Exhibit 10.1
EXECUTION COPY
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SALE AND SERVICING AGREEMENT
among
USAA AUTO OWNER TRUST 2005-2,
as Issuer,
USAA ACCEPTANCE, LLC,
as Depositor,
and
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
Dated as of June 1, 2005
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Table of Contents
Page
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ARTICLE I
DEFINITIONS AND USAGE.........................................1
ARTICLE II TRUST
PROPERTY................................................1
SECTION 2.1 Conveyance of Trust Property;
Intent of the Parties...........1
SECTION 2.2 Representations and Warranties of
the Depositor
regarding the Receivables....................................2
SECTION 2.3 Repurchase upon
Breach........................................5
SECTION 2.4 Custody of Receivable
Files...................................5
SECTION 2.5 Duties of Servicer as
Custodian...............................6
SECTION 2.6 Instructions; Authority to
Act................................7
SECTION 2.7 Custodian's
Indemnification...................................7
SECTION 2.8 Effective Period and
Termination..............................7
ARTICLE III ADMINISTRATION AND
SERVICING OF RECEIVABLES AND TRUST
PROPERTY......................................................8
SECTION 3.1 Duties of
Servicer............................................8
SECTION 3.2 Collection of Receivable
Payments.............................8
SECTION 3.3 Realization Upon
Receivables..................................9
SECTION 3.4 Allocations of
Collections....................................9
SECTION 3.5 Maintenance of Security Interests
in Financed Vehicles.......10
SECTION 3.6 Covenants of
Servicer........................................10
SECTION 3.7 Purchase of Receivables Upon
Breach..........................10
SECTION 3.8 Servicer
Fees................................................11
SECTION 3.9 Servicer's
Certificate.......................................11
SECTION 3.10 Annual Statement as
to Compliance; Notice of Event of
Servicing Termination.......................................11
SECTION 3.11 Annual Independent
Certified Public Accountant's Report......12
SECTION 3.12 Access to Certain
Documentation and Information
Regarding Receivables.......................................13
SECTION 3.13 Servicer
Expenses............................................13
SECTION 3.14
Insurance....................................................13
ARTICLE IV DISTRIBUTIONS;
RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS AND
CERTIFICATEHOLDERS...........................................13
SECTION 4.1
Accounts.....................................................13
SECTION 4.2
Collections..................................................15
SECTION 4.3 Application of
Collections...................................15
SECTION 4.4
Advances.....................................................15
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SECTION 4.5 Additional
Deposits..........................................16
SECTION 4.6
Distributions................................................16
SECTION 4.7 Reserve
Account..............................................20
SECTION 4.8 Net
Deposits.................................................22
SECTION 4.9 Statements to Noteholders and
Certificateholders.............22
ARTICLE V THE
DEPOSITOR................................................24
SECTION 5.1 Representations, Warranties and
Covenants of Depositor.......24
SECTION 5.2 Liability of Depositor;
Indemnities..........................25
SECTION 5.3 Merger or Consolidation of, or
Assumption of the
Obligations of Depositor....................................26
SECTION 5.4 Limitation on Liability of
Depositor and Others..............26
SECTION 5.5 Depositor May Own Notes or
Certificates......................26
ARTICLE VI THE
SERVICER.................................................27
SECTION 6.1 Representations of
Servicer..................................27
SECTION 6.2 Indemnities of
Servicer......................................28
SECTION 6.3 Merger or Consolidation of, or
Assumption of the
Obligations of Servicer.....................................29
SECTION 6.4 Limitation on Liability of
Servicer and Others...............29
SECTION 6.5 Delegation of
Duties.........................................30
SECTION 6.6 Servicer Not to Resign as
Servicer...........................30
SECTION 6.7 Servicer May Own Notes or
Certificates.......................31
ARTICLE VII SERVICING
TERMINATION........................................31
SECTION 7.1 Events of Servicing
Termination..............................31
SECTION 7.2 Appointment of Successor
Servicer............................32
SECTION 7.3 Repayment of
Advances........................................33
SECTION 7.4 Notification to Noteholders and
Certificateholders...........33
SECTION 7.5 Waiver of Past Events of Servicing
Termination...............34
ARTICLE VIII
TERMINATION..................................................34
SECTION 8.1 Optional Purchase of All
