Servicer the use of all software necessary or desirable to collect the Pool Receivables and the Related Security, and make the same available to the Backup Servicer or other third-party custodian specified by, and at a place selected by, the Agent and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections with respect to the Pool Receivables in a manner acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or the Backup Servicer (or such other party designated by the Majority Purchasers) (for the benefit of the Secured Parties).
(b)The Seller hereby authorizes the Agent (for the benefit of the Secured Parties), and irrevocably appoints the Agent (acting on behalf of the Secured Parties) as its attorney-in-fact with full power of substitution and with full authority in the place and stead of the Seller, which appointment is coupled with an interest, to take any and all steps in the name of the Seller and on behalf of the Seller necessary or desirable, in the determination of the Agent, to collect any and all amounts or portions thereof due under any and all Pool Receivables or Related Security, including, without limitation, endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Pool Receivables, Related Security and the related Contracts. The Agent shall only exercise the powers conferred by this subsection (b) after the occurrence of a Termination Event. Notwithstanding anything to the contrary contained in this subsection (b), none of the powers conferred upon such attorney-in-fact pursuant to the immediately preceding sentence shall subject such attorney-in-fact to any liability if any action taken by it shall prove to be inadequate or invalid, nor shall they confer any obligations upon such attorney-in-fact in any manner whatsoever.
Section 4.5. Responsibilities of the Seller. Anything herein to the contrary notwithstanding, the Seller shall (i) perform all of its obligations, if any, under the Contracts related to the Pool Receivables to the same extent as if interests in such Pool Receivables had not been transferred hereunder, and the exercise by any Secured Party of its rights hereunder shall not relieve the Seller from such obligations and (ii) pay when due any taxes, including, without limitation, any sales taxes payable in connection with the Pool Receivables and their creation and satisfaction. The Agent, the Purchaser Agents, the Purchasers, the Backup Servicer and any successor Servicer shall not have any obligation or liability with respect to any Pool Receivable, any Related Security or any related Contract, nor shall any of them be obligated to perform any of the obligations of the Seller or AFC under any of the foregoing.
Section 4.6. Servicing Fee. The Servicer shall be paid a monthly fee in arrears, through distributions contemplated by Section 1.4, equal to (a) at any time AFC or an Affiliate of AFC is the Servicer, [**], (b) at any time the Backup Servicer has become the Servicer hereunder, [**], and (c) at any time a Person other than AFC, an Affiliate of AFC or the Backup Servicer is the Servicer, the Unaffiliated Servicing Fees or such other amount as the Agent and such successor Servicer shall agree. The Servicing Fee shall not be payable to the extent funds are not available to pay the Servicing Fee pursuant to Section 1.4.
Section 4.7. Specified Ineligible Receivables. On or prior to the initial date of purchase of a Receivable under the Purchase and Sale Agreement, the Servicer (so long as the Originator is the Servicer) may designate such Receivable as a “Specified Ineligible Receivable” (which designation may take the form of a specification that a certain class or category of Receivables to be transferred from the Originator to the Seller after such designation will be treated as “Specified Ineligible Receivables”). In addition, the Servicer (so long as the Originator is the Servicer) may, on behalf of the Seller, (i) designate an existing Receivable then owned by the Seller as a “Specified Ineligible Receivable” or (ii) designate an existing Specified Ineligible Receivable then owned by the Seller as a Receivable (i.e., no longer a “Specified Ineligible Receivable”), in each of cases (i) and (ii) with the prior written consent of the Majority Purchasers. For the avoidance of doubt, any Receivable which was treated as an Eligible
Receivable hereunder at any time may not be treated as a “Specified Ineligible Receivable” without the prior written consent of the Majority Purchasers. The Servicer (so long as the Originator is the Servicer) shall identify the aggregate Outstanding Balance of all such “Specified Ineligible Receivables” on the Servicer Report. To the extent the Servicer has from time to time identified a Receivable as a “Specified Ineligible Receivable” in accordance with this Section, for so long as such Receivable is a Specified Ineligible Receivable, (i) such Receivable shall not be included as an Eligible Receivable by the Seller or the Servicer hereunder, (ii) such Receivable shall not be included in any calculations of the Delinquency Ratio or the Default Ratio or other Pool Receivables information (other than a statement of the aggregate Outstanding Balance of such Specified Ineligible Receivables) hereunder and (iii) such Receivable shall not be considered a Receivable for purposes of clause (o) of Exhibit V hereof.
ARTICLE V.
THE AGENTS
Section 5.1. Appointment and Authorization. Each Purchaser and Purchaser Agent (including each Purchaser and Purchaser Agent that may from time to time become a party hereto) hereby irrevocably designates and appoints Bank of Montreal as the “Agent” hereunder and authorizes the Agent to take such actions and to exercise such powers as are delegated to the Agent hereby and to exercise such other powers as are reasonably incidental thereto. The Agent shall hold, in its name, for the benefit of the Secured Parties, a security interest in the Liquidation Account and the Cash Reserve Account pursuant to an account control agreement. The Agent shall not have any duties other than those expressly set forth herein or any fiduciary relationship with any Indemnified Party, and no implied obligations or liabilities shall be read into this Agreement or any other Transaction Document or otherwise exist against the Agent. The Agent does not assume, nor shall it be deemed to have assumed, any obligation to, or relationship of trust or agency with, the Seller or Servicer. Notwithstanding any provision of this Agreement or any other Transaction Document to the contrary, in no event shall the Agent ever be required to take any action which exposes the Agent to personal liability (unless indemnified in advance in a manner determined satisfactory to the Agent in its sole and absolute discretion) or which is contrary to the provision of any Transaction Document or applicable law.
(a)Each Purchaser hereby irrevocably designates and appoints the respective institution identified as the Purchaser Agent for such Purchaser on the signature pages hereto or in any agreement pursuant to which such Purchaser becomes a party hereto, and each authorizes such Purchaser Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to such Purchaser Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Purchaser Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Purchaser or other Purchaser Agent or the Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Purchaser Agent shall be read into this Agreement or otherwise exist against such Purchaser Agent.
(b)Except as otherwise specifically provided in this Agreement, the provisions of this Article V are solely for the benefit of the Purchaser Agents, the Agent and the Purchasers, and none of the Seller or Servicer shall have any rights as a third-party beneficiary or otherwise under any of the provisions of this Article V, except that this Article V shall not affect any obligations which any Purchaser Agent, the Agent or any Purchaser may have to the Seller or the Servicer under the other provisions of this Agreement. Furthermore, no Purchaser shall have any rights as a third-party beneficiary or otherwise under any of the provisions hereof in respect of a Purchaser Agent which is not the Purchaser Agent for such Purchaser.
(c)In performing its functions and duties hereunder, the Agent shall act solely as the agent of the Secured Parties, and the Agent does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller or Servicer or any of their successors and assigns. In performing its functions and duties hereunder, each Purchaser Agent shall act solely as the agent of its respective Purchasers and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller, the Servicer, any other Purchaser, any other Purchaser Agent or the Agent, or any of their respective successors and assigns.
Section 5.2. Delegation of Duties. The Agent may, with the prior written consent of the Majority Purchasers, execute any of its duties through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible to the Purchaser Agents or any Purchaser for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
Section 5.3. Exculpatory Provisions. None of the Purchaser Agents, the Agent or any of their directors, officers, agents or employees shall be liable for any action taken or omitted (i) with the consent or at the direction of the Majority Purchasers (or in the case of any Purchaser Agent, the Purchaser relating to such Purchaser Agent) or (ii) in the absence of such Person’s gross negligence or willful misconduct. The Agent shall not be responsible to any Purchaser or Purchaser Agent for (i) any recitals, representations, warranties or other statements made by the Seller, Servicer, the Originator or any of their Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction Document, (iii) any failure of the Seller, the Servicer, the Originator or any of their Affiliates to perform any obligation it may have under any Transaction Document to which it is a party or (iv) the satisfaction of any condition specified in Exhibit II. The Agent shall not have any obligation to any Purchaser or any Purchaser Agent to ascertain or inquire about the observance or performance of any agreement contained in any Transaction Document or to inspect the properties, books or records of the Seller, Servicer, the Originator or any of their Affiliates.
Section 5.4. Reliance by Agents. Each Purchaser Agent and the Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or other writing or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person and upon advice and statements of legal counsel (including counsel to the Seller or Servicer), independent accountants and other experts selected by the Agent or any such Purchaser Agent. Each Purchaser Agent and the Agent shall in all cases be fully justified in
failing or refusing to take any action under any Transaction Document unless it shall first receive such advice or concurrence of the Majority Purchasers (or in the case of any Purchaser Agent, the Purchaser relating to such Purchaser Agent) and it shall first be indemnified to its satisfaction against any and all liability and expense which may be incurred by reason of taking or continuing to take any such action.
(a)With regard to the Purchasers and the Purchaser Agents, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Purchasers and the Purchaser Agents, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Purchasers and Purchaser Agents.
(b)Purchasers that have a common Purchaser Agent and that have a majority of the Investment of all such related Purchasers shall be entitled to request or direct the related Purchaser Agent to take action, or refrain from taking action, under this Agreement on behalf of such Purchasers. With regard to the Purchasers and the Purchaser Agents, such Purchaser Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of such Purchasers, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of such Purchaser Agent’s related Purchasers.
(c)Unless otherwise advised in writing by a Purchaser Agent or by any Purchaser on whose behalf such Purchaser Agent is purportedly acting, each party to this Agreement may assume that (i) such Purchaser Agent is acting for the benefit of each of the Purchasers for which such Purchaser Agent is identified herein (or in any Joinder Agreement or assignment agreement) as being the Purchaser Agent, as well as for the benefit of each assignee or other transferee from any such Person, and (ii) each action taken by such Purchaser Agent has been duly authorized and approved by all necessary action on the part of the Purchasers on whose behalf it is purportedly acting. Each Purchaser Agent and its Purchaser(s) shall agree amongst themselves as to the circumstances and procedures for removal, resignation and replacement of such Purchaser Agent.
Section 5.5. Notice of Termination Date. Neither any Purchaser Agent nor the Agent shall be deemed to have knowledge or notice of the occurrence of any Termination Event or Unmatured Termination Event unless such Person has received notice from any Purchaser, Purchaser Agent, the Servicer or the Seller stating that a Termination Event or Unmatured Termination Event has occurred hereunder and describing such Termination Event or Unmatured Termination Event. If the Agent receives such a notice, it shall promptly give notice thereof to each Purchaser Agent whereupon each such Purchaser Agent shall promptly give notice thereof to its Purchasers. If a Purchaser Agent receives such a notice (other than from the Agent), it shall promptly give notice thereof to the Agent. The Agent shall take such action concerning a Termination Event or Unmatured Termination Event as may be directed by the Majority Purchasers (unless such action is otherwise specified herein as requiring the consent of all Purchasers), but until the Agent receives such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, as the Agent deems advisable and in the best interests of the Secured Parties.
Section 5.6. Non-Reliance on Agent, Purchaser Agents and Other Purchasers. Each Purchaser expressly acknowledges that none of the Agent, the Purchaser Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent or any Purchaser Agent hereafter taken, including any review of the affairs of the Seller, Servicer or the Originator, shall be deemed to constitute any representation or warranty by the Agent or such Purchaser Agent, as applicable. Each Purchaser represents and warrants to the Agent and the Purchaser Agents that, independently and without reliance upon the Agent, Purchaser Agents or any other Purchaser and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller, Servicer and the Originator, and the Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document. Except for items specifically required to be delivered hereunder, the Agent shall not have any duty or responsibility to provide any Purchaser Agent with any information concerning the Seller, Servicer or the Originator or any of their Affiliates or the Receivables that comes into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
Section 5.7. Agent, Purchaser Agents and Purchasers. Each of the Purchasers, the Agent, the Purchaser Agents and their Affiliates may extend credit to, accept deposits from and generally engage in any kind of banking, trust, debt or other business with the Seller, KAR, Servicer or the Originator or any of their Affiliates. With respect to the acquisition of the Eligible Receivables pursuant to this Agreement, any of the Purchaser Agents and the Agent shall, to the extent they become Purchasers hereunder, have the same rights and powers under this Agreement as any Purchaser and may exercise the same as though it were not such an agent, and the terms “Purchaser” and “Purchasers” shall, in such case, include such Purchaser Agent or the Agent in their individual capacities.
Section 5.8. Indemnification. Each Purchaser shall indemnify and hold harmless the Agent (but solely in its capacity as Agent) and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Seller or Servicer and without limiting the obligation of the Seller or Servicer to do so), ratably in accordance with their respective Investment from and against any and all liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses and disbursements of any kind whatsoever (including in connection with any investigative or threatened proceeding, whether or not the Agent or such Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Agent or such Person as a result of, or related to, any of the transactions contemplated by the Transaction Documents or the execution, delivery or performance of the Transaction Documents or any other document furnished in connection therewith (but excluding any such liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such Person as finally determined by a court of competent jurisdiction). The obligations of any Note Issuer under this Section 5.8 shall be subject to the restrictions of Section 6.5.
Section 5.9. Successor Agent. The Agent may, upon at least thirty (30) days notice to the Seller, the Servicer, the Backup Servicer, each Purchaser and Purchaser Agent, resign as Agent. Such resignation shall not become effective until a successor Agent is appointed by the Majority Purchasers and has accepted such appointment. Upon such acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Transaction Documents. After any retiring Agent’s resignation hereunder, the provisions of Sections 3.1, 3.2, 3.3 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent.
ARTICLE VI.
MISCELLANEOUS
Section 6.1.Amendments, Etc. No waiver of any provision of this Agreement or consent to any departure by the Seller or Servicer therefrom shall be effective unless in writing signed by the Majority Purchasers. No amendment of any provisions of this Agreement shall be effective unless in writing signed by each Purchaser Agent, the Agent, the Seller and the Servicer; provided, further, that other than an amendment to extend the Termination Date, no amendment shall be effective unless (i) each Purchaser (or the applicable Purchaser Agent on its behalf) shall have received written confirmation by any Rating Agency rating the Agreement that such amendment shall not cause their rating to be downgraded or withdrawn, and (ii) each Note Issuer that is a Purchaser (or the applicable Purchaser Agent on its behalf), if required, shall have received written confirmation by the Rating Agencies that such amendment shall not cause the rating on the then outstanding Notes of such Note Issuer to be downgraded or withdrawn. Any such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Agent, any Purchaser, or any Purchaser Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
Section 6.2. Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile and electronic mail communication) and sent or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or, in the case of the Backup Servicer, at its notice address designated in the Backup Servicing Agreement or, in any case, at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile or electronic mail shall be effective when sent (and shall, unless such delivery is waived by the recipient by electronic mail or other means, be followed by hard copy sent by first class mail), and notices and communications sent by other means shall be effective when received.
Section 6.3.Assignability. (a) This Agreement and any Purchaser’s rights and obligations herein (including ownership of its Participation) shall be assignable, in whole or in
part, by such Purchaser and its successors and assigns with the prior written consent of the Seller and the Agent; provided, however, that such consent shall not be unreasonably withheld; and provided, further, that no such consent shall be required if the assignment is made to (i) any Affiliate of such Purchaser, (ii) any Liquidity Bank (or any Person who upon such assignment would be a Liquidity Bank) of such Purchaser and from any such Liquidity Bank to a Purchaser hereunder, (iii) any Program Support Provider (or any Person who upon such assignment would be a Program Support Provider) of such Purchaser or (iv) to any other Purchaser in such Purchaser’s Purchaser Group. Each assignor may, in connection with the assignment, disclose to the applicable assignee any information relating to the Seller or the Pool Receivables furnished to such assignor by or on behalf of the Seller, the Agent, the Purchasers or the Purchaser Agents.
Upon the assignment by a Purchaser in accordance with this Section 6.3, the assignee receiving such assignment shall have all of the rights of such Purchaser with respect to the Transaction Documents and the Investment (or such portion thereof as has been assigned).
(b)Each Purchaser may at any time grant to one or more banks or other institutions (each a “Liquidity Bank”) party to a Liquidity Agreement or to any other Program Support Provider participating interests or security interests in its Participation. In the event of any such grant by a Purchaser of a participating interest to a Liquidity Bank or other Program Support Provider, the Purchaser shall remain responsible for the performance of its obligations hereunder. The Seller agrees that each Liquidity Bank or other Program Support Provider shall be entitled to the benefits of Sections 1.8 and 1.10.
(c)This Agreement and the rights and obligations of any Purchaser Agent hereunder shall be assignable, in whole or in part, by such Purchaser Agent and its successors and assigns; provided, however, that if such assignment is to any Person that is not an Affiliate of the assigning Purchaser Agent, such Purchaser Agent must receive the prior written consent (which consent in each case shall not be unreasonably withheld) of the Agent and the Seller.
(d)Except as provided in Section 4.1(d), neither the Seller nor the Servicer may assign its rights or delegate its obligations hereunder or any interest herein without the prior written consent of the Majority Purchasers.
(e)Without limiting any other rights that may be available under applicable law, the rights of any Purchaser may be enforced by it directly or by its Purchaser Agent or its other agents.
(f)[**]
(g)Notwithstanding any other provision of this Section 6.3, (i) any Purchaser may at any time pledge or grant a security interest in all or any portion of its rights (including, without limitation, any interests in its Participation and any rights to payment of Investment and Discount) under this Agreement to secure obligations of such Purchaser to a Federal Reserve Bank and (ii) any Note Issuer may at any time pledge or grant a security interest in all or any portion of its rights (including, without limitation, any Participation and any rights to payment of Investment and Discount) under this Agreement to a collateral trustee in order to comply with
Rule 3a-7 under the Investment Company Act of 1940 (as amended), in each case without notice to or consent of any Seller Party, the Agent, any Purchaser Agent or any Purchaser; provided that no such pledge or grant of a security interest shall release a Purchaser from any of its obligations hereunder, or substitute any such pledgee or grantee for such Purchaser as a party hereto.
Section 6.4.Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Section 3.1 hereof, the Seller agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing of Pool Receivables) of this Agreement, any Liquidity Agreement, the other Transaction Documents and the other documents and agreements to be delivered hereunder or in connection herewith, including all reasonable costs and expenses relating to the amending, amending and restating, modifying or supplementing any such documents or agreements and the waiving of any provisions thereof, and including in all cases, without limitation, Rating Agency fees (including in connection with the execution hereof and any amendments hereto) and Attorney Costs for the Agent, each Purchaser, each Program Support Provider, each Purchaser Agent, the Backup Servicer, any successor Servicer and their respective Affiliates and agents with respect thereto and with respect to advising the Agent, the Purchaser, each Program Support Provider and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other Transaction Documents, and all reasonable costs and expenses, if any (including Attorney Costs), of each Purchaser Agent, each Purchaser, each Program Support Provider, the Agent, the Backup Servicer, any successor Servicer and their respective Affiliates and agents in connection with the enforcement of this Agreement and the other Transaction Documents.
(b)In addition, the Seller shall pay on demand any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.
Section 6.5. No Proceedings; Limitation on Payments. (a) Each of the Seller, the Servicer, the Agent, the Purchaser Agents, the Purchasers, the Backup Servicer, each assignee of a Participation or any interest therein, and each Person which enters into a commitment to purchase or does purchase a Participation or interests therein hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, any Note Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing Note issued by any such Note Issuer is paid in full.
(b)Notwithstanding any provisions contained in this Agreement to the contrary, no Note Issuer shall, nor shall it be obligated to, pay any amount pursuant to this Agreement unless such Note Issuer has excess cash flow from operations or has received funds with respect to such obligation which may be used to make such payment and which funds or excess cash flow are not required to repay its Notes when due. Any amounts which a Note Issuer does not pay pursuant to the operation of the preceding sentence shall not constitute a claim against such Note
Issuer for any such insufficiency unless and until the condition described in the preceding sentence is satisfied. Nothing in this subsection (b) shall be construed to forgive or cancel any obligations of such Note Issuer hereunder.
(c)Each of the Servicer, the Agent, the Purchaser Agents, the Purchasers, the Backup Servicer, each assignee of a Participation or any interest therein, and each Person which enters into a commitment to purchase or does purchase a Participation or interests therein hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, the Seller any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after all amounts payable by the Seller hereunder are paid in full.
(d)Notwithstanding any provisions contained in this Agreement to the contrary, the Seller shall not be obligated to pay any amount pursuant to this Agreement unless the Seller has property or other assets which may be used to make such payment. Any amounts which the Seller does not pay pursuant to the operation of the preceding sentence shall not constitute a claim against the Seller for any such insufficiency unless and until the conditions described in the preceding sentence are satisfied. Nothing in this subsection (d) shall be construed to forgive or cancel any obligations of the Seller hereunder.
Section 6.6.Confidentiality. Unless otherwise required by applicable law or already known by the general public or the third party to which it is disclosed, the Seller agrees to maintain the confidentiality of this Agreement and the other Transaction Documents (and all drafts thereof) in communications with third parties and otherwise; provided that this Agreement may be disclosed to (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent and (b) the Seller’s legal counsel and auditors if they agree to hold it confidential.
Section 6.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF INDIANA (WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE PURCHASERS IN THE POOL RECEIVABLES AND THE OTHER ITEMS DESCRIBED IN SECTION 1.2(d) IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF INDIANA.
(b)ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS COOK COUNTY AND CHICAGO OR NEW YORK NEW YORK COUNTY, NEW YORK CITY OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS OR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PURCHASERS, THE SELLER, THE SERVICER, THE PURCHASER AGENTS AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PURCHASERS, THE SELLER, THE SERVICER, THE PURCHASER AGENTS AND THE AGENT IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
Section 6.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
Section 6.9.Survival of Termination. The provisions of Sections 1.8, 1.10, 3.1, 3.2, 6.4, 6.5, 6.6, 6.7, 6.10 and 6.13 shall survive any termination of this Agreement.
Section 6.10.WAIVER OF JURY TRIAL. THE PURCHASERS, THE SELLER, THE SERVICER, THE PURCHASER AGENTS, THE AGENT AND THE BACKUP SERVICER (BY ACCEPTING THE BENEFIT HEREOF) EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE PURCHASERS, THE SELLER, THE SERVICER, THE PURCHASER AGENTS, THE AGENT AND THE BACKUP SERVICER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 6.11. Entire Agreement. This Agreement (together with the other Transaction Documents) embodies the entire agreement and understanding between the Purchasers, the Seller, the Servicer, the Purchaser Agents and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.
Section 6.12. Headings. The captions and headings of this Agreement and in any Exhibit hereto are for convenience of reference only and shall not affect the interpretation hereof or thereof.
Section 6.13. Liabilities of the Purchasers. The obligations of each Purchaser under this Agreement are solely the corporate obligations of such Purchaser. No recourse shall be had for any obligation or claim arising out of or based upon this Agreement against any stockholder, employee, officer, director or incorporator of any Purchaser; and provided, however, that this Section 6.13 shall not relieve any such Person of any liability it might otherwise have for its own gross negligence or willful misconduct. The agreements provided in this Section 6.13 shall survive termination of this Agreement.
Section 6.14. Tax Treatment. The Participations shall be treated and reported as indebtedness of the Seller for all income and franchise tax purposes. The Seller, the Servicer, the Agent and Fairway and each Purchaser, by its agreement to make a purchase (and to make reinvestments, if applicable) with regard to its Participation, agrees, and shall cause its assignees to agree, to treat and report the Participations as indebtedness of the Seller for all income and franchise tax purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
AFC FUNDING CORPORATION,
as Seller
By: /s/ Amy Wirges
Name: Amy Wirges
Title: Sr. Vice President Finance and Treasurer
AFC Funding Corporation
11299 N. Illinois Street
Carmel, Indiana 46032
Attention: Amy Wirges
Telephone: 317-843- 4795
Facsimile: 317- 360-3766
E-mail: awirges@autofinance.com
AUTOMOTIVE FINANCE CORPORATION,
as Servicer
By: /s/ Amy Wirges
Name: Amy Wirges
Title: Sr. Vice President Finance and Treasurer
Automotive Finance Corporation
11299 N. Illinois Street
Carmel, Indiana 46032
Attention: Amy Wirges
Telephone: 317-843- 4795
Facsimile: 317- 360-3766
E-mail: awirges@autofinance.com
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S-1
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Ninth Amended and Restated
Receivables Purchase Agreement
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BMO CAPITAL MARKETS CORP.,
as Purchaser Agent for Fairway Finance
Company, LLC and Bank of Montreal
By: /s/ John Pappano
Name: John Pappano
Title: Managing Director
BMO Capital Markets Corp.
115 S. LaSalle, 37th Floor West
Chicago, Illinois 60603
Attention: Conduit Administration
Telephone: (312) 461-5640
Facsimile: (312) 293-4908
E-mail: fundingdesk@bmo.com
FAIRWAY FINANCE COMPANY, LLC,
as a Purchaser
By: /s/ Lori Rezza
Name: Lori Rezza
Title: Vice President
Fairway Finance Company, LLC
c/o Lord Securities Corp.
48 Wall Street, 27th Floor
New York, New York 10005
Attention: Irina Khaimova
Telephone: (212) 346-900
Facsimile: (212) 346-9012
Email: Irina.Khaimova@tmf-group.com
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S-2
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Ninth Amended and Restated
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BANK OF MONTREAL,
as a Purchaser
By: /s/ Karen Louie
Name: Karen Louie
Title: Director
Bank of Montreal
115 S. LaSalle, 25th Floor West
Chicago, Illinois 60603
Attention: Karen Louie
Telephone: (312) 293-4410
Facsimile: (312) 293-4948
E-mail: karen.louie@bmo.com
Maximum Commitment:
[**]
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S-3
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Ninth Amended and Restated
Receivables Purchase Agreement
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PNC BANK, NATIONAL ASSOCIATION,
as Purchaser and Purchaser Agent for itself
By: /s/ Lawrence Beller
Name: Lawrence Beller
Title: Senior Vice President
PNC Bank, National Association
300 Fifth Avenue
Pittsburgh, PA 15222
Attention: ABF Administration
Telephone: (412) 768-3090
Facsimile: (412) 762-9184
E-mail: abfadmin@pnc.com / alex.langley@pnc.com
Maximum Commitment:
[**]
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S-4
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Ninth Amended and Restated
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THUNDER BAY FUNDING, LLC, as a Purchaser
By: Royal Bank of Canada,
its attorney-in-fact
By: /s/ Kevin P Wilson
Name: Kevin P Wilson
Title: Authorized Signatory
Thunder Bay Funding, LLC
c/o Global Securitization Services, LLC
68 South Service Road, Suite 120
Melville, New York 11747
Tel: (631) 930-7207
Fax: (212) 302-8767
Attn: Tony Wong
RBCUS@gssnyc.com
with a copy to:
RBC Capital Markets
Two Little Falls Center
2751 Centerville Road, Suite 212
Wilmington, DE 19808
Attn: Securitization Finance
Email: conduit.management@rbccm.com
Maximum Commitment:
[**]
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S-5
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Ninth Amended and Restated
Receivables Purchase Agreement
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ROYAL BANK OF CANADA,
as Purchaser Agent for Thunder Bay Funding, LLC
By: /s/ Kevin P Wilson
Name: Kevin P Wilson
Title: Authorized Signatory
By: /s/ Lisa Wang
Name: Lisa Wang
Title: Authorized Signatory
Royal Bank Plaza, North Tower
200 Bay Street
2nd Floor
Toronto Ontario M5J2W7
Attn: Securitization Finance
Telephone: (416)-842-3842
Email: conduit.management@rbccm.com
with a copy to
Royal Bank of Canada
Two Little Falls Center
2751 Centerville Road, Suite 212
Wilmington, DE 19808
Telephone : (302)-892-5903
Email : conduit.management@rbccm.com
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S-6
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Ninth Amended and Restated
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FIFTH THIRD BANK, NATIONAL ASSOCIATION
as Purchaser and as Purchaser Agent for itself
By: /s/ Andrew D. Jones
Name: Andrew D. Jones
Title: Managing Director
Fifth Third Bank, National Association
38 Fountain Square Plaza, MD 109046
Cincinnati, OH 45263
Attention: Asset Securitization Group
Telephone: (513) 534-0836
Facsimile: (513) 534-0319
E-mail: andrew.jones@53.com
53.Securitization.Bancorp@53.com
ABF.Reporting@53.com
Maximum Commitment
[**]
TRUIST BANK, as Purchaser and as Purchaser Agent for itself
By: /s/ John Malone
Name: John Malone
Title: Senior VP
3333 Peachtree Road
10th Floor East
Atlanta, Georgia 30326
Attn: John Malone
Tel: (404) 439-9542
Fax: (404) 926-5100
Email: John.Malone@Truist.com
Maximum Commitment
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S-7
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Ninth Amended and Restated
Receivables Purchase Agreement
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CHARIOT FUNDING LLC, as a Purchaser
By: JPMorgan Chase Bank, N.A.,
its attorney-in-fact
By: /s/ Cameron Milligan
Name: Cameron Milligan
Title: Executive Director
Chariot Funding LLC
c/o JPMorgan Chase Bank, N.A.
10 South Dearborn Street, 16th Floor
Chicago, IL 60603
Attention: Alan English
Tel: (312) 732-7985
Fax: (312) 377-0490
Email: alan.p.english@jpmorgan.com; evanmaschmeyer@jpmorgan.com; cameron.milligan@jpmorgan.com; ABS.Treasury.Dept@jpmorgan.com
Maximum Commitment
[**]
JPMORGAN CHASE BANK N.A.,
as Purchaser Agent for Chariot Funding LLC
By: /s/ Cameron Milligan
Name: Cameron Milligan
Title: Executive Director
c/o JPMorgan Chase Bank, N.A.
10 South Dearborn Street, 16th Floor
Chicago, IL 60603
Attention: Alan English
Tel: (312) 732-7985
Fax: (312) 377-0490
Email: alan.p.english@jpmorgan.com; evan.maschmeyer@jpmorgan.com; cameron.milligan@jpmorgan.com; ABS.Treasury.Dept@jpmorgan.com
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S-8
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Ninth Amended and Restated
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BANK OF MONTREAL,
as Agent
By: /s/ Karen Louie
Name: Karen Louie
Title: Director
Bank of Montreal
115 S. LaSalle, 25th Floor West
Chicago, Illinois 60603
Attention: Karen Louie
Telephone: (312) 293-4410
Facsimile: (312) 293-4948
Email: Karen.louie@bmo.com
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S-9
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Ninth Amended and Restated
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Acknowledged and Agreed:
KAR AUCTION SERVICES, INC.,
as provider of the Performance Guaranty
By: /s/ Eric M. Loughmiller
Name: Eric M. Loughmiller
Title: Executive Vice President and Chief Financial Officer
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S-10
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Ninth Amended and Restated
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STATE OF INDIANA )
) SS
COUNTY OF HAMILTON )
Before me the undersigned, a Notary Public in and for the said County and State, personally appeared Amy Wirges___________, an officer of AFC FUNDING CORPORATION, personally known to me who acknowledged the execution of the foregoing this 28th day of September, 2020.
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/s/ Mark R. Nelson
Signature
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My Commission Expires: October 26, 2024
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Mark R. Nelson
Printed Name
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My County of Residence: Hamilton County
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STATE OF INDIANA )
) SS
COUNTY OF HAMILTON )
Before me the undersigned, a Notary Public in and for the said County and State, personally appeared Amy Wirges , an officer of AUTOMOTIVE FINANCE CORPORATION, personally known to me who acknowledged the execution of the foregoing this 28th day of September, 2020.
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/s/ Mark R. Nelson
Signature
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My Commission Expires: October 26, 2024
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Mark R. Nelson
Printed Name
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My County of Residence: Hamilton County
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S-11
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Ninth Amended and Restated
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EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the Agreement.
“Adjusted Net Spread” means the annualized percentage equivalent of a fraction (computed as of the last day of each calendar month), the numerator of which is the excess of (x) all Finance Charge and Floorplan Fee Collections received and applied during such calendar month (including recoveries) over (y) the sum of, without duplication, (i) the Carry Costs for such calendar month, (ii) the aggregate amount of Receivables that became Defaulted Receivables during such calendar month, and (iii) the aggregate amount of non-cash adjustments that reduced the Outstanding Balance of any Pool Receivable during such calendar month (but excluding any Receivable that was included in the calculation of Net Spread pursuant to clause (ii) above in any previous calendar month); and the denominator of which is the average aggregate Outstanding Balances of the Pool Receivables during such calendar month.
“Adverse Claim” means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, it being understood that a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, in favor of the Agent for the benefit of the Secured Parties contemplated by the Agreement shall not constitute an Adverse Claim.
“AFC” has the meaning set forth in the preamble to this Agreement.
“Affected Person” has the meaning set forth in Section 1.8.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person, except that with respect to a Purchaser, Affiliate shall mean the holder(s) of its capital stock.
“Agent” has the meaning set forth in the preamble to this Agreement.
“Aggregate Participation” means, at any time, the sum of the Participations expressed as a percentage.
“Agreement” has the meaning set forth in the preamble to this Agreement.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Seller Parties or their respective Subsidiaries from time to time concerning or related to bribery or corruption.
“Attorney Costs” means and includes all reasonable fees and reasonable disbursements of any law firm or other external counsel, and all reasonable disbursements of internal counsel.
“Auction Credit” means a Receivable pursuant to which a wholesale auction has granted credit for the purposes of a float sale arrangement with dealers, provided that the wholesale auction shall be considered the “Obligor” of such Receivable and shall be subject to the Normal Concentration Percentage or Special Concentration Percentage, as applicable.
“Backup Servicer” means the Person appointed to act as backup servicer pursuant to the Backup Servicing Agreement.
“Backup Servicing Agreement” means (i) the Backup Servicing Agreement, dated as of September 29, 2020, among Wells Fargo Bank, National Association, the Servicer and the Agent; and (ii) any replacement backup servicing agreement entered into from time to time with the prior written consent of the Majority Purchasers; in each case as such agreements may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.
“Backup Servicing Fee Letter” means (i) the Backup Servicing Agreement, setting forth the Backup Servicing Fees payable to the Backup Servicer; and (ii) any replacement backup servicing fee letter entered into from time to time with the prior written consent of the Majority Purchasers; in each case as such letters may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.
“Backup Servicing Fees” means all fees and reimbursable expenses (excluding Transition Expenses) payable to the Backup Servicer (for the avoidance of doubt, prior to Backup Servicer assuming the role of Servicer) pursuant to the Backup Servicing Agreement or the Backup Servicing Fee Letter.
“Bank Rate” means, for any Purchaser for any Yield Period, an interest rate per annum (rounded to the nearest 1/10,000th of 1%) equal to (a) the Eurodollar Rate for such Yield Period multiplied by (b) the Statutory Reserve Rate; provided, that in the case of any Yield Period on or after the first day of which the applicable Purchaser Agent shall have been notified by a Liquidity Bank or the related Purchaser that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Liquidity Bank or such Purchaser to fund its Investment based on the Eurodollar Rate set forth above (and such Liquidity Bank or such Purchaser, as applicable, shall not have subsequently notified such Purchaser Agent that such circumstances no longer exist), the “Bank Rate” for each such Yield Period shall be an interest rate per annum equal to the Base Rate in effect on each day of such Yield Period. Notwithstanding the foregoing, the “Bank Rate” for each day in a Yield Period occurring during the continuance of a Termination Event shall be an interest rate equal to 2% per annum above the Base Rate in effect on such day.
“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11U.S.C. § 101, et seq.), as amended and in effect from time to time.
“Base Rate” means, for any Purchaser for any day, a fluctuating interest rate per annum equal to the highest of: (a) the rate of interest most recently announced by the applicable Reference Bank as its prime commercial rate for loans made in Dollars in the United States or (b) [**]% per annum above the latest NYFRB Rate. For the avoidance of doubt, if the Base Rate as determined pursuant to the foregoing would be less than [**], such rate shall be deemed to be [**] for purposes of this Agreement.