Receivables.........................34
SECTION 8.2 Succession Upon Satisfaction and
Discharge of Indenture......34
ARTICLE IX MISCELLANEOUS
PROVISIONS.....................................35
SECTION 9.1
Amendment....................................................35
SECTION 9.2 Protection of Title to Trust
Property........................36
SECTION 9.3 GOVERNING
LAW................................................38
SECTION 9.4
Notices......................................................38
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SECTION 9.5 Severability of
Provisions...................................39
SECTION 9.6
Assignment...................................................39
SECTION 9.7 Further
Assurances...........................................39
SECTION 9.8 No Waiver; Cumulative
Remedies...............................39
SECTION 9.9 Third-Party
Beneficiaries....................................39
SECTION 9.10 Actions by
Noteholders or Certificateholders.................39
SECTION 9.11 Limitation of
Liability of Owner Trustee and Indenture
Trustee.....................................................40
SECTION 9.12 Savings
Clause...............................................40
Schedule A Schedule of
Receivables.....................................A-1
Schedule B Location of
Receivable Files ...............................B-1
Appendix A Definitions and
Usage..............................Appendix A-1
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SALE AND
SERVICING AGREEMENT, dated as of June 1, 2005 (as from time to
time amended, supplemented or otherwise
modified and in effect, this
"Agreement"), among USAA AUTO OWNER TRUST
2005-2 (the "Issuer"), a Delaware
statutory trust, USAA ACCEPTANCE, LLC, a
Delaware limited liability company
(the "Depositor") and USAA FEDERAL SAVINGS
BANK, a federally chartered savings
association, as seller of the Receivables
to the Depositor (in such capacity,
the "Seller") and servicer (in such
capacity, the "Servicer").
WHEREAS,
the Issuer desires to purchase a portfolio of receivables and
related property consisting of motor
vehicle installment loan contracts
originated by the Seller in the ordinary
course of its business;
WHEREAS,
the Seller is concurrently selling such portfolio of
receivables and related property to the
Depositor pursuant to the Receivables
Purchase Agreement, and the Depositor is
willing to sell such portfolio of
receivables and related property to the
Issuer; and
WHEREAS,
the Servicer is willing to service such receivables on behalf
of the Issuer.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good
and valuable consideration, the
receipt and sufficiency of which is hereby
acknowledged, the parties hereto,
intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS AND USAGE
Except as
otherwise specified herein or as the context may otherwise
require, capitalized terms used but not
otherwise defined herein are defined
in Appendix A hereto, which also contains
rules as to usage that shall be
applicable herein.
ARTICLE II
TRUST PROPERTY
SECTION
2.1 Conveyance of Trust Property; Intent of the Parties. In
consideration of the Issuer's delivery to,
or upon the order of, the Depositor
of the Notes and the Certificates, the
Depositor does hereby irrevocably sell,
transfer, assign and otherwise convey to
the Issuer (i) without recourse
(subject to the obligations herein) all
right, title and interest of the
Depositor, whether now owned or hereafter
acquired, in and to the Trust
Property and (ii) funds in the amount of
the Reserve Initial Deposit. The
sale, transfer, assignment and conveyance
made hereunder shall not constitute
and is not intended to result in an
assumption by the Issuer of any obligation
of the Depositor to the Obligors or any
other Person in connection with the
Receivables and the other Trust Property or
any agreement, document or
instrument related thereto. The Depositor
and the Issuer intend that the sale,
transfer, assignment and conveyance of the
Trust Property pursuant to this
Section 2.1 shall be a sale, and not a
secured borrowing, for accounting
purposes.
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SECTION
2.2 Representations and Warranties of the Depositor regarding
the Receivables. The Depositor makes the
following representations and
warranties with respect to the Receivables,
on which the Issuer relies in
purchasing the Receivables and pledging the
same to the Indenture Trustee.
Such representations and warranties speak
as of the execution and delivery of
this Agreement and as of the Transfer Date,
but shall survive the sale,
transfer and assignment of the Receivables
by the Depositor to the Issuer and
the pledge of the Receivables by the Issuer
to the Indenture Trustee pursuant
to the Indenture.
(i)
Schedule of
Receivables. The information set forth in Schedule A
to this Agreement with respect to each Receivable is true and
correct in all material respects, and no selection procedures
adverse to the Securityholders have been used in selecting the
Receivables from all receivables owned by the Seller which meet
the selection criteria specified herein.