“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate (which may be a SOFR-Based Rate) that has been selected by the Agent and the Seller giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the Eurodollar Rate for U.S. dollar-denominated syndicated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than [**], the Benchmark Replacement will be deemed to be [**] for the purposes of this Agreement; provided further that any such Benchmark Replacement shall be administratively feasible as determined by the Agent in its sole discretion.
“Benchmark Replacement Adjustment” means the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Agent and the Seller giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the Eurodollar Rate with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the Eurodollar Rate with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time (for the avoidance of doubt, such Benchmark Replacement Adjustment shall not be in the form of a reduction to the applicable rate).
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Yield Period,” timing and frequency of determining rates and making payments of interest and other administrative matters) that the Agent decides in its reasonable discretion may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement).
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the Eurodollar Rate:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Eurodollar Screen Rate permanently or indefinitely ceases to provide the Eurodollar Screen Rate; or
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the Eurodollar Rate:
(1) a public statement or publication of information by or on behalf of the administrator of the Eurodollar Screen Rate announcing that such administrator has ceased or will cease to provide the Eurodollar Screen Rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Eurodollar Screen Rate;
(2) a public statement or publication of information by the regulatory supervisor for the administrator of the Eurodollar Screen Rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for the Eurodollar Screen Rate, a resolution authority with jurisdiction over the administrator for the Eurodollar Screen Rate or a court or an entity with similar insolvency or resolution authority over the administrator for the Eurodollar Screen Rate, in each case which states that the administrator of the Eurodollar Screen Rate has ceased or will cease to provide the Eurodollar Screen Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Eurodollar Screen Rate; and/or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of the Eurodollar Screen Rate announcing that the Eurodollar Screen Rate is no longer representative.
“Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Agent or the Majority Purchasers, as applicable, by notice to the Seller, the Agent (in the case of such notice by the Majority Purchasers) and the Purchaser Agents.
“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the Eurodollar Rate and solely to the extent that the Eurodollar Rate has not been replaced with a Benchmark
Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the Eurodollar Rate for all purposes hereunder in accordance with Section 1.14 and (y) ending at the time that a Benchmark Replacement has replaced the Eurodollar Rate for all purposes hereunder pursuant to Section 1.14.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation in a form as agreed to by the Agent.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“BMO Harris Bank” means BMO Harris Bank N.A.
“Business Day” means any day on which (i) (A) the Agent at its branch office in Chicago, Illinois is open for business and (B) commercial banks in New York City are not authorized or required to be closed for business, and (ii) if this definition of “Business Day” is utilized in connection with the Eurodollar Rate, dealings are carried out in the London interbank market.
“Buyer’s Fees” means the fees paid by an Obligor to an auction or other commercial inventory source in connection with a purchase of a vehicle by such dealer.
“Carry Costs” means, with respect to any calendar month, the sum of the amounts of the following items that accrued or were incurred during such calendar month: (a) all Discount, (b) the Program Fee, (c) the Servicing Fee, (d) the Backup Servicing Fee and (e) all other expenses and fees of the Seller under the Agreement.
“Cash Reserve” means (i) at any time after the occurrence and during the continuation of a Level One Trigger, [**] of the aggregate Investment at such time and (ii) at any other time, an amount equal to 1% of the aggregate Investment at such time.
“Cash Reserve Account” means that certain bank account numbered [**] maintained at BMO Harris Bank subject to the security interest of Bank of Montreal as Agent and maintained for the benefit of the Secured Parties.
“Cash Reserve Account Bank” means the bank holding the Cash Reserve Account.
“Change in Control” means
(a) AFC shall fail to own, free and clear of all Adverse Claims, 100% of the outstanding shares of voting stock of the Seller, except as otherwise provided by the Pledge Agreement; or
(b) KAR shall fail to own, directly or indirectly, free and clear of all Adverse Claims (other than the KAR Credit Facility Pledge), at least 80% of the outstanding shares of voting stock of AFC, on a fully diluted basis.
“Closing Date” means September 29, 2020.
“Collections” means, with respect to any Pool Receivable, (a) all funds which are received by the Seller, the Originator or the Servicer (including amounts paid directly to an Originating Lender and subsequently forwarded to the Seller, the Originator or the Servicer) in payment of any amounts owed in respect of such Receivable (including, without limitation, principal payments, finance charges, floorplan fees, curtailment fees, interest and all other charges), or applied (or to be applied) to amounts owed in respect of such Receivable (including, without limitation, insurance payments and net proceeds of the sale or other disposition of vehicles or other collateral or property of the related Obligor or any other Person directly or indirectly liable for the payment of such Pool Receivable applied (or to be applied) thereto), (b) all Collections deemed to have been received pursuant to Section 1.9 and (c) all other proceeds of such Receivable.
“Company Note” has the meaning set forth in Section 3.2 of the Purchase and Sale Agreement.
“Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate (which may include compounding in arrears with a lookback and/or suspension period as a mechanism to determine the interest amount payable prior to the end of each Yield Period) being established by the Agent in accordance with:
(1) the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:
(2) if, and to the extent that, the Agent determines that Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that the Agent determines in its reasonable discretion are substantially consistent with any evolving or then-prevailing market convention for determining compounded SOFR for U.S. dollar-denominated syndicated credit facilities at such time;
provided, further, that if a Purchaser Agent objects, within five (5) Business Days of receipt thereof, to the rate, methodologies for such rate or conventions for such rate established by the Agent, the Agent shall negotiate in good faith with such Purchaser Agent to select a rate, methodologies for such rate and conventions for such rate reasonably acceptable to such Purchaser Agent; provided, further, that if the Agent decides that any such rate, methodology or convention determined in accordance with clause (1) or clause (2) is not administratively feasible for the Agent, then Compounded SOFR will be deemed unable to be determined for purposes of the definition of “Benchmark Replacement.”
“Contract” means, with respect to any Obligor, collectively, the Dealer Note issued by such Obligor, or similar agreement between such Obligor and AFC or an Originating Lender, as applicable, any guaranty issued in connection therewith and each other agreement or instrument
executed by an Obligor pursuant to or in connection with any of the foregoing, the purpose of which is to evidence, secure or support such Obligor’s obligations to AFC or each Originating Lender, as applicable, under such Dealer Note or other similar agreement.
“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the Yield Period with respect to the Eurodollar Rate.
“CP Rate” means, for any Purchaser for any Yield Period, to the extent such Purchaser funds any portion of its Investment for such Yield Period by the issuance of Notes, the rate equivalent to the weighted average cost (as determined by the applicable Purchaser Agent and which shall include dealer fees, incremental carrying costs incurred with respect to Notes maturing on dates other than those on which corresponding funds are received by the Purchaser, other borrowings by the Purchaser or its related commercial paper issuer if the Purchaser does not itself issue commercial paper to fund any Investment hereunder (other than under any Program Support Agreement), actual costs of swapping foreign currencies into Dollars to the extent the Notes are issued in a market outside the U.S. and any other costs associated with the issuance of Notes) of or related to the issuance of Notes that are allocated, in whole or in part, by the Purchaser or the applicable Purchaser Agent to fund or maintain such portion of the Investment (and which may be also allocated in part to the funding of other assets of the Purchaser); provided, however, that if the rate (or rates) is a discount rate, then the rate (or if more than one rate, the weighted average of the rates) shall be the rate resulting from converting such discount rate (or rates) to an interest -bearing equivalent rate per annum. It is understood and agreed that any Purchaser or Purchaser Agent may either “match fund” Notes or “pool fund” Notes to maintain any Investment and may select the duration of Notes maintaining the Investment in its discretion. Notwithstanding anything herein to the contrary, in no event shall the CP Rate be less than [**]. Notwithstanding the foregoing, the “CP Rate” for each day in a Yield Period occurring during the continuance of a Termination Event shall be an interest rate equal to 2% per annum above the Base Rate in effect on such day.
“Credit and Collection Policy” means those receivables credit and collection policies and procedures of the Servicer in effect on the date of the Agreement and provided to the Agent and the Purchaser Agents (including the core policies and procedures manuals and the credit policy manual), as modified in compliance with the Agreement.
“Curtailment Date” means, with respect to any Receivable, the date defined as such in the Contract for such Receivable.
“Dealer Note” means a note and security agreement in the form of the Originator’s form Demand Promissory Note and Security Agreement and any other promissory note issued by an Obligor in favor of AFC or the applicable Originating Lender.
“Debt” means (i) indebtedness for borrowed money (which shall not include, in the case of the Seller or AFC, accounts payable to any Affiliate in the ordinary course of business arising from the provision of goods and services by such Affiliate), (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price
of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of kinds referred to in clauses (i) through (iv) above, and (vi) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA.
“Default Ratio” means the ratio (expressed as a percentage and rounded upward to the nearest 1/100th of 1%) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables that became Defaulted Receivables during such month plus the aggregate amount of non-cash adjustments that reduced the Outstanding Balance of any Pool Receivable during such month (other than a Pool Receivable that became a Defaulted Receivable during such month) by (ii) the aggregate amount of Pool Receivables that were generated by the Originator (including those acquired by the Originator from any Originating Lender) during the calendar month that occurred five calendar months prior to the calendar month ending on such day.
“Defaulted Receivable” means a Pool Receivable:
(i) as to which any payment, or part thereof, remains unpaid for more than 90 days after the due date for such payment;
(ii) which, consistent with the Credit and Collection Policy, would be written off the Seller’s books as uncollectible; or
(iii) which is converted to a long term payment plan in the form of a note or other similar document.
“Deferred Purchase Date” has the meaning specified in Section 1.2(a).
“Deferring Purchaser” has the meaning specified in Section 1.2(a).
“Delinquency Ratio” means the ratio (expressed as a percentage and rounded upward to the nearest 1/100 of 1%) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables (net of all miscellaneous credits) that were Delinquent Receivables on such day by (ii) the aggregate Outstanding Balance of all Pool Receivables on such day.
“Delinquent Receivable” means a Pool Receivable which is not a Defaulted Receivable (i) as to which any payment, or part thereof, remains unpaid for more than 30 days after the due date for such payment or (ii) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the Seller.
“Deposit Account” means an account listed on Schedule II hereto and maintained at a bank or other financial institution for the purpose of receiving Collections.
“Deposit Account Agreement” means a letter agreement, in form and substance acceptable to the Agent, among the Seller, the Agent and the applicable Deposit Bank, as the same may be amended, supplemented, amended and restated, or otherwise modified from time to time in accordance with the Agreement.
“Deposit Bank” means any of the banks or other financial institutions at which one or more Deposit Accounts are maintained.
“Discount” means, with respect to each Purchaser:
(i) for the portion of Investment of its Participation for any Yield Period to the extent such Purchaser will be funding such portion of the Investment through the issuance of Notes and such Purchaser has elected by notice to the Servicer to charge its cost of funds,
(ii) for the portion of Investment of its Participation for any Yield Period to the extent such Purchaser will not be funding such portion of the Investment at the rate specified in clause (i) (a “Eurodollar Funding”),
where:
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BR
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the Bank Rate for the applicable portion of the Investment for such Yield Period
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the applicable portion of Investment during such Yield Period
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CPR
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the CP Rate of such Purchaser for the applicable portion of the Investment for such Yield Period
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ED
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the actual number of days during such Yield Period
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TF
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the Termination Fee, if any, for such portion of Investment of the Participation for such Yield Period;
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provided, that no provision of the Agreement shall require the payment or permit the collection of Discount in excess of the maximum permitted by applicable law; and provided, further, that Discount for any Investment of any Participation shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.
“Dividends” means any dividend or distribution (in cash or obligations) on any shares of any class of Seller’s capital stock or any warrants, options or other rights with respect to shares of any class of Seller’s capital stock.
“Dollars” means, and the conventional “$” signifies, the lawful currency of the United States.
“Early Opt-in Election” means the occurrence of:
(a) (i) a determination by the Agent or (ii) a notification by the Majority Purchasers to the Agent (with a copy to the Seller) that the Majority Purchasers have determined that U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 1.14 are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the Eurodollar Rate, and
(b) (i) the election by the Agent or (ii) the election by the Majority Purchasers to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Agent of written notice of such election to the Seller and the Purchaser Agents or by the Majority Purchasers of written notice of such election to the Agent.
“Eligible Contract” means a Contract in one of the forms delivered to and approved by the Purchaser Agents with such variations as AFC shall approve in its reasonable business judgment that shall not materially adversely affect the rights of the Originator or the Originating Lender, the Seller or the Purchasers.
“Eligible Receivable” means, at any time, any Receivable:
(a) which is denominated and payable only in Dollars, was originated by an Originating Lender and acquired by the Originator pursuant to an Originating Lender Sale Agreement or originated by the Originator in the ordinary course of business, was sold to the Seller pursuant to the Purchase and Sale Agreement and is either a general intangible, a payment intangible, an account or chattel paper;
(b) the Obligor of which is a resident of the United States and is not a government or a governmental subdivision or agency, provided, however, personal guarantees of a United States resident Obligor are permitted to be provided by Canadian residents, and provided further, a co-signer or co-guarantor may be a resident of a country other than the United States or Canada if there is at least one personal guaranty from a United States resident;
(c) in which the Agent (for the benefit of the Secured Parties) has a first priority, perfected security interest free from any Adverse Claim, and with respect to which the Agent has (i) a first priority perfected security interest in the vehicles financed thereby (except to the extent of any Permitted Liens), and (ii) a perfected security interest in all other Related Security with respect to such Receivable (to the extent that a security
interest in such other Related Security can be perfected by the filing of a financing statement);
(d) in which Seller has a first priority, perfected ownership interest, free from any Adverse Claim, and with respect to which the Seller has (i) a first priority perfected security interest in the vehicles financed thereby (except to the extent of any Permitted Liens), and (ii) a perfected security interest in all other Related Security with respect to such Receivable (to the extent that a security interest in such other Related Security can be perfected by the filing of a financing statement);
(e) which arises from the making of a loan to finance the purchase or retention of ownership of (i) an automobile or light duty truck, the ownership of which is evidenced by a certificate of title or electronic title, driven or drawn by mechanical power, manufactured primarily for use on the public streets, roads or highways with two axles, or (ii) a Specialty Vehicle;
(f) that is guaranteed by the related dealer’s parent, general partner or owners, provided that, in the Servicer’s discretion, guarantees shall not be required from (i) public companies, (ii) private equity firms or other similar entities, or (iii) passive partners or minority partners when an operating partner has provided a guarantee;
(g) which arises under an Eligible Contract that has been duly authorized and executed by the parties thereto and that, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable enforceable against such Obligor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law;
(h) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy);
(i) the sale of which pursuant to the Purchase and Sale Agreement, and the transfer of an undivided interest in which pursuant to this Agreement, do not contravene or conflict with any law, or require the consent of the Obligor or any other Person;
(j) with respect to which the Majority Purchasers have not given Seller at least five (5) Business Days’ notice that such Receivable will not be an Eligible Receivable hereunder, provided that such designation is in good faith and based on a reasonable business judgment by the Majority Purchasers that such Receivable should not be considered an Eligible Receivable;
(k) the Obligor of which is not an Affiliate of AFC, an Excluded Obligor or a father, mother, son or daughter (or any Affiliate thereof) of any officer or director of AFC or its Affiliates;
(l) for which AFC has taken (or caused to be taken) all commercially reasonable action to ensure that (i) the Obligor of such Receivable does not hold physical possession of the certificate of title or certificate of origin with respect to such Receivable (except for any Receivable originated in the State of Michigan and any other state where the Obligor is required to hold the certificate of title or certificate of origin), and (ii) in the case where there is only an electronic title (and not a physical title), the Seller (or the Originator or Originating Lender) is identified as lienholder in the electronic title records;
(m) which is not an Excluded Receivable, a Specified Ineligible Receivable, or a Title Attached Receivable;
(n) (i) which satisfies all applicable requirements of the Credit and Collection Policy, (ii) other than with respect to any Rental Receivable, whose terms require a minimum principal payment of not less than [**] plus accrued interest and fees on each Curtailment Date, provided that, subject to a Special Concentration Percentage, such minimum principal payment for a Receivable may be less than [**] so long as it is at least [**], (iii) for which all payments required to be made pursuant to the related Contract in connection with any Curtailment Date extension have not been waived and have been made within [**] of each such extension, (iv) whose terms (including the due date thereof) have not otherwise been amended or modified in any material respect and (v) other than with respect to any Rental Receivable, which has not been outstanding longer than [**];
(o) which is payable on demand and which the related Contract requires to be repaid on the earlier of (i) [**] following the sale of the vehicle such Receivable financed, and (ii) the Curtailment Date for such Receivable;
(p) which is not a Defaulted Receivable and which is not a Delinquent Receivable;
(q) from an Obligor not more than [**] of whose aggregate Outstanding Balance of all Receivables of such Obligor and its Affiliates are Defaulted Receivables;
(r) for which the Obligor has not “short-paid” the Receivable or paid with non-sufficient funds;
(s) from an Obligor that, to the knowledge of the Servicer or the Seller, has not admitted in writing its inability to pay its debts generally or made a general assignment for the benefit of creditors; and no proceeding has been instituted (and is continuing) by or against such Obligor seeking to adjudicate it bankrupt or insolvent, or seeking the liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property;
(t) if the Receivable is an Auction Credit, then (i) the wholesale auction is not fronting for a government or a governmental subdivision or agency, (ii) the Servicer has received a bill of sale evidencing the transaction between the wholesale auction and the purchasing dealer, (iii) the wholesale auction has been underwritten in accordance with the Credit and Collection Policy’s requirements for platinum dealers, (iv) a UCC has been filed against the wholesale auction, and (v) clauses (f) and (g) above shall be deemed to be satisfied if the wholesale auction, rather than the applicable dealer, signs the applicable Eligible Contract; and
(u) (i) except for any Contract which has been executed electronically, there is only one original, executed copy of such Contract held by the Servicer and (ii) for any Contract which has been executed electronically, such Contact has been executed in compliance with all applicable e-sign laws and the Servicer has access to an electronic copy of such Contract executed by all parties thereto which can be printed and used to enforce such Contract.
“Enforcement Costs” means, at any time, all unpaid costs and expenses incurred by the Agent in enforcing its rights and the rights of the other Indemnified Parties hereunder.
“Enhancement Build Trigger” means the occurrence of either (i) as of the last day of any calendar month, the Adjusted Net Spread for such calendar month is less than [**], or (ii) as of the last day of any calendar month, the Payment Rate for such calendar month shall be less than [**]; provided, that following each occurrence of an Enhancement Build Trigger, such trigger shall remain in effect until, for three consecutive calendar months, (i) the Adjusted Net Spread is greater than [**] and (ii) the Payment Rate is greater than [**] (in each case, as determined at the end of each such calendar month).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.
“ERISA Affiliate” shall mean, with respect to any Person, at any time, each trade or business (whether or not incorporated) that would, at the time, be treated together with such Person as a single employer under Section 4001 of ERISA or Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
“Eurodollar Funding” means any funding the Discount with respect to which is determined pursuant to clause (ii) of the definition of Discount.
“Eurodollar Rate” means, with respect to any day during a Yield Period, the Eurodollar Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Yield Period.
“Eurodollar Screen Rate” means, for any day during a Yield Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for U.S. Dollars for a three-month Yield Period as displayed on such day and time on the US0003M Index screen of Bloomberg that displays such rate (or, in the event such rate does not appear on such screen of Bloomberg, on any successor or substitute screen of Bloomberg that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Agent in its reasonable discretion); provided that if the Eurodollar Screen Rate as so determined would be less than [**]%, such rate shall be deemed to [**]% for the purposes of this Agreement.
“Excluded Obligor” means an Obligor so designated in writing as such by the Agent or the Majority Purchasers in a notice to the Seller in good faith and in the Agent’s or the Majority Purchasers’ reasonable judgment relating to credit considerations from time to time, it being understood that from time to time such designation may be revoked by written notice to the Seller.
“Excluded Receivable” means any Receivable that the Originator determines (prior to or concurrently with origination) (i) is clearly not contemplated by the Transaction Documents due to size, terms, ineligibility or commingling concerns and (ii) is not to be transferred to the Seller pursuant to the Purchase and Sale Agreement. The Seller and the Purchasers have no ownership or other interest in any Excluded Receivables. For the avoidance of doubt, as required by Exhibit IV(l)(xv), the Seller and the Servicer shall maintain a complete list of Excluded Receivables at all times and shall provide notice to the Purchaser Agents promptly following any changes thereto.
“Facility” means the purchase facility established by the Agreement.
“Fairway” means Fairway Finance Company, LLC.
“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal (for each day during such period) to: (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York, or (b) if such rate is not so published for any Business Day, the average of the quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. Notwithstanding anything herein to the contrary, in no event shall the Federal Funds Rate be less than 0.00%.
“Federal Reserve Bank of New York’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.
“Fee Letter” means, as to any Purchaser, the fee letter entered into by such Purchaser’s Purchaser Agent and the Seller as described more particularly in Section 1.5.
“Final Payout Date” means the date following the Termination Date on which no Investment or Discount in respect of any Participation under the Agreement shall be outstanding and all other amounts payable by the Originator, the Seller or the Servicer to the Purchasers, the Purchaser Agents, the Agent, the Backup Servicer, any successor Servicer or any other Affected Person under the Transaction Documents shall have been paid in full.
“Finance Charge and Floorplan Fee Collections” means, with respect to any calendar month, any Collections applied by the Servicer in such calendar month to the payment of interest and finance charges and all other amounts (other than principal) owed under a Contract.
“GAAP” means generally accepted accounting principles and practices in the United States, consistently applied.
“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including without limitation any court, and any Person owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
“Heavy Duty Truck” means [**].
“Indemnified Amounts” has the meaning set forth in Section 3.1.
“Indemnified Party” has the meaning set forth in Section 3.1.
“Insolvent” or “Insolvency” means, with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case (a) and (b) undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.
“Investment” means, with respect to any Purchaser, the aggregate of the amounts paid to the Seller in respect of the Participation of such Purchaser pursuant to the Agreement, reduced from time to time by amounts actually distributed and applied on account of such Investment pursuant to Section 1.4; provided, that if such Investment shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be
returned for any reason, such Investment shall be increased by the amount of such rescinded or returned distribution, as though it had not been made.
“Joinder Agreement” means a Joinder Agreement substantially in the form of Annex C and executed pursuant to Section 1.12.
“KAR” means KAR Auction Services, Inc., a Delaware corporation.
“KAR Credit Facility” means that certain Amended and Restated Credit Agreement, originally dated as of March 11, 2014, as amended by the Incremental Commitment Agreement and First Amendment, dated as of March 9, 2016, as amended by the Incremental Commitment Agreement and Second Amendment, dated as of May 31, 2017, as amended by the Third Amendment, dated as of September 19, 2019, as amended by the Fourth Amendment, dated as of May 29, 2020, and as amended by the Fifth Amendment, dated as of September 2, 2020, by and among KAR, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and agents party thereto, as the same may be amended, supplemented, restated or otherwise modified from time to time.
“KAR Credit Facility Pledge” means the pledge of AFC stock to secure the obligations under the KAR Credit Facility.
“KAR Financial Covenant” means the financial condition covenant set forth in Section 8.1 of the KAR Credit Facility. Such covenant (including all defined terms incorporated therein) will survive the termination of the KAR Credit Facility and can only be amended, modified, added or terminated from time to time with the prior written consent of the Majority Purchasers; provided, however, that as long as KAR’s senior secured debt shall be rated at least “BBB- (stable)” by S&P and at least “Baa3 (stable)” by Moody’s, the financial covenant will conform with the financial covenants required by KAR’s Credit Facility or any replacement facility without the consent of the Majority Purchasers.
“KAR Financial Covenant Event” means any breach of the KAR Financial Covenant.
“KAR Financial Covenant Termination Event” means, following the occurrence of a KAR Financial Covenant Event, the earliest to occur of (i) if a Majority Purchasers Notice Event has occurred, 120 days following the occurrence of such Majority Purchasers Notice Event, (ii) any KAR Restricted Amendment and (iii) the occurrence of a Majority Purchasers Notice Event resulting in the KAR Credit Facility being accelerated.
“KAR Restricted Amendment” means any action under or amendment to the KAR Credit Facility which, in the sole and absolute discretion of the Majority Purchasers, results in or may result in (i) an acceleration (in whole or in part) of principal or interest or the amount of principal or interest due under the KAR Credit Facility, (ii) the pledge of any additional collateral by AFC under the KAR Credit Facility (other than newly-acquired collateral of the same type as that already pledged thereunder, e.g., a newly-acquired additional trademark is pledged where all trademarks of the relevant entity had previously been pledged), (iii) any amendment to any provisions or the addition of any provision to the KAR Credit Facility regarding the Seller or its
assets or AFC as Originator or Servicer hereunder, (iv) any change, amendment or modification to AFC’s guaranty under the KAR Credit Facility or (v) any action by any party to the KAR Credit Facility against AFC’s guaranty under the KAR Credit Facility or the assets of AFC.
“Legal Final Maturity Date” means the first Settlement Date on or after the date that is two years after the Termination Date.
“Level One Trigger” means the occurrence of any of the following (i) as of the last day of any calendar month, the arithmetic average of the Net Spread [**], (ii) the Delinquency Ratio is greater than [**] or (iii) as of the last day of any calendar month, the arithmetic average of the Payment Rate [**]; provided, however, that following each occurrence of a Level One Trigger, such trigger shall remain in effect until [**].
“Liquidation Account” means that certain bank account numbered 181-446-6 maintained at BMO Harris Bank in Chicago, Illinois or such other account at such other bank approved by the Agent, with the Purchasers and their respective Purchaser Agents receiving notice that such account is maintained at such bank, in either case, which is in the name of “Liquidation Account, Bank of Montreal as Agent,” and pledged, on a first-priority basis, by the Seller to the Agent pursuant to Section 1.2(d).
“Liquidation Account Bank” means the bank holding the Liquidation Account.
“Liquidity Agreement” means any loan or asset purchase agreement or similar agreement whereby a Note Issuer party hereto as a Purchaser obtains commitments from financial institutions to support its funding obligations hereunder and/or to refinance any Notes issued to fund the Note Issuer’s Investment hereunder.
“Liquidity Bank” has the meaning set forth in Section 6.3(b).
“Loss Percentage” means, on any date, the greatest of [**].
“Loss Reserve” means, for any date and any Participation, an amount equal to the product of [**].
“Lot Check” means, with respect to any Obligor, a physical inspection of such Obligor’s financed vehicles and which may include a review of such Obligor’s books and records related thereto.
“Majority Purchasers” means Purchasers having a share of the Aggregate Participation equal to or greater than [**].
“Majority Purchasers Notice Event” means, following the occurrence of a KAR Financial Covenant Event, the Majority Purchasers have provided the Agent and Seller with written notice of the Majority Purchasers’ declaration of a KAR Financial Covenant Termination Event.
“Marine Craft” means [**].
“Material Adverse Effect” means, with respect to any event or circumstance, a material adverse effect on:
(a) the business, operations, property or financial condition of the Seller or the Servicer;
(b) the ability of the Seller or the Servicer to perform its obligations under this Agreement or any other Transaction Document to which it is a party or the performance of any such obligations;
(c) the validity or enforceability of this Agreement or any other Transaction Document;
(d) the status, existence, perfection, priority or enforceability of the Agent’s interest (for the benefit of the Secured Parties) in the Pool Receivables or Related Security; or
(e) the collectibility of the Pool Receivables.
“Maximum Amount” means the lesser of (i) $1,600,000,000 or (ii) the sum of the Maximum Commitments of all Purchasers.
“Maximum Commitment” means, with respect to a Purchaser, the maximum Dollar amount of Investment that such Purchaser is willing to fund, as set forth on the signature pages of this Agreement, any Joinder Agreement or any assignment entered into pursuant to Section 6.3, as applicable, which amount may, following the written request of the Seller, be increased at any time with the written consent of such Purchaser.
“Moody’s” means Moody’s Investor Services, Inc.
“Motorcycle” means [**].
“Multiemployer Plan” means a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“Net Receivables Pool Balance” means, at any time, the amount determined pursuant to the calculation in Schedule III.
“Net Spread” means the annualized percentage equivalent of a fraction (computed as of the last day of each calendar month), the numerator of which is the excess of (x) all Finance Charge and Floorplan Fee Collections received and applied during such calendar month over (y) the sum of, without duplication, (i) the Carry Costs for such calendar month and (ii) the aggregate amount of non-cash adjustments that reduced the Outstanding Balance of any Pool Receivable during such calendar month (but excluding any Receivable that was included in the calculation of Net Spread pursuant to clause (ii) above in any previous calendar month); and the denominator of which is the average aggregate Outstanding Balances of the Pool Receivables during such calendar month.
“New Car” means [**].
“Normal Concentration Percentage” for any Obligor (other than Obligors subject to Special Concentration Percentages) means at any time [**].
“Note Issuer” means Fairway and any other Purchaser which funds its Investment and other investments by issuing short or medium term promissory notes.
“Notes” means, in the case of any Note Issuer, the short-term promissory notes issued or to be issued by such Note Issuer to fund its investments in accounts receivable or other financial assets.
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates as so determined shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Obligor” means, with respect to any Receivable, a Person obligated to make payments pursuant to the Contract relating to such Receivable; provided that Receivables generated by Affiliates of any Obligor shall be treated as if generated by such Obligor.
“Official Body” means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of any such government or political subdivision, or any court, tribunal, grand jury or arbitrator, or any accounting board or authority (whether or not a part of government) which is responsible for the establishment or interpretation of national or international accounting principles, in each case whether foreign or domestic.
“Originating Lender” means AFC Cal, LLC, a California limited liability company and each other entity approved in writing by the Purchaser Agents as an Originating Lender hereunder in their sole discretion.
“Originating Lender Sale Agreement” means each transfer agreement between an Originating Lender and the Originator; prior to the Receivables of any Originating Lender being treated as Eligible Receivables hereunder, the Majority Purchasers shall have consented to the form of Originating Lender Sale Agreement and each Rating Agency rating the Facility shall have received a copy thereof at least 5 Business Days prior to such Receivables receiving such treatment.
“Originator” has the meaning set forth in the Purchase and Sale Agreement.
“Outstanding Balance” means, with respect to any Receivable, the then unpaid principal amount of all advances or loans made to the related Obligor pursuant to the related Contract by AFC or the Originating Lender, as applicable, to the extent that (a) for auction purchases, such amount does not exceed 100% of the auction costs, including (i) Buyer’s Fees, (ii) inspection fees, (iii) reconditioning costs inclusive of light body work, light mechanical work or replacement parts not to exceed $500, (iv) transportation fees, [**] or (b) for non-auction purchases, such amount does not exceed the wholesale cost, including any applicable Buyer’s Fees as set forth on the related bill of sale or other similar document, for the related vehicles.
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight LIBOR borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the NYFRB as set forth on the Federal Reserve Bank of New York’s Website from time to time, and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate.
“Participation” means, with respect to any Purchaser at any time, the undivided percentage ownership interest of such Purchaser in (i) each and every Pool Receivable now existing or hereafter arising, other than any Pool Receivable that arises on or after the Termination Date, (ii) all of Seller’s right, title and interest in, to and under all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. Such undivided percentage interest shall be computed as
I + DP + LR
NRPB
where:
I = the Investment of such Participation at the time of computation as reduced by the amount of cash in the Deposit Accounts at the end of business on either (i) with respect to any Servicer Report, the last Business Day of the prior calendar month, or (ii) with respect to any Portfolio Certificate, the last Business Day of the prior calendar week, in each case that was wired to the respective Purchaser on the immediately following Business Day to pay down that Purchaser’s Investment.
LR = the Loss Reserve of such Participation at the time of computation (calculated after reducing the Purchaser’s Investment by the amount of cash in the Deposit Accounts at the end of business on either (i) with respect to any Servicer Report, the last Business Day of the prior calendar month, or (ii) with respect to any Portfolio Certificate, the last Business Day of the prior calendar week, in each case that was wired to the respective Purchaser on the second immediately following Business Day to pay down that Purchaser’s Investment).
DP = the aggregate unfulfilled purchase amounts of all Deferring Purchasers at such time.
NRPB = the Net Receivables Pool Balance at the time of computation.
Each Participation shall be determined from time to time pursuant to the provisions of Sections 1.2(a) and 1.3.
“Paydown Day” means any day that is not a Termination Day on which the conditions set forth in Section 2 of Exhibit II are not either satisfied or waived.
“Payment Rate” means the ratio (expressed as a percentage and rounded upward to the nearest 1/100th of 1%) computed as of the last day of each calendar month by dividing [**].
“Perfection Representation” means the representations, warranties and covenants set forth in Exhibit VII attached hereto.
“Performance Guaranty” means the Performance Guaranty, dated as of April 20, 2007, made by KAR in favor of the Agent for the benefit of the Secured Parties, as the same may be amended, supplemented or otherwise modified from time to time with the prior written consent of the Majority Purchasers.
“Permitted Investments” means (i) overnight obligations of the United States of America, (ii) time deposits or AAAm or AAAm-G rated money market accounts maintained at financial institutions rated at the time of investment not less than A-1 by S&P and P-1 by Moody’s, (iii) certificates of deposit that are not represented by instruments, have a maturity of one week or less and are issued by financial institutions rated at the time of investment not less than A-1 by S&P and P-1 by Moody’s and (iv) commercial paper rated at the time of investment not less than A-1 by S&P and P-1 by Moody’s and, in the cases of clauses (ii), (iii) and (iv), having a maturity date not later than (A) with respect to amounts on deposit in the Cash Reserve Account, the immediately succeeding Settlement Date and (B) with respect to amounts on deposit in the Liquidation Account, the earlier of (x) the next Settlement Date and (y) one week from the date of investment; provided, however, that the Majority Purchasers may, from time to time, upon three Business Days’ prior written notice to Servicer, remove from the scope of “Permitted Investments” any such obligations, certificates of deposit or commercial paper and specify to be within such scope, other investments. Each of the parties hereto agrees that, until consented to in writing by each of the Purchasers, only obligations described in clauses (i) (overnight obligations of the United States of America) and (ii) (time deposits maintained at financial institutions rated at the time of investment not less than A-1 by S&P and P-1 by Moody's) shall constitute Permitted Investments.
“Permitted Lien” means (i) any mechanic’s lien, supplier’s lien, materialman’s lien, landlord’s lien or similar lien arising by operation of law with respect to the Related Security and (ii) and liens for taxes, assessments or similar governmental charges or levies incurred in the ordinary course of business that are not yet due and payable or as to which any applicable grace period shall not have expired, or that are being contested in good faith by proper proceedings and for which adequate reserves have been established, but only so long as foreclosure with respect
to such a lien is not imminent and the use and value of the property to which the Adverse Claim attaches is not impaired during the pendency of such proceeding.
“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
“Plan” means, at a particular time, any employee benefit plan or other plan established, maintained or contributed to by the Seller or any ERISA Affiliate thereof that is covered by Title IV of ERISA.
“Pledge Agreement” means the Pledge Agreement dated May 31, 2002 between AFC and the Agent, as the same may be amended or modified with the prior written consent of the Majority Purchasers.
“Pool Receivable” means a Receivable conveyed to the Seller pursuant to the Purchase and Sale Agreement and not reconveyed to the Originator in accordance with the terms of the Purchase and Sale Agreement.
“Pool Receivable Documents” has the meaning set forth in paragraph (l)(iii) of Exhibit IV to the Agreement.
“Portfolio Certificate” means a certificate substantially in the form of Exhibit VI to the Agreement.
“Prior Agreement” has the meaning set forth in the Preliminary Statements.
“Program Fee” means, as to any Purchaser, the periodic fees set forth in the applicable Fee Letter.
“Program Support Agreement” means, as to any applicable Note Issuer party hereto as a Purchaser, the Liquidity Agreement and any other agreement (if any) entered into by any Program Support Provider providing for the issuance of one or more letters of credit for the account of the Purchaser, the issuance of one or more surety bonds for which the Purchaser is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, the sale by the Purchaser to any Program Support Provider of the Participation (or portions thereof) and/or the making of loans and/or other extensions of credit to the Purchaser in connection with the Purchaser’s securitization program, together with any letter of credit, surety bond or other instrument issued thereunder.
“Program Support Provider” as to any Note Issuer means and includes any Liquidity Bank and any other or additional Person (other than any customer of a Purchaser) now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, a Purchaser or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with any Note Issuer’s securitization program.
“Purchase and Sale Agreement” means the Amended and Restated Purchase and Sale Agreement, dated as of May 31, 2002, among the Originator and the Seller, as the same has been and may be modified, supplemented, amended and amended and restated from time to time in accordance with the Transaction Documents and with prior written consent of the Majority Purchasers.
“Purchase Notice” has the meaning set forth in Section 1.2(a).
“Purchaser” means Fairway, Bank of Montreal, Fifth Third Bank, National Association Thunder Bay Funding, LLC, PNC Bank, National Association, Chariot Funding LLC, Truist Bank and each other Person which becomes a “Purchaser” hereunder in accordance with the provisions of Section 1.12 or Section 6.3(a).
“Purchaser Agent” means, as to any Purchaser, the financial institution designated by such Purchaser as responsible for administering this Agreement on behalf of such Purchaser, together with any successors or permitted assigns acting in such capacity; if any Purchaser does not so designate another institution as its Purchaser Agent, such Purchaser shall be deemed to have designated itself as its Purchaser Agent and all references herein to such Purchaser’s Purchaser Agent shall mean and be references to such Purchaser.
“Purchaser Group” means each Purchaser Agent and the Purchasers for which such Purchaser Agent acts hereunder. A Purchaser Group may contain Purchasers with Maximum Commitments and Purchasers without Maximum Commitments. The Purchaser Agent of each Purchaser Group may allocate Investments to be made by the Purchasers in any Purchaser Group in its sole discretion with the agreement of such Purchasers.
“Purchaser’s Account” means (i) as to Fairway, the special account (account number ([**]) maintained at the office of BMO Harris Bank, or such other account as may be so designated in writing by its Purchaser Agent to the Seller and (ii) as to any other Purchaser, such account as may be so designated in writing by the applicable Purchaser Agent to the Seller and the Servicer.
“Purchasers’ Share” means the share of Collections deposited into the Deposit Accounts represented by the Aggregate Participation.
“Rating Agencies” means Moody’s and S&P, as applicable.
“Receivable” means any right to payment from any Person, whether constituting an account, chattel paper, instrument, payment intangible or a general intangible, arising from the providing of financing and other services by the Originator or the applicable Originating Lender to (i) new, used and wholesale automobile, light truck or other Specialty Vehicle dealers or to (ii) wholesale auctions under an Auction Credit, and includes the right to payment of any interest or finance charges and other obligations of such Person with respect thereto.
“Recreational Vehicle” means [**].
“Reference Bank” means Bank of Montreal, provided that if so agreed by the Seller, the Servicer and the Agent, each Purchaser which becomes a party hereto by virtue of Section 1.12 may designate a different Reference Bank for purposes of calculating the Base Rate applicable to such Purchaser’s Investment.
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulatory Change” has the meaning set forth in Section 1.8.
“Related Security” means, with respect to any Pool Receivable:
(a) all right, title and interest in and to all Contracts and other Pool Receivable Documents that relate to such Receivable;
(b) all security interests or liens and rights in property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, including all rights in vehicles securing or purporting to secure such payment and any insurance or other proceeds arising therefrom;
(c) all UCC financing statements covering any collateral securing payment of such Receivable;
(d) all guarantees and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise;
(e) all rights in any power of attorney delivered by the related Obligor; and
(f) all rights and claims of the Seller with respect to such Receivable pursuant to the Purchase and Sale Agreement.
“Relevant Governmental Body” means the Federal Reserve Board and/or the NYFRB, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB or, in each case, any successor thereto.
“Rental Receivable” means a Receivable which satisfies all of the requirements of the definition of Eligible Receivable except clause [**], provided [**], (ii) such Receivable must have a current maturity of [**], (iii) the applicable terms thereof must require [**], (iv) the Obligor thereof must be otherwise current on its obligations under the related Contract, (v) if applicable, [**].
“Reorganization” means, with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .22, .27 or .28 of PBGC Reg. §4043.
“Required Enhancement Percentage” means [**] or such lesser percentage agreed by all of the Purchaser Agents; provided, that following each occurrence of an Enhancement Build Trigger, any lesser percentage shall automatically increase to [**] until all Purchasers agree to a lesser percentage (for the avoidance of doubt, regardless of whether the Enhancement Build Trigger is cured in accordance with its terms); provided, further, any reductions to the Required Enhancement Percentage are subject to confirmation of the then–current rating of the Facility from any Rating Agency rating the Facility.
“Restricted Payments” has the meaning set forth in paragraph (o)(i) of Exhibit IV of the Agreement.
“Salvage Vehicle” means any vehicle [**]; provided that such vehicle [**] For purposes of the Net Receivables Pool Balance calculation, the value of Receivables that are originated for the purpose of financing Salvage Vehicles is limited to [**].
“Sanctioned Country” means, at any time, a country or territory which is the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
“S&P” means Standard and Poor’s Ratings Services.
“Secured Parties” means, collectively, the Purchasers, the Purchaser Agents, the Agent and the Program Support Providers.
“Seller” has the meaning set forth in the preamble to this Agreement.
“Seller Parties” means the Seller, the Originator and the Servicer.
“Seller’s Share” means the Seller’s share of Collections deposited into the Deposit Accounts, calculated as 100% minus the Aggregate Participation.
“Servicer” has the meaning set forth in the preamble to this Agreement.
“Servicer Report” means a report, in substantially the form of Annex B hereto.
“Servicer Report Date” means the 15th day of each month, or if such day is not a Business Day, the next Business Day.
“Servicing Fee” shall mean the fee referred to in Section 4.6.
“Settlement Date” means the 20th day of each calendar month or, if such day is not a Business Day, the following Business Day.
“Single Employer Plan” means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.
“SOFR” with respect to any day means the secured overnight financing rate published for such day by the NYFRB, as the administrator of the benchmark (or a successor administrator), on the Federal Reserve Bank of New York’s Website.
“SOFR-Based Rate” means SOFR, Compounded SOFR or Term SOFR.
“Special Concentration Percentage” means, as a percentage of the aggregate Eligible Receivables [**] at such time, without duplication:
(i) [**];
(ii) [**];
(iii) [**];
(iv) [**];
(v) [**];
(vi) [**];
(vii) [**];
(viii) [**];
(ix) [**]; and
(x) [**].
“Special Obligor” means any Obligors, together with their Affiliates, identified as a Special Obligor on the most recent Servicer Report by the Servicer.
“Specialty Vehicles” means [**].
“Specified Ineligible Receivables” means those Pool Receivables that the Servicer has identified as “Specified Ineligible Receivables” pursuant to Section 4.7.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the Agent is subject with respect to the Bank Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). Such reserve percentage shall include those imposed pursuant to Regulation D.
“Subsidiary” means, with respect to any Person, a corporation, partnership or other entity of which such Person and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors.
“Tangible Net Worth” means, with respect to any Person, the net worth of such Person calculated in accordance with GAAP after subtracting therefrom the aggregate amount of such Person’s intangible assets, including, without limitation, goodwill, franchises, licenses, patents, trademarks, tradenames, copyrights, service marks and brand names and capitalized software.
“Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Termination Date” means the earliest of (i) the Business Day which the Seller so designates by notice to the Agent at least 30 days in advance pursuant to Section 1.1(b), (ii) January 31, 2024, and (iii) the date determined pursuant to Section 2.2.
“Termination Day” means each day which occurs on or after the Termination Date, unless the occurrence of the Termination Date (if declared by the Majority Purchasers pursuant to Section 2.2) is waived in accordance with Section 6.1.
“Termination Event” has the meaning specified in Exhibit V.
“Termination Fee” means, with respect to any portion of the Investment of any Purchaser and any Yield Period during which any reduction of such portion of the Investment occurs on a date other than the date on which the Notes or Eurodollar Funding supporting such portion of Investment matures, the amount, if any, by which (i) the additional Discount (calculated without taking into account any Termination Fee) which would have accrued during the remainder of such period on the reductions of Investment had such reductions remained as Investment, exceeds (ii) the income, if any, received by the applicable Purchaser from investing the proceeds of such reductions of Investment, as determined by the related Purchaser Agent, which determination shall be binding and conclusive for all purposes, absent manifest error.
“Title Attached Receivable” means a Receivable which satisfies all of the requirements of the definition of Eligible Receivable and for which AFC has recorded an account payable
subject to the receipt of the certificate of title for the vehicle securing or purporting to secure such Receivable, but has not authorized the release of funds for such vehicle.
“Tractors” means [**].
“Transaction Documents” means the Agreement, the Deposit Account Agreements, the Purchase and Sale Agreement, each Originating Lender Sale Agreement, the Performance Guaranty, the Pledge Agreement, the Company Note, each Joinder Agreement, the Backup Servicing Agreement, the Backup Servicing Fee Letter (if any) and all other certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection with any of the foregoing, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with the Agreement.
“Transition Expenses” means all reasonable cost and expenses (including Attorney Costs) incurred by the Backup Servicer in connection with transferring servicing obligations under this Agreement, which shall not exceed the cap established in the Backup Servicing Agreement or the Backup Servicing Fee Letter.
“UCC” means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction.
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment; provided that, if the Unadjusted Benchmark Replacement as so determined would be less than zero, the Unadjusted Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.
“Unaffiliated Servicing Fees” means all Servicing Fees payable to an entity, that is not AFC, any Affiliate thereof, or the Backup Servicer, engaged as Servicer hereunder, as such entity and the Agent shall agree.
“United States” or “U.S.” means the United States of America.
“Unmatured Termination Event” means an event which, with the giving of notice or lapse of time, or both, would constitute a Termination Event.
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended.
“Yield Period” means, with respect to each portion of Investment of any Purchaser:
(a) initially the period commencing on the date of a purchase pursuant to Section 1.2 and ending on the last day of the calendar month of such purchase; and
(b) thereafter each calendar month; provided that the final Yield Period shall extend to the date of reduction of the Investment in full.
Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Indiana, and not specifically defined herein, are used herein as defined in such Article 9. Unless the context otherwise requires, “or” means “and/or,” and “including” (and with correlative meaning “include” and “includes”) means including without limiting the generality of any description preceding such term.
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to the Effectiveness of this Agreement. The effectiveness of the Agreement is subject to the condition precedent that the Agent shall have received on or before the date hereof the following, each in form and substance satisfactory to the Agent:
(a) A counterpart of the Agreement and the other Transaction Documents duly executed by the parties thereto.
(b) Certified copies of (i) the resolutions of the board of directors of each of the Seller and AFC authorizing the execution, delivery, and performance by the Seller and AFC of the Agreement and the other Transaction Documents, (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Agreement and (iii) the articles of incorporation and by-laws of the Seller and AFC (to the extent such documents have been modified since they were last delivered to the Agent).
(c) A certificate of the secretary or assistant secretary of the Seller and AFC certifying the names and true signatures of the officers of the Seller and AFC authorized to sign the Agreement and the other Transaction Documents.
(d) Favorable opinions of Ice Miller LLP, special counsel for the Seller and AFC, as to corporate, enforceability and such other matters as the Agent may reasonably request.
(e) Evidence of payment by the Seller of all fees, costs and expenses then due and payable to the Purchasers or the Agent (including, without limitation, any such fees payable under the Fee Letter), together with Attorney Costs of the Agent to the extent invoiced prior to or on such date, plus such additional amounts of Attorney Costs as shall constitute the Agent’s reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings.
(f) Such confirmations from the Rating Agencies as shall be required by any Purchaser in its sole discretion.
(g) Such other approvals, opinions or documents as the Agent may reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each purchase (including the initial purchase) and each reinvestment shall be subject to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered to the Agent on or prior to such purchase, in form and substance satisfactory to the Agent, (i) a completed Servicer Report with respect to the immediately preceding calendar month, dated within 30 days
prior to the date of such purchase (or a completed Portfolio Certificate, dated as of the last Business Day of the immediately preceding calendar week) and (ii) a completed Portfolio Certificate to the extent a daily Portfolio Certificate is required in accordance with Section 4.2(e) of the Agreement, and shall have delivered to the Agent such additional information as may reasonably be requested by the Agent.
(b) on the date of such purchase or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true):
(i) the representations and warranties contained in Exhibit III are true and correct on and as of the date of such purchase or reinvestment as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes a Termination Event or an Unmatured Termination Event; and
(iii) the sum of the aggregate of the Participations does not exceed 100%; and
(iv) the amount on deposit in the Cash Reserve Account is equal to or greater than the Cash Reserve; and
(c) the Agent shall have received such other approvals, opinions or documents it may reasonably request.
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Seller. The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated and in existence under the laws of the State of Indiana, and is duly qualified to do business, and is in good standing, as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified except where the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Seller of the Agreement and the other Transaction Documents to which it is a party, including the Seller’s use of the proceeds of purchases and reinvestments, (i) are within the Seller’s corporate powers, (ii) have been duly authorized by all necessary corporate action of the Seller, (iii) do not contravene or result in a default under or conflict with (1) the Seller’s charter or by-laws, (2) any law, rule or regulation applicable to the Seller, (3) any contractual restriction binding on or affecting the Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Seller or its property, and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of the Seller’s properties, where, in the cases of items (2), (3) and (4), such contravention, default or conflict has had or could reasonably be expected to have a Material Adverse Effect. The Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by the Seller.
(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for the due execution, delivery and performance by the Seller of the Agreement or any other Transaction Document to which it is a party other than those previously obtained or UCC filings.
(d) Each of the Agreement and the other Transaction Documents to which it is a party constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law.
(e) Since December 31, 2019 there has been no material adverse change in the business, operations, property or financial condition of the Seller or AFC, the ability of the Seller or AFC to perform its obligations under the Agreement or the other Transaction Documents to which it is a party or the collectibility of the Pool Receivables, or which affects the legality, validity or enforceability of the Agreement or the other Transaction Documents.
(f) (i) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Seller, threatened against the Seller before any Government Authority or
arbitrator and (ii) the Seller is not subject to any order, judgment, decree, injunction, stipulation or consent order of or with any Government Authority or arbitrator, that, in the case of each of foregoing clauses (i) and (ii), could reasonably be expected to have a Material Adverse Effect.
(g) The Seller is the legal and beneficial owner of the Pool Receivables free and clear of any Adverse Claim, excepting only Permitted Liens; and has acquired all of the Originator’s right, title and interest in, to and under the Related Security. Upon each purchase or reinvestment, the Agent (for the benefit of the Secured Parties) shall acquire a valid and enforceable perfected undivided percentage ownership interest, to the extent of the Aggregate Participation, in each Pool Receivable then existing or thereafter arising, free and clear of any Adverse Claim, excepting only Permitted Liens, in the Collections with respect thereto and in the Seller’s right, title and interest in, to and under the Related Security and proceeds thereof. The Agreement creates a security interest in favor of the Agent (for the benefit of the Secured Parties) in the items described in Section 1.2(d), and the Agent (for the benefit of the Secured Parties) has a first priority perfected security interest in such items. No effective financing statement or other instrument similar in effect naming AFC or the Seller as debtor or seller and covering any Contract or any Pool Receivable or the Related Security or Collections with respect thereto or any Deposit Account is on file in any recording office, except those filed in favor of the Agent (for the benefit of the Secured Parties) relating to the Agreement.
(h) [Reserved].
(i) Each Servicer Report, Portfolio Certificate, information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Agent or any Purchaser Agent in connection with the Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Agent and any such Purchaser Agent at such time) as of the date so furnished, and no such item contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.
(j) The principal place of business and chief executive office (as such terms are used in the UCC) of the Seller and the office(s) where the Seller keeps its records concerning the Pool Receivables are located at the address set forth under its signature to this Agreement.
(k) The names and addresses of all the Deposit Banks, together with the account numbers of the Deposit Accounts of the Seller at such Deposit Banks, are specified in Schedule II to the Agreement.
(l) The Seller is not in violation of any order of any court, arbitrator or Governmental Authority.
(m) Neither the Seller nor any Affiliate of the Seller has any direct or indirect ownership or other financial interest in any Purchaser, the Agent or any Purchaser Agent.
(n) No proceeds of any purchase or reinvestment will be used for any purpose that violates any applicable law, rule or regulation, including, without limitation, Regulations T, U and X of the Federal Reserve Board.
(o) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable as of the date of such calculation.
(p) No event has occurred and is continuing, or would result from a purchase in respect of, or reinvestment in respect of, any Participation or from the application of the proceeds therefrom, which constitutes a Termination Event.
(q) The Seller and the Servicer have complied in all material respects with the Credit and Collection Policy with regard to each Pool Receivable.
(r) The Seller has complied with all of the terms, covenants and agreements contained in the Agreement and the other Transaction Documents and applicable to it.
(s) The Seller’s complete corporate name is set forth in the preamble to the Agreement, and the Seller does not use and has not during the last six years used any other corporate name, trade name, doing-business name or fictitious name, and except for names first used after the date of the Agreement and set forth in a notice delivered to the Agent pursuant to paragraph (l)(vi) of Exhibit IV.
(t) The authorized capital stock of Seller consists of 1,000 shares of common stock, no par value, 100 shares of which are currently issued and outstanding. All of such outstanding shares are validly issued, fully paid and nonassessable and are owned (beneficially and of record) by AFC.
(u) The Seller has filed all federal and other tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing.
(v) The Seller is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(w) The Seller is not (i) a country, territory, organization, person or entity named on an Office of Foreign Asset Control (OFAC) list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
(x) No “accumulated funding deficiency” (within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA) exists with respect to any Single Employer Plan, and each Single Employer Plan has complied in all material respects with the applicable provisions of ERISA and the Internal Revenue Code. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits. Neither the Seller nor any ERISA Affiliate has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Seller nor any ERISA Affiliate would become subject to any liability under ERISA if the Seller or any such ERISA Affiliate were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
(y) During the preceding 12 calendar months, the aggregate principal balance of receivables in the Seller’s receivables portfolio that do not represent either (A) part or all of the sales price of merchandise (including automobiles, light duty trucks or Specialty Vehicles) or services or (B) loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance or services (including loans to finance the purchase of an automobile, light duty truck or Specialty Vehicle) was less than [**] of the aggregate principal balance of receivables held by the Seller.
(z) The Seller (or the Servicer on its behalf) has implemented and maintains in effect policies and procedures designed to ensure compliance by the Seller and its directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Seller and its officers and employees and, to the knowledge of the Seller, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. Neither (a) the Seller or, to the knowledge of the Seller, any of its directors, officers or employees, nor (b) to the knowledge of the Seller, any agent of the Seller that will act in any capacity in connection with or benefit from the facility established hereby, is a Sanctioned Person. No purchase of a Participation, use of proceeds thereof or other transaction contemplated by this Agreement will violate Anti-Corruption Laws or applicable Sanctions.
B. Representations and Warranties of the Servicer. The Servicer represents and warrants as follows:
(a) The Servicer is a corporation duly organized and in existence under the laws of the State of Indiana, and is duly qualified to do business, and is in good standing, as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified except where the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Servicer of the Agreement and the other Transaction Documents to which it is a party, (i) are within the Servicer’s corporate powers, (ii) have been duly authorized by all necessary corporate action on the part of the Servicer, (iii) do not contravene or result in a default under or conflict with (1) the Servicer’s
charter or by-laws, (2) any law, rule or regulation applicable to the Servicer, (3) any contractual restriction binding on or affecting the Servicer or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Servicer or its property, and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties, where, in the cases of items (2), (3) and (4), such contravention, default or conflict has had or could reasonably be expected to have a Material Adverse Effect. The Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by the Servicer.
(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for the due execution, delivery and performance by the Servicer of the Agreement or any other Transaction Document to which it is a party.
(d) Each of the Agreement and the other Transaction Documents to which it is a party constitutes 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 bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law.
(e) There is no pending or threatened action or proceeding affecting the Servicer before any Governmental Authority or arbitrator which could have a Material Adverse Effect.
(f) The Servicer has complied in all material respects with the Credit and Collection Policy with regard to each Pool Receivable.
(g) the Servicer is not subject to any order, judgment, decree, injunction, stipulation or consent order of or with any Governmental Authority or arbitrator, that, could reasonably be expected to have a Material Adverse Effect.
(h) Each Servicer Report, Portfolio Certificate, information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Agent or any Purchaser Agent in connection with the Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Agent and any such Purchaser Agent at such time) as of the date so furnished, and no such item contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.
(i) The principal place of business and chief executive office (as such terms are used in the UCC) of the Servicer and the office(s) where the Servicer keeps its records concerning the Pool Receivables are located at the address set forth under its signature to this Agreement or the Backup Servicing Agreement, as applicable.
(j) The Servicer is not in violation of any order of any court, arbitrator or Governmental Authority.
(k) Neither the Servicer nor any Affiliate of the Servicer has any direct or indirect ownership or other financial interest in any Purchaser, the Agent or any Purchaser Agent.
(l) The Servicer is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(m) The Servicer is not (i) a country, territory, organization, person or entity named on an OFAC list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
(n) The Servicer has implemented and maintains in effect policies and procedures designed to ensure compliance by the Seller Parties and their respective Subsidiaries, directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each of the Seller Parties, their respective Subsidiaries and their respective officers and employees and, to the knowledge of such Seller Party, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Seller Parties, any Subsidiary or, to the knowledge of the applicable Seller Party, any of their respective directors, officers or employees, or (b) to the knowledge of the applicable Seller Party, any agent of such Seller Party or any Subsidiary that will act in any capacity in connection with or benefit from the facility established hereby, is a Sanctioned Person. No purchase of a Participation, use of proceeds thereof or other transaction contemplated by this Agreement will violate Anti-Corruption Laws or applicable Sanctions.
EXHIBIT IV
COVENANTS
Covenants of the Seller and the Servicer. Until the latest of the Termination Date, the date on which no Investment of or Discount in respect of any Participation shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Purchasers, the Purchaser Agents, the Agent and any other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. Each of the Seller and the Servicer shall comply in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications, and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications, and privileges would not materially adversely affect the collectibility of the Receivables or the enforceability of any related Contract or the ability of the Seller or the Servicer to perform its obligations under any related Contract or under the Agreement.
(b) Offices, Records and Books of Account, Etc. The Seller shall provide the Agent with at least 60 days’ written notice prior to making any change in the Seller’s name or jurisdiction of organization or making any other change in the Seller’s identity or corporate structure (including a merger) which could impair or otherwise render any UCC financing statement filed in connection with this Agreement “seriously misleading” as such term is used in the applicable UCC; each notice to the Agent pursuant to this sentence shall set forth the applicable change and the proposed effective date thereof. The Seller and Servicer will also maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without limitation, records adequate to permit the daily identification of each Pool Receivable and all Collections of and adjustments to each existing Pool Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection Policy. Each of the Seller and the Servicer shall, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Pool Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy with regard to each Pool Receivable and the related Contract.
(d) Ownership Interest, Etc. The Seller shall, at its expense, take all action necessary or desirable to establish and maintain a valid and enforceable undivided ownership interest, to the extent of the Aggregate Participation, in the Pool Receivables (free and clear of any Adverse Claim excepting only Permitted Liens) and the Collections with respect thereto and
the Seller’s right, title and interest in, to and under the Related Security and the proceeds thereof, and a first priority perfected security interest in the items described in Section 1.2(d), in favor of the Agent (for the benefit of the Secured Parties), including, without limitation, taking such action to perfect, protect or more fully evidence the interest of the Agent (for the benefit of the Secured Parties) under the Agreement as the Agent may request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim (excepting only Permitted Liens) upon or with respect to, any or all of its right, title or interest in, to or under, any item described in Section 1.2(d) (including without limitation the Seller’s undivided interest in any Receivable, Related Security, or Collections, or upon or with respect to any account to which any Collections of any Receivables are sent), or assign any right to receive income in respect of any items contemplated by this paragraph (e); provided that the Seller or Servicer may sell any Defaulted Receivables (including any Contracts and Related Security with respect thereto and any judgment obtained thereon) to any Person who is not an Affiliate of the Seller or the Servicer (and does not own 5% or more of any equity interest in the Servicer or any Affiliate thereof and in which the Servicer, directly or indirectly, does not own, directly or indirectly, 5% or more of the equity of such Person) on arm’s-length terms in order to maximize collections thereon.
(f) Extension or Amendment of Receivables. After the occurrence and during the continuance of a Termination Event or an Unmatured Termination Event or after the Termination Date (or if a Termination Event or Unmatured Termination Event would result therefrom), neither the Seller nor the Servicer shall extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable in any material respect, or amend, modify or waive any term or condition of any related Contract in any material respect.
(g) Change in Business or Credit and Collection Policy. Without the prior written consent of the Majority Purchasers, neither the Seller nor the Servicer shall make any material change in the character of its business or in the Credit and Collection Policy, or any change in the Credit and Collection Policy that would adversely affect the collectibility of the Pool Receivables or the enforceability of any related Contract or the ability of the Seller or Servicer to perform its obligations under any related Contract or under the Agreement; provided that prior written consent shall not be required for changes to standard operating practices or procedures (excluding any changes to credit underwriting criteria), however, any Purchaser Agent can prevent a change, or require that a change be reversed, by notifying the Servicer that such Purchaser Agent reasonably believes such change would have a material adverse impact on the Pool Receivables.
(h) Audits. Each of the Seller and the Servicer shall, from time to time during regular business hours, upon reasonable prior notice as requested by the Agent, permit the Agent or its agents or representatives, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Seller or the Servicer relating to Pool Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices
and properties of the Seller and the Servicer for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Pool Receivables and the Related Security or the Seller’s or Servicer’s performance hereunder or under the Contracts with any of the officers, employees, agents or contractors of the Seller having knowledge of such matters; provided, however, that the Agent shall not be reimbursed for more than two such examinations in any year (including any examinations conducted pursuant to any other Transaction Document but excluding any audit conducted pursuant to Section 4.2(a)) unless (x) a Level One Trigger has occurred and is continuing, in which case the Agent shall be reimbursed for four such examinations per year in addition to any audits conducted pursuant to Section 4.2(a) or (y) a Termination Event or Unmatured Termination Event has occurred, in which case the Agent shall be reimbursed for all such examinations.
(i) Change in Deposit Banks, Deposit Accounts and Payment Instructions to Obligors. Neither the Seller nor the Servicer shall add or terminate any bank as a Deposit Bank or any account as a Deposit Account from those listed in Schedule II to the Agreement without (i) the prior written consent of the Agent and (ii) in the case of a new Deposit Account and/or Deposit Bank, the applicable Deposit Bank has executed, and the applicable Deposit Account is subject to, a Deposit Account Agreement consented to in writing by the Agent.
(j) Deposit Accounts. Each Deposit Account shall at all times be subject to a Deposit Account Agreement. Neither the Seller nor the Servicer will deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Deposit Account, the Liquidation Account or the Cash Reserve Account cash or cash proceeds other than Collections of Pool Receivables; provided that, with respect to the Deposit Accounts held at [**] (numbered [**] and [**]), only cash attributable to “cash collateral” (as such term is defined in the applicable Contract) shall be deposited into such account. In addition, any such “cash collateral” amounts so set aside with respect to a particular Obligor shall be held in the aforementioned Deposit Account until such amounts are either (i) transferred to the Liquidation Account, if such amounts are being applied to such Obligor’s related Receivables (in such event, the “cash collateral” so applied shall be deemed Collections) or (ii) returned to such Obligor, if such Obligor has paid its related Receivables in full or as specified in the related Contract documentation.
(k) Marking of Records. At its expense, the Seller (or the Servicer on its behalf) shall mark its master data processing records relating to Pool Receivables.
(l) Reporting Requirements. The Seller will provide to the Agent and each Purchaser Agent (in multiple copies, if requested by the Agent) (except that with respect to paragraphs (i), (ii), (iii) and (iv), the Seller will cause AFC (or, with respect to paragraph (iv), the Servicer), to provide to the Agent, each Purchaser Agent, the Backup Servicer (in the case of paragraph (iii)) and (in the case of items (iii)(a), (iv) and (xiv)) each Rating Agency rating the Facility, the following:
(i) (I) as soon as available and in any event within 45 days after the end of each fiscal quarter of AFC (including the end of each fiscal year) in a format acceptable to the Agent the consolidating balance sheet of AFC and its consolidated Subsidiaries as of the end of such quarter and statements of income
of AFC and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of such Person and (II) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of KAR, the unaudited consolidated balance sheet of KAR and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter;
(ii) (I) as soon as available and in any event within 90 days after the end of each fiscal year of KAR, a copy of the audited consolidated balance sheet of KAR and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, reported on by KPMG LLP or other independent certified public accountants of nationally recognized standing; (II) as soon as available and in any event within 90 days after the end of each fiscal year of KAR (A) audited financial statements for KAR which include a consolidating income statement and consolidating balance sheet showing the consolidation of AFC and its Subsidiaries into KAR’s audited financial statements and (B) an opinion of KPMG LLP or other independent certified public accountants acceptable to the Agent addressing such consolidating information either in an explanatory paragraph following the KAR audit opinion or in a separate report; and (III) if any Purchaser Agent provides AFC written notice on or prior to the 150th day before the end of any fiscal year of AFC that such Purchaser Agent desires the separate annual financial statements of AFC, as soon as available and in any event within 90 days after the end of each fiscal year of AFC, (A) a copy of the annual report for AFC and its consolidated Subsidiaries, containing financial statements for such year audited by KPMG LLP or other independent certified public accountants acceptable to the Agent, and (B) the consolidating balance sheet of AFC and the income statement of AFC for such year certified by the chief financial officer of AFC;
(iii) (a) as soon as available and in any event not later than the Servicer Report Date, a Servicer Report as of the calendar month ended immediately prior to such Servicer Report Date and (b) unless the Agent has otherwise agreed in writing, a Portfolio Certificate as of each Friday, delivered on the first Business Day of the next calendar week (or as of each Business Day to the extent required by Section 4.2(e)). Each Servicer Report shall contain a current list of all branch offices, loan processing offices or other locations at which records and documents relating to the Pool Receivables (including, without limitation, any related Contracts and vehicle certificates of title) (collectively, the “Pool Receivable Documents”) are held by the Servicer. The Servicer shall provide each Rating Agency rating the Facility with prior notice of any material change to the form of Servicer Report and get their consent thereto prior to implementing any such change.
(iv) as soon as possible and in any event within three days after the occurrence of each Termination Event and Unmatured Termination Event, a statement of the chief financial officer of the Seller setting forth details of such Termination Event or event and the action that the Seller has taken and proposes to take with respect thereto;
(v) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any ERISA Affiliate files with respect to a Plan under ERISA or the Internal Revenue Code with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any ERISA Affiliate receives from any of the foregoing or from any Multiemployer Plan to which the Seller or any ERISA Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on the Seller and/or any such ERISA Affiliate in excess of $250,000;
(vi) at least 60 days prior to any change in the Seller’s name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof;
(vii) such other information respecting the Pool Receivables, the Related Security (including inventory reports by branch, Obligor, vehicle identification number, and other descriptions sufficient to identify the Related Security) or the condition of operations, financial or otherwise, of the Seller or AFC as the Agent or any Purchaser Agent may from time to time reasonably request;
(viii) promptly after the Seller obtains knowledge thereof, notice of any litigation, regulatory ruling, default under any Originating Lender Sale Agreement or other event which could reasonably be expected to prevent any Originating Lender from originating Receivables or transferring Receivables to the Originator following origination;
(ix) promptly after the Seller obtains knowledge thereof, notice of the commencement of any proceedings instituted by or against any of the Seller, the Servicer or the Originator, as applicable, in any federal, state or local court or before any governmental body or agency, or before any arbitration board, in which the amount involved, in the case of the Servicer or Originator, is $500,000 or more and not covered by insurance or in which injunctive or similar relief is sought or any litigation or proceeding relating to any Transaction Document;
(x) promptly after the occurrence thereof, notice of any event or circumstance that could reasonably be expected to have a Material Adverse Effect;
(xi) notice of any material change to the Credit and Collection Policy or material change to the standard operation practices or procedures;
(xii) any amendment, waiver, extension, termination or replacement of the KAR Credit Facility (with a copy thereof) and an execution copy of the underlying credit agreement with respect to the KAR Credit Facility, in each case, upon execution thereof;
(xiii) as soon as possible and in any event within 30 days after the Seller knows or has reason to know of: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan that is a Single Employer Plan, a failure to make any required contribution to a Plan, the creation of any lien in favor of the Pension Benefit Guaranty Corporation or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the Pension Benefit Guaranty Corporation or the Seller or any ERISA Affiliate or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of any Plan;
(xiv) as soon as available and in any event upon the earlier to occur of (x) 45 days following the end of a fiscal quarter (90 days, in the case of the fourth fiscal quarter in any fiscal year) and (y) the day a compliance certificate is delivered pursuant to the KAR Credit Facility, a compliance certificate setting forth computations in reasonable detail satisfactory to the Majority Purchasers demonstrating compliance with the financial covenants of KAR thereunder;
(xv) promptly after any changes, the current list of Excluded Receivables; and
(xi) promptly following any changes in the ownership of the Borrower or AFC which shall require the delivery of a Beneficial Ownership Certification under the Beneficial Ownership Regulation or update to any of the information provided in any Beneficial Ownership Certification, an updated Beneficial Ownership Certification.