(ii)
No Sale or Transfer.
No Receivable has been sold, transferred,
assigned or pledged by the Depositor to any Person other than
the
Issuer.
(iii) Good
Title. Immediately prior to the transfer and assignment of
the Receivables to the Issuer herein contemplated, the
Depositor
had good and marketable title to each Receivable free and clear
of
all Liens and rights of others; and, immediately upon the
transfer
thereof, the Issuer, has either (i) good and marketable title
to
each Receivable, free and clear of all of all Liens and rights
of
others, and the transfer has been perfected under applicable
law
or (ii) a first priority perfected security interest in each
Receivable.
(iv)
Receivable Files. The
Receivable Files shall be kept at one or
more of the locations specified in Schedule B hereto.
(v)
Characteristics
of Receivables. Each Receivable (a) has been
originated for the retail financing of a Financed Vehicle by an
Obligor located in one of the States of the United States or
the
District of Columbia; (b) contains customary and enforceable
provisions such that the rights and remedies of the holder
thereof
are adequate for realization against the collateral of the
benefits of the security; and (c) provides for fully amortizing
level scheduled monthly payments (provided that the payment in
the
last month in the life of the Receivable may be different from
the
level scheduled payment) and for accrual of interest at a fixed
rate according to the simple interest method.
(vi)
Compliance with Law.
Each Receivable and each sale of the related
Financed Vehicle complied at the time it was originated or
made,
and complies on and after the Cut-off Date, in all material
respects with all requirements of applicable federal, state,
and
local laws, and regulations thereunder, including usury laws,
the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Fair Credit Reporting Act, the Federal Trade Commission
Act,
the Magnuson-Moss Warranty Act, Federal Reserve Board
Regulations
B and Z, state adaptations of the National Consumer Act and of
the
Uniform Consumer Credit Code, and any
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other consumer credit, equal opportunity, and disclosure laws
applicable to such Receivable and sale.
(vii)
Binding Obligation. Each Receivable constitutes the legal,
valid,
and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in all material respects in
accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization, liquidation
and
other similar laws and equitable principles relating to or
affecting the
enforcement of creditors' rights.
(viii) No
Government Obligor. No Receivable is due from the United
States of America or any state or from any agency, department,
instrumentality or political subdivision of the United States
of
America or any state or local municipality and no Receivable is
due from a business except to the extent that such receivable
has
a personal guaranty.
(ix)
Security Interest in
Financed Vehicle. Immediately prior to the
sale and assignment thereof to the Issuer as herein
contemplated,
each Receivable was secured by a validly perfected first
priority
security interest in the Financed Vehicle in favor of the
Seller
as secured party or all necessary and appropriate action with
respect to such Receivable had been taken to perfect a first
priority security interest in the related Financed Vehicle in
favor of the Seller as secured party, which security interest
is
assignable and has been so assigned by the Seller to the
Depositor
and by the Depositor to the Issuer.
(x)
Receivables in
Force. No Receivable has been satisfied,
subordinated, or rescinded, nor has any Financed Vehicle been
released from the Lien granted by the related Receivable in
whole
or in part.
(xi)
No Waiver. No
provision of a Receivable has been waived in such a
manner that such Receivable fails either to meet all of the
representations and warranties made by the Depositor herein
with
respect thereto pursuant to this Section 2.2.
(xii) No
Amendments. No Receivable has been amended except pursuant to
instruments included in the Receivable Files and no such
amendment
has caused such Receivable either to fail to meet all of the
representations and warranties made by the Depositor herein
with
respect thereto pursuant to this Section 2.2.
(xiii) No
Defenses. As of the Cut-off Date, there are no rights of
rescission, setoff, counterclaim, or defense, and the Depositor
has no knowledge of the same being asserted or threatened, with
respect to any Receivable.
(xiv) No
Liens. As of the Cut-off Date, the Depositor has no knowledge
of any Liens, claims that have been filed, including Liens for
work, labor, materials or unpaid taxes relating to a Financed
Vehicle, that would be Liens prior to, or equal or coordinate
with, the Lien granted by the Receivable.