(m) Separate Corporate Existence. Each of the Seller and AFC hereby acknowledges that the Purchasers, the Agent and the Purchaser Agents are entering into the transactions contemplated by the Agreement and the Transaction Documents in reliance upon the Seller’s identity as a legal entity separate from AFC. Therefore, from and after the date hereof, the Seller and AFC shall take all reasonable steps to continue the Seller’s identity as a separate legal entity and to make it apparent to third Persons that the Seller is an entity with assets and liabilities distinct from those of AFC, the Originator and any other Person, and is not a division of AFC or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the covenant set forth in paragraph (a) of this Exhibit IV, the Seller and AFC shall take such actions as shall be required in order that:
(i) The Seller will be a limited purpose corporation whose primary activities are restricted in its articles of incorporation to purchasing Receivables from the Originator, entering into agreements for the servicing of such Receivables, selling
undivided interests in such Receivables and conducting such other activities as it deems necessary or appropriate to carry out its primary activities;
(ii) Not less than one member of Seller’s Board of Directors (the “Independent Directors”) shall be individuals who are not direct, indirect or beneficial stockholders, officers, directors, employees, affiliates, associates, customers or suppliers of the Originator or any of its Affiliates. The Seller’s Board of Directors shall not approve, or take any other action to cause the commencement of a voluntary case or other proceeding with respect to the Seller under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law, or the appointment of or taking possession by, a receiver, liquidator, assignee, trustee, custodian, or other similar official for the Seller unless in each case the Independent Directors shall approve the taking of such action in writing prior to the taking of such action. The Independent Directors’ fiduciary duty shall be to the Seller (and creditors) and not to the Seller’s shareholders in respect of any decision of the type described in the preceding sentence. In the event an Independent Director resigns or otherwise ceases to be a director of the Seller, there shall be selected a replacement Independent Director who shall not be an individual within the proscriptions of the first sentence of this clause (ii) or any individual who has any other type of professional relationship with the Originator or any of its Affiliates or any management personnel of any such Person or Affiliate and who shall be (x) a tenured professor at a business or law school, (y) a retired judge or (z) an established independent member of the business community, having a sound reputation and experience relative to the duties to be performed by such individual as an Independent Director;
(iii) No Independent Director shall at any time serve as a trustee in bankruptcy for Originator or any Affiliate thereof;
(iv) Any employee, consultant or agent of the Seller will be compensated from the Seller’s own bank accounts for services provided to the Seller except as provided herein in respect of the Servicing Fee. The Seller will engage no agents other than a Servicer for the Receivables, which Servicer will be fully compensated for its services to the Seller by payment of the Servicing Fee;
(v) The Seller will contract with the Servicer to perform for the Seller all operations required on a daily basis to service its Receivables. The Seller will pay the Servicer a monthly fee based on the level of Receivables being managed by the Servicer. The Seller will not incur any material indirect or overhead expenses for items shared between the Seller and the Originator or any Affiliate thereof which are not reflected in the Servicing Fee. To the extent, if any, that the Seller and the Originator or any Affiliate thereof share items of expenses not reflected in the Servicing Fee, such as legal, auditing and other professional services, such expenses will be allocated to the extent practical on the basis of actual use or the value of services rendered, and otherwise on a basis reasonably related to the actual use or the value of services rendered, it being understood that Originator shall pay all expenses relating to the preparation, negotiation, execution
and delivery of the Transaction Documents, including, without limitation, legal and other fees;
(vi) The Seller’s operating expenses will not be paid by Originator or any Affiliate thereof unless the Seller shall have agreed in writing with such Person to reimburse such Person for any such payments;
(vii) The Seller will have its own separate mailing address and stationery;
(viii) The Seller’s books and records will be maintained separately from those of the Originator or any Affiliate thereof;
(ix) Any financial statements of the Originator or KAR which are consolidated to include the Seller will contain detailed notes clearly stating that the Seller is a separate corporate entity and has sold ownership interests in the Seller’s accounts receivable;
(x) The Seller’s assets will be maintained in a manner that facilitates their identification and segregation from those of the Originator and any Affiliate thereof;
(xi) The Seller will strictly observe corporate formalities in its dealings with the Originator and any Affiliate thereof, and funds or other assets of the Seller will not be commingled with those of the Originator or any Affiliate thereof. The Seller shall not maintain joint bank accounts or other depository accounts to which the Originator or any Affiliate thereof (other than AFC in its capacity as Servicer) has independent access and shall not pool any of the Seller’s funds at any time with any funds of the Originator or any Affiliate thereof;
(xii) The Seller shall pay to the Originator the marginal increase (or, in the absence of such increase, the market amount of its portion) of the premium payable with respect to any insurance policy that covers the Seller and any Affiliate thereof, but the Seller shall not, directly or indirectly, be named or enter into an agreement to be named, as a direct or contingent beneficiary or loss payee, under any such insurance policy, with respect to any amounts payable due to occurrences or events related to the Originator or any Affiliate thereof (other than the Seller); and
(xiii) The Seller will maintain arm’s length relationships with the Originator and any Affiliate thereof. The Originator or any Affiliate thereof that renders or otherwise furnishes services to the Seller will be compensated by the Seller at market rates for such services. Neither the Seller nor the Originator or any Affiliate thereof will be or will hold itself out to be responsible for the debts of the other or the decisions or actions respecting the daily business and affairs of the other.
(n) Mergers, Acquisitions, Sales, etc.
(i) The Seller shall not:
(A) be a party to any merger or consolidation, or directly or indirectly purchase or otherwise acquire, whether in one or a series of transactions, all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or sell, transfer, assign, convey or lease any of its property and assets (including, without limitation, any Pool Receivable or any interest therein) other than pursuant to this Agreement;
(B) make, incur or suffer to exist an investment in, equity contribution to, loan, credit or advance to, or payment obligation in respect of the deferred purchase price of property from, any other Person, except for obligations incurred pursuant to the Transaction Documents; or
(C) create any direct or indirect Subsidiary or otherwise acquire direct or indirect ownership of any equity interests in any other Person.
(o) Restricted Payments.
(i) General Restriction. Except in accordance with subparagraph (ii), the Seller shall not (A) purchase or redeem any shares of its capital stock, (B) declare or pay any Dividend or set aside any funds for any such purpose, (C) prepay, purchase or redeem any subordinated indebtedness of the Seller, (D) lend or advance any funds or (E) repay any loans or advances to, for or from the Originator. Actions of the type described in this clause (i) are herein collectively called “Restricted Payments”.
(ii) Types of Permitted Payments. Subject to the limitations set forth in clause (iii) below, the Seller may make Restricted Payments so long as such Restricted Payments are made only to the Originator and only in one or more of the following ways:
(A) Seller may make cash payments (including prepayments) on the Company Note in accordance with its terms; and
(B) if no amounts are then outstanding under the Company Note, the Seller may declare and pay Dividends.
(iii) Specific Restrictions. The Seller may make Restricted Payments only out of Collections paid or released to the Seller pursuant to Section 1.4(b). Furthermore, the Seller shall not pay, make or declare:
(A) any Dividend if, after giving effect thereto, Seller’s Tangible Net Worth would be less than [**]; or
(B) [**].
(p) Use of Seller’s Share of Collections. Subject to clause (o) above, the Seller shall apply its share of Collections to make payments in the following order of priority: first, the payment of its expenses (including, without limitation, the obligations payable to Purchasers, the Affected Persons, the Agent, the Purchaser Agents and the Agent under the
Transaction Documents), second, the payment of accrued and unpaid interest on the Company Note, third, the payment of the outstanding principal amount of the Company Note, and fourth, other legal and valid corporate purposes permitted by the Agreement.
(q) Amendments to Certain Documents.
(i) The Seller shall not amend, supplement, amend and restate, or otherwise modify the Purchase and Sale Agreement, the Company Note, any other document executed under the Purchase and Sale Agreement, the Deposit Account Agreements, the Backup Servicing Agreement, the Backup Servicing Fee Letter (if any) or the Seller’s articles of incorporation or by-laws, except (A) in accordance with the terms of such document, instrument or agreement and (B) with the prior written consent of the Agent. The Seller shall obtain confirmation of the then–current rating of the Facility from any Rating Agency rating the Facility prior to amending the Seller’s articles of incorporation.
(ii) The Servicer shall maintain a complete list of Excluded Receivables and shall update such list on a timely basis for all changes thereto.
(iii) The Originator shall not enter into, or otherwise become bound by, any agreement, instrument, document or other arrangement that restricts its right to amend, supplement, amend and restate or otherwise modify, or to extend or renew, or to waive any right under, this Agreement or any other Transaction Document.
(r) Incurrence of Indebtedness. Except for Debt incurred pursuant to the Company Note and liabilities incurred pursuant to or in connection with the Transaction Documents or otherwise permitted therein, the Seller shall not (i) create, incur or permit to exist any Debt or liability, (ii) cause or permit to be issued for its account any letters of credit or bankers’ acceptances, or (iii) enter into any swap or derivative contract.
(s) Lot Checks. The Seller shall, or shall cause the Servicer to, conduct Lot Checks of the Obligors according to the Originator’s customary practices or such more frequent intervals as may reasonably be requested by the Agent.
(t) Cash Collateral Amounts. With respect to each Eligible Receivable, if the related Contract (or related documentation) includes a “cash collateral” feature, then all such “cash collateral” shall be deposited to the Deposit Accounts held at [**] (numbered [**] and [**]) and such amounts shall be used to secure the obligations of the related Obligor.
(u) Article 122a. On any date on which the Net Receivables Pool Balance is greater than zero (1) AFC shall own 100% of the outstanding equity (including amounts represented by the Loss Reserve) of the Seller; (2) the equity in the Seller shall represent at least [**] of the Net Receivables Pool Balance (i.e., by virtue of the Loss Percentage being in excess of [**]); (3) AFC shall not enter into any credit risk mitigation short positions or any other hedges with respect to its equity interest in the Seller or the Eligible Receivables (including amounts represented by the Loss Reserve); (4) in each Servicer Report, AFC shall represent (a)
that it continues to own 100% of the outstanding equity of the Seller and (b) that no credit risk mitigation, short positions or any other hedges with respect to its equity interest in the Seller or the Eligible Receivables (including amounts represented by the Loss Reserve) have been entered into; and (5) AFC shall provide to any Purchaser or Purchaser Agent which is subject to European Union Directive 2006/48/EC (the “CRD”) all information which such Purchaser or Purchaser Agent reasonably requests or requires in order for such Purchaser or Purchaser Agent to comply with its obligations under Article 122(a)(4) and (5) of the CRD.
(v) The Servicer shall maintain in effect and enforce policies and procedures designed to ensure compliance by the Seller Parties and each of their respective Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. The Servicer covenants and agrees not to use, and shall procure that none of the Seller Parties, their Subsidiaries or their respective directors, officers, employees and agents shall use, the proceeds of any purchase of a Participation hereunder (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person or in any Sanctioned Country, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a “Termination Event”:
(a) Any Person which is the Servicer shall fail to (1) make when due any payment or deposit to be made by it under the Agreement or any other Transaction Document or (2) set aside or allocate all accrued and unpaid Program Fee, Discount or Servicing Fee in accordance with Section 1.4(b) and in each case, such failure shall remain unremedied for two Business Days after the earlier of (i) the Servicer’s knowledge of such failure and (ii) notice to the Servicer of such failure; or
(b) The Seller shall fail (i) to transfer to any successor Servicer when required any rights, pursuant to the Agreement, which the Seller then has with respect to the servicing of the Pool Receivables, or (ii) to make any payment required under the Agreement or any other Transaction Document, and in either case such failure shall remain unremedied for two Business Days after notice or discovery thereof; or
(c) Any representation or warranty made or deemed made by the Seller or the Servicer (or any of their respective officers) under or in connection with the Agreement or any other Transaction Document or any information or report delivered by the Seller or the Servicer pursuant to the Agreement or any other Transaction Document shall prove to have been incorrect, incomplete (with respect to such information or report delivered) or untrue in any material respect when made or deemed made or delivered; provided, however, if the violation of this paragraph (c) by the Seller or the Servicer may be cured without any potential or actual detriment to any Purchaser, the Agent, any Purchaser Agent, the Backup Servicer or any Program Support Provider, the Seller or the Servicer, as applicable, shall have 30 days from the earlier of (i) such Person’s knowledge of such failure and (ii) notice to such Person of such failure to so cure any such violation before a Termination Event shall occur so long as such Person is diligently attempting to effect such cure; or
(d) The Seller or the Servicer shall fail to perform or observe any other material term, covenant or agreement contained in the Agreement or any other Transaction Document on its part to be performed or observed and any such failure shall remain unremedied for 30 days after the earlier of (i) such Person’s knowledge of such failure and (ii) notice to such Person of such failure (or, with respect to a failure to deliver the Servicer Report or the Portfolio Certificate pursuant to the Agreement, such failure shall remain unremedied for five days); or
(e) (i) A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Debt of the Seller, AFC or KAR or (ii) a default shall occur in the performance or observance of any obligation or condition with respect to such Debt if the effect of such default is to accelerate the maturity of any such Debt, and, in the case of either clause (i) or clause (ii), the Debt with respect to which non-payment and/or non-performance shall have occurred exceeds, at any point in time, with respect
to the Seller or AFC, $1,000,000 in the aggregate for all such occurrences or, with respect to KAR, $35,000,000, in the aggregate for all such occurrences; or
(f) The Agreement or any purchase or any reinvestment pursuant to the Agreement shall for any reason (other than pursuant to the terms hereof) (i) cease to create, or the Aggregate Participation shall for any reason cease to be, a valid and enforceable perfected undivided percentage ownership interest to the extent of the Aggregate Participation in each Pool Receivable free and clear of any Adverse Claim, excepting only Permitted Liens and the Collections with respect thereto and the Seller’s right, title and interest in, to and under the Related Security and the proceeds thereof, or (ii) cease to create with respect to all of Seller’s right, title and interest in, to and under the items described in Section 1.2(d)(A) – (F), or the interest of the Agent (for the benefit of the Secured Parties) with respect to such items shall cease to be, a valid and enforceable first priority perfected security interest, and in the case of the Pool Receivables, free and clear of any Adverse Claim, excepting only Permitted Liens; or
(g) The Originator, KAR or Seller shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Originator, KAR or Seller seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 45 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Originator, KAR or Seller shall take any corporate action to authorize any of the actions set forth above in this paragraph (g); or
(h) As of the last day of any calendar month, the arithmetic average of the Default Ratios for the most recent [**] shall exceed [**] or the Default Ratio as of the last day of any calendar month shall exceed [**]; or
(i) As of the last day of any calendar month, the arithmetic average of the Delinquency Ratios for the most recent [**] shall exceed [**] or the Delinquency Ratio as of the last day of any calendar month shall exceed [**]; or
(j) as of the last day of any calendar month, the arithmetic average of the Net Spread for the most recent [**] shall be less [**]; or
(k) at any time, the Aggregate Participation exceeds 100% and such condition shall continue unremedied for five days after any date any Servicer Report or Portfolio Certificate is required to be delivered; or
(l) A Change in Control shall occur; or
(m) (i) Any “accumulated funding deficiency” (within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (ii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Purchasers, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iii) the Seller or any ERISA Affiliate shall, or in the reasonable opinion of the Majority Purchasers, is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, (iv) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Internal Revenue Code with regard to any assets of the Seller or any ERISA Affiliate and such lien shall not have been released within ten Business Days, or the Pension Benefit Guaranty Corporation shall, or shall indicate its intention to, file notice of a lien pursuant to Section 4068 of ERISA or perfect a lien under Section 302(f) of ERISA with regard to any of the assets of Seller or any ERISA Affiliate, or (v) any other adverse event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i), (ii), (iii), (iv) and (v) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to involve an aggregate amount of liability to the Seller or an ERISA Affiliate in excess of $10,000,000; or
(n) The Tangible Net Worth of the Seller shall be less than [**] or the Tangible Net Worth of the Originator shall be less than [**] (provided that if GAAP is adjusted such that leases that were previously treated as operating leases are treated as debt, the parties shall negotiate in good faith to adjust this provision to reflect a level which takes into consideration such change); or
(o) Any material adverse change shall occur in the reasonable business judgment of the Agent or the Majority Purchasers in the collectibility of the Pool Receivables or the business, operations, property or financial condition of the Originator or the Seller; or
(p) The Termination Date shall occur or any Purchase and Sale Termination Event (as defined in the Purchase and Sale Agreement) shall occur (whether or not waived by the Seller); or
(q) The Performance Guaranty shall cease to be in full force and effect with respect to KAR, KAR shall fail to comply with or perform any provision of the Performance Guaranty, or KAR (or any Person by, through or on behalf of KAR) shall contest in any manner the validity, binding nature or enforceability of the Performance Guaranty with respect to KAR; or
(r) the sum of all of AFC’s Debt (i) excluding intercompany loans between AFC and KAR, (ii) excluding any guarantee of KAR’s Debt under the KAR Credit Facility, and (iii) including the outstanding balance of any other recourse transactions (which excludes the Investment of the Aggregate Participation under this Agreement and any Canadian securitization obligations) exceeds the sum of [**] plus the aggregate unfulfilled purchases of all Deferring Purchasers at such time (provided that if GAAP is adjusted such that leases that were previously
treated as operating leases are treated as debt, the parties shall negotiate in good faith to adjust this provision to reflect a level which takes into consideration such change); or
(s) AFC’s Debt (excluding guarantees) to equity ratio is greater than [**] (provided that if GAAP is adjusted such that leases that were previously treated as operating leases are treated as debt, the parties shall negotiate in good faith to adjust this provision to reflect a level which takes into consideration such change); or
(t) The aggregate Outstanding Balances of Eligible Receivables shall be less than $100,000,000; or
(u) The amount on deposit in the Cash Reserve Account shall at any time fail to equal or exceed the Cash Reserve for a period of [**]; or
(v) (i) any of the Originator, the Seller or the Servicer shall have asserted that any of the Transaction Documents to which it is a party is not valid and binding on the parties thereto; or (ii) any court, governmental authority or agency having jurisdiction over any of the parties to any of the Transaction Documents or any property thereof shall find or rule that any material provisions of any of the Transaction Documents is not valid and binding on the parties thereto and all appeals therefrom have been decided or the time to appeal has run; or
(w) the Backup Servicer shall resign or be terminated and no successor Backup Servicer reasonably acceptable to the Agent shall have been appointed pursuant to a replacement Backup Servicing Agreement within 90 days of such resignation or termination; unless on or prior to the first day in which a Backup Servicer is required to be appointed pursuant to this paragraph (w) KAR’s senior unsecured debt shall be rated at least “BBB-” by S&P and “Baa3” by Moody’s; provided, that a Termination Event shall be deemed to occur if no Backup Servicer reasonably acceptable to the Agent shall have been appointed within 90 days following any subsequent withdrawal, suspension or downgrade of such senior unsecured debt ratings of KAR below “BBB-” by S&P or below “Baa3” by Moody’s or, if the applicable rating is “BBB-” by S&P or “Baa3” by Moody’s, the placement of such ratings on credit watch or similar notation; or
(x) the occurrence of a KAR Financial Covenant Termination Event; or
(y) as of the last day of any calendar month, the arithmetic average of the Payment Rate for the most recent [**] shall be less than [**]; or
(z) As reported on its consolidated balance sheet, AFC shall fail to maintain (as measured as of the last Business Day of each calendar week) cash and cash equivalents (including, without limitation, any intercompany receivable payable by KAR to AFC upon demand) of at least [**], at least [**] of which must constitute unrestricted cash (i.e., cash that is neither (i) pledged to a third party unrelated to this facility, nor (ii) in an account in which a third party unrelated to this facility has a perfected security interest).
EXHIBIT VI
PORTFOLIO CERTIFICATE
On file with the Agent
EXHIBIT VII
PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS
In addition to the representations, warranties and covenants contained in the Agreement, to induce Purchasers and Agent to enter into the Agreement and, in the case of Purchasers, to purchase the Participation hereunder, the Seller hereby represents, warrants and covenants to Agent and the Purchasers as to itself as follows on the Closing Date and on the date of each purchase and reinvestment in the Participation thereafter:
General
1. The Agreement creates a valid and continuing security interest (as defined in the Indiana UCC) in the Pool Receivables in favor of the Agent, for the benefit of the Secured Parties, which security interest is prior to all other Adverse Claims, and is enforceable as such as against creditors of and purchasers from the Seller.
2. The Pool Receivables constitute “accounts,” “payment intangibles,” “general intangibles,” “instruments” or “tangible chattel paper,” within the meaning of the Indiana UCC.
3. The Cash Reserve Account, the Deposit Accounts and the Liquidation Account and all subaccounts of such accounts, constitute either a “deposit account” or a “securities account” within the meaning of the Indiana UCC.
4. The Originator or the Originating Lender, as applicable, thereof has perfected its security interest against the Obligors in the property securing the Pool Receivables (to the extent that a security interest in such property can be perfected by the filing of a financing statement).
Creation
5. The Seller owns and has good and marketable title to the Pool Receivables free and clear of any Adverse Claim, claim or encumbrance of any Person, excepting only Permitted Liens.
6. Originator has received all consents and approvals to the sale of the Pool Receivables to the Seller required by the terms of the Receivables that constitute instruments or payment intangibles.
Perfection
7. Each of the Originator and the Seller has caused or will have caused, within ten days after the effective date of the Agreement, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the sale of the Receivables from Originator to the Seller pursuant to the Purchase
and Sale Agreement and the security interest therein granted by the Seller to the Agent, for the benefit of the Secured Parties, hereunder; and Originator or Originating Lender has in its possession the original copies of such instruments or tangible chattel paper that constitute or evidence the Pool Receivables, and all financing statements referred to in this paragraph contain a statement to the effect that: A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Agent, for the benefit of the Secured Parties.
8. With respect to Pool Receivables that constitute an instrument or tangible chattel paper:
Such instruments or tangible chattel paper is in the possession of the Servicer and the Agent has received a written acknowledgment from the Servicer that the Servicer is holding such instruments or tangible chattel paper solely on behalf and for the benefit of the Agent, on behalf of the Secured Parties, and each of the Originator and the Seller has caused or will have caused, within ten days after the effective date of the Agreement, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law, and all financing statements referred to in this paragraph contain a statement to the effect that: A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Agent, for the benefit of the Secured Parties.
9. With respect to the Cash Reserve Account, the Deposit Accounts and the Liquidation Account and all subaccounts of such accounts that constitute deposit accounts, either:
(i) The Seller has delivered to the Agent, for the benefit of the Secured Parties, a fully executed agreement pursuant to which the bank maintaining the deposit accounts has agreed to comply with all instructions originated by the Agent, for the benefit of the Secured Parties, directing disposition of the funds in such accounts without further consent by the Seller; or
(ii) The Seller has taken all steps necessary to cause the Agent, on behalf of the Secured Parties, to become the account holder of such accounts.
10. With respect to the Cash Reserve Account, the Deposit Accounts and the Liquidation Account or subaccounts of such accounts that constitute “securities accounts” or “securities entitlements” within the meaning of the Indiana UCC:
(i) The Seller has delivered to the Agent, for the benefit of the Secured Parties, a fully executed agreement pursuant to which the securities intermediary has agreed to comply with all instructions originated by the Agent, for the benefit of the Secured Parties, relating to such account without further consent by the Seller; or
(ii) The Seller has taken all steps necessary to cause the securities intermediary to identify in its records the Agent, for the benefit of the Secured Parties, as the
person having a security entitlement against the securities intermediary in each of such accounts.
Priority
11. Other than the transfer of the Receivables to the Seller under the Purchase and Sale Agreement and the security interest granted to the Agent, for the benefit of the Secured Parties, pursuant to this Agreement, neither the Seller nor the Originator has pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Pool Receivables or the Cash Reserve Account, the Deposit Accounts, the Liquidation Account or any subaccount of such accounts. Neither the Seller nor the Originator has authorized the filing of, or is aware of any financing statements against the Seller or the Originator that include a description of collateral covering the Pool Receivables or the Cash Reserve Account, the Deposit Accounts, the Liquidation Account or any subaccount of such accounts other than any financing statement relating to the security interest granted to the Agent, for the benefit of the Secured Parties, hereunder or that has been terminated.
12. Neither the Seller nor the Originator is aware of any judgment, ERISA or tax lien filings against either the Seller or the Originator.
13. None of the instruments or tangible chattel paper that constitute or evidence the Pool Receivables has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Seller or the Agent, for the benefit of the Secured Parties.
14. Neither the Cash Reserve Account, the Deposit Accounts, the Liquidation Account nor any subaccount of such accounts are in the name of any person other than the Seller or the Agent, on behalf of the Secured Parties. The Seller has not consented to the securities intermediary of any such account to comply with entitlement orders of any person other than the Agent, on behalf of the Secured Parties.
15. Survival of Perfection Representations. Notwithstanding any other provision of the Agreement or any other Transaction Document, the Perfection Representations contained in this Exhibit VII shall be continuing, and remain in full force and effect (notwithstanding any termination of the commitments or any replacement of the Servicer or termination of Servicer’s rights to act as such) until such time as Investments and all other obligations under the Agreement have been finally and fully paid and performed.
16. No Waiver. The parties to the Agreement: (i) shall not, without obtaining a confirmation of the then-current rating of the Facility, waive any of the Perfection Representations; and (ii) shall provide each Rating Agency rating the Facility with prompt written notice of any breach of the Perfection Representations, and shall not, without obtaining a confirmation of the then-current rating of the Facility (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the Perfection Representations.
17. Servicer to Maintain Perfection and Priority. The Servicer covenants that, in order to evidence the interests of the Agent, on behalf of the Secured Parties, under this Agreement, Servicer shall take such action, or execute and deliver such instruments (other than effecting a Filing (as defined below), unless such Filing is effected in accordance with this paragraph) as may be necessary or advisable including, without limitation, such actions as are requested by the Agent, on behalf of the Secured Parties, to maintain and perfect, as a first priority interest (subject only to Permitted Liens), the Agent’s, on behalf of the Secured Parties’, security interest in the Pool Receivables and Collections with respect thereto and the Seller’s right, title and interest in, to and under the Related Security and the proceeds thereof. Servicer shall, from time to time and within the time limits established by law, prepare and present to the Agent, on behalf of the Secured Parties, for the Agent, on behalf of the Secured Parties, to authorize (based in reliance on the opinion of counsel hereinafter provided for) the Servicer to file, all financing statements, amendments, continuations, initial financing statements in lieu of a continuation statement, terminations, partial terminations, releases or partial releases, or any other filings necessary or advisable to continue, maintain and perfect the Agent’s, on behalf of the Secured Parties’, security interest in the Pool Receivables and Collections with respect thereto and the Seller’s right, title and interest in, to and under the Related Security and the proceeds thereof as a first-priority interest (subject only to Permitted Liens) (each a “Filing”). Servicer shall present each such Filing to the Agent, on behalf of the Secured Parties, together with (x) an opinion of counsel as to perfection and such other matters as the Agent may reasonably request with respect to such Filing, and (y) a form of authorization for the Agent’s, on behalf of the Secured Parties’ signature. Upon receipt of such opinion of counsel and form of authorization, the Agent, on behalf of the Secured Parties, shall promptly authorize in writing Servicer to, and Servicer shall, effect such Filing under the Uniform Commercial Code without the signature of Originator, the Seller, or the Agent, on behalf of the Secured Parties where allowed by applicable law. Notwithstanding anything else in the Agreement to the contrary, the Servicer shall not have any authority to effect a Filing without obtaining written authorization from the Agent, on behalf of the Secured Parties, in accordance with this paragraph (17).
Exhibit 10.16
CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.
[**] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Execution Copy
FIFTH AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
BETWEEN
AUTOMOTIVE FINANCE CANADA INC.
- and -
KAR AUCTION SERVICES, INC.
- and -
PRECISION TRUST
Dated as of September 30, 2020
McCarthy Tétrault LLP
TABLE OF CONTENTS
Schedule "A" Form of Purchase Request
Schedule "B" Location of Records
Schedule "C" Form of Servicer Report
Schedule "D" Form of Portfolio Certificate
Schedule "E" Deposit Accounts
Schedule "F" Form of Increase Request
Schedule "G" Form of Quebec Assignment
Schedule "H" Net Receivables Pool Balance Calculation
FIFTH AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
MEMORANDUM OF AGREEMENT dated as of September 30, 2020.