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(xv)
No Default. Except for
payment defaults continuing for a period of
not more than thirty (30) days as of the Cut-off Date, the
Depositor has no knowledge that a default, breach, violation,
or
event permitting acceleration under the terms of any Receivable
exists; the Depositor has no knowledge that a continuing
condition
that with notice or lapse of time would constitute a default,
breach, violation, or event permitting acceleration under the
terms of any Receivable exists; and the Depositor has not
waived
any of the foregoing.
(xvi)
Insurance. Each Receivable requires that the Obligor thereunder
obtain comprehensive and collision insurance covering the
Financed
Vehicle.
(xvii) Lawful
Assignment. No Receivable has been originated in, or is
subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under the Agreement
is
unlawful, void or voidable.
(xviii) All Filings
Made. No filings (other than UCC filings which have
been made) or other actions are necessary in any jurisdiction
to
give the Issuer a first priority perfected security interest in
the Receivables and to give the Indenture Trustee a first
priority
perfected security interest in the Receivables.
(xix) One
Original. With respect to any Receivable for which an original
executed copy exists, there is no more than one original
executed
copy of such Receivable which does not have any marks or
notations
indicating that it has been pledged, assigned or otherwise
conveyed to any Person other than the Seller and which,
immediately
prior to the delivery thereof to the Servicer, as
custodian for the Indenture Trustee, was in the possession of
the
Seller.
(xx)
Security. Each
Receivable is secured by a new or used automobile
or light-duty truck.
(xxi)
Maturity of Receivables. Each Receivable has a remaining
maturity,
as of the Cut-off Date, of not less than 6 months and not more
than 72 months and an original maturity of not less than 9
months
and
not more than 72 months. No Receivable has a scheduled
maturity later than July 2, 2011.
(xxii) Annual
Percentage Rate. Each Receivable is a fully-amortizing
simple interest contract which bears interest at a fixed rate
per
annum and which provides for level scheduled monthly payments
(except for the last payment, which may be minimally different
from the level payments) over its respective remaining term, is
not secured by any interest in real estate, and has not been
identified on the computer files of the Seller as relating to
Obligors who have requested a reduction in the periodic finance
charges, as of the Cut-off Date, by application of the
Servicemembers Civil Relief Act.
(xxiii) No
Repossessions. Each Receivable is secured by a Financed
Vehicle that, as of the Cut-off Date, has not been repossessed
without reinstatement of such Receivable.
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(xxiv)
Obligor Not Subject to Bankruptcy Proceedings. Each Receivable
has been entered into by an Obligor who has not been identified
on
the computer files of the Seller as being a debtor in any
bankruptcy proceeding as of the Cut-off Date.
(xxv) No
Overdue Payments. No Receivable has any payment that is more
than thirty (30) days past due as of the Cut-off Date.
(xxvi)
Tangible Chattel Paper. The Receivables constitute "tangible
chattel paper" within the meaning of UCC Section 9-102.
(xxvii)
Remaining Principal Balance. Each Receivable had a remaining
principal balance, as of the Cut-off Date, of at least $800.00.
(xxviii)
Filing Statement Language. The financing statements referenced
in paragraph (xviii) above, will contain a statement to the
following effect "A purchase of or security interest in any
collateral described in this financing statement will violate
the
rights of the Secured Party".
SECTION
2.3 Repurchase upon Breach. Each of the Depositor, the
Servicer,
the Issuer and the Owner Trustee shall
inform the other parties to this
Agreement promptly, in writing, upon the
discovery by it of any breach of the
Depositor's representations and warranties
pursuant to Section 2.2. Unless the
breach shall have been cured by the last
day of the second Collection Period
following written notice to the Indenture
Trustee of such breach, the
Indenture Trustee shall enforce the
obligation of the Depositor under this
Section 2.3 to repurchase any Receivable,
the Issuer's interest in which is
materially and adversely affected by the
breach as of such last day (or, at
the Depositor's option, the last day of the
first Collection Period following
the discovery). In consideration of the
purchase of the Receivable, the
Depositor shall remit the Purchase Amount
(less any Liquidation Proceeds
deposited, or to be deposited, in the
Collection Account with respect to such
Receivable pursuant to Section 3.3), in the
manner specified in Section 4.5.
The sole remedy of the Issuer, the Owner
Trustee, the Indenture Trustee, the
Noteholders or the Certificateholders with
respect to a breach of the
Depositor's representations and warranties
pursuant to Section 2.2 shall be to
require the Depositor to repurchase such
Receivables pursuant to this Section
2.3. The obligation of the Depositor to
repurchase under this Section 2.3
shall not be solely dependent upon the
actual knowledge of the Depositor of
any breached representation or warranty.
Neither the Owner Trustee nor the
Indenture Trustee shall have any duty to
conduct an affirmative investigation
as to the occurrence of any condition
requiring the repurchase of any
Receivable pursuant to this Section 2.3 or
the eligibility of any Receivable
for purposes of this Agreement.
Notwithstanding anything herein to the
contrary, the Depositor shall only be
obligated to pay such Purchase Amount
and repurchase the related Receivable to
the extent it receives the Purchase
Amount from the Seller pursuant to Section
7.02 of the Receivables Purchase
Agreement.
SECTION
2.4 Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce
administrative costs, the Issuer, upon
the execution and delivery of this
Agreement, hereby revocably appoints the
Servicer, and the Servicer hereby accepts
such appointment, to act as the
agent of the Issuer and the Indenture
Trustee as custodian of the
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following documents or instruments, which
are hereby constructively delivered
to the Indenture Trustee, as pledgee of the
Issuer pursuant to the Indenture,
with respect to each Receivable:
(i) The original executed Receivable or, if no such original
exists, a
copy thereof.
(ii) The original credit application fully executed by the
Obligor
or a
photocopy thereof or a record thereof on a computer file,
diskette
or on
microfiche.
(iii) The notice of recorded Lien or such documents that the
Servicer
or the Depositor shall keep on file, in accordance with its
customary
procedures, evidencing the first priority perfected security
interest
of the Seller in the Financed Vehicle.
(iv) Any and all other documents (including any computer file,
diskette
or microfiche) that the Servicer or the Seller shall keep on
file, in
accordance with its customary procedures, relating to a
Receivable, an Obligor (to the extent relating to a Receivable), or
a
Financed
Vehicle.
The
Servicer acknowledges that it holds the documents and
instruments
relating to the Receivables for the benefit
of the Issuer and the Indenture
Trustee. The Issuer and the Indenture
Trustee shall have no responsibility to
monitor the Servicer's performance as
custodian and shall have no liability in
connection with the Servicer's performance
of such duties hereunder.
SECTION
2.5 Duties of Servicer as Custodian.
(a)
Safekeeping. The Servicer shall hold the Receivable Files for
the
benefit of the Issuer and the Indenture
Trustee and shall maintain such
accurate and complete accounts, records and
computer systems pertaining to
each Receivable File as shall enable the
Servicer and the Issuer to comply
with the terms and conditions of this
Agreement, and the Indenture Trustee to
comply with the terms and conditions of the
Indenture. In performing its
duties as custodian, the Servicer shall act
with reasonable care, using that
degree of skill and attention that the
Servicer exercises with respect to the
receivable files relating to all comparable
automotive receivables that the
Servicer services for itself or others. The
Servicer shall conduct, or cause
to be conducted, periodic audits of the
Receivable Files held by it under this
Agreement and of the related accounts,
records and computer systems, in such a
manner as shall enable the Issuer or the
Indenture Trustee to identify all
Receivables Files and such related
accounts, records and computer systems and
verify the accuracy of the Servicer's
record keeping. The Servicer shall
promptly report to the Issuer and the
Indenture Trustee any failure on its
part to hold the Receivable Files and
maintain its accounts, records, and
computer systems as herein provided and
shall promptly take appropriate action
to remedy any such failure. Nothing herein
shall be deemed to require an
initial review or any periodic review by
the Issuer, the Owner Trustee or the
Indenture Trustee of the Receivable
Files.
(b)
Maintenance of and Access to Records. The Servicer shall
maintain
each Receivable File at its offices
specified in Schedule B to this Agreement,
or at such other office as shall be
specified to the Issuer and the Indenture
Trustee by 30 days' prior written notice.
The Servicer shall make available to
the Issuer and the Indenture Trustee or
their duly authorized representatives,
attorneys, or auditors, the Receivable
Files and the related accounts, records
and
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computer systems maintained by the Servicer
during normal business hours as
the Issuer or the Indenture Trustee shall
reasonably request, which does not
unreasonably interfere with the Servicer's
normal operations.