B E T W E E N:
AUTOMOTIVE FINANCE CANADA INC.,
a corporation incorporated under the laws of the Province of Ontario,
(hereinafter referred to as the "Seller" and the initial "Servicer"),
- and -
KAR AUCTION SERVICES, INC.,
a corporation incorporated under the laws of Delaware,
(hereinafter referred to as the "Performance Guarantor" or "KAR"),
- and -
BNY TRUST COMPANY OF CANADA,
a trust company incorporated under the laws of Canada and licensed to carry on business as a trustee in each of the provinces of Canada, in its capacity as trustee of Precision Trust, a trust established pursuant to the laws of the Province of Ontario,
(hereinafter referred to as the "Trust"),
WHEREAS the Seller, the Performance Guarantor and the Trust entered into a fourth amended and restated receivables purchase agreement dated as of December 20, 2016 (as amended prior to the date hereof, the "Amended and Restated RPA") pursuant to which from time to time the Seller sold to the Trust and the Trust purchased from the Seller, an undivided co-ownership interest in the Seller's present and future Receivables and the Related Security related thereto on a fully serviced basis, all in accordance with the terms of the Amended and Restated RPA;
AND WHEREAS the Performance Guarantor agreed to guarantee the obligations of the Servicer under the Amended and Restated RPA in accordance with the terms thereof;
AND WHEREAS the parties to the Amended and Restated RPA now desire to amend and restate the Amended and Restated RPA on the terms and conditions set out herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the covenants and agreements of the parties herein contained and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties), the parties hereby covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1Definitions
In this Agreement, unless the context requires otherwise, the following terms shall have the following meanings:
"Adjusted Net Spread" means the annualized percentage equivalent of a fraction (computed as of the last day of each calendar month), the numerator of which is the excess of (x) all Finance Charge and Floorplan Fee Collections received and applied during such calendar month (including recoveries) over (y) the sum of, without duplication, (i) the Carry Costs for such calendar month, (ii) the aggregate amount of Receivables that became Defaulted Receivables during such calendar month, and (iii) the aggregate amount of non-cash adjustments that reduced the Principal Balance of any Pool Receivable during such calendar month (but excluding any Receivable that was included in the calculation of Net Spread pursuant to clause (ii) above in any previous calendar month); and the denominator of which is the average aggregate Principal Balances of the Pool Receivables during such calendar month;
"AFC" means Automotive Finance Corporation, an Indiana corporation;
"Affected Person" has the meaning ascribed thereto in Section 10.3(b);
"Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person;
"Agreement" means this agreement as amended, restated, supplemented or otherwise modified from time to time;
"Auction Credit" means a Receivable pursuant to which a wholesale auction has granted credit for the purpose of a float sale agreement with dealers, provided that the wholesale auction shall be the "Obligor" of such Receivable and shall be subject to the Normal Concentration Percentage and the Special Concentration Percentage, as applicable;
"Backup Servicer" means Wells Fargo Bank, National Association, and any other backup servicer subsequently appointed pursuant to the terms of the Backup Servicing Agreement;
"Backup Servicing Agreement" means (i) the backup servicing agreement dated September 30, 2020 between Wells Fargo Bank, National Association, the Servicer and the Trust; and (ii) any replacement backup servicing agreement entered into from time to time with the prior written consent of the Trust, in each case as such agreements may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof;
"Backup Servicing Fee Letter" means (i) the Backup Servicing Agreement, setting forth the Backup Servicing Fees payable to the Backup Servicer and (ii) any replacement backup servicing fee letter entered into from time to time with the prior written consent of the Trust, in each case
as such letters may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof;
"Backup Servicing Fees" means all fees and reimbursable expenses (excluding Transition Expenses) payable pursuant to the Backup Servicing Agreement or the Backup Servicing Fee Letter (for the avoidance of doubt, prior to the Backup Servicer assuming the role of Servicer);
"Blocked Account Agreement" means the blocked account agreements referred to in Section 3.1(l);
"Blocked Account Claims" means any Security Interest in favour of a bank or other financial institution under a Blocked Account Agreement;
"BMONB" means BMO Nesbitt Burns Inc.;
"Business Day" means any day (other than a Saturday, Sunday or public holiday) on which banks are open for business in Toronto, Ontario, but excluding any public holiday in the United States identified by the Seller as not constituting a "Business Day" for the purposes of this Agreement;
"Buyer’s Fees" means the fees paid by an Obligor to an auction or other commercial inventory source in connection with a purchase of a vehicle by such Obligor;
"Carry Costs" means, with respect to any Collection Period, the sum of the amounts of the following items that accrued or were incurred during such Collection Period: (a) the Funding Discount, (b) the Standby Fee, (c) the Replacement Servicer Fee, or, to the extent no Replacement Servicer Fee is payable during such Collection Period, the Notional Servicer Fee, (d) the Backup Servicing Fees and (e) all other expenses and fees payable by the Seller under this Agreement;
"Cash Deposit Amount" means, with respect to the Purchase or any Increase, an amount sufficient to ensure that after effecting such Purchase or Increase, the amount contained in the Cash Reserve Account is equal to the Cash Reserve Required Amount;
"Cash Payment" means, in respect of the Purchase the amount set forth in the Purchase Request as the "Cash Payment" and, in respect of each Increase, the amount set forth in the related Increase Request as the "Cash Payment";
"Cash Reserve Account" means an Eligible Deposit Account established in the name of the Trust and designated as the Cash Reserve Account for the purposes hereof, the balance of which shall be subject to the control of the Trust for the benefit of the Trust and the Seller and applied in accordance with the terms hereof, which account shall bear interest and shall initially be account number [**], transit number [**], maintained at the main [**];
"Cash Reserve Event" means as of any Settlement Date, (i) the arithmetic average of the Net Spread for [**], (ii) the Delinquency Ratio is greater than [**], or (iii) the arithmetic average of
the Payment Rate for [**]; provided, however, that following each occurrence of a Cash Reserve Event, such trigger shall remain in effect until [**];
"Cash Reserve Excess Amount" means, on any Remittance Date, the amount of cash on deposit in the Cash Reserve Account after giving effect to any payments into and from the Cash Reserve Account on such Remittance Date in excess of the Cash Reserve Required Amount;
"Cash Reserve Required Amount" means, on any day the sum of (a) after the occurrence and during the continuation of a Cash Reserve Event, [**] of the Investment on such day, and (b) on any other day, 1.0% of the Investment on such day;
"Closing Date" means September 30, 2020, or such other date as may be mutually agreed between the parties;
"Collection Account" means an Eligible Deposit Account established in the name of the Trust, in trust for and on behalf of the Trust and the Seller, which account shall initially be account number [**], transit number [**] maintained at [**];
"Collection Costs" means, in respect of a Collection Period, all reasonable out-of-pocket costs and expenses of the Servicer (if other than the Seller, the Backup Servicer or any Affiliate thereof) and the Trust in administering the Pool Assets and collecting amounts payable thereunder and enforcing the Related Security related thereto, including reasonable legal expenses of the Servicer or the Trust;
"Collection Period" means the period from and including the first day of a calendar month to and including the last day of such calendar month, provided that the first Collection Period will begin at the close of business on February 9, 2010 and end on (and include) February 28, 2010 and the last Collection Period will be the Collection Period in which the Final Termination Date occurs;
"Collections" means, with respect to the Pool Receivables, (a) all funds which are received by the Seller, the Servicer or the Trust in payment of any amounts owed in respect of such Receivables (including, without limitation, principal payments, finance charges, floorplan fees, curtailment fees, interest and all other charges), or applied (or to be applied) to amounts owed in respect of such Receivables (including, without limitation, insurance payments and net proceeds of the sale or other disposition of vehicles or other collateral or property of the related Obligors or any other Person directly or indirectly liable for the payment of Pool Receivables applied (or to be applied) thereto), (b) all Collections deemed to have been received pursuant to Section 5.17, (c) all other proceeds of such Receivables, and (d) without duplication, all other amounts deposited to the Deposit Accounts or the Collection Account hereunder;
"Contract" means, with respect to any Obligor, collectively, the Dealer Note issued by such Obligor, or similar agreement between such Obligor and the Seller, any guarantee issued in connection therewith and each other agreement or instrument executed by an Obligor pursuant to or in connection with any of the foregoing, the purpose of which is to evidence, secure or support such Obligor's obligations to the Seller under such Dealer Note or other similar agreement, forms
of all such Dealer Notes and other agreement forms having been delivered to and approved by the Trust;
"Credit and Collection Policies" means those receivables credit and collection policies and procedures of the Servicer in effect on the date of this Agreement and provided to the Trust (including the core policies and procedures manuals and the credit policy manual), as modified in compliance with this Agreement;
"Curtailment Date" means, with respect to any Receivable, the date specified as such in the Contract for such Receivable;
"Dealer Note" means a note and security agreement substantially in the form of the Seller's standard form demand promissory note and security agreement and any other promissory note issued, or agreement made by, an Obligor in favor of the Seller;
"Default Ratio" means the ratio (expressed as a percentage and rounded upward to the nearest 1/100th of 1%) computed as of each Settlement Date by dividing (i) the aggregate Principal Balance of all Receivables (other than Specified Ineligible Receivables) that became Defaulted Receivables during the related Collection Period plus the aggregate amount of non-cash adjustments that reduced the Principal Balance of any Receivable during such Collection Period (other than a Receivable that became a Defaulted Receivable during such Collection Period) by (ii) the aggregate amount of Receivables (other than Specified Ineligible Receivables) that were generated by the Seller during the Collection Period that occurred five calendar months prior to the Collection Period ending on such Settlement Date;
"Defaulted Receivable" means a Pool Receivable:
(a)as to which any payment, or part thereof, remains unpaid for more than 90 days after the due date for such payment;
(b)which, consistent with the Credit and Collection Polices, would be written off the Seller's books as uncollectible; or
(c)which is converted to a long term payment plan in the form of a note or other similar document;
"Deferred Increase Date" has the meaning ascribed thereto in Section 2.1(c);
"Deferred Purchase Price" means the aggregate of amounts paid to the Seller in respect of the Deferred Purchase Price pursuant to Sections 2.7(f), 2.10(f) and 2.14;
"Delinquency Ratio" means the ratio (expressed as a percentage and rounded upward to the nearest 1/100 of 1%) computed as of each Settlement Date by dividing (i) the aggregate Principal Balance of all Receivables (other than Specified Ineligible Receivables) that were Delinquent Receivables on such Settlement Date, by (ii) the Pool Balance (less the aggregate Principal Balance of all Specified Ineligible Receivables) on such Settlement Date;
"Delinquent Receivable" means a Pool Receivable which is not a Defaulted Receivable (i) as to which any payment, or part thereof, remains unpaid for more than 30 days after the due date for such payment, or (ii) which, consistent with the Credit and Collection Policies, would be classified as delinquent by the Seller;
"Deposit Accounts" means the Eligible Deposit Accounts established in the name of the Servicer, in trust for and on behalf of the Trust and the Seller, which accounts shall be separate and segregated from the Servicer's own assets and shall initially be the accounts listed in Schedule "E", as such Schedule may be updated from time to time by the Servicer with the approval of the Trust;
"Eligible Deposit Account" means either (a) a deposit account with an Eligible Institution, or (b) a segregated trust account with the corporate trust department of a depositary institution organized under the laws of Canada or a province thereof and authorized to act as a trustee for funds deposited in such account, so long as any of the securities of such depositary institution shall have a credit rating from Moody’s in one or more of its generic credit rating categories which signifies investment grade;
"Eligible Institution" means a depositary institution which (x) at all times (a) has either (i) a long-term unsecured debt rating not lower than A2 by Moody’s, or (ii) a short-term rating not lower than P-1 by Moody’s, or (b) has its obligations with respect to the relevant matter guaranteed by an institution with the ratings referred to in (a), or (y) has been approved in writing by Moody’s;
"Eligible Investments" means, at any particular date, book-based securities, negotiable instruments or securities, in each case maturing not later than the Business Day preceding the next succeeding Remittance Date after such date represented by instruments in bearer or registered form which evidence any of:
(a) direct obligations of, or obligations fully guaranteed as to the timely payment of principal and interest by, the Government of Canada or the government of British Columbia, Alberta or Ontario, provided any such government is rated not less than P-1 by Moody’s;
(b) any security having a rating of at least P-1 by Moody’s, but for greater certainty, excluding any security that is extendable by its terms;
(c) any other class of investments approved in writing by the Trust (other than those set out in (a) and (b) above); and
(d) without limiting the generality of the foregoing, if qualified under (b) or (c) above, securities of the Bank of Montreal and any Affiliate thereof may be considered Eligible Investments for the purposes of this definition;
"Eligible Receivable" means, at any time, a Receivable:
(a)the Obligor of which (i) is a Person that is a resident of Canada and located in a province or territory of Canada or is a co-signer or co-guarantor who is a resident of another country (provided there is at least one personal guaranty from a Canadian resident), (ii) is not the Government of Canada or any agency or instrumentality thereof or any federal crown corporation, and (iii) is not any provincial or territorial government or agency thereof;
(b)that is not a Defaulted Receivable or Delinquent Receivable;
(c)which is denominated and payable to the Seller only in Canadian dollars in Canada;
(d)which, together with the related Contract and Related Security, has been originated or acquired in Canada by the Seller in the ordinary course of business;
(e)which arises under a Contract which, together with such Receivable and the Related Security in respect thereof, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor thereof, enforceable by the Seller and its assigns against such Obligor in accordance with its terms subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and to equitable principles of general application;
(f)which is secured by the Related Security which contains customary and enforceable provisions such that the rights and remedies of the Seller and its assigns are adequate for realization against the collateral of the benefits of the security, including the Related Security of such Receivable, subject to the limitations on enforceability in (e) above;
(g)in respect of which the Related Vehicle and Proceeds Security, as against creditors of the applicable Obligor, is a perfected, valid, subsisting and enforceable Security Interest in the Financed Vehicle in favour of the Seller, perfected by all necessary or appropriate filings, registrations, recordings or other actions in each jurisdiction necessary to ensure the perfection of such Security Interest for the term thereof and which, in respect of the Related Vehicle Security, is subject only to Security Interests in favour of other Persons which are subordinate in priority to the Related Vehicle Security, Operation of Law Claims and Government and Employee Claims, and provided that, to the knowledge of the Seller at such time, no enforcement or collection proceedings have been commenced in respect of any such Security Interest, Operation of Law Claim or Government and Employee Claim;
(h)for which the interest of the Seller in the Receivable and the Related Security related thereto and the Contract giving rise thereto, as against creditors of the Seller, is free and clear of all Security Interests and rights of others, other than
Government and Employee Claims, Operation of Law Claims, Blocked Account Claims and those created pursuant to this Agreement;
(i)upon the purchase of an interest in such Receivable and the Related Security in respect thereof by the Trust, the Trust will obtain good and marketable title to the Trust's Co-Ownership Interest therein free and clear of any Security Interest created by, or arising through, the Seller (as opposed to a Security Interest created by, or arising through an Obligor) other than Blocked Account Claims;
(j)the sale of which pursuant to the terms hereof does not contravene or conflict with any law, rules or regulations applicable thereto, or require the consent of the Obligor or any other Person;
(k)in respect of which, to the knowledge of the Seller, no enforcement action, whether by repossession or otherwise, has been taken by any Person in respect of the related Financed Vehicle;
(l)there is no federal, provincial or local law or ordinance under which such Receivable or the Related Security is subject to any Taxes, nor will any payment or remittance to be made by or on behalf of the Seller on its own behalf or on behalf of any Obligor under this Agreement be subject to any Taxes; provided, however, that this statement shall not extend to any Taxes payable by, or required to be withheld by the Seller on account of Taxes payable on the income or capital of the Trust or Taxes payable in respect of GST or PST payable by Obligors;
(m)(i) which satisfies all applicable requirements of the Credit and Collection Policies, (ii) other than with respect to a Rental Receivable, whose terms require a minimum principal payment of not less than [**] plus accrued interest and, if applicable, payment of the applicable floorplan fees or curtailment fees, on each Curtailment Date, provided that, subject to a Special Concentration Percentage, such minimum principal payment for a Receivable may be less than [**] so long as it is at least [**], (iii) for which all payments required to be made pursuant to the related Contract in connection with any Curtailment Date extension have not been waived and have been made within [**] of each such extension, (iv) whose terms, including the due date thereof have not otherwise been amended or modified in any material respect, and (v) [**];
(n)which is payable on demand and which the related Contract requires repayment on the earlier of (i) [**] following the sale of the related Financed Vehicle, and (ii) the Curtailment Date for such Receivable;
(o)which arises from the making of a loan to finance the purchase of (i) an automobile or light duty truck, driven or drawn by mechanical power, manufactured primarily for use on the public streets, roads or highways, with two axles or (ii) a Specialty Vehicle;
(p)where not more than [**] of the aggregate Principal Balance of all Receivables of the Obligor of such Receivable and its Affiliates are Defaulted Receivables;
(q)the Obligor of which is not an Affiliate of the Seller or the Performance Guarantor, an Excluded Obligor or a father, mother, son or daughter (or any Affiliate thereof) of any officer or director of the Seller or its Affiliates;
(r)the Obligor of which is not, to the knowledge of the Seller, subject to any proceedings of the type described in Sections 5.11(g) or 5.11(h);
(s)which is guaranteed by the related Obligor's parent, general partner or owners, provided that, in the Servicer's discretion, guarantees shall not be required from (i) public companies, (ii) private equity firms or other similar entities, or (iii) passive partners or minority partners when an operating partner has provided a guarantee;
(t)which is not a Specified Ineligible Receivable or an Excluded Receivable;
(u)with respect to which the Trust has not given Seller at least five (5) Business Days’ notice that such Receivable will not be an Eligible Receivable hereunder, provided that such designation is in good faith and based on a reasonable business judgement by the Trust that such Receivable should not be considered an Eligible Receivable;
(v)for which the Obligor has not "short-paid" the Receivables or paid with non-sufficient funds;
(w)if the Receivable is an Auction Credit, then (i) the wholesale auction is not fronting for a government or a governmental subdivision or agency, (ii) the Servicer has received a bill of sale evidencing the transaction between the wholesale auction and purchasing dealer, (iii) the wholesale auction has been underwritten in accordance with the Credit and Collection Policies’ requirements for platinum dealers, (iv) a PPSA financing statement or equivalent has been filed against the wholesale auction, and (v) clauses (e) and (s) above shall be deemed to be satisfied if the wholesale auction, rather than the applicable dealer, signs the applicable Contract; and
(x)(i) except for any Contract which has been executed electronically, there is only one original, executed copy of such Contract held by the Seller and (ii) for any Contract which has been executed electronically, such Contact has been executed in compliance with all applicable e-sign laws and the Seller has access to an electronic copy of such Contract executed by all parties thereto which can be printed and used to enforce such Contract;
"Enhancement Build Trigger" means the occurrence of either (i) as of the last day of any calendar month, the Adjusted Net Spread for such calendar month is less than [**], or (ii) as of the last day of any calendar month, the Payment Rate for such calendar month shall be less than
[**]; provided, that following each occurrence of an Enhancement Build Trigger, such trigger shall remain in effect until, for three consecutive calendar months, (i) the Adjusted Net Spread is greater than [**] and (ii) the Payment Rate is greater than [**] (in each case, as determined at the end of each such calendar month);
"ETA" means Part IX of the Excise Tax Act (Canada);
"Excluded Obligor" means an Obligor so designated in writing as such by the Trust in a notice to the Seller in good faith and in the Trust's reasonable judgment relating to credit considerations from time to time, it being understood that from time to time such notice may be revoked by written notice to the Seller;
"Excluded Receivable" means any Receivable that is clearly not contemplated by this Agreement due to size, terms, ineligibility or commingling concerns. The Trust has no ownership or other interest in any Excluded Receivables. For the avoidance of doubt, as required by Sections 5.7(o) and 7.2(j), the Seller and the Servicer shall maintain a complete list of Excluded Receivables at all times and shall provide notice to the Trust promptly following any changes thereto;
"Final Termination Date" means the first Remittance Date following the Termination Date on which the Investment is reduced to zero and all Replacement Servicer Fees, Collection Costs, Funding Discounts, Backup Servicing Fees, Transition Expenses, indemnified amounts and Standby Fees have been paid in full;
"Finance Charge and Floorplan Fee Collections" means, with respect to any Collection Period, any Collections applied by the Servicer in such Collection Period in respect of interest and finance charges and any other amount (other than principal) owed under a Contract;
"Financed Vehicle" means [**];
"Funding Discount" means, for each day during a Tranche Period, the amount determined pursuant to the following formula:
Where:
"TA" means the Tranche Amount outstanding on such day; and
"TR" means the Tranche Rate on such day;
"GAAP" means generally accepted accounting principles and practices in the United States, consistently applied;
"Government and Employee Claim" means, in respect of any Person, liens or deemed trusts for taxes, assessments, employee claims or similar governmental or employee charges or levies affecting such Person or its property and, in the case of the Seller, incurred in the ordinary course of business that are not yet due and payable or as to which any applicable grace period shall not have expired, or that are being contested in good faith by proper proceedings and for which adequate reserves have been established, but only so long as foreclosure with respect to such a lien is not imminent and the use and value of the property to which the Security Interest attaches is not impaired during the pendency of such proceeding;
"Governmental Authority" means the government of any sovereign state or any political subdivision thereof, or of any political subdivision of a political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, administrative or other functions of or pertaining to government;
"Gross-up" has the meaning ascribed thereto in Section 9.5;
"Grossed-up Payment" has the meaning ascribed thereto in Section 9.5;
"GST" means all amounts payable under the ETA or pursuant to any similar value added tax legislation in any other jurisdiction of Canada that is stated to be harmonized with the GST, and any similar tax payable under the laws of the Province of Quebec;
"Heavy Duty Truck" means [**];
"Increase" means an increase in the Investment pursuant to Section 2.1(b) hereof;
"Increase Request" means the written request sent to the Trust by the Seller pursuant to Section 2.1(b) in the form annexed hereto as Schedule "F";
"Indebtedness" means, without duplication:
(a)indebtedness for borrowed money (including, without limitation, amounts payable to Affiliates);
(b)obligations evidenced by bonds, debentures, notes or other similar instruments;
(c)the redemption price of any redeemable preference shares;
(d)obligations in respect of letters of credit or similar instruments issued or accepted by any bank or other institution; and
(e)obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (d) above;
provided, however, that "Indebtedness" shall not include obligations both (A) classified as accounts payable or accrued liabilities under GAAP and (B) incurred in the ordinary course of business;
"Indemnified Amounts" has the meaning ascribed thereto in Section 9.1;
"Indemnified Parties" has the meaning ascribed thereto in Section 9.1;
"Initial Closing Date" means February 8, 2010;
"Insurance Policies" means any comprehensive, collision, fire, theft or other insurance policy maintained by an Obligor with respect to one or more Financed Vehicles which is in an amount not less than 50% of the market value of such Financed Vehicles and in which the Seller or the Servicer is or is required to be named as loss payee;
"Investment" means, with respect to the Trust, the aggregate of the amounts paid to the Seller in respect of Cash Payments pursuant to this Agreement, reduced from time to time by amounts actually distributed and applied on account of such Investment pursuant to Article 2; provided, that if such Investment shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Investment shall be increased by the amount of such rescinded or returned distribution, as though it had not been made;
"KAR Credit Facility" means that certain Amended and Restated Credit Agreement, originally dated as of March 11, 2014, as amended by the Incremental Commitment Agreement and First Amendment dated as of March 9, 2016, as amended by the Incremental Commitment Agreement and Second Amendment dated as of May 31, 2017, as amended by the Third Amendment dated as of September 19, 2019, as amended by the Fourth Amendment dated as of May 29, 2020 and amended by the Fifth Amendment dated as of September 2, 2020, by and among KAR, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and agents party thereto, as the same may be amended, supplemented, restated or otherwise modified from time to time;
"KAR Financial Covenant" means the financial covenant regarding KAR's maximum consolidated senior secured leverage ratio as set forth in Section 8.1 of the KAR Credit Facility. Such covenant (including all defined terms incorporated therein) will survive the termination of the KAR Credit Facility and can only be amended, modified, added or terminated from time to time with the prior written consent of the Trust; provided, however, that as long as KAR's senior secured debt shall be rated at least "BBB- (stable)" by Standard & Poor's and at least "Baa3 (stable)" by Moody's, the financial covenant will conform with the financial covenants required by KAR's Credit Facility or any replacement facility without the consent of the Trust;
"KAR Financial Covenant Event" means any breach of the KAR Financial Covenant;
"KAR Financial Covenant Termination Event" means, following the occurrence of a KAR Financial Covenant Event, the earliest to occur of (i) if a Trust Notice Event has occurred, 120
days following the occurrence of such Trust Notice Event, (ii) any KAR Restricted Amendment, and (iii) the occurrence of a Trust Notice Event resulting in the KAR Credit Facility being accelerated;
"KAR Restricted Amendment" means any action under or amendment to the KAR Credit Facility which, in the sole and absolute discretion of the Trust, results in or may result in (i) an acceleration (in whole or in part) of principal or interest or the amount of principal or interest due under the KAR Credit Facility, (ii) the pledge of any additional collateral by the Seller under the KAR Credit Facility other than newly acquired collateral of the same type already pledged thereunder (e.g., a newly-acquired additional trademark is pledged where all trademarks of the relevant entity had previously been pledged), or (iii) any amendment to any provisions or the addition of any provision to the KAR Credit Facility regarding the Seller or its assets;
Legal Final Maturity Date" means the first Settlement Date on or after the date that is two years after the Termination Date;
"Loss Percentage" means, on any Settlement Date, the greatest of [**];
"Loss Reserve" means, for any date, an amount equal to the product of [**];
"Lot Check" means, with respect to an Obligor, a physical inspection of such Obligor's Financed Vehicles and which may include a review of such Obligor's books and records related thereto;
"Marine Craft" means [**];
"Material Adverse Effect" means any effect upon the business, operations, property or financial condition of the Seller or the Servicer, as applicable, which materially adversely affects (i) the interest of the Trust in the Pool Assets, (ii) the collectability or credit quality of a Receivable forming part of the Pool Assets, (iii) the legality, validity or enforceability of Receivables, (iv) the Related Security or (v) the Seller or Servicer's, as applicable, ability to perform its obligations hereunder;
"Moody's" means Moody's Investor Services, Inc. and its successors;
"Motorcycle" means [**];
"Net Cash Payment" means, with respect to the Purchase the amount set forth in the Purchase Request as the "Net Cash Payment" and, in respect of each Increase, the amount set forth in the related Increase Request as the "Net Cash Payment";
"Net Receivables Pool Balance" means, at any time, the amount determined pursuant to the calculation in Schedule "H";
"Net Spread" means, in respect of a Collection Period, the annualized percentage equivalent of a fraction, the numerator of which is the excess of (x) all Finance Charge and Floorplan Fee Collections received and applied during such Collection Period over (y) the sum of, without duplication, (i) the Carry Costs for such Collection Period, plus (ii) the aggregate amount of non-
cash adjustments that reduced the Principal Balance of any Pool Receivable during such Collection Period (but excluding any Receivable that was included in the calculation of Net Spread pursuant to clause (y)(ii) above in any previous Collection Period); and the denominator of which is the average Pool Balance during such Collection Period;
"New Car" means a "new motor vehicle" within the meaning of Regulation 333/08 under the Motor Vehicle Dealer Act, 2002 (Ontario);
"Normal Concentration Percentage" for any Obligor (other than Obligors subject to Special Concentration Percentages) means at any time, [**];
"Notes" means the short-term debt obligations issued by the Trust in connection with the transactions contemplated hereby;
"Notional Servicer Fee" means, for any Collection Period, an amount equal to [**] times the average aggregate net book value of all Pool Receivables outstanding during such Collection Period;
"Obligor" means any Person who is obligated to make payment on a Receivable including any co-signer or guarantor;
"Operation of Law Claim" means any mechanic's lien, supplier's lien, materialman's lien, landlord's lien or similar lien arising and having priority governed by operation of law but not including any Security Interest arising pursuant to a written security agreement and which can only be perfected pursuant to the provisions of a PPSA;
"Paydown Date" means any day prior to the occurrence of a Trigger Date on which:
(a)the Servicer has failed to deliver a Servicer Report or a Portfolio Certificate in accordance with the terms hereof;
(b)any of the statements contained in Section 3.2(b) are not satisfied and have not been waived by the Trust; or
(c)the Trust's Share is greater than 100%;
"Payment Rate" means the ratio (expressed as a percentage and rounded upward to the nearest 1/100th of 1%) computed as of the last day of each Collection Period by dividing [**];
"Person" means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated organization, association, board or body established by statute, government (or any agency or political subdivision thereof) or other entity;
"Pool Assets" means each Pool Receivable and the Related Security with respect thereto;
"Pool Balance" means, on a particular date, the aggregate Principal Balance of the Receivables Pool on that date;
"Pool Receivable" means any Receivable forming part of the Receivables Pool;
"Portfolio Certificate" means a certificate substantially in the form of Schedule "D" thereto;
"PPSA" means the Personal Property Security Act (Ontario) and the comparable legislation of any other province or territory of Canada;
"Prime Rate" means, at any time and from time to time, the fluctuating annual interest rate most recently established by Bank of Montreal which it refers to as its "prime rate";
"Principal Balance" means, with respect to any Receivable, the then unpaid principal amount of all advances or loans made to the related Obligor pursuant to the related Contract by the Seller, to the extent that [**];
"Program Fee Side Letter" means the letter agreement between the Seller and the Securitization Agent dated September 30, 2020 as the same may be amended, varied or replaced from time to time;
"Program Limit" means $175 million or such greater amount as the Seller and the Trust may agree upon in writing;
"PST" means amounts payable under a statute of any province or territory in Canada imposing a single stage retail sales tax;
"Purchase" means the purchase of the Trust's Co-Ownership Interest effected pursuant to Section 2.2(a);
"Purchase Price" means the sum of the Cash Payments and the Deferred Purchase Price;
"Purchase Request" means the written request sent to the Trust by the Seller pursuant to Section 2.1 in form annexed hereto as Schedule "A";
"Quebec Assignment" means the form of assignment attached hereto as Schedule "G";
"Receivable" means any right to payment from an Obligor arising under a Contract, whether such indebtedness or other obligations constitute accounts, chattel paper, instruments or general intangibles, arising from the providing of financing and other services by the Seller to (i) new, used and wholesale automobile, light truck or other Specialty Vehicle dealers or (ii) wholesale auctions under an Auction Credit, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto;
"Receivables Pool" means all present Receivables (other than Excluded Receivables) and all future Receivables (other than Excluded Receivables) and all Related Security with respect to such Receivables; provided that the Receivables Pool shall not include any such interests (other than proceeds of such interests) created after the Final Termination Date;
"Records" means all contracts, books, records, microfiche and other documents and information (including computer programmes, tapes, diskettes, data processing software and related property and rights) maintained by or on behalf of the Seller evidencing or otherwise relating to any Pool Receivables, including the Contracts related thereto, or relating to any of the related Financed Vehicles, Obligors, Related Security, Collections or the Deposit Accounts and shall include all such records, information and material maintained or required to be maintained by the Servicer in respect thereof but excluding for greater certainty the financial statements of the Seller and its Affiliates;
"Recreational Vehicle" means [**];
"Register" has the meaning ascribed thereto in Section 10.14;
"Related Security" means, with respect to any Receivable:
(a)the Related Vehicle and Proceeds Security;
(b)all of the Seller's interest in all warranties, indemnities, service obligations and other contract rights issued or granted by, or otherwise existing under applicable law against, the Obligor or the manufacturer in respect of the related Financed Vehicle;
(c)all guarantees and Security Interests (other than the Related Vehicle and Proceeds Security) from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable, or otherwise, together with all financing statements or other instruments describing any collateral securing such Receivable, and including all Security Interests (other than the Related Vehicle and Proceeds Security) granted by any Person (whether or not the primary Obligor on such Receivable) under or in connection therewith and purporting to secure payment of such Receivable;
(d)all Records relating to such Receivable, including all original Contracts;
(e)all service contracts and other contracts and agreements relating to such Receivable; and
(f)all proceeds of or relating to any of the foregoing, including proceeds of or relating to the Receivable;
"Related Vehicle and Proceeds Security" means with respect to any Receivable, the Seller's Security Interest in the related Financed Vehicle, and all proceeds thereof including proceeds of Insurance Policies;
"Related Vehicle Security" means with respect to any Receivable, the Seller's Security Interest in the related Financed Vehicle excluding all proceeds thereof but including proceeds of Insurance Policies;
"Remittance Date" means Tuesday of each week or, if Tuesday is not a Business Day, the next Business Day, or any other Business Day agreed to by the Servicer and the Securitization Agent; provided that, after the Termination Date, the Trust may designate additional Business Days as Remittance Dates in its discretion;
"Rental Receivable" means a Receivable which satisfies all the requirements of the definition of Eligible Receivable except [**], provided [**], (ii) such Receivable must have a current maturity of [**], (iii) the terms of the related Contract as they apply to such Receivable require [**], (iv) the Obligor thereof must be otherwise current on its obligations under the related Contract, (v) if applicable, [**];
"Replacement Servicer" means, at any time following a Servicer Transfer, the Person whom the Trust designates from time to time by written notice given to the Seller in accordance with Section 5.13 as the Replacement Servicer;
"Replacement Servicer Fee" means, in respect of any Collection Period, if the Backup Servicer is the Replacement Servicer, the amount referred to in the Backup Servicing Agreement or Backup Servicing Fee Letter, and if a Person other than the Seller, an Affiliate of the Seller or the Backup Servicer is the Replacement Servicer, the actual fee payable to such Person, calculated and payable monthly based on the aggregate net book value of all Pool Receivables outstanding as at each Settlement Date;
"Reporting Date" means, in respect of a Collection Period, the 15th day of the following calendar month or, if such day is not a Business Day, the next following Business Day;
"Required Enhancement Percentage" means [**] or such lesser percentage agreed to by the Trust; provided, that following each occurrence of an Enhancement Build Trigger, any lesser percentage shall automatically increase to [**] until the Trust agrees to a lesser percentage;
"Salvage Vehicle" means any vehicles provided that such vehicle [**]. For purposes of the Net Receivables Pool Balance calculation, the value of Receivables that are originated for the purpose of financing Salvage Vehicles is limited to [**];
"Securitization Agent" means BMONB, in its capacity as securitization agent of the Trust;
"Security Interest" means a lien, security interest, hypothec, title retention agreement, pledge, assignment (whether or not by way of security), charge, encumbrance, mortgage, right of set-off, lease or other right or claim of any Person;
"Seller's Retained Interest" has the meaning ascribed thereto in Section 2.3;
"Seller's Share" means 100% minus the Trust's Share;
"Servicer" means the Person designated as the Servicer for the time being pursuant to Sections 5.1 and 5.13 which shall be the Seller initially and, after a Servicer Transfer, means any Replacement Servicer (including, for greater certainty, the Backup Servicer to the extent it is the Replacement Servicer);
"Servicer Report" means a report substantially in the form of Schedule "C";
"Servicer Termination Event" has the meaning ascribed thereto in Section 5.11;
"Servicer Transfer" has the meaning ascribed thereto in Section 5.12;
"Settlement Date" means, in respect of a Collection Period, the last day of the Collection Period;
"Special Concentration Percentage" means, as a percentage of the aggregate Eligible Receivables [**] at such time, without duplication:
i.[**];
ii.[**];
iii.[**];
iv.[**];
v.[**];
vi.[**];
vii.[**];
viii.[**];
ix.[**]; and
x.[**];
"Special Obligors" means any Obligors, together with their Affiliates, identified as a "Special Obligor" on the most recent Servicer Report by the Servicer;
"Specialty Vehicles" means [**];
"Specified Ineligible Receivable" means any Pool Receivable that the Servicer has identified as a "Specified Ineligible Receivable" pursuant to Section 2.16;
"Standard & Poor's" means Standard & Poor's Rating Service, a division of The McGraw Hill Companies Inc., and its successors;
"Standby Fee" has the meaning ascribed thereto in the Program Fee Side Letter;
"Tangible Net Worth" means, with respect to any Person, the net worth of such Person calculated in accordance with GAAP after subtracting therefrom the aggregate amount of such Person's intangible assets, including, without limitation, goodwill, franchises, licenses, patents, trademarks, tradenames, copyrights, service marks and brand names and capitalized software;
"Tax" means any withholding, stamp, general corporation, property, capital, large corporations, excise, GST, PST, sales or other tax or any fee, levy, assessment or other governmental charge, including any related penalties or interest (excluding any tax imposed upon the Trust with respect to its income);
"Tax Credit" has the meaning ascribed thereto in Section 9.5;
"Termination Date" means the earlier of:
(a)the Trigger Date;
(b)January 31, 2024, which date may be extended by notice from the Trust to the Seller upon agreement to such extension by the Seller and the Trust; and
(c)the date the Seller designates as the Termination Date upon 30 days' notice to the Trust;
"Three-Month CDOR" means, on any day and for any Tranche Period, the annual rate of interest equal to the average discount rate (rounded upwards, if necessary, to the nearest 0.00001%) of 3-month Canadian dollar bankers' acceptances as displayed on the "Bloomberg Screen CDOR Page" as at approximately 10:00 a.m. (Toronto time) on the first day of such applicable Tranche Period (or, if such day is not a Business Day, on the preceding Business Day), provided, however, that if such rate does not appear on the Bloomberg Screen CDOR Page on such day as contemplated, then the CDOR rate on such day shall be calculated as the average of the rates for such period applicable to Canadian dollar bankers' acceptances quoted by the banks listed on Schedule I of the Bank Act (Canada) as at approximately 10:00 a.m. (Toronto time) on such day (or, if such day is not a Business Day, on the preceding Business Day).
If the Securitization Agent has determined that Three-Month CDOR has been discontinued and an alternative reference rate has been selected by a central bank, reserve bank, monetary authority or any similar institution (including any committee or working group thereof), or identified through any other applicable regulatory authority or legislative action or guidance, that is consistent with accepted market practice, the Securitization Agent will use such alternative rate as a substitute for Three-Month CDOR for each future interest determination date. As part of such substitution, the Securitization Agent will make such adjustments to such alternative rate or the spread thereon, as well as the business day convention, determination dates and related provisions and definitions, in each case that are consistent with accepted market practice or applicable regulatory or legislative action or guidance for the use of such alternative rate for debt obligations such as the Notes, as determined by the Securitization Agent.
If, with respect to any Tranche Period, the Securitization Agent determines that Three-Month CDOR has been discontinued, but there is no clear market consensus as to whether any rate has replaced Three-Month CDOR in customary market usage, the Securitization Agent may, in its reasonable discretion, determine the alternative rate and make any adjustments thereon, which determinations will be binding on the parties hereto, and use such alternative rate as a substitute for Three-Month CDOR for the current interest determination date and for each future interest
determination date; provided that such alternative rate shall be consistent with the alternative rates that the Securitization Agent determines for other transactions where the Securitization Agent is required to determine an alternative rate.
If Three-Month CDOR with respect to a Tranche Period is not determined pursuant to the above and no alternative reference rate has been selected, Three-Month CDOR with respect to such Tranche Period will be fixed at a rate equal to Three-Month CDOR with respect to the last Tranche Period on which Three-Month CDOR was determined pursuant to the above.
Notwithstanding the foregoing, in no event shall Three-Month CDOR be less than [**];
"Tractor" means [**];
"Tranche Amount" means, on any date, the principal amount of Notes outstanding on such date;
"Tranche Period" means the period beginning on a Remittance Date and ending on the day immediately prior to the next occurring Remittance Date; provided that the first Tranche Period shall be the period beginning on the date of the Purchase and ending on the day immediately prior to the first Remittance Date;
"Tranche Rate" means (a) at any time prior to the occurrence of a Trigger Event, [**], and (b) at any time on or after the occurrence of a Trigger Event, [**];
"Transition Expenses" means all reasonable costs and expenses (including reasonable legal fees) incurred by the Backup Servicer in connection with transferring servicing obligations under this Agreement, which shall not exceed the cap established in the Backup Servicing Agreement or the Backup Servicing Fee Letter;
"Trigger Date" means the day that, in accordance with Section 6.2, is declared as, or automatically becomes, the Trigger Date;
"Trigger Event" has the meaning ascribed thereto in Section 6.1;
"Trust Notice Event" means, following the occurrence of a KAR Financial Covenant Event, the Trust has provided the Seller with written notice of the Trust's declaration of a KAR Financial Covenant Termination Event;
"Trust's Co-Ownership Interest" has the meaning ascribed thereto in Section 2.3;
"Trust's Share" means on any Business Day before the Termination Date, the percentage computed as:
where:
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I
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=
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the Investment at the time of computation, reduced by the aggregate amount deposited in the Collection Account on (i) with respect to any Servicer Report, the last Business Day of the immediately prior Collection Period, or (ii) with respect to any Portfolio Certificate, the last Business Day of the prior calendar week, provided that in the case of each of (i) and (ii) above, an equal amount is wired to the Trust on the immediately following Remittance Date to pay down the Investment,
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DP
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the aggregate unfulfilled purchase amounts of the Trust at such time,
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LR
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the Loss Reserve at the time of computation,
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NRPB
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=
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the Net Receivables Pool Balance at the time of computation,
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and, on any Business Day on or after the Termination Date, the Trust's Share calculated as of the last Business Day prior to the Termination Date; and
"USA PATRIOT ACT" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended.
1.2Headings
The division of this Agreement into Articles, Sections, Schedules and other subdivisions, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section, Schedule or other portion hereof and include the recitals and any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to particular Articles, Sections and Schedules are to the particular Articles, Sections and Schedules of this Agreement.
1.3Number, Gender, Etc.
Words importing the singular number shall include the plural and vice versa; words importing gender shall include all genders. Any use of the term "including" in this Agreement shall be read as, and shall mean, "including, without limitation".
1.4Non-Business Days
Whenever any payment to be made hereunder shall be stated to be due or any action to be taken hereunder shall be stated to be required to be taken on a day other than a Business Day, unless
otherwise specifically provided for herein, such payment shall be made or such action shall be taken on the next succeeding Business Day.
1.5Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties hereto hereby attorns to the non-exclusive jurisdiction of the courts of the Province of Ontario.
1.6References to Statutes
All references herein to any statute or any provision thereof shall, unless otherwise specified herein, mean such statute or provision as the same may be amended, re-enacted or replaced from time to time.
1.7Severability
In the event that one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Each of the provisions of this Agreement is hereby declared to be separate and distinct.
1.8Currency
All amounts expressed herein in terms of money refer to lawful currency of Canada and all payments to be made hereunder shall be made in such currency.
1.9Schedules
The following Schedules annexed hereto are incorporated herein by reference and are deemed to be part hereof:
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Schedule "A"
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Form of Purchase Request
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Schedule "B"
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Location of Records
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Schedule "C"
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Form of Servicer Report
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Schedule "D"
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Form of Portfolio Certificate
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Schedule "E"
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Deposit Accounts
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Schedule "F"
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Form of Increase Request
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Schedule "G"
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Form of Quebec Assignment
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Schedule "H"
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Net Receivables Pool Balance Calculation
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ARTICLE 2
PURCHASES AND INCREASES
2.1Purchase Request and Increase
(a)At any time on or after February 8, 2010 and on or prior to February 15, 2010, the Seller may, by delivery of an appropriately completed Purchase Request to the Trust, request the Trust to purchase an undivided co-ownership interest in the Receivables Pool from the Seller. The Purchase Request shall specify (i) the amount of the Cash Payments to be paid to the Seller (which shall not be less than $30,000,000 and shall be an integral multiple of $100,000) and the Net Cash Payment to be paid to the Seller, and (ii) the date of such Purchase.
(b)From time to time after the initial Purchase hereunder up to the Termination Date, the Seller may, by delivery of an appropriately completed Increase Request delivered to the Trust at least one Business Day prior to the date of the proposed Increase, request the Trust to increase the Investment and the amount of its undivided co-ownership interest in the Receivables Pool. The Increase Request shall specify, (i) the amount of the Cash Payment and the Net Cash Payment to be paid to the Seller, (ii) the date of such Increase (which shall be a Remittance Date), and (iii) the account number of the Seller into which the Net Cash Payment should be deposited.