(c)
Release of Documents. Upon written instructions from the
Indenture
Trustee, the Servicer shall release or
cause to be released any document in
the Receivable Files to the Indenture
Trustee, the Indenture Trustee's agent
or the Indenture Trustee's designee, as the
case may be, at such place or
places as the Indenture Trustee may
reasonably designate, as soon as is
reasonably practicable, to the extent it
does not unreasonably interfere with
the Servicer's normal operations. The
Servicer shall not be responsible for
any loss occasioned by the failure of the
Indenture Trustee or its agent or
designee to return any document or any
delay in doing so.
SECTION
2.6 Instructions; Authority to Act. All instructions from the
Indenture Trustee shall be in writing and
signed by an Authorized Officer of
the Indenture Trustee, and the Servicer
shall be deemed to have received
proper instructions with respect to the
Receivable Files upon its receipt of
such written instructions.
SECTION
2.7 Custodian's Indemnification. The Servicer, as custodian,
shall indemnify the Issuer, the Owner
Trustee and the Indenture Trustee for
any and all liabilities, obligations,
losses, compensatory damages, payments,
costs, or expenses of any kind whatsoever
that may be imposed on, incurred, or
asserted against the Issuer, the Owner
Trustee or the Indenture Trustee as the
result of any improper act or omission in
any way relating to the maintenance
and custody by the Servicer as custodian of
the Receivable Files; provided,
however, that the Servicer shall not be
liable (i) to the Issuer for any
portion of any such amount resulting from
the willful misfeasance, bad faith,
or negligence of the Indenture Trustee, the
Owner Trustee or the Issuer, (ii)
to the Owner Trustee for any portion of any
such amount resulting from the
willful misfeasance, bad faith, or
negligence of the Indenture Trustee, the
Owner Trustee or the Issuer and (iii) to
the Indenture Trustee for any portion
of any such amount resulting from the
willful misfeasance, bad faith, or
negligence of the Indenture Trustee, the
Owner Trustee or the Issuer.
SECTION
2.8 Effective Period and Termination. The Servicer's
appointment
as custodian shall become effective as of
the Cut-off Date and shall continue
in full force and effect until terminated
pursuant to this Section 2.8. If the
Bank shall resign as Servicer in accordance
with the provisions of this
Agreement or if all of the rights and
obligations of the Servicer shall have
been terminated under Section 7.1, the
appointment of the Servicer as
custodian hereunder may be terminated by
the Indenture Trustee, or by the
holders of Notes evidencing not less than a
majority of the principal amount
of the Notes Outstanding (or if no Notes
are Outstanding, by holders of
Certificates evidencing not less than a
majority of the Certificate Balance),
in the same manner as the Indenture Trustee
or such Securityholders may
terminate the rights and obligations of the
Servicer under Section 7.1. As
soon as practicable after any termination
of such appointment, the Servicer
shall deliver to the Indenture Trustee or
the Indenture Trustee's agent the
Receivable Files and the related accounts
and records maintained by the
Servicer at such place or places as the
Indenture Trustee may reasonably
designate.
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ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES AND TRUST PROPERTY
SECTION 3.1 Duties of
Servicer. The Servicer shall manage, service,
administer and make collections on the
Receivables with reasonable care, using
that degree of skill and attention that the
Servicer exercises with respect to
all comparable new or used automobile and
light-duty truck receivables that it
services for itself. The Servicer's duties
shall include collection and
posting of all payments, responding to
inquiries of Obligors on such
Receivables, investigating delinquencies,
sending payment coupons to Obligors,
reporting tax information to Obligors,
accounting for collections, furnishing
monthly and annual statements to the Owner
Trustee and the Indenture Trustee
with respect to distributions, making
Advances pursuant to Section 4.4,
preparing (or causing to be prepared) the
tax returns of the Trust in
accordance with Section 5.6 of the Trust
Agreement and, if requested to do so,
providing the certifications required,
pursuant to Section 5.1(b) hereof. The
Servicer shall follow its customary
standards, policies and procedures in
performing its duties as Servicer. Without
limiting the generality of the
foregoing, the Servicer is hereby
authorized and empowered to execute and
deliver, on behalf of itself, the Issuer,
the Owner Trustee, the Indenture
Trustee, the Noteholders, the
Certificateholders, or any of them, any and all
instruments of satisfaction or
cancellation, or partial or full release or
discharge, and all other comparable
instruments, with respect to such
Receivables or to the Financed Vehicles
securing such Receivables. If the
Servicer shall commence a legal proceeding
to enforce a Receivable, the Issuer
(in the case of a Receivable other than a
Purchased Receivable) shall
thereupon be deemed to have automatically
assigned, solely for the purpose of
collection, such Receivable to the
Servicer. If in any enforcement suit or
legal proceeding it shall be held that the
Servicer may not enforce a
Receivable on the ground that it shall not
be a real party in interest or a
holder entitled to enforce the Receivable,
the Issuer shall, at the Servicer's
expense and direction, take steps to
enforce the Receivable, including
bringing suit in its name or the names of
the Indenture Trustee, the
Noteholders, the Certificateholders, or any
of them. The Issuer shall furnish
the Servicer with any powers of attorney
and other documents reasonably
necessary or appropriate to enable the
Servicer to carry out its servicing and
administrative duties hereunder.