(c)Notwithstanding the foregoing, the Trust may, in its sole discretion by written notice to the Seller and the Servicer by 5:00 p.m. on the date of receipt of an Increase Request, elect to fund any requested Increase no later than the [**] day following the Seller's delivery of an Increase Request (the "Deferred Increase Date"), rather than on the requested Increase date. In the event that the Trust so elects to defer funding an Increase, subject to the adjustment of the Investment for
certain purposes as described in Section 2.1(d), the Trust shall be obligated to fund such Increase no later than such Deferred Increase Date so long as all applicable conditions precedent to such Increase pursuant to Section 3.2 were satisfied on the related requested Increase date (regardless of whether such conditions precedent to funding are not satisfied thereafter or on the Deferred Increase Date). The Trust may (in its sole discretion) fund such Increase on any Business Day prior to such Deferred Increase Date. Subject to any adjustment of the Cash Payment payable as described in Section 2.1(d), the Seller shall be obligated to accept the proceeds of any such Increase on the date funded by the Trust.
(d)Future Increase Requests and reports shall be calculated on a pro forma basis including any unfulfilled Increases in the calculation of the Investment (e.g., the calculation of the Trust's Share shall include such unfulfilled Increases). For the avoidance of doubt, any payments required by clause (c) of the definition of Paydown Date shall be satisfied first by reducing the current balance of any unfulfilled Increases to zero before allocating the Trust's Share of Collections to the Trust. In addition, no unfulfilled Increase shall accrue Funding Discount or be included in the calculation of fees hereunder until funded.
2.2Purchase and Sale
(a)If the conditions precedent in Section 3.1 (in the case of the Purchase hereunder) and Section 3.2 are satisfied or have not been satisfied but have been waived by the Trust, on the date specified in the Purchase Request, the Seller shall sell, assign and transfer to the Trust, and the Trust shall purchase, an undivided co-ownership interest in the Receivables Pool, having the terms and attributes and conferring upon the Trust the entitlements and property rights set out in Section 2.3, for the Purchase Price applicable to the Purchase, and the Trust shall deposit the applicable Cash Deposit Amount into the Cash Reserve Account and pay to the Seller the Net Cash Payment in respect thereof on the date of such Purchase. Upon the making of such payment and deposit, all of the Seller's right, title and interest in and to an undivided co-ownership interest in the Receivables Pool shall be sold, assigned and transferred to the Trust on a fully serviced basis without recourse (except as provided by this Agreement), without the need of any formality or other instrument of assignment.
(b)If the conditions precedent in Section 3.2 are satisfied or have not been satisfied but have been waived by the Trust, on the date specified in an Increase Request, the Seller shall sell, assign and transfer to the Trust, and the Trust shall purchase, an additional undivided co-ownership interest in the Receivables Pool, having the terms and attributes and conferring upon the Trust the entitlements and property rights set out in Section 2.3, for the additional Purchase Price applicable to the Increase, and the Trust shall deposit the applicable Cash Deposit Amount into the Cash Reserve Account and pay to the Seller the Net Cash Payment in respect
thereof on the date of such Increase and thereafter the Investment shall be increased by the amount of the Cash Payment and the Trust's Share shall be calculated based on such increased Investment. Upon the making of such payment and deposit pursuant to the Increase Request, an additional interest in the Receivables Pool shall be sold, assigned and transferred to the Trust on a fully serviced basis without recourse (except as provided by this Agreement), without the need of any formality or other instrument of assignment, such that the Trust's Share shall be calculated based on such increased Investment.
(c)In addition to Sections 2.2(a) and 2.2(b), but subject to the last sentence of this Section 2.2(c), the Seller shall, on the date hereof, execute and deliver to the Trust the Quebec Assignment. For greater certainty, to the extent there is any conflict or inconsistency between this Agreement and the Quebec Assignment, the Quebec Assignment shall govern.
2.3Ownership Interests
The undivided co-ownership interests in the Receivables Pool to be conveyed to and owned by the Trust pursuant to the terms hereof shall constitute and comprise property interests in the Receivables Pool that shall entitle the Trust to receive amounts from the Trust's Share of Collections from Receivables and other amounts constituting the Receivables Pool in the amounts, at the times and on the terms and conditions herein provided. Such undivided co-ownership interest is not intended and shall not be construed as merely a contractual or personal right against the Seller but rather as an interest in rem. The undivided co-ownership interest in the Receivables Pool acquired by the Trust by way of the Purchase and any Increases in accordance with Section 2.1 are collectively referred to herein as the "Trust's Co- Ownership Interest." The undivided ownership interest in the Receivables Pool not constituting the Trust's Co-Ownership Interest shall be retained by the Seller and shall constitute and comprise property interests in the Receivables Pool that shall entitle the Seller to receive amounts from the Seller's Share of Collections from Receivables and other amounts constituting the Receivables Pool in the amounts, at the times and on the terms and conditions herein provided. Such undivided ownership interest in the Receivables Pool not constituting the Trust's Co-Ownership Interest is referred to herein as the "Seller's Retained Interest". The Seller and Trust shall hold the Seller's Retained Interest and Trust's Co-Ownership Interest, respectively, as tenants in common.
2.4Transfer From Deposit Accounts to Collection Account
On each Business Day, all amounts on deposit in each Deposit Account shall be transferred by the Servicer from such Deposit Account to the Collection Account.
2.5Allocations of Seller's Share of Collections Before the Termination Date
The Seller hereby authorizes and directs the Servicer, on each Business Day which is prior to the occurrence of the Termination Date, to allocate from the Seller's Share of Collections for such day, the following amounts in the following order:
(a)to the Replacement Servicer, an amount equal to the Seller's Share of the sum of any Replacement Servicer Fee and any Collection Costs, and any arrears thereof, and to the Backup Servicer, the Seller's Share of any Backup Servicing Fees and Transition Expenses, and any arrears thereof;
(b)in respect of the Cash Reserve Account, the amount, if any, by which the balance on deposit in the Cash Reserve Account is less than the Cash Reserve Required Amount; and
(c)as to any remaining balance (i) to the extent any Enhancement Build Trigger is in effect, then either, as specified by the Seller or the Servicer, (x) to be retained in the Deposit Accounts or Collection Account until the following Business Day for allocation pursuant to Section 2.5 or 2.8, as applicable, on such following Business Day, (y) to repay the Investment pursuant to Section 2.13, or (z) to the Seller on account of the Seller’s Retained Interest to originate Eligible Receivables (provided that the amount paid to the Seller under this clause (z) shall not exceed [**] of the par amount of such originated Eligible Receivables), or (ii) if no Enhancement Build Trigger is in effect, to be allocated to the Seller on account of the Seller’s Retained Interest.
2.6Allocation of Trust's Share of Collections Before the Termination Date
The Trust hereby authorizes and directs the Servicer, on each Business Day which is prior to the occurrence of the Termination Date, to allocate from the Trust's Share of Collections for such day and from amounts available in the Cash Reserve Account pursuant to Section 2.14, the following amounts in the following order of priority:
(a)to the Replacement Servicer, an amount equal to the Trust's Share of the sum of any Replacement Servicer Fee and any Collection Costs, and any arrears thereof, and to the Backup Servicer, the Trust's Share of the Backup Servicing Fees and Transition Expenses, and any arrears thereof;
(b)to the Trust, an amount equal to the sum of the Funding Discount and the Standby Fees accrued through such day;
(c)into the Cash Reserve Account, the amount, if any (after giving effect to Section 2.5(b)), by which the balance on deposit in the Cash Reserve Account is less than the Cash Reserve Required Amount;
(d)to the Trust, if a voluntary paydown of the Investment is being made, for application in reduction of the Investment in accordance with Section 2.13;
(e)to the Trust, subject to Section 2.1(d), if such Business Day is a Paydown Date, an amount up to the amount of the Investment for application in reduction of the Investment; provided that if a Paydown Date has occurred pursuant to clause (c) of the definition of Paydown Date, the amount to be applied in reduction of the
Investment shall only be the amount (subject to such amounts being in integral multiples of $100,000) necessary to cause the Trust's Share to be reduced to an amount equal to or less than 100%;
(f)to the relevant Indemnified Party, an amount equal to the aggregate amounts owed to such Indemnified Party pursuant to Sections 9.1 or 9.4 that remain unpaid;
(g)to the Trust, any other amounts owing to the Trust hereunder; and
(h)as to any remaining balance (i) to the extent any Enhancement Build Trigger is in effect, then either, as specified by the Seller or the Servicer, (x) to be retained in the Deposit Accounts or Collection Account until the following Business Day for allocation pursuant to Section 2.6 or 2.9, as applicable, on such following Business Day, (y) to be allocated to repay the Investment pursuant to Section 2.13, or (z) to be allocated to the Seller on account of Deferred Purchase Price to originate Eligible Receivables (provided that the amount allocated to the Seller under this clause (z) shall not exceed [**] of the par amount of such Eligible Receivables), or (ii) if no Enhancement Build Trigger is in effect, to be allocated to the Seller on account of Deferred Purchase Price, but only to the extent no Paydown Date exists or would result from such allocation.
2.7Payments from Collection Account
Amounts on deposit in the Collection Account deposited pursuant to Section 2.4 shall be paid out and applied by the Servicer as follows:
(a)amounts allocated for the benefit of the Replacement Servicer and Backup Servicer pursuant to Sections 2.5(a) and 2.6(a) shall be paid to the Replacement Servicer and Backup Servicer, as applicable, when due and payable;
(b)amounts allocated pursuant to Sections 2.5(b) and 2.6(c) shall be deposited to the Cash Reserve Account;
(c)amounts allocated pursuant to (i) Section 2.6(b) shall be paid to the Trust on each Remittance Date and (ii) Section 2.6(g) shall be paid to the Trust on the second Remittance Date of each month;
(d)amounts allocated pursuant to Sections 2.5(c)(i)(y), 2.6(d), 2.6(e) and 2.6(h)(i)(y) shall be paid to the Trust on each Remittance Date and the Investment shall be reduced by the amounts distributed and applied pursuant to such Sections;
(e)amounts allocated for the benefit of an Indemnified Party pursuant to Section 2.6(f) shall be paid when due and payable to such Indemnified Party or as such Indemnified Party may otherwise direct; and
(f)amounts allocated pursuant to Section 2.5(c)(ii) shall be paid to the Seller in respect of the Seller's Retained Interest on each Business Day and amounts
allocated pursuant to Section 2.6(h)(ii) shall be paid to the Seller in respect of Deferred Purchase Price on each Business Day.
For greater certainty, priority shall be determined by the priority of allocations under Sections 2.5 and 2.6 and not by the order in which payments and deposits are referred to in this Section 2.7.
2.8Allocation and Payment of Seller's Share of Collections After a Termination Date
The Seller hereby authorizes and directs the Servicer, on each Business Day on or after the occurrence of a Termination Date, to allocate from the Seller's Share of Collections for such day, the following amounts in the following order:
(a)to the Replacement Servicer, an amount equal to the Seller's Share of the sum of any Replacement Servicer Fee and any Collection Costs, and any arrears thereof, and to the Backup Servicer, the Seller's Share of any Backup Servicing Fees and Transition Expenses, and any arrears thereof;
(b)to the relevant Indemnified Party, an amount equal to the aggregate amounts owed to such Indemnified Party pursuant to Sections 9.1 or 9.4 that remain unpaid; and
(c)to the Seller, the balance on account of the Seller's Retained Interest.
2.9Allocation of Trust's Share of Collections After a Termination Date
The Trust hereby authorizes and directs the Servicer, on each Business Day which is on or after the Termination Date, to allocate from the Trust's Share of Collections for such day and amounts available in the Cash Reserve Account pursuant to Section 2.14, the following amounts in the following order of priority:
(a)to the Replacement Servicer, an amount equal to the Trust's Share of the sum of any Replacement Servicer Fee and any Collection Costs, and any arrears thereof, and to the Backup Servicer, the Trust's Share of the Backup Servicing Fees and Transition Expenses, and any arrears thereof;
(b)to the Trust, an amount equal to the Funding Discount accrued through such day;
(c)to the Trust, an amount equal to the Investment;
(d)to the extent the amounts payable under Section 2.8(b) have not been satisfied in full, to the relevant Indemnified Party, an amount equal to the aggregate amounts owed to such Indemnified Party pursuant to Sections 9.1 or 9.4 that remain unpaid;
(e)to the Trust, any other amounts owing to the Trust hereunder; and
(f)to the Seller, the balance, as Deferred Purchase Price.
2.10Payments from Collection Account After a Termination Date
Amounts on deposit in the Collection Account deposited pursuant to Section 2.4 shall be paid out and applied by the Trust as follows:
(a)amounts held on deposit for the benefit of the Replacement Servicer pursuant to Sections 2.8(a) and 2.9(a) shall be paid to the Replacement Servicer when due and payable;
(b)amounts held on deposit for the benefit of the Backup Servicer pursuant to Sections 2.8(a) and 2.9(a) shall be paid to the Backup Servicer when due and payable;
(c)amounts held on deposit for the benefit of an Indemnified Party pursuant to Sections 2.8(b) and 2.9(d) shall be paid to such Indemnified Party or as such Indemnified Party may otherwise direct, when due and payable;
(d)amounts allocated pursuant to Sections 2.9(b) and 2.9(e) shall be paid to the Trust on such dates as the Trust may determine;
(e)amounts allocated pursuant to Section 2.9(c) shall be paid to the Trust on each Remittance Date and the Investment shall be reduced by such amounts distributed; and
(f)amounts allocated pursuant to Section 2.8(c) shall be paid to the Seller in respect of the Seller's Retained Interest on each Business Day and amounts allocated pursuant to Section 2.9(f) shall be paid to the Seller on account of Deferred Purchase Price on each Business Day.
For greater certainty, priority shall be determined by the priority of allocations under Sections 2.8 and 2.9 and not by the order in which payments and deposits are referred to in this Section 2.10.
2.11Purchases Limited by Program Limit
No Purchase or Increase may be made hereunder if, after giving effect thereto, the Investment would exceed the Program Limit.
2.12Program Limit
The Seller may, upon at least 30 days written notice to the Trust, reduce in part the unused portion of the Program Limit; provided that each partial reduction shall be in the amount of at least $1,000,000 or an integral multiple thereof and shall be effective on a Remittance Date.
2.13Voluntary Paydown of Investment
If at any time the Seller wishes to reduce the Investment, the Seller shall (i) provided the reduction can be fully paid on a Remittance Date, provide details thereof in a Servicer Report or Portfolio Certificate one day prior to such Remittance Date, or (ii) give the Trust, the Servicer and the Backup Servicer at least two Business Days' prior written notice thereof (including the amount of such proposed reduction and the proposed date on which such reduction will commence).
Following the delivery of such notice, on the proposed date of commencement of such reduction and on each day thereafter, the Servicer shall allocate all amounts available for allocation under Section 2.6(d) to the Trust until the aggregate amount allocated shall equal the desired amount of reduction, provided that,
(a)unless otherwise agreed by the Trust, the amount of any such reduction shall be not less than $1,000,000 and shall be an integral multiple of $1,000,000, and the Investment after giving effect to such reduction shall be not less than $30 million, and
(b)the Seller shall use reasonable efforts to choose a reduction amount, and the date of commencement thereof, so that to the extent practicable such reduction shall commence and conclude in the same Collection Period.
2.14Cash Reserve Account
To the extent that on any Business Day before the Termination Date the Trust's Share of Collections is less than the sum of the amounts referred to in Sections 2.6(a) and 2.6(b), the Trust shall apply, by deposit to the Collection Account, any amounts on deposit in the Cash Reserve Account to make the allocations specified in Sections 2.6(a) and 2.6(b) on such Business Day. On each Remittance Date prior to the Termination Date, any Cash Reserve Excess Amount shall, if requested by the Seller, be paid to the Seller on account of Deferred Purchase Price. On the Termination Date, the balance of the Cash Reserve Account shall be deposited to the Collection Account and applied under Section 2.9.
2.15Calculations
In making all allocation and payments of Collections and amounts on deposit in the Cash Reserve Account hereunder, the Servicer shall use the information contained in the most recently delivered Servicer Report or Portfolio Certificate, as applicable, including any Servicer Report or Portfolio Certificate delivered on the day of such allocation or payment.
2.16Specified Ineligible Receivables
At any time prior to a Receivable first being referenced in a Servicer Report or a Portfolio Certificate as an Eligible Receivable, the Servicer (so long as the Seller is the Servicer) may
designate such Receivable as a "Specified Ineligible Receivable" (which designation may take the form of a specification that a certain class or category of Receivables to be created after such designation will be treated as "Specified Ineligible Receivables"). In addition, the Servicer (so long as the Seller is the Servicer) may, on behalf of the Seller, (i) designate an existing Receivable as a "Specified Ineligible Receivable" or (ii) designate an existing Specified Ineligible Receivable as a Receivable (i.e., no longer a "Specified Ineligible Receivable"), in each of cases (i) and (ii) with the prior written consent of the Trust. For the avoidance of doubt, any Receivable which was treated as an Eligible Receivable hereunder at any time may not be treated as a "Specified Ineligible Receivable" without the prior written consent of the Trust. The Servicer (so long as the Seller is the Servicer) shall identify the aggregate Principal Balance of all such "Specified Ineligible Receivables" on each Servicer Report. To the extent the Servicer has from time to time identified a Receivable as a "Specified Ineligible Receivable" in accordance with this Section, for so long as such Receivable is a Specified Ineligible Receivable, such Receivable (i) shall not be included as an Eligible Receivable by the Seller or the Servicer hereunder, (ii) shall not be included in any calculations of the Delinquency Ratio or the Default Ratio or other Receivables Pool information (other than a statement of the aggregate Principal Balance of such Specified Ineligible Receivables) hereunder and (iii) shall not be considered a Receivable for purposes of Section 6.1.
2.17Collection Account
Subject to this Section 2.17, the Servicer shall be entitled to access the Collection Account and the Collections deposited therein, and may withdraw funds deposited to the Collection Account and payable to the Seller pursuant to Sections 2.7(f) and 2.10(f) prior to the relevant Remittance Date. Notwithstanding anything else contained in this Agreement, the Trust may notify the Servicer that it no longer wishes the Servicer to have the access rights described in this Section 2.17 and/or to be authorized to allocate and pay the amounts referred to in Sections 2.5, 2.6, 2.7, 2.8, 2.9 and 2.10. Upon receipt of such notice, the Servicer will have no further access or other rights with respect to the Collection Account and the Trust, or its nominees, will assume the duties of the Servicer under the aforementioned Sections 2.5 through 2.10.
2.18Location of Cash Reserve Account and Collection Account.
If at any time the Bank of Montreal (or any subsequent Eligible Institution) ceases to be an Eligible Institution, the Servicer (on the Seller’s behalf) shall promptly establish a new Cash Reserve Account and a new Collection Account at a financial institution which is an Eligible Institution and transfer all amounts on deposit in such accounts at the Bank of Montreal (or any subsequent Eligible Institution) to such new accounts at such financial institution, until such time as the Bank of Montreal (or any subsequent Eligible Institution) meets the Eligible Institution requirements.
2.19Legal Final Maturity Date
All obligations of the Seller hereunder shall be due and payable in full on the Legal Final Maturity Date (unless due and payable earlier than such date in accordance with the provisions hereof).
ARTICLE 3
CONDITIONS PRECEDENT
3.1Conditions Precedent for the Initial Purchase
Prior to the Purchase occurring hereunder, the following shall have occurred, or the Seller shall have delivered to the Trust the following, as the case may be, in each case in form and substance satisfactory to the Trust, acting reasonably:
(a)a certificate of an officer of the Seller attaching copies of its constating documents;
(b)a certificate of status for the Seller in the Province of Ontario and a certificate of compliance for the Performance Guarantor in the State of Delaware;
(c)resolutions of the board of directors of the Seller approving and authorizing the execution, delivery and performance of this Agreement and the other documents to be delivered by the Seller hereunder, and the Purchase and any Increase hereunder up to the Program Limit, certified by a senior officer of the Seller to be in full force and effect as of the Initial Closing Date;
(d)incumbency certificates of the officers of the Seller executing this Agreement and the other documents to be delivered by the Seller hereunder showing their names, offices and specimen signatures on which certificates the Trust shall be entitled to conclusively rely until such time as the Trust receives from the Seller a replacement certificate meeting the requirements of this Section 3.1(d);
(e)a copy of the Credit and Collection Policies and sample copies of each of the forms of Contract and other documents used or acquired by the Seller in each of the provinces of Canada with respect to Financed Vehicles and the Related Security, including credit application forms;
(f)reports showing the results of the searches conducted in the Provinces of Ontario and Quebec against the Seller and its predecessors on the Business Day immediately preceding the Initial Closing Date to determine the existence of any Security Interests in the Pool Assets;
(g)copies of verification statements, officially stamped or marked to indicate that copies of such documents have been filed with the appropriate Governmental Authorities in the Provinces of Ontario and Quebec or, if officially stamped copies are not available prior to the Initial Closing Date, photocopies of documents accepted for filing or registration, of all financing statements or other similar statements or other registrations, if any, filed in such province or provinces with respect to the Purchase to ensure recognition as against third
parties of the interests of the Trust in the Pool Assets; in each case showing the Seller's address as 1717 Burton Road, Vars, Ontario, K0A 3H0;
(h)evidence that such Persons as the Trust may have designated who have registered financing statements or similar instruments against the Seller shall have entered into such agreements or acknowledgements or amended their registrations, filings or recordings so as to negate any Security Interest or other interest in the Pool Assets capable of encumbering or defeating the interests of the Trust therein;
(i)executed copies of this Agreement, the Program Fee Side Letter, the Quebec Assignment and the other agreements and instruments called for hereunder;
(j)an opinion of counsel to the Seller (including certain matters under Quebec Law) dated as of the Initial Closing Date, which opinions may rely on an officer's certificate of the Seller as to certain factual matters;
(k)an opinion of counsel to the Performance Guarantor dated as of the Initial Closing Date;
(l)Blocked Account Agreements with respect to the Deposit Accounts executed by the banks or other financial institutions at which each of the Deposit Accounts are located shall have been be executed and delivered to the Trust in form satisfactory to the Trust; and
(m)such other documentation as may be required by the Trust or its counsel, Bennett Jones LLP or the Seller or its counsel, Osler Hoskin & Harcourt LLP, acting reasonably.
3.2Conditions Precedent in Favour of the Trust for Purchase/All Increases
Prior to the Purchase and all Increases hereunder, the following shall have occurred, or the Seller shall have delivered to the Trust the following, as the case may be, in each case in form and substance satisfactory to the Trust, acting reasonably:
(a)the Trust shall have received the Purchase Request or Increase Request duly executed by the Seller;
(b)immediately prior to, at the time of and after giving effect to the Purchase or Increase, the following statements will be true, and the Seller, by accepting any payment pursuant to Section 2.2 in respect of the Purchase or any Increase, will be deemed to have certified that:
(i)the representations and warranties of the Seller contained in Section 4.1 are correct on and as of the date of purchase as though made on and as of such date; and
(ii)no event has occurred and is continuing, or would result from the effecting of such Purchase or Increase, that constitutes a Trigger Event or would constitute a Trigger Event by further requirement that notice be given or time elapse or both; and
(c)all other documents, instruments, opinions and agreements required by the terms hereof to be delivered to the Trust shall have been so delivered and shall be satisfactory in form and substance to the Trust, acting reasonably, and the Trust shall have received such other approvals, opinions or documents as it may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1General Representations and Warranties of the Seller
The Seller represents and warrants to the Trust (in its capacity as Seller and as Servicer), and acknowledges that the Trust is relying upon such representations and warranties in consummating the transactions contemplated hereby that as of the Closing Date and as of the date of each Increase:
(a)the Seller is a corporation duly incorporated and existing under its jurisdiction of incorporation, the Seller is not a "non-resident" of Canada for the purposes of the Income Tax Act (Canada) and the Seller is duly qualified, licensed or registered in each of the provinces of Canada to carry on its present business and operations, except where the failure to be so qualified, licensed or registered could not reasonably be expected to have a Material Adverse Effect;
(b)the execution, delivery and performance by the Seller of this Agreement and all other instruments, agreements and documents to be delivered by it hereunder, and the transactions contemplated hereby and thereby, are within the Seller's powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Seller's constating documents or by-laws, (ii) any resolution of its board of directors (or any committee thereof) or shareholders or (iii) any law or any contractual restriction binding on or affecting the Seller (including pursuant to any indentures, loan or credit agreements, leases, mortgages or security agreements), the contravention of which could reasonably be expected to have a Material Adverse Effect, and do not result in or require the creation of any Security Interest (other than any Security Interest created pursuant to this Agreement and the Related Security, the Blocked Account Claims, or Security Interests permitted by this Agreement), upon or with respect to any of its properties, and the consummation of the transactions contemplated hereby does not require approval of shareholders or approval or consent of any Person under any contract to which the Seller is a party;
(c)no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance by the Seller of this Agreement or any other instrument, agreement or document to be delivered hereunder or thereunder except (i) those that have already been given, filed or obtained, as the case may be, and (ii) financing statements filed in favour of the Trust;
(d)this Agreement and the other instruments, agreements and documents executed in connection herewith constitute legal, valid and binding obligations of the Seller enforceable against it in accordance with their terms, subject to (a) applicable bankruptcy, reorganization, winding-up, insolvency, moratorium and other laws of general application limiting the enforcement of creditors' rights; (b) the fact that the granting of equitable remedies such as specific performance and injunction is within the discretion of a court of competent jurisdiction; and (c) general principles of equity;
(e)all filings, recordings, registrations or other actions required under this Agreement have been made or taken in Ontario (the parties acknowledge that in Quebec such filings, recordings, registrations or other actions shall be taken immediately following closing), in order to validate, preserve, perfect or protect the interests (including the co-ownership interest) of the Trust in, and the rights of the Trust to collect, any and all of the Pool Assets, including the right to enforce the Related Security;
(f)as of the date hereof, the chief executive office of the Seller is located in Ontario and the books, Records and documents related to the Receivables in which the Seller has an interest and other printed information (excluding policies or certificates of insurance) evidencing or relating to the Pool Assets, the Obligors and the related Financed Vehicles are located at the offices shown in Schedule "B";
(g)the Records contain all information reasonably necessary for the enforcement and Collection by the Trust of the Pool Assets, including the name, address and phone number of each Obligor, the Principal Balance and any accrued interest and fees on each Pool Receivable, the vehicle identification number of each related Financed Vehicle and the payment history of the Obligor with respect to each Pool Receivable, as such information may change from time to time;
(h)each Servicer Report and Portfolio Certificate fully and accurately summarizes the information contained therein and reflects all of the Pool Receivables and the adjusted Principal Balances;
(i)there is no order, judgment or decree of any court, arbitrator or similar tribunal or Governmental Authority purporting to enjoin or restrain, and there are no proceedings before any court, arbitrator or similar tribunal or Governmental Authority seeking to enjoin or restrain the Seller from effecting the Purchase or
any Increase hereunder, or the Seller, its agents or the Trust from making any collection in respect thereof, which could reasonably be expected to have a Material Adverse Effect;
(j)there are no actions, suits or proceedings in existence or, to the knowledge of the Seller, pending or threatened, against or affecting the Seller or its Affiliates, or the property of the Seller or of any such Affiliates, in any court, or before any arbitrator of any kind, or before or by any governmental body, which could reasonably be expected to have a Material Adverse Effect;
(k)the transactions contemplated herein do not require compliance with the Bulk Sales Act (Ontario) or any similar legislation of any other jurisdiction;
(l)all documents, computer files, microfiche or other records and materials containing information or disclosure relating to the Seller, the Backup Servicer, the Performance Guarantor, the Obligors, the Financed Vehicles and the Pool Assets made available to the Trust from time to time will be true and correct in all material respects;
(m)the computer records of the Seller which contain particulars of the Pool Assets will contain notations, marks or other designations sufficient to identify that an interest in the Pool Assets has been sold by the Seller to the Trust hereunder;
(n)the Records relating to the Pool Assets are current and reflect all material transactions between the Seller and the Obligors under such Pool Assets and any other Person in respect thereof;
(o)each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable as of the date of such calculation;
(p)the Credit and Collection Policies in their current form do not contain any amendments or new policies or practices when compared to the historical policies and practices of the Servicer that would have adversely affected the historical collection results that have been furnished to the Trust;
(q)since December 31, 2019, there has been no material adverse change in the business, operations, property or financial condition of the Seller or AFC, the ability of the Seller or AFC to perform its obligations under this Agreement or the other documents delivered or to be delivered by it hereunder or the collectability of the Pool Receivables, or which affects the legality, validity, or enforceability of this Agreement or the other documents delivered or to be delivered by it hereunder; and
(r)the Seller is not: (i) a country, territory, organization, person or entity named on an Office of Foreign Asset Control (OFAC) list; (ii) a Person that resides or has a
place of business in a country or territory named on such lists or which is designated as a "Non-Cooperative Jurisdiction" by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a "Foreign Shell Bank" within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdictions designated by the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
4.2Survival
Subject to Section 10.13, the representations, warranties and covenants of the Seller (in its capacity as Servicer) contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement.
4.3Representations and Warranties of the Trust
The Trust represents and warrants to the Seller, and acknowledges that the Seller is relying upon such representations and warranties in consummating the transactions contemplated hereby, that:
(a)the Trust is validly existing under the laws of the Province of Ontario;
(b)the execution, delivery and performance by it of this Agreement and the other documents to be delivered by it hereunder (i) are within its powers and (ii) do not contravene: (A) the documents pursuant to which it was established, (B) in any material respect, any law, rule or regulation applicable to it, (C) any material contractual restriction binding on or affecting it or its property, or (D) any material order, writ, judgement, award, injunction or decree binding on or affecting it or its property;
(c)no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance by it of this Agreement or any other document to be delivered by it hereunder other than those which have been obtained or completed;
(d)this Agreement constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms subject to (a) applicable bankruptcy, reorganization, winding-up, insolvency, moratorium and other laws of general application limiting the enforcement of creditors' rights; (b) the fact that the granting of equitable remedies such as specific performance and injunction is within the discretion of a court of competent jurisdiction; and (c) general principles of equity;
(e)there is no pending or, to its knowledge, threatened, action or proceeding affecting it or any of its assets before any court, governmental agency or arbitrator which would, if determined adversely, have a material adverse effect on the Seller's rights or interests hereunder; and
(f)it is not a non-resident of Canada within the meaning of the Income Tax Act (Canada).
4.4Survival
Subject to Section 10.13, the representations and warranties of the Trust contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement.
ARTICLE 5
ADMINISTRATION
5.1Designation of the Servicer
The Trust hereby designates the Seller as the initial Servicer under this Agreement and by executing and delivering this Agreement, the Seller agrees to accept its designation as the Servicer until a Servicer Transfer, and hereby agrees to perform the duties and obligations of the Servicer pursuant to the terms hereof, at no cost to the Trust. Subject to the provisions of this Agreement, the Servicer shall administer, service and collect the Pool Assets as agent for the Trust until the Final Termination Date and the Trust shall not terminate the Seller as Servicer except in accordance with Section 5.12. The Servicer may, in accordance with the terms of the Credit and Collection Policies, subcontract with any Person for the administration and collection of the Pool Receivables; provided however, that the Servicer shall remain liable for the performance of the duties and obligations so subcontracted and all other duties and obligations of the Servicer pursuant to the terms hereof.
5.2Standard of Care
The Servicer, as agent for the Trust (to the extent provided herein), shall perform its duties hereunder with reasonable care and diligence, using that degree of skill and attention that the Servicer exercises in managing, servicing, administering, collecting on and performing similar functions relating to comparable Receivables that it services for itself or other Persons.
5.3Authorization of Servicer
Without limiting the generality of the authority granted by the designation of any Person as Servicer, and subject to the other provisions of this Agreement, the Servicer is hereby authorized and empowered by the Trust to take any and all reasonable steps in its name and on its behalf necessary or desirable, and not inconsistent with the sale, transfer and assignment of an undivided co-ownership interest in the Pool Assets to the Trust, except that the Servicer shall not be required to notify any Person of the Trust's interest therein until the occurrence of a Trigger
Event (other than a Trigger Event pursuant to Section 6.1(ee)), in the reasonable determination of the Servicer, to collect all amounts due under any and all Pool Assets, including, to execute and deliver, on behalf of the Trust and its successors and assigns, any and all instruments of satisfaction or cancellation, or partial or full release or discharge, and all other comparable instruments, with respect to the Pool Assets and, after delinquency of any Pool Receivable, and to the extent permitted under and in compliance with applicable law and regulations, to commence proceedings with respect to enforcing payment of such Pool Receivable and the Related Security, and adjusting, settling or compromising the account or payment thereof, to the same extent as the Seller could have done if it had continued to own the Pool Assets. The Trust shall furnish the Servicer with any powers of attorney and other documents that are within the ability of the Trust to furnish and which are reasonably necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder as agent of the Trust.
5.4Enforcement of Contracts
The Servicer is authorized to enforce and protect the Trust's rights and interests in, to and under the Pool Assets and the Trust's right to receive payment in respect thereof, and the Servicer may commence or defend proceedings in the name of the Trust (or any agent thereof, including the Servicer) for the purpose of enforcing or protecting any rights under any of the Pool Assets or against any Obligor personally. Unless the Trust shall have given its express prior written consent thereto, the Servicer shall not take any action that would make the Trust a party to any litigation. Notwithstanding the foregoing, the Servicer need not seek the Trust's consent to make the Trust a party to litigation incidental to the enforcement by the Servicer of any of the Pool Assets.
5.5Assignment for Purpose of Enforcement
If the Servicer shall commence a legal proceeding to enforce any rights under any of the Pool Assets or against an Obligor personally in accordance with this Agreement, the Trust shall thereupon be deemed to have automatically assigned its interest in any affected Pool Asset to the Servicer as of the day prior to such commencement, solely for the purpose of and only to the extent necessarily incidental to the enforcement by the Servicer of such rights. The Servicer shall hold any such assigned interest in a Pool Asset in trust for the Trust and the same shall be deemed to have been automatically re-assigned to the Trust when the assignment to the Servicer ceases to be necessary for the enforcement by the Servicer of such rights. If in any enforcement suit or legal proceeding it shall be held that the Servicer may not enforce a right under a Pool Asset on the grounds that it shall not be a real party in interest or a holder entitled to enforce rights in respect of the Pool Asset, the Trust shall, at the Servicer's expense and direction, take such steps as are necessary to enforce the Pool Asset.
5.6Deposit of Collections
The Servicer shall deposit, or cause to be deposited, all Collections, to the Deposit Accounts as soon as reasonably possible and in any event, within one Business Day of receipt. All Collections deposited to the Deposit Accounts shall be held for the benefit of the Trust and the Seller, shall only be invested in Eligible Investments and shall be withdrawn from the Deposit
Accounts only in accordance with the terms of this Agreement. Notwithstanding the foregoing, the Servicer shall be entitled to reimburse itself out of Collections for any amounts paid by it to [**] pursuant to Section 8 of the Blocked Account Agreement in respect of chargebacks relating to cheques, drafts and other payment items dishonoured or otherwise returned for insufficient funds. Each of the parties hereto agrees that, until consented to in writing by the Trust, only obligations described in clause (a) of the definition of Eligible Investments shall constitute Eligible Investments.