SECTION
3.2 Collection of Receivable Payments. The Servicer shall make
reasonable efforts to collect all payments
called for under the terms and
provisions of the Receivables as and when
the same shall become due and shall
follow such collection procedures as it
follows with respect to all comparable
new or used automobile and light-duty truck
receivables that it services for
itself. The Servicer shall not change the
amount of or reschedule the due date
of any scheduled payment of a Receivable to
a date more than 30 days from the
original due date of such scheduled
payment, change the annual percentage rate
of or extend any Receivable or change any
material term of a Receivable,
except as provided by the terms of the
Receivable or of this Agreement or as
required by law or court order; provided,
however, that the Servicer may
extend any Receivable that is in default or
with respect to which default is
reasonably foreseeable and that would be
acceptable to the Servicer with
respect to comparable new or used
automobile and light-duty truck receivables
that it services for itself if (a) the
amount on deposit in the Reserve
Account is greater than zero at the time of
the extension, (b) the total
credit-related extensions granted on the
Receivable will not exceed four
months in the aggregate,
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(c) the total number of credit-related
extensions granted on the Receivable
will not exceed two, and (d) the maturity
of such Receivable will not be
extended beyond July 2, 2011. If, as a
result of inadvertently rescheduling or
extending payments, such rescheduling or
extension breaches any of the terms
of the proviso to the preceding sentence,
then the Servicer shall be obligated
to purchase such Receivable pursuant to
Section 3.7. For the purpose of such
purchases pursuant to Section 3.7, notice
shall be deemed to have been
received by the Servicer at such time as
shall make purchase mandatory as of
the last day of the Collection Period
during which the discovery of such
breach occurred.
Notwithstanding anything to the contrary herein, the Servicer
may
implement programs that grant payment
extensions in respect of receivables
that are not delinquent. Any such program
shall be implemented with the
approval of the senior officer's credit
committee of the Servicer in
accordance with the Servicer's general
lending and policy guidelines. Any such
payment extension may extend the maturity
of the applicable receivable beyond
its original term to maturity.
Notwithstanding anything to the contrary
herein, the Servicer may also reduce the
interest rate on Receivables affected
by the application of the Servicemembers
Civil Relief Act to a rate that is
lower than the maximum rate prescribed by
the Servicemembers Civil Relief Act
and may readjust the payment schedule for
any Receivable that is affected by
the application of the Servicemembers Civil
Relief Act until the maturity of
the receivable.
SECTION
3.3 Realization Upon Receivables. On behalf of the Issuer, the
Servicer shall use reasonable efforts,
consistent with its customary
standards, policies and procedures, to
repossess or otherwise convert the
ownership of the Financed Vehicle securing
any Receivable as to which the
Servicer shall have determined to be a
Defaulted Receivable or otherwise (and
shall specify any such Defaulted Receivable
to the Indenture Trustee no later
than the Determination Date following the
Collection Period in which the
Servicer shall have made such
determination). The Servicer shall follow such
customary standards, policies and
procedures as it shall deem necessary or
advisable in its servicing of comparable
receivables, which may include
selling the Financed Vehicle at public or
private sale. The Servicer shall be
entitled to recover from proceeds all
reasonable expenses incurred by it in
the course of converting the Financed
Vehicle into cash proceeds. The
Liquidation Proceeds (net of such expenses)
realized in connection with any
such action with respect to a Receivable
shall be deposited by the Servicer in
the Collection Account in the manner
specified in Section 4.2 and shall be
applied to reduce (or to satisfy, as the
case may be) the Purchase Amount of
the Receivable, if such Receivable is to be
repurchased by the Depositor
pursuant to Section 2.3, or is to be
purchased by the Servicer pursuant to
Section 3.7. The foregoing shall be subject
to the provision that, in any case
in which the Financed Vehicle shall have
suffered damage, the Servicer shall
not be required to expend funds in
connection with the repair or the
repossession of such Financed Vehicle
unless it shall determine in its
discretion that such repair and/or
repossession will increase the Liquidation
Proceeds by an amount greater than the
amount of such expenses.