5.7Description of Services
The Servicer shall, unless the Trust directs otherwise, take or cause to be taken all such reasonable actions as may be necessary or advisable from time to time to administer and service each Pool Receivable and the Related Security and the related Collections in accordance with the provisions of the Credit and Collection Policies, this Agreement and applicable law. Without limiting the generality of the foregoing, the Servicer shall, in accordance with and subject to the Credit and Collection Policies, with respect to each Pool Receivable:
(a)take or cause to be taken all such actions as may be necessary or desirable from time to time to collect the Pool Receivable in accordance with the terms and provisions of the applicable Contract and in accordance with the terms of this Agreement;
(b)keep an individual record with respect to the Pool Receivable and post to it all payments received under or in respect of such Pool Receivable;
(c)deposit all Collections in respect of the Pool Receivable to the Deposit Accounts as required by Section 5.6, regardless of any defence, set-off right or counterclaim;
(d)give timely notice to the Obligor of the Pool Receivable of any payment or other default thereunder within the Servicer's knowledge;
(e)record the Pool Receivable as being delinquent or defaulted in accordance with the Credit and Collection Policies;
(f)investigate all delinquencies and defaults under the Pool Receivable;
(g)respond to all reasonable enquiries of the Obligor of the Pool Receivable or other obligors under the Related Security;
(h)take such steps as are reasonably necessary or appropriate to maintain the perfection and priority, as the case may be, of the Security Interests, if any, created pursuant to the Pool Receivable and the Related Security and, subject to Sections 5.7(m) and (n) to refrain from releasing or subordinating any such Security Interest in whole or in part except to the extent that the Servicer would
have done so in a similar situation with respect to other Receivables administered by it on its own behalf;
(i)make all payments to Governmental Authorities and others where a statutory lien or deemed trust having priority over the Trust's interest in any of the Pool Assets has arisen (provided that nothing herein shall preclude the Servicer from contesting any claim in the ordinary course of business and in good faith);
(j)subject to Sections 5.3 and 5.4, determine the advisability of taking action and instituting and carrying out legal proceedings with respect to the Pool Receivable and the Related Security in case of default by the Obligor under such Pool Receivable and take such action and institute and carry out such legal proceedings determined by it to be advisable;
(k)maintain Records with respect to the Pool Receivable and the Related Security and, subject to Section 10.9, grant representatives of the Trust reasonable access to examine and make copies of such Records and a reasonable opportunity to discuss matters relating to the administration and servicing of the Pool Receivable and the Related Security with personnel of the Servicer involved in such administration and servicing during business hours, including the opportunity to see and review information systems and software in operation;
(l)hold as trust property for and on behalf of the Trust and the Seller, free and clear, as against creditors of the Seller, of all Security Interests and rights of others other than Government and Employee Claims, Operation of Law Claims and those created pursuant to this Agreement, all Records with respect to the Pool Receivable at any one or more of the offices identified in Schedule "B" until the Final Termination Date;
(m)execute and deliver all such assignments, releases and discharges of the Pool Receivable and the Related Security as are required by the terms thereof and upon receipt of all amounts due thereunder or as necessary to allow the Servicer to liquidate and sell a Financed Vehicle in accordance with the Credit and Collection Policies;
(n)settle, compromise and otherwise deal with any claims under the Pool Receivable or the Related Security if necessary, advisable or otherwise permitted in accordance with the terms of the related Contract, this Agreement and the Credit and Collection Policies; and
(o)maintain a complete list of Excluded Receivables and shall update such list on a timely basis for all changes thereto.
5.8Affirmative Covenants of the Servicer
From the date hereof until the Final Termination Date, the Servicer covenants and agrees that it will, unless the Trust shall otherwise consent in writing:
(a)comply in all respects with all applicable laws, rules, regulations and orders with respect to it, its business and properties, all Pool Assets and the performance of its obligations as Servicer, such compliance to include paying before the same become delinquent all Taxes and Security Interests imposed upon the Servicer or its property in accordance with its normal policies with respect thereto, except to the extent the same are contested in good faith and by appropriate proceedings or where failure to do so could not reasonably be expected to have a Material Adverse Effect;
(b)preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified as an extra-provincial corporation or other out-of-jurisdiction corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualifications could reasonably be expected to have a Material Adverse Effect;
(c)hold as trust property for and on behalf of the Trust and the Seller, at any one or more of the offices designated under the heading "Location of Records" in Schedule "B" (provided that, as may be necessary, originals may be delivered to any law firm acting on behalf of the Servicer in connection with any claims or proceedings connected with a Pool Asset) with respect to each Pool Receivable, until the obligations in respect of such Pool Receivable have been satisfied, the following documents or instruments, which are hereby constructively delivered to the Trust:
i.the original Contracts applicable to the Pool Receivables;
ii.the original credit application, credit analysis and credit agency report (unless no such report could be obtained in respect of the Obligor) and "credit bureau score" and "custom score" records, if any, relating to the Obligor, all in accordance with the Credit and Collection Policies;
iii.all other documents that the Servicer shall keep on file, in accordance with its customary procedures, evidencing the Related Security; and
iv.any and all other documents that the Servicer shall keep on file, in accordance with its customary procedures, relating to a Receivable, an Obligor or any Financed Vehicles;
(d)comply with the Credit and Collections Policies in regard to the Pool Assets and otherwise, as applicable, in performing its covenants hereunder, except to the extent that non-compliance therewith would not materially adversely affect the
Trust's interest in any Pool Assets with respect thereto or the collectability or enforceability thereof, it being agreed for the purposes of this Agreement that the invalidity or loss of priority of any material Security Interest in any Financed Vehicle comprising part of the Related Security related to any Pool Receivable would materially adversely affect the Trust's interest therein;
(e)at its own expense, employ and provide general administrative, supervisory and accounting staff and general overhead as may from time to time be reasonably required to carry out its obligations hereunder and cause its employees to perform their responsibilities in collecting and administering the Pool Assets in the same manner as if the Pool Assets were owned by the Seller, except (i) to the extent necessary or desirable to accommodate the exercise by the Trust of its rights under this Agreement, or (ii) as otherwise required hereby;
(f)pay from its own funds all general administrative and out-of-pocket expenses and other costs incurred by it in carrying out its obligations hereunder and all fees and expenses of any administrator appointed or subcontractor retained by it;
(g)cause the computer records of the Seller which contain particulars of the Pool Assets to contain notations, marks or other designations sufficient to identify that an interest in the Pool Assets has been sold by the Seller to the Trust hereunder;
(h)maintain and implement administrative and operating procedures (including an ability to recreate Records in the event of the destruction of the originals of such Records) to keep and maintain, and keep and maintain all Records and other information reasonably necessary or advisable to enable the Servicer to produce the information required to be produced by it pursuant hereto or reasonably necessary or advisable for the enforcement of all of the Pool Receivables and Related Security (including Records adequate to permit the daily identification of all Collections under and adjustments to each Pool Receivable);
(i)at any time and from time to time during regular business hours, upon five Business Days' prior notice, subject to Section 10.9, (A) assemble such of the Records or copies thereof as may reasonably be requested by the Trust and make same available to the Trust at the principal place of business of the Servicer and, if the Records cannot be provided solely at such office, at such other offices of the Servicer or its Affiliates where Records are kept, and permit the Trust, its agents or representatives, to examine and make copies, as reasonably required, of such Records and (B) permit the Trust or its agents to visit the offices and properties of the Seller for the purpose of discussing matters relating to the Pool Assets and the Servicer's performance hereunder with any of the Servicer's officers or employees having knowledge of such matters, provided that the Trust shall act reasonably to minimize any disruption to the Servicer in connection therewith; provided that prior to the occurrence of a Cash Reserve Event or a Trigger Event, the Trust shall not be reimbursed for more than two such examinations in any year, if a Cash Reserve Event has occurred and is continuing, the Trust shall not be reimbursed
for more than four such examinations in any year and, if a Trigger Event has occurred and is continuing, the Trust shall be reimbursed for all such examinations;
(j)to the extent the Records consist in whole or in part of computer programs which are licensed by the Servicer, the Servicer will, forthwith upon the occurrence of the first Servicer Termination Event, use its best efforts to arrange for the licence or sublicence of such programs to the Trust for the limited purpose of permitting the Trust or any Replacement Servicer to administer and collect the Pool Assets and to enforce the rights acquired by the Trust in respect of the Related Security;
(k)at its expense, timely and fully perform and comply in all material respects with all material provisions, covenants and other promises required to be observed by the Seller under the Contracts in connection with the Pool Assets;
(l)permit the Trust at any reasonable time and from time to time to inspect the data processing systems used by the Servicer to service, administer and collect the Pool Receivables and the Related Security and, in the event that the Seller is not the Servicer, to permit the Servicer to use, through the Seller only (and not directly), any computer or computer related equipment, together with all necessary software, that had been used by the Seller to service, administer and collect the Pool Receivables and the Related Security immediately prior to the Seller ceasing to be the Servicer, provided that the Trust shall act reasonably to minimize any disruption to the Servicer in connection therewith;
(m)give the Trust not less than 30 days' prior written notice of any change in the address of its chief place of business and chief executive office, and written notice promptly after any change in the address of an office listed under the heading "Location of Records" in Schedule "B", and each such notice shall be deemed to amend Schedule "B" accordingly;
(n)provide to the Trust not less than 30 days' prior notice of any change in the name of the Servicer as stated in its constating documents;
(o)co-operate with, and offer such assistance as may reasonably be requested by, the chartered accountants selected by the Trust to furnish reports in respect of the Trust, the Purchase, any Increases and the servicing of the Pool Assets under this Agreement;
(p)upon request of the Trust and with the Servicer's written consent, such consent not to be unreasonably withheld, request the Servicer's auditors to assist the Trust's auditors to the extent and in such manner as is reasonably required for the Trust's auditors to report on the status of the Pool Assets under this Agreement;
(q)make or cause to be made all filings, recordings, registrations and take all other actions in each jurisdiction necessary to validate, preserve, perfect or protect the
co-ownership interests of the Trust in the Pool Assets including, the right to enforce the Related Security; and
(r)following the occurrence and during the continuation of a Servicer Termination Event or a Cash Reserve Event, the Servicer shall provide to the Backup Servicer and the Trust (if requested) on a daily basis an electronic download with respect to the Pool Receivables in form and substance acceptable to the Backup Servicer (and which shall include, but not be limited to, all Records related to each Receivable required by the Backup Servicer to service and collect such Receivable) and a Portfolio Certificate (including information with respect to all Collections received and all Receivables acquired by the Seller). Following the occurrence and during the continuation of a Cash Reserve Event, the Trust shall have the right to require the Seller or the Servicer to, and upon such request the Seller or the Servicer, as applicable, shall, assemble copies of all of the Contracts and make the same available to the Backup Servicer or other third-party custodian specified by, and at a place selected by, the Trust within 30 days.
5.9Reporting Requirements of the Servicer
From the date hereof until the Final Termination Date, the Servicer covenants and agrees that it will, unless the Trust shall otherwise consent in writing, deliver to the Trust:
(a)on each Reporting Date, a Servicer Report relating to the Pool Assets during the related Collection Period and relating to all transactions between the Seller in its capacity as Servicer and the Trust during such Collection Period, such report to be current as of the close of business of the Servicer on the related Settlement Date;
(b)on the first Business Day of each week, a Portfolio Certificate relating to the Pool Assets as of the close of business of the Servicer on the last day of the prior week;
(c)on each Business Day following the occurrence and during the continuation of an Enhancement Build Trigger or a Trigger Event, a Portfolio Certificate relating to the Pool Assets as of the close of business of the Servicer on the Business Day immediately preceding such Business Day;
(d)upon the Trust's reasonable request therefor, a listing by Obligor of all Pool Receivables and current aging report for all Delinquent Receivables;
(e)forthwith after the occurrence of each Servicer Termination Event and each event or the existence of any fact which, with the giving of such notice or lapse of time or both, may constitute a Servicer Termination Event, a statement of a senior financial officer or accounting officer of the Servicer setting forth details as to such Servicer Termination Event or fact or event and the action which the Servicer has taken and is proposing to take with respect thereto; and
(f)promptly, from time to time, such other documents, records, information or reports with respect to the Pool Assets or the conditions or operations, financial or otherwise, of the Servicer as the Trust may from time to time reasonably request.
5.10Negative Covenants of the Servicer
From the date of this Agreement until the Final Termination Date, the Servicer covenants and agrees that it will not, unless the Trust shall otherwise consent in writing:
(a)except as otherwise provided herein, whether by operation of law or otherwise, purport to sell, assign or otherwise dispose of, or create or suffer to exist any Security Interest upon or with respect to the Seller's or the Trust's interest in the Pool Assets if the effect of such Security Interest would be to cause the related Pool Receivable not to be an Eligible Receivable, or assign any right to receive payment under, or to enforce the Servicer's interest in, any of the Pool Assets, provided that the Servicer may enter into arrangements with collection agencies, private investigation firms and law firms to directly collect and hold payments of Receivables in trust for the benefit of the Trust and the Seller in accordance with the Credit and Collection Policies;
(b)without the prior written consent of the Trust, make any change in the Credit and Collection Policies which could reasonably be expected to have a Material Adverse Effect, or make any change to its credit, collection and administration practices and procedures with respect to Pool Receivables or Receivables which are to become Pool Receivables, provided that prior written consent shall not be required for changes to standard operating procedures (excluding any changes to credit underwriting criteria), however, the Trust can prevent a change, or require that a change be reversed, by notifying the Servicer that the Trust reasonably believes such a change would have a material adverse impact on the Pool Receivables;
(c)after the occurrence and during the continuance of a Trigger Event, extend the maturity or adjust the Principal Balance or otherwise modify the terms of any Pool Receivable in any material respect, or amend, modify or waive any term or condition of any related Contract in any material respect;
(d)release any security, guarantee or insurance securing any indebtedness under any of the Pool Receivables, except to the extent that granting such release is in accordance with this Agreement, the Credit and Collection Policies and the Servicer's usual practices as an obligee or such security or insurance is replaced in a form acceptable to the Trust, acting reasonably;
(e)take any action that adversely affects the perfection, validity or protection of the Trust's rights to collect amounts owing in respect of the Pool Receivables and the proceeds thereof, including the right to enforce the Related Security, except to the
extent that the Servicer would have done so in a similar situation with respect to other similar receivables administered by it on its own behalf;
(f)enter into any transaction of reorganization, amalgamation or arrangement, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or sell, lease or otherwise dispose of its assets as an entirety or substantially as an entirety; except that the Servicer may enter into a transaction of reorganization, amalgamation, or arrangement, so long as (i) such transaction could not reasonably be expected to have a Material Adverse Effect, (ii) as a condition to the completion of such transaction, the continued or reorganized corporation shall have executed an agreement of assumption to perform every obligation of the Servicer hereunder and under the other agreements, instruments and documents executed and delivered by the Servicer hereunder or otherwise contemplated hereby, (iii) the Backup Servicer shall have provided its written consent and acknowledged its continuing obligations under the Backup Servicer Agreement in respect of the obligations of such continued or reorganized corporation, and (iv) the Performance Guarantor shall have provided its written consent and acknowledged its continuing obligations under this Agreement in respect of the obligations of such continued or reorganized corporation; or
(g)resign as Servicer (provided, for greater certainty, that nothing herein contained shall limit the ability of the Trust to appoint a Replacement Servicer in accordance with the provisions of this Agreement).
5.11Servicer Termination Events
The occurrence or existence of one or more of the following events or facts which is continuing and has not been remedied by the Servicer or the Backup Servicer within the time period specified if any, with respect to such events or facts shall constitute a "Servicer Termination Event":
(a)the Servicer fails to make any payment or deposit to be made by it hereunder and such failure continues for two Business Days after the occurrence of such failure;
(b)any failure on the part of the Servicer to duly perform or observe any material term, condition, covenant or agreement of the Servicer set forth in this Agreement (other than Section 5.10(f)) or any document executed in connection herewith, other than such as are specifically referred to in paragraph (a) above, which failure continues unremedied for a period of 30 days after the date on which the Servicer receives written notice thereof from the Trust specifying the default or breach;
(c)any representation or warranty made by the Servicer (or any of its officers) in or pursuant to this Agreement, the Purchase Request, any Increase Request, any Servicer Report, any Portfolio Certificate or any document executed in connection herewith or therewith proves to have been false or incorrect in any material
respect when made and has not been cured within 30 days after written notice thereof has been received by the Servicer from the Trust;
(d)the taking of possession by an encumbrancer (including a receiver, receiver manager or trustee) of any assets of the Servicer (other than solely to perfect a security interest therein), or the levying or enforcement or a distress or execution or any similar process against any part of the assets of the Servicer that remains unsatisfied for 30 days after the Servicer becoming aware thereof, which materially adversely affects the Servicer's ability to perform its obligations hereunder;
(e)the issuance or levying of a writ of execution, attachment or similar process against all or a substantial portion of the property of the Servicer, the Backup Servicer or the Performance Guarantor, in connection with any judgment against the Servicer, the Backup Servicer or the Performance Guarantor in any amount that materially affects the property of the Servicer, the Backup Servicer or the Performance Guarantor if such writ of execution, attachment or similar process shall not have been stayed or dismissed after 45 days;
(f)any failure on the part of the Servicer to duly perform or observe the terms of Section 5.10(f);
(g)any of the Servicer, AFC or the Performance Guarantor shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceedings shall be instituted by or against the Servicer or the Performance Guarantor seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking the entry of an order for relief by the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, if such proceeding has been instituted against the Servicer or the Performance Guarantor, as the case may be, either such proceeding has not been stayed or dismissed within 45 days or any of the actions sought in such proceeding (including the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official) are granted, or the Servicer or the Performance Guarantor take any corporate action to authorize any of the actions described in this Section 5.11(g); and
(h)the filing by the Servicer, AFC or the Performance Guarantor of a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act or any other similar legislation in the applicable jurisdiction, to some or all of its creditors.
5.12Effecting a Servicer Transfer
At any time after the occurrence of a Servicer Termination Event that has not been subsequently waived in writing by the Trust, the Trust may effect a termination of a Servicer's designation as Servicer hereunder (a "Servicer Transfer") by giving notice to the Servicer of its decision to terminate the Servicer's engagement as Servicer, which termination shall take effect at the time specified in such notice, or, failing the specification of any time, upon the appointment of a Replacement Servicer. Any waiver delivered by the Trust will only be effective with respect to the specific matters in respect of which it is given and shall not be applicable to any further event or occurrence. The Trust acknowledges that any written waiver it delivers will be irrevocable by the Trust.
5.13Appointment of Replacement Servicer
At any time after the occurrence of a Servicer Termination Event, the Trust may by instrument in writing delivered to the Servicer designate and appoint as the Replacement Servicer any Person;
5.14Additional Servicer Covenants Following a Servicer Transfer
From and after a Servicer Transfer until the Final Termination Date, the Servicer and the Seller covenant and agree that they shall, in addition to any other obligations, upon the request of the Trust:
(a)instruct the Obligor of each Pool Receivable (and any other Persons, if applicable, in the case of the Related Security) to remit all payments due under the Pool Receivables and Related Security to the Replacement Servicer;
(b)remit to the Replacement Servicer all payments, if any, received by the predecessor Servicer from Obligors and from other Persons, if applicable, under the Pool Assets;
(c)segregate all cash, cheques and other instruments constituting Collections in a manner acceptable to the Trust and, immediately upon receipt, deposit all such cash, cheques and instruments, duly endorsed or with duly executed instruments of transfer, to an account specified by the Replacement Servicer;
(d)cause the computer records of the Seller which contain particulars of the Pool Assets to contain notations, marks or other designations sufficient to identify that an interest in the Pool Assets has been sold by the Seller to the Trust hereunder;
(e)deliver copies or originals of all Records (including computer diskettes or tapes containing all information necessary or reasonably desirable to enable the Trust or its agent to collect the amounts owing under the Pool Receivables and the Related Security, together with a printed copy or microfiche of all such information) to the Trust or as it may direct in writing (or retain the same in segregated storage if so directed), and provide the Trust or its agent with all reasonable assistance
necessary to decipher the information contained on the computer diskettes or tapes; and
(f)perform any and all acts and execute and deliver any and all documents as may reasonably be requested by the Trust in order to effect the purposes of this Agreement or to enable the Replacement Servicer to collect and enforce the Pool Receivables and any Related Security and Collections related thereto.
5.15Trust Rights Following a Servicer Transfer
Upon a Servicer Transfer, the Trust may, but is not required to, at any time (unless prior to such time the Seller shall have purchased from the Trust and satisfied all of its obligations with respect to such purchase, all of the Pool Receivables), directly or through the Replacement Servicer, without limitation:
(a)perform the services, duties and functions of the Servicer specified in Article 5 of this Agreement with respect to the Pool Assets as the Trust reasonably deems fit;
(b)notify any Obligor of the purchase by the Trust and the sale, transfer and assignment by the Seller of any Pool Assets under this Agreement;
(c)contact any Obligor for any reasonable purpose, including for the performance of audits and verification analyses, and the determination of account balances and other data maintained by the predecessor Servicer;
(d)direct any Obligor to make all payments on account of any Pool Receivables or Related Security directly to the Trust at an address designated by the Trust or to such third party (including the Replacement Servicer) or bank or depositary as may be designated by the Trust;
(e)request any Obligor to change the instructions for any direct debit or electronic funds transfer otherwise payable to the Seller or the Servicer; and
(f)proceed directly against any Obligor and take any and all other actions, in the Seller's name or otherwise, necessary or reasonably desirable to collect the Pool Receivables, enforce the Related Security or effect any related result.
5.16Power of Attorney; Further Assurances
(a)The Seller hereby grants to the Trust an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the Seller or in the name of the Trust, acting reasonably, all steps necessary or advisable to endorse or negotiate an instrument, bill of exchange or other writing or to otherwise enforce or realize on any Pool Asset or other right of any kind held or owned by the Seller or transmitted to or received by the Seller or the Trust as payment on account or otherwise in respect of the Pool Asset, and to execute and deliver, in the Seller's name and on the Seller's behalf, such instruments and
documents necessary or desirable to evidence or protect the ownership of the Trust in the Pool Assets and to execute and file, in the Seller's name and on the Seller's behalf, such recording, registration, financing or similar statements (including any amendments, renewals and continuation statements) under applicable laws, including the PPSA, in such jurisdictions where it may be necessary to validate, perfect or protect the ownership of the Trust as aforesaid. The Seller shall execute and deliver such additional documents and shall take such further actions as the Trust may reasonably request to effect or evidence the sale, assignment and transfer of the Pool Assets, and the Trust's ownership interest therein or otherwise necessary or desirable in furtherance of the foregoing. The Seller shall execute and deliver to the Trust such powers of attorney as may be necessary or appropriate to enable the Trust to endorse for payment any cheque, draft or other instrument delivered to the Trust in payment of any amount under or in respect of a Pool Asset.
(b)The Trust hereby covenants and agrees that it will not exercise any of the rights conferred by Section 5.16(a) except upon the occurrence of a Trigger Event and then only in respect of the Pool Assets.
5.17Deemed Collections
(a)If, on any day prior to the Final Termination Date, any Pool Receivable is either (i) reduced or cancelled as a result of any breach by the Seller or the Servicer of its obligations hereunder or of the terms of the related Contract; or (ii) reduced or cancelled as a result of a set-off in respect of any claim by the applicable Obligor against the Seller or the Servicer (whether such claim arises out of the same or a related transaction or an unrelated transaction or the loss of or interference with the right of the Obligor to quiet enjoyment of, and continued possession of, the Financed Vehicle), the Servicer or the Seller and the Servicer (on a joint and several basis), so long as the Servicer is the Seller or an Affiliate thereof, as the case may be shall, for all purposes hereof, be irrebuttably deemed to have received a Collection of such Receivable in the amount of such reduction or cancellation and shall deposit such amount to the Deposit Accounts in accordance with the terms of Section 5.6.
(b)If on any day prior to the Final Termination Date any Security Interest, other than a Blocked Account Claim, is validly asserted by any Person (other than the Trust) against any Pool Receivable (as determined by a court of competent jurisdiction or due to the agreement or acquiescence of the Seller or Servicer), and such Security Interest has arisen by or through the action or inaction of the Seller or the Servicer, and, with respect to any Security Interest granted by or arising through an Obligor and asserted against a Financed Vehicle, such Security Interest ranks in priority to or pari-passu with the interest of the Trust, the Seller shall, for all purposes hereof, be irrebuttably deemed to have received on such day, a
Collection of any affected Pool Receivable in full and shall deposit such amounts to the Deposit Accounts in accordance with the terms of Section 5.6.
(c)If on any day prior to the Final Termination Date it is discovered or determined (i) that any Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance was not an Eligible Receivable on the date of such calculation, or (ii) the Servicer, so long as the Servicer is the Seller or an Affiliate thereof, has extended, amended or otherwise modified a Contract in contravention of Section 5.10(c), the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full.
(d)If the Seller or Servicer has been deemed, pursuant to Section 5.17(a), (b) or (c) to have received a Collection of any Pool Receivable in full, upon deposit by the Seller or Servicer to the Collection Account of the amount thereof, the Trust will be deemed to have sold to the Seller or Servicer, as the case may be, without further instrument or formality, the related Pool Receivables together with the Related Security in respect thereof free and clear of all Security Interests arising through the Trust but otherwise on an "as is, where is" basis without recourse to, or representation or warranty of the Trust.
ARTICLE 6
TRIGGER EVENTS
6.1Meaning of Trigger Event
The term "Trigger Event" means any of the following events or circumstances:
(a)the Seller or the Servicer fails to make any payment or deposit to be made by it hereunder and such failure continues for two Business Days after the occurrence of such failure;
(b)any failure on the part of the Seller to duly perform or observe any material term, condition, covenant or agreement of the Seller set forth in this Agreement (other than Section 7.3(c)) or any document executed in connection herewith, other than such as are specifically referred to in paragraph (a) above, which failure continues unremedied for a period of 30 days after the date on which the Seller receives written notice thereof from the Trust specifying the default or breach;
(c)a Servicer Termination Event occurs;
(d)any representation or warranty made by the Seller (or any of its officers) in or pursuant to this Agreement, the Purchase Request, any Increase Request, any Servicer Report, any Portfolio Certificate or any document executed in connection herewith or therewith proves to have been false or incorrect in any material
respect when made and has not been cured within 30 days after written notice thereof has been received by the Seller from the Trust;
(e)the taking or possession by an encumbrancer (including a receiver, receiver manager or trustee) of any assets of the Seller (other than solely to perfect a security interest therein) or the levying or enforcement or a distress or execution or any similar process against any of the assets of the Seller that remains unsatisfied for 30 days after the Seller becoming aware thereof, which materially adversely affects the Seller's ability to perform its obligations hereunder;
(f)the issuance or levying of a writ of execution, attachment or similar process against all or a substantial portion of the property of the Seller, in connection with any judgment against the Seller in any amount that materially affects the property of the Seller if such writ of execution, attachment or similar process shall not have been stayed or dismissed after 45 days;
(g)any failure on the part of the Seller to duly perform or observe the terms of Section 7.3(c);
(h)the filing by the Seller of a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act or any other similar legislation in the applicable jurisdiction, to some or all of its creditors;
(i)the Seller shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceedings shall be instituted by or against the Seller seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking the entry of an order for relief by the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, if such proceeding has been instituted against the Seller either such proceeding has not been stayed or dismissed within 45 days or any of the actions sought in such proceeding (including the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official) are granted, or the Seller take any corporate action to authorize any of the actions described in this Section 6.1(i);
(j)the Seller shall fail to transfer to any Replacement Servicer when required any rights, pursuant to the Agreement, which the Seller then has with respect to the servicing of the Pool Receivables;
(k)(i) a default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness of the Seller, AFC or the Performance Guarantor or (ii) a default shall occur in the performance
or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness, and, in the case of either clause (i) or clause (ii), the Indebtedness with respect to which non-payment and/or non-performance shall have occurred and is continuing exceeds, at any point in time, with respect to the Seller and AFC, $1,000,000 and with respect to the Performance Guarantor, $35,000,000, in the aggregate for all such occurrences;
(l)this Agreement, the Purchase or any Increases shall for any reason (other than pursuant to the terms hereof) cease to create, or shall for any reason cease to be, a valid and enforceable perfected co-ownership interest in each Pool Receivable and the Collections with respect thereto;
(m)as of any Settlement Date, the arithmetic average of the Default Ratios for the most recent [**] shall exceed [**] or the Default Ratio as of any Settlement Date shall exceed [**];
(n)as of any Settlement Date, the arithmetic average of the Delinquency Ratios for the most recent [**] shall exceed [**] or the Delinquency Ratio as of any Settlement Date shall exceed [**];
(o)as of any Settlement Date, the arithmetic average of the Net Spread for the most recent [**] shall be [**] or less;
(p)the Tangible Net Worth of the Seller shall be less than [**] or the Tangible Net Worth of AFC shall be less than [**] (provided that if GAAP is adjusted such that leases that were previously treated as operating leases are treated as debt, the parties shall negotiate in good faith to adjust this provision to reflect a level which takes into consideration such change);
(q)any material adverse change shall occur in the reasonable business judgment of the Trust in the collectability of the Receivables or the business, operations, property or financial condition of the Seller or the Performance Guarantor;
(r)this Agreement shall cease to be in full force and effect with respect to the Performance Guarantor, the Performance Guarantor shall fail to comply with or perform any provision of this Agreement, or the Performance Guarantor (or any Person by, through or on behalf of the Performance Guarantor) shall contest in any manner the validity, binding nature or enforceability of this Agreement with respect to the Performance Guarantor;
(s)the sum of all of the Seller's Indebtedness, net of [**], exceeds [**] (provided that if GAAP is adjusted such that leases that were previously treated as operating leases are treated as debt, the parties shall negotiate in good faith to adjust this provision to reflect a level which takes into consideration such change);
(t)the Seller's Indebtedness (excluding guarantees) to equity ratio is greater than [**] to 1 (provided that if GAAP is adjusted such that leases that were previously treated as operating leases are treated as debt, the parties shall negotiate in good faith to adjust this provision to reflect a level which takes into consideration such change);
(u)the aggregate of the Principal Balances of all Eligible Receivables shall be less than $30 million;
(v)a Blocked Account Agreement in favour of the Trust in place with respect to any Deposit Account shall have terminated other than as a result of any action by the Trust (and not been replaced) or shall be of no force and effect or otherwise unenforceable;
(w)AFC shall not hold, directly or indirectly, 100% of the outstanding share capital of the Seller, or the Performance Guarantor shall not hold, directly or indirectly, at least 80% of all of the outstanding share capital of AFC; provided that, for greater certainty, the pledge as security by the Seller or the Performance Guarantor, as the case may be, of all or any of such shares shall not be a Trigger Event hereunder;
(x)the amount on deposit in the Cash Reserve Account shall at any time before the Termination Date fail to equal or exceed the Cash Reserve Required Amount for a period of [**];
(y)(i) any of the Seller or the Servicer shall have asserted that this Agreement or any document executed herewith to which it is a party is not valid and binding on the parties thereto; or (ii) any court, governmental authority or agency having jurisdiction over any of the parties to any of such documents or any property thereof shall find or rule that any material provisions of any of such documents is not valid and binding on the parties thereto and all appeals therefrom have been decided or the time to appeal has run;
(z)the Backup Servicer shall resign or be terminated and no successor Backup Servicer reasonably acceptable to the Trust shall have been appointed pursuant to a replacement Backup Servicing Agreement, within 90 days of such resignation or termination, as applicable; unless on or prior to the first day on which a Backup Servicer is required to be appointed pursuant to this paragraph (z), the Performance Guarantor's senior unsecured debt shall be rated at least "BBB-" by Standard & Poor's and "Baa3" by Moody's; provided, that a Trigger Event shall be deemed to occur if no Backup Servicer reasonably acceptable to the Trust shall have been appointed within 90 days following any subsequent withdrawal, suspension or downgrade of such senior unsecured debt ratings of the Performance Guarantor below "BBB-" by Standard & Poor's or below "Baa3" by Moody's or, if the applicable rating is "BBB-" by Standard & Poor's or "Baa3" by Moody's, the placement of such ratings on credit watch or similar notation;
(aa)the occurrence of a KAR Financial Covenant Termination Event;
(bb)the arithmetic average Payment Rate for [**] is less than [**];
(cc)at any time the Trust Share exceeds 100%, and such condition shall continue unremedied for five days after any date any Servicer Report or Portfolio Certificate is required to be delivered;
(dd)as reported on its consolidated balance sheet, AFC shall fail to maintain (as measured as of the last Business Day of each calendar week) cash and cash equivalents (including, without limitation, any intercompany receivable payable by KAR to AFC upon demand) of at least [**], at least [**] of which must constitute unrestricted cash (i.e., cash that is neither (i) pledged to a third party unrelated to the KAR Credit Facility, nor (ii) in an account in which a third party unrelated to the KAR Credit Facility has a perfected security interest; or
(ee)the Termination Date shall have occurred.
6.2Action Upon Occurrence of a Trigger Event
Upon the occurrence of any Trigger Event described in Sections 6.1(a), (b), (c), (d), (g), (l), (m), (n), (o), (p), (q), (r), (s), (t), (u), (v), (w), (x), (y), (z), (aa), (bb), (cc), and (dd) provided such Trigger Event has not been subsequently waived in writing by the Trust, the Trust or its authorized agent may, by notice to the Seller declare the Trigger Date to have occurred on the date specified in such notice. Upon the occurrence of any other Trigger Event described in Section 6.1, the Trigger Date will occur automatically, without the necessity of any notice. Upon any such declaration or automatic occurrence, the Trust will have, in addition to its rights and remedies hereunder and under any documents related hereto, all other rights and remedies under applicable laws and otherwise, which rights and remedies will be cumulative. Notwithstanding the above, the Trust may waive any Trigger Event in its sole discretion and, if given, such waiver shall be irrevocable.
6.3Optional Repurchase of Pool Receivables
If, at any time the Pool Balance is less than 10% of the highest ever Pool Balance, the Servicer may elect, by notice to the Trust, to purchase all of the Pool Receivables and the Related Security. The purchase by the Servicer of all of the Pool Receivables and the Related Security shall be effective upon the payment by the Servicer to the Trust of an amount equal to the sum of (i) the then outstanding Investment, (ii) the Funding Discount, and (iii) any other fees, costs and expenses incurred by the Trust in connection with this Agreement to the date of or as a result of such purchase, including any interest and other costs required to be paid on outstanding Notes. Upon the payment to the Trust of such amount by deposit to the Collection Account, the Trust shall transfer, assign and convey to the Servicer or as it may direct all of the Trust's right, title and interest in, to and under such Pool Receivables and the Related Security related thereto, without recourse, and subject only to the representations and warranties of the Trust that such right, title and interest is held beneficially by it and is transferred, assigned and conveyed to the
Servicer or as it may direct free and clear of any Security Interests created, suffered or permitted to exist by the Trust.
ARTICLE 7
GENERAL COVENANTS AND POWER OF ATTORNEY
7.1Affirmative Covenants of the Seller
From the date hereof until the Final Termination Date, the Seller covenants and agrees that it will, unless the Trust shall otherwise consent in writing:
(a)comply in all respects with all applicable laws, rules, regulations and orders with respect to it, its business and properties and all Pool Assets, such compliance to include paying before the same become delinquent all Taxes and Security Interests imposed upon the Seller or its property in accordance with its normal policies with respect thereto, except to the extent the same are contested in good faith and by appropriate proceedings or where failure to do so could not reasonably be expected to have a Material Adverse Effect;
(b)preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified as an extra-provincial corporation or other out-of-jurisdiction corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect;
(c)at any time and from time to time during regular business hours, upon five Business Days' prior written notice, subject to Section 10.9, (A) assemble such of the Records or copies thereof in its possession or control as may reasonably be required by the Trust and make same available to the Trust at the principal place of business of the Seller and, if the Records cannot be provided solely at such office, at such other offices of the Seller or its Affiliates where Records are kept, and permit the Trust, its agents or representatives, to examine and make copies, as reasonably requested, of such Records and (B) permit the Trust or its agents to visit the offices and properties of the Seller and its Affiliates for the purpose of discussing matters relating to the Pool Assets and the Seller's performance hereunder with any of the Seller's officers or employees having knowledge of such matters, provided that the Trust shall act reasonably to minimize any disruption to the Seller in connection therewith; provided that prior to the occurrence of a Cash Reserve Event or a Trigger Event, the Trust shall not be reimbursed for more than two such examinations in any year, if a Cash Reserve Event has occurred and is continuing, the Trust shall not be reimbursed for more than four such examinations in any year and, if a Trigger Event has occurred and is continuing, the Trust shall be reimbursed for all such examinations;
(d)at its expense, timely and fully perform and comply in all material respects with all material provisions, covenants and other obligations required to be observed, complied with or performed by the Seller under the Contracts relating to the Pool Assets;
(e)give the Trust at least 30 days' prior written notice of any change in the address of its chief place of business and chief executive office, and written notice promptly after any change in the address of an office listed under the heading "Location of Records" in Schedule "B", and each such notice shall be deemed to amend Schedule "B" accordingly;
(f)provide to the Trust not less than 30 days' prior notice of any change in the name of the Seller as stated in its constating documents;
(g)co-operate with, and offer such assistance as may reasonably be requested by, the chartered accountants selected by the Trust to furnish reports in respect of the Trust, the Purchase and any Increase and the servicing of the Pool Assets under this Agreement;
(h)upon request of the Trust and with the Seller's written consent, such consent not to be unreasonably withheld, request the Seller's auditors to assist the Trust's auditors to the extent and in such manner as is reasonably required for the Trust's auditors to report on the status of the Pool Assets under this Agreement;
(i)conduct Lot Checks of each Obligor in accordance with the Seller's customary practices or on such more frequent intervals as may be reasonably requested by the Trust;
(j)promptly after becoming aware thereof, but in any event no later than two Business Days thereafter, provide the Trust with notice of any Servicer Termination Event that is continuing when the Seller becomes aware thereof; and
(k)make or cause to be made all filings, recordings, and registrations and take all other actions in each jurisdiction necessary or appropriate to validate, preserve, perfect or protect the co-ownership interests of the Trust in the Pool Assets, including the right to enforce the Related Security.
7.2Reporting Requirements of the Seller
From the date hereof until the Final Termination Date, the Seller covenants and agrees that it will, unless the Trust shall otherwise consent in writing, deliver to the Trust:
(a)within five Business Days after the Seller becomes aware of a material adverse change in the business, operations, properties or condition (financial or otherwise) (other than matters of a general economic nature) of the Seller, the Backup Servicer or the Performance Guarantor, or of an occurrence of a breach of its
obligations under this Agreement, notice of such change or occurrence together with a statement by a responsible officer of the Seller specifying the facts, the nature and period of existence of any such breach, condition or event and the action the Seller has taken, is taking and proposes to take with respect thereto;
(b)within five Business Days of the Seller becoming aware thereof, notice of any litigation or other court or arbitration proceeding affecting the Seller which could reasonably be expected to have a Material Adverse Effect;
(c)within five Business Days of the Seller becoming aware thereof, notice of any litigation or other court or arbitration proceeding affecting the Backup Servicer or the Performance Guarantor which could reasonably be expected to have a Material Adverse Effect;
(d)as soon as available and in any event within 45 days after the end of each fiscal quarter of the Seller, the unaudited financial statements of the Seller and, as soon as available but in any event within 90 days after the end of the fiscal year of the Seller, the unaudited financial statements of the Seller;
(e)as soon as available and in any event within 90 days after the end of the fiscal year of the Performance Guarantor, the audited consolidated balance sheet of the Performance Guarantor and its consolidated subsidiaries as of the end of such year and the related audited consolidated statements of income and of cash flows for such year; reported on by KPMG LLP or other independent certified public accountants of nationally recognized standing;
(f)promptly after the sending or filing thereof, copies of all reports which the Seller sent to any holders of securities which it has offered to the public;
(g)forthwith after the occurrence of each Trigger Event and each event or the existence of any fact which, with the giving of notice or lapse of time or both, may constitute a Trigger Event, a statement of a senior financial officer or accounting officer of the Seller setting forth details as to such Trigger Event or fact or event and the action which the Seller has taken and is proposing to take with respect thereto;
(h)notice of any material change to the Credit and Collection Policies or change to the standard operating practices or procedures;
(i)promptly, from time to time, such other documents, records, information or reports with respect to the Pool Assets or the conditions or operations, financial or otherwise, of the Seller as the Trust may from time to time reasonably request; and
(j)promptly after any changes, the current list of Excluded Receivables.
7.3Negative Covenants of the Seller
From the date of this Agreement until the Final Termination Date, the Seller covenants and agrees that it will not, unless the Trust shall otherwise consent in writing:
(a)except as otherwise provided herein, and whether by operation of law or otherwise, purport to sell, assign or otherwise dispose of, or create or suffer to exist any Security Interest upon or with respect to the Seller's or the Trust's interest in the Pool Assets if the effect of such Security Interest would be to cause the related Pool Receivable not to be an Eligible Receivable, or assign any right to receive payment under, or to enforce the Seller's interest in, any of the Pool Assets, provided, that the Seller or Servicer may sell the interest of the Seller and the Trust in Defaulted Receivables including any Contracts and Related Security with respect thereto and any judgement obtained thereon to any Person who is not an Affiliate of the Seller or Servicer (and does not own 5% or more of any equity interest in the Servicer or any Affiliate thereof and in which the Servicer does not own, directly or indirectly, 5% or more of the equity of such Person) on arm’s-length terms in order to maximize collections thereon;
(b)take any action that adversely affects the perfection, validity or protection of the Trust's rights to collect amounts owing pursuant to the Pool Assets and the proceeds thereof, including the right to enforce the Related Security, except to the extent that the Seller would have done so in a similar situation with respect to other similar receivables administered by it on its own behalf; or
(c)enter into any transaction of reorganization, amalgamation or arrangement, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or, other than with respect to sales, assignments, leases, licences or transfers of computer hardware and software, or of leases and licences relating thereto or any rights or benefits thereunder, in the ordinary course of business, sell, lease or otherwise dispose of its assets as an entirety or substantially as an entirety; except that the Seller may enter into a transaction of reorganization, amalgamation, or arrangement, so long as (i) such transaction could not reasonably be expected to have a Material Adverse Effect, (ii) as a condition to the completion of such transaction, the continued or reorganized corporation shall have executed an agreement of assumption to perform every obligation of the Seller hereunder and under the other agreements, instruments and documents executed and delivered by the Seller hereunder or otherwise contemplated hereby, (iii) the Backup Servicer shall have provided its written consent and acknowledged its continuing obligations under the Backup Servicer Agreement in respect of the obligations of such continued or reorganized corporation and (iv) the Performance Guarantor shall have provided its written consent and acknowledged its continuing obligations under this Agreement in respect of the obligations of such continued or reorganized corporation.
7.4Covenants of the Trust
The Trust covenants and agrees that it will:
(a)until the Final Termination Date, use commercially reasonably efforts to ensure that the fair value of the Pool Assets held by it will constitute no more than one-half of the total fair value of all assets owned by it; and
(b)not use personal information relating to Obligors received from the Seller other than in connection with the collection, servicing and administration of the Pool Assets and for other reasonable purposes ancillary thereto, all in accordance with and as allowed by applicable law.
ARTICLE 8
PERFORMANCE GUARANTEE
8.1Performance Guarantee
The Performance Guarantor hereby unconditionally and irrevocably guarantees to the Trust, the due and prompt performance, payment and observance by the Servicer (to the extent the Servicer is the Seller or an Affiliate thereof) of all of the terms, conditions, covenants, agreements, indemnities, liabilities and obligations of any kind whatsoever (collectively, the "Guaranteed Obligations") strictly in accordance with the terms hereof (the "Performance Guarantee"). If for any reason whatsoever, the Servicer shall fail to perform, pay or observe any of the Guaranteed Obligations, the Performance Guarantor shall forthwith perform, pay and observe, as applicable, any such of the Guaranteed Obligations as they may be required to be performed, paid or observed in accordance with the terms of this Agreement.
8.2Guarantee Unconditional
The obligations of the Performance Guarantor pursuant to this Article 8 are continuing, unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged, diminished, limited, impaired or otherwise affected by (and the Performance Guarantor hereby waives, to the fullest extent permitted by applicable law):
(a)any extension, modification, amendment or renewal of, or indulgence with respect to, or substitutions for, the Guaranteed Obligations or any part thereof or any agreement relating thereto at any time;
(b)any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Guaranteed Obligations or any part thereof;
(c)any waiver of any right, power or remedy or of any default with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto or
with respect to any collateral securing the Guaranteed Obligations or any part thereof;
(d)any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any collateral securing the Guaranteed Obligations or any part thereof, any other guarantees with respect to the Guaranteed Obligations or any part thereof, or any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof;
(e)the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to any collateral securing the Guaranteed Obligations or any part thereof;
(f)the application of payments received from any source to the payment of indebtedness of the Seller or the Servicer other than the Guaranteed Obligations, any part thereof or amounts which are not covered by this Agreement, even though the Trust might lawfully have elected to apply such payments to any part or all of the Guaranteed Obligations;
(g)any other act, or omission to act, or delay of any kind by any of the Servicer, the Seller, the Trust or any other person or any other circumstance whatsoever, whether similar or dissimilar to the foregoing, which might, but for the provisions of this Section 8.2, constitute a legal or equitable discharge, defense, limitation or reduction of the Performance Guarantor's obligations hereunder (other than the payment or extinguishment in full of all of the Guaranteed Obligations); or
(h)the existence of any claim, set-off or other rights which the Performance Guarantor may have at any time against the Seller, the Servicer or any other Person, including any Obligor, whether in connection with any transactions under this Agreement, any related document or any other transaction,
The foregoing provisions apply (and the foregoing waivers by the Performance Guarantor will be effective) even if the effect of any action (or failure to take action) by the Trust is to destroy or diminish the Performance Guarantor's subrogation rights, the Performance Guarantors' right to proceed against the Servicer or Seller for reimbursement, the Performance Guarantors' right to recover contribution from any other guarantor or any other right or remedy which may be available to the Performance Guarantor.
8.3Recourse against Servicer
The Trust shall not be required to exhaust its recourse against the Servicer, Seller or any other person, or under any other security or guarantee, before being entitled to performance by the Performance Guarantor under this Agreement.
8.4Authorization by the Performance Guarantor
The Trust may continue to effect Increases without notice to or authorization from the Performance Guarantor regardless of the Servicer's or Seller's financial or other condition at the time of any such transaction. The Performance Guarantor represents and warrants to the Trust that it has adequate means to obtain from the Servicer and the Seller on a continuing basis all information concerning the financial condition of the Servicer and the Seller, and agrees with the Trust that the Trust shall not have any obligation to disclose or discuss with the Performance Guarantor any information which it has respecting the financial condition of the Servicer and the Seller.
8.5No Subrogation
Until all of the Guaranteed Obligations have been paid or performed in full, the Performance Guarantor shall not exercise any right of subrogation to, and the Performance Guarantor waives, to the fullest extent permitted by law, any right to enforce, any remedy which the Trust now has or may hereafter have against the Servicer or the Seller in respect of the Guaranteed Obligations and the Performance Guarantor waives any benefit of, and any right to participate in, any security now or hereafter held by the Trust for the Guaranteed Obligations. The Performance Guarantor authorizes the Trust, subject to applicable law, to take any action or exercise any remedy which the Trust now has or may hereafter have against the Servicer or the Seller in respect of the Guaranteed Obligations, without notice to the Performance Guarantor.
8.6Stay of Acceleration
If acceleration of the time for payment of any amount payable by the Servicer or the Seller in respect of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Seller or the Servicer or any moratorium affecting the payment of the Guaranteed Obligations, all such amounts otherwise subject to acceleration will nonetheless be payable by the Performance Guarantor hereunder forthwith upon demand by the Trust.
8.7Representations and Warranties
The Performance Guarantor represents and warrants to the Trust, that as at the date hereof and at each date that an Increase occurs:
(a)it is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware;
(b)it has full power and authority to execute and deliver this Agreement and to perform the terms and conditions hereof and is duly qualified, licensed or registered in each relevant jurisdiction to carry on its present business and operations except where the failure to be so qualified, licensed or registered does not and will not materially adversely affect such operations or its ability to perform its obligations hereunder, as applicable;
(c)the execution, delivery and performance by the Performance Guarantor of this Agreement, and the transactions contemplated hereby, are within the powers of the Performance Guarantor, have been duly authorized by all necessary corporate or other action (as applicable) and do not contravene (i) the constating documents or by-laws of the Performance Guarantor, or (ii) any law or any contractual restriction binding on or affecting the Performance Guarantor, the contravention of which could be expected to materially adversely affect the Performance Guarantor's ability to perform its obligations hereunder, does not result in or require the creation of any Security Interest upon or with respect to the Performance Guarantor's properties, and the consummation of the transactions contemplated hereby does not require approval of shareholders or partners or approval or consent of any Person under any contract to which the Performance Guarantor is a party, except, to the extent such approvals have been granted;
(d)no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance by the Performance Guarantor of this Agreement, other than those that have been obtained or made, as the case may be, or any filings required after the date hereof with any securities regulators;
(e)this Agreement constitutes a legal, valid and binding obligation of the Performance Guarantor, enforceable against it in accordance with its terms subject to (i) applicable bankruptcy, reorganization, winding-up, insolvency, moratorium and other laws of general application limiting the enforcement of creditors' rights; (ii) the fact that the granting of equitable remedies such as specific performance and injunction is within the discretion of a court of competent jurisdiction; and (iii) general principles of equity;
(f)there has been no material adverse change in the business of the Performance Guarantor since the date of the most recent audited financial statements of the Performance Guarantor delivered to the Trust;
(g)there is no order, judgment or decree of any court, arbitrator or similar tribunal or Governmental Authority purporting to enjoin or restrain, and there are no proceedings before any court, arbitrator or similar tribunal or Governmental Authority which might materially adversely affect the Performance Guarantor's ability to perform its obligations hereunder; and
(h)there are no actions, suits or proceedings in existence or, to the Performance Guarantor's knowledge, pending or threatened, against or affecting it or its property in any court, or before any arbitrator of any kind, or before or by any governmental body, in respect of which there is a reasonable possibility of an adverse determination that could materially adversely affect the Performance Guarantor's financial condition or materially adversely affect the ability of the Performance Guarantor to perform its obligations under this Agreement; and
(i)it is not: (i) a country, territory, organization, person or entity named on an Office of Foreign Asset Control (OFAC) list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or which is designated as a "Non-Cooperative Jurisdiction" by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a "Foreign Shell Bank" within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdictions designated by the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
8.8Payments
All payments to be made by the Performance Guarantor under this Performance Guarantee shall be made in full, without set-off or counterclaim and without deduction for any taxes, levies, duties, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever. If at any time, or from time to time, any applicable law, regulation or international agreement requires the Performance Guarantor to make any such deduction or withholding from any such payment other than as a result of the Trust or any assignee thereof being a non-resident of Canada for purposes of the Income Tax Act (Canada), the sums due from the Performance Guarantor with respect to such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Trust receives a net sum equal to the sum which it would have received had no deduction or withholding been required, and the Performance Guarantor shall indemnify the Trust on an after tax basis with respect to any such deduction or withholding, including with respect to any taxes payable by the Trust on any increased amounts payable under this Article 8.
ARTICLE 9
INDEMNIFICATION
9.1Indemnification by the Seller
Without limiting any other rights which the Trust may have hereunder or under applicable law, the Seller hereby agrees to indemnify the Trust and the Securitization Agent, and their respective officers, agents, trustees and assigns (collectively, the "Indemnified Parties"), from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable legal fees and disbursements, and any costs associated with the appointment of a Replacement Servicer, resulting from the Seller's or Servicer's breach of any of its duties or obligations hereunder (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or reasonably incurred by any of the Indemnified Parties and arising out of or as a result of the Seller's or Servicer's breach or violation of this Agreement, excluding, however, amounts (i) resulting solely from the failure of any Obligor to pay an amount owing under a Pool Receivable, or (ii) resulting from gross negligence or wilful misconduct on the part
of the Trust or the Securitization Agent. Without limiting the generality of the foregoing but subject to the restrictions in clauses (i) and (ii) above, the Seller shall indemnify the Indemnified Parties for Indemnified Amounts awarded or incurred as aforesaid relating to or resulting from:
(a)the failure of any information contained in a Servicer Report or a Portfolio Certificate to be true and correct (including the failure of a Pool Receivable included in the calculation of Net Receivables Pool Balance to be an Eligible Receivable as of the date of such calculation), or the failure of any other information provided to the Trust or the Securitization Agent with respect to Receivables or this Agreement to be true and correct;
(b)the failure of any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement to have been true and correct in all respects when made;
(c)the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Assets or the related Contract; or the failure of any Pool Assets or the related Contract to conform to any such applicable law, rule or regulation;
(d)the failure to vest in the Trust a valid and enforceable perfected first ranking (as against the Seller and creditors of the Seller) co-ownership interest in the Pool Receivables and the Related Security and Collections with respect thereto;
(e)the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the PPSA of any applicable jurisdiction or other applicable laws with respect to any Pool Receivables and the Related Security and Collections in respect thereof, whether at the time of the Purchase or any Increase at any subsequent time;
(f)any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Pool Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from or relating to the transaction giving rise to such Receivable or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Servicer or by any agent or independent contractor retained by the Seller or any of its Affiliates);
(g)any failure of the Seller to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations under the Contracts;
(h)any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with goods, insurance or services that are the subject of or secure any Contract;
(i)the commingling of Collections of Pool Assets at any time with other funds;
(j)any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases or in respect of any Pool Receivable, Related Security or Contract;
(k)any reduction in the Investment as a result of the payment of allocations of Collections pursuant to Sections 2.7(d), 2.10(e) or 2.13, in the event that all or a portion of such payments shall thereafter be rescinded or otherwise must be returned for any reason;
(l)any tax or governmental fee or charge (other than any tax upon or measured by net income or gross receipts), all interest and penalties thereon or with respect thereto, and all reasonable out-of-pocket costs and expenses, including the reasonable fees and expenses of counsel in defending against the same, which may arise by reason of the purchase or ownership of the Trust's Co-Ownership Interest or other interests in the Receivables Pool or in any Related Security or Contract;
(m)the failure by the Seller or the Servicer to pay when due any taxes payable by it, including, without limitation, the franchise taxes and sales, excise or personal property taxes payable in connection with the Receivables;
(n)the failure by the Seller or the Servicer to be duly qualified to do business, to be in good standing or to have filed appropriate registration documents in any jurisdiction;
(o)the failure to vest and maintain vested in the Trust a perfected ownership interest in respect of the Trust's Co-Ownership Interest free and clear of any Security Interest created by or through the Seller, whether existing at the time of the consummation of the transactions contemplated hereby or at any time thereafter, other than Security Interests created by or arising through the Trust;
(p)any claim for personal injury, death, property damage or product liability which may arise by reason of, result from or be caused by, or relate to the use, operation, maintenance or ownership of, the Financed Vehicles; and
(q)any material failure of the Seller to perform its duties or obligations, as Servicer or otherwise, in accordance with the provisions of this Agreement.
9.2Notification of Potential Liability
The Seller will, upon becoming aware of circumstances that could reasonably be expected to result in material liability of the Seller under this Article 9, promptly notify the Trust thereof.
9.3Litigation
At the request of the Trust, the Seller shall, at its expense, co-operate with the Trust in any action, suit or proceeding brought by or against the Trust relating to any of the transactions contemplated by this Agreement or any of the Pool Assets (other than an action, suit or proceeding by the Seller, the Backup Servicer, the Performance Guarantor or any of their respective Affiliates against the Trust or by the Trust against the Seller, the Backup Servicer, the Performance Guarantor or any of their respective Affiliates). In addition, the Seller agrees to notify the Trust and the Trust agrees to notify the Seller, at the Seller's expense, promptly upon learning of any pending or threatened action, suit or proceeding, if the judgment or expenses of defending such action, suit or proceeding would be covered by Section 9.1 (except for an action, suit or proceeding by the Seller, the Backup Servicer, the Performance Guarantor or any of their respective Affiliates against the Trust or by the Trust against the Seller, the Backup Servicer, the Performance Guarantor or any of their respective Affiliates and except for ordinary course litigation relating to the enforcement of the Pool Assets) and to consult with the Trust, concerning the defence and prior to settlement; provided, however, that if (i) the Seller shall have acknowledged that Section 9.1 would cover any judgment or expenses in any action, suit or proceeding, and (ii) in the sole determination of the Trust, acting reasonably, the Seller has the financial ability to satisfy such judgment or expenses, then the Seller shall have the right, on behalf of the Trust but at the Seller's expense, to defend such action, suit or proceeding with counsel selected by the Seller, and shall have sole discretion as to whether to litigate, appeal or enter into an exclusively monetary settlement.
9.4Tax Indemnity
The Seller agrees to defend and to save the Indemnified Parties harmless from and against any and all liabilities arising out of the transactions contemplated by this Agreement with respect to or resulting from any delay by the Seller in paying or any omission to pay any Taxes otherwise required under this Agreement to be paid or withheld and remitted by or on behalf of the Seller on its own behalf, on behalf of the Trust or on behalf of any Obligor. If the Seller shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable by or on behalf of the Seller on its own behalf or on behalf of any Obligor to the Trust hereunder or in connection with the execution, delivery, filing and recording hereof and of the other documents to be delivered hereunder and the consummation of the transactions contemplated hereby, or if the Trust shall be required to pay any Taxes in respect of any sum received by the Trust from the Seller hereunder:
(a)the sum payable to the Trust shall be increased as may be necessary (or an amount shall be owed to the Trust) so that, after all required deductions, withholdings or payments in respect of such Taxes have been made, the Trust receives or retains an amount equal to the sum that the Trust would have received or retained had no such deductions, withholdings or payments been made;
(b)the Seller shall make such deductions or withholdings; and
(c)the Seller shall pay forthwith the full amount deducted or withheld to the relevant taxation authority or other authority in accordance with applicable law and will provide to the Trust copies of such forms as are required to be provided to such authority evidencing the payment by the Seller.
For greater certainty, it is hereby acknowledged by the parties hereto that the Seller shall not be liable to indemnify the Indemnified Parties under this Section for any Taxes payable by, or required to be withheld by, the Seller on account of Taxes payable on the income or gains of the Trust, Taxes payable by virtue of the non-resident status of the Trust or Taxes payable on the capital of the Trust.
9.5Tax Credit
If a payment (a "Grossed-up Payment") made by the Seller includes an amount (a "Gross-up") referred to in Section 9.4, and the Trust is able to apply for or otherwise take advantage of any tax credit or deduction in computing income or similar benefit by reason of any withholding or deduction made by the Seller in respect of the Grossed-up Payment (such credit, deduction or benefit hereinafter being referred to as a "Tax Credit"), then the Trust will, at the expense of the Seller, use reasonable endeavours to obtain the Tax Credit and, if it realizes the Tax Credit (whether by way of reducing taxes payable, receiving a tax refund, or otherwise), the Trust shall, subject to the provisos to this Section 9.5, pay to the Seller such amount, if any (not exceeding the Gross-up) as is determined by the Trust to be equal to the net after-tax value to the Trust of such part of the Tax Credit as is reasonably attributable to such withholding or deduction having regard to all dealings giving rise to similar credits, deductions or benefits in relation to the same tax period and to the cost of obtaining the same. Any such reimbursement shall be conclusive evidence of the amount due to the Seller absent manifest error and shall be accepted by the Seller in full and final settlement of its rights of reimbursement hereunder; provided that notwithstanding the foregoing, (i) nothing herein contained shall interfere with the right of the Trust to arrange its tax affairs in whatever manner it deems fit and, in particular, the Trust shall not be under any obligation to claim relief from its income or similar tax liability in respect of any such deduction or withholding in priority to any other relief, claims, credits or deductions available to it; and (ii) the Trust shall not be obligated to disclose to the Seller any information regarding its tax affairs or tax computations; provided, further, that if, as a result of (x) an audit of the Trust by its auditors or by a taxing authority, or (y) any change to the affairs of the Trust or to the available information concerning such affairs, which change is relevant to the determination that reimbursement with respect to a Tax Credit is payable to the Seller hereunder, the Trust determines, in its reasonable discretion, that any such payment made by the Trust to the Seller hereunder would not have been made had the Trust known the results of such audit or anticipated such change, or would have been made in a smaller amount, then the Seller shall pay to the Trust the amount of such payment which the Trust so determines, acting reasonably, to have been an overpayment.
ARTICLE 10
MISCELLANEOUS
10.1Liability of the Trust and the Securitization Agent
Neither BNY Trust Company of Canada or BMONB, nor any of their respective directors, officers, agents or employees, will be liable pursuant to this Agreement for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own negligence or wilful misconduct. Without limiting the generality of the foregoing, and notwithstanding any term or provision hereof to the contrary, the Seller hereby acknowledges and agrees that BMONB, in its capacity as Securitization Agent, acts as agent for the Trust and, except as otherwise provided in the first sentence of this Section, has no duties or obligations to, will incur no liability to, and does not act as an agent in any capacity for, the Seller.
10.2Delegation in Favour of Securitization Agent
The Trust may delegate to the Securitization Agent all or any of its powers, rights and discretion hereunder, and the Securitization Agent may from time to time take such actions and exercise such powers for and on behalf of the Trust as are delegated to it or contemplated hereby and all such actions and powers as are reasonably incidental thereto. Each of the Seller and the Servicer shall be entitled to and be fully protected in relying on any instruction made or given by the Securitization Agent, and shall have no liability to the Trust in respect of such reliance.
10.3Change in Circumstances
If, at any time:
(a)the introduction of, or any change in, or in the interpretation, administration application or implementation of, any applicable law or regulation by any court or Governmental Authority, in each case, adopted, issued, taking effect or occurring after the later of: (i) the date hereof; and (ii) the most recent date on which the Termination Date is extended in accordance with the terms of this Agreement; or
(b)the compliance by any of the Trust, the Securitization Agent, BMONB and/or any liquidity provider or credit enhancement provider to the Trust, or any of their Affiliates (each, an "Affected Person"), with any changed or introduced guideline, direction or request, or any change in the interpretation or administration thereof made after the later of: (i) the date hereof; and (ii) the most recent date on which the Termination Date is extended in accordance with the terms of this Agreement, from or by any Governmental Authority or professional self-regulating or governing body (including, for greater certainty, the Office of the Superintendent of Financial Institutions Canada, the Board of Governors of the United States Federal Reserve System or any other body or entity governing accounting treatment or reserve requirements) or any change in generally accepted accounting principles including the adoption of International Financial Reporting Standards (whether or not having the force of law);
has in the reasonable opinion of the Affected Person, the effect of:
(i)(A) increasing the costs, expenses or liabilities of, or imposes, modifies or deems applicable any reserve, assessment, fee, tax, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, in each case any Affected Person (including as a result of a change in the Affected Person's capital position), as such costs, expenses or liabilities relate to the Trust making, funding or maintaining the Investment hereunder, provided that in the case of BMONB or any of its Affiliates, such increased costs, liabilities or expenses shall be limited to those that are directly attributable to increases in regulatory capital of BMONB or such Affiliates, (B) reducing the rate of return (on capital or otherwise) to any Affected Person in connection with, or as a result of the Affected Person either having to raise additional capital or incurring a deteriorated capital position as a result of the Trust making, funding or maintaining the Investment hereunder, (C) requiring the payment of any Taxes on or calculated with reference to the capital or debt of any Affected Person or (D) requiring any Affected Person to make any payment it would not otherwise be required to make; or
(ii)reducing the amount received or receivable by the Trust under this Agreement or in respect of any Pool Receivable, and provided that any such introductions or changes enumerated in clauses (a) and (b) above are of application across any applicable industry in which such Affected Person participates and are not limited in their application to one or more Affected Persons,
then the Seller shall, from time to time upon demand by the Trust, pay forthwith to the Trust or the applicable Affected Person, either directly or indirectly through the Trust, the amount of any such increased costs, expenses or liabilities incurred, reduction in amounts received or receivable, reduction in rate of return or required payment made or to be made; provided that the Seller shall not be obligated to indemnify any Affected Person for any period in excess of 30 days prior to receipt of such notice. The Trust shall deliver to the Seller a certificate setting forth the cause and computation of the amount of any such increased costs, expenses or liabilities, reduction in amounts received or receivable, reduction in rate of return, or required payment made or to be made, which computation may utilize such averaging and attribution methods as the Trust, or the applicable Affected Person, believes to be fair, acting reasonably. Upon becoming aware thereof, the Trust shall, as soon as reasonably possible thereafter, notify the Seller of any event or circumstance which will result in any payment being required to be made by the Seller pursuant to this Section 10.3.
10.4Amendments, Waivers, Etc.
No amendment or waiver of any provision of this Agreement nor consent to any departure by the Seller or the Trust therefrom shall be effective unless the same shall be in writing and signed by
(i) the Seller, the Trust and the Performance Guarantor (with respect to an amendment) or (ii) the Trust (with respect to a waiver or consent by it) or the Seller (with respect to a waiver or consent by the Seller), as the case may be, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.
10.5Notices, Etc.
All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telecopied or electronic transmission) and telecopied, mailed or delivered, to each party hereto, at its address set forth under its name on the signature page hereof or at such other address as shall be designated by such parties in a written notice to the other party hereto. All such notices and communications shall be effective, in the case of written notice, on the Business Day it is delivered, and, in the case of notice by telecopy or electronic transmission, when telecopied or electronically transmitted against receipt of answer back, in each case addressed as aforesaid.
10.6No Waiver; Remedies
No failure on the part of the Trust to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
10.7Binding Effect; Assignability
This Agreement shall be binding upon and enure to the benefit of the Seller, the Performance Guarantor and the Trust, and their respective successors and permitted assigns; provided, however, that (i) neither the Seller nor the Performance Guarantor may assign its rights hereunder or any interest herein without the prior written consent of the Trust, such consent not to be unreasonably withheld or delayed, and (ii) prior to the occurrence of a Trigger Date, the Trust may not assign its rights hereunder or any interest herein, without the prior written consent of the Seller, such consent not to be unreasonably withheld, provided that the Trust shall be permitted to assign its rights hereunder and interests herein without consent of the Seller to any other asset-backed commercial paper conduit administered by BMONB, to BMONB or any Affiliates of BMONB and as security for the benefit of the holders of Notes.
10.8Costs and Expenses
In addition to the rights of indemnification granted to the Trust under Article 9, the Seller shall pay to the Trust all reasonable out-of-pocket costs and expenses (including the reasonable fees and disbursements of counsel on a substantial indemnity basis) incurred by the Trust and its agents in connection with the preparation of this Agreement, the consummation of the transactions contemplated hereby and the enforcement of the Seller's obligations and liabilities under this Agreement or under any related documents. The Servicer shall also pay to the Trust such expenses as the Trust and the Securitization Agent may reasonably incur and such fees as the Trust and the Seller agree the Trust or the Securitization Agent may charge in respect of each
amendment to this Agreement and each waiver of any provision of this Agreement requested by the Seller or required or initiated as a result of the Seller's actions.
10.9Confidentiality
Each of the Trust, the Seller, the Servicer, the Performance Guarantor and the Securitization Agent shall make all reasonable efforts to hold all non-public information obtained pursuant to this Agreement and the transactions contemplated hereby or effected in connection herewith in accordance with its customary procedures for handling its confidential information of this nature, provided that, notwithstanding the foregoing, the Trust, the Seller, the Servicer, the Performance Guarantor and the Securitization Agent may make disclosure of such non-public information as requested or required by any governmental agency or representative thereof or pursuant to legal process or when required under applicable law, and to its professional advisors; provided that, unless specifically prohibited by applicable law or court order, each party hereto shall notify the other party hereto of any request by any governmental agency or representative thereof for disclosure of any such non-public information prior to disclosure of such information to permit the party affected to contest such disclosure, if possible.
10.10Effect of Agreement
Each of the Seller and the Trust hereby expressly acknowledges that this Agreement, except as specifically provided with respect to the duties and obligations of the Servicer, is intended to create a relationship of purchaser and vendor. Each of the Seller and the Trust hereby expressly disclaims any intention to establish a trust relationship (except to the extent expressly provided herein) or to constitute either the Seller or the Trust as the agent of the other except to the extent that the Seller, in its capacity as the Servicer, is acting as an agent of the Trust. The Seller, on the one hand, and the Trust, on the other, covenant with each other that they will not, at any time, allege or claim that a relationship of trust or agency is created hereby, except as otherwise expressly provided for herein.
10.11Agreement Non-Exclusive
The parties hereby acknowledge and agree that this Agreement does not create any rights of exclusivity between them.
10.12No Set-off
All payments to be made by the Seller or the Servicer hereunder shall be made without any deduction, set-off or counterclaim.
10.13Termination
This Agreement shall remain in full force and effect until the Final Termination Date; provided, however, that the Trust's rights and remedies with respect to any incorrect representation or warranty made or deemed to be made by the Seller herein and the indemnification and payment
provisions hereof shall be continuing and will survive any termination hereof for a period of six years commencing on the Final Termination Date.
10.14Discharge of Certain Registrations in the Province of Quebec
So long as no Servicer Termination Event shall have occurred, the Servicer shall have the authority to sign, for and on behalf of the Trust, any document reasonably required to be signed by the Trust and the Seller and filed in the Register of Personal and Movable Real Rights (Quebec) (the "Register") for the purpose of effecting the discharge of any hypothec, lease, sale with a reservation of ownership, sale with a right of repurchase or any other registration forming part of the Pool Assets and registered in the Register, provided such discharge is granted by the Servicer in the ordinary course of its business.
10.15Execution in Counterparts
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
10.16Amendment and Restatement
This Agreement amends and restates in full and supersedes the Amended and Restated RPA, and it is hereby confirmed by the parties hereto that all prior actions of the parties made pursuant to the Amended and Restated RPA are effective as if made hereunder.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their respective duly authorized officers as of the date first written above.
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AUTOMOTIVE FINANCE CANADA INC.
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Per:
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/s/ Amy Wirges
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Name: Amy Wirges
Title: Sr. Vice President Finance and Treasurer
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Address:
1717 Burton Road
Vars, ON
K0A 3H0
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Attention: Vice President of Legal
Telecopier No.: 613-443-3436
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With a copy to:
Automotive Finance Corporation
11299 N. Illinois Street
Carmel, Indiana
46032
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Attention: Vice President of Legal
Telecopier No.: 866-929-3430
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And to:
Automotive Finance Corporation
11299 N. Illinois Street
Carmel, Indiana
46032
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Attention: Amy Wirges
Telecopier No.: 317-360-3766
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KAR AUCTION SERVICES, INC.
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Per:
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/s/ Eric M. Loughmiller
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Name: Eric M. Loughmiller
Title: Executive Vice President and Chief Financial Officer
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Address:
11299 N. Illinois Street
Carmel, IN 46032
USA
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Attention: Chuck Coleman
Executive Vice President and
General Counsel
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BNY TRUST COMPANY OF CANADA, in its capacity as trustee of PRECISION TRUST, by its Securitization Agent, BMO NESBITT BURNS INC.
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Per:
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/s/ John Vidinovski
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Name: John Vidinovski
Title: Managing Director
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Per:
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/s/ Kevin Brown
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Name: Kevin Brown
Title: Director
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c/o BMO Nesbitt Burns Inc.
3rd Floor Podium
1 First Canadian Place
Toronto, Ontario
M5X 1H3
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Attention: Managing Director
Securitization
Telecopier No.: 416-359-1910
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