SECTION
3.4 Allocations of Collections. If an Obligor is obligated
under
one or more Receivables and also under one
or more other assets owned by the
Bank or assigned by the Bank to third
parties, then any payment on any such
asset received from or on behalf of such
Obligor shall, if identified as being
made with respect to a particular item or
asset, be applied to such
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item, and otherwise shall be allocated by
the Bank in accordance with its
customary standards, policies and
procedures.
SECTION
3.5 Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, in accordance with its
customary procedures, take such steps
as are necessary to maintain perfection of
the security interest created by
each Receivable in the related Financed
Vehicle. The Issuer hereby authorizes
the Servicer to take such steps as are
necessary to re-perfect such security
interest on behalf of the Issuer and the
Indenture Trustee in the event of the
relocation of a Financed Vehicle or for any
other reason, in either case, when
the Servicer has knowledge of the need for
such re-perfection. In the event
that the assignment of a Receivable to the
Issuer is insufficient, without a
notation on the related Financed Vehicle's
certificate of title, or without
fulfilling any additional administrative
requirements under the laws of the
state in which the Financed Vehicle is
located, to transfer to the Issuer a
perfected security interest in the related
Financed Vehicle, the Servicer
hereby agrees that the Servicer's listing
as the secured party on the
certificate of title is deemed to be in its
capacity as agent of the Issuer
and the Indenture Trustee and further
agrees to hold such certificate of title
as the agent and custodian of the Issuer
and the Indenture Trustee; provided
that the Servicer shall not, nor shall the
Issuer or the Indenture Trustee
have the right to require that the
Servicer, make any such notation on the
related Financed Vehicles' certificate of
title or fulfill any such additional
administrative requirement of the laws of
the state in which a Financed
Vehicle is located.
SECTION
3.6 Covenants of Servicer. The Servicer shall not (i) release
the Financed Vehicle securing each such
Receivable from the security interest
granted by such Receivable in whole or in
part except in the event of payment
in full by or on behalf of the Obligor
thereunder, (ii) impair the rights of
the Trust or the Indenture Trustee in the
Receivables, or (iii) increase the
number of payments under a Receivable,
increase the Amount Financed under a
Receivable or extend or forgive payments on
a Receivable, except as provided
in Section 3.2. In the event that at the
end of the scheduled term of any
Receivable, the outstanding principal
amount thereof is such that the final
payment to be made by the related Obligor
is larger than the regularly
scheduled payment of principal and interest
made by such Obligor, the Servicer
may permit such Obligor to pay such
remaining principal amount in more than
one payment of principal and interest;
provided that the last such payment
shall be due on or prior to the Collection
Period immediately preceding the
Class B Final Scheduled Payment Date.
SECTION
3.7 Purchase of Receivables Upon Breach. (a) The Servicer, the
Depositor or the Owner Trustee, as the case
may be, promptly shall inform the
other parties to this Agreement, in
writing, upon the discovery of any breach
pursuant to Section 3.2, 3.5 or 3.6. Unless
the breach shall have been cured
by the last day of the second Collection
Period following such discovery (or,
at the Servicer's election, the last day of
the first following Collection
Period), the Servicer shall purchase any
Receivable materially and adversely
affected by such breach as determined by
the Indenture Trustee (which shall
include any Receivable as to which a breach
of Section 3.6 has occurred) at
the Purchase Amount (less any Liquidation
Proceeds deposited, or to be
deposited, in the Collection Account with
respect to such Receivable pursuant
to Section 3.3). In consideration of the
purchase of such Receivable, the
Servicer shall remit the Purchase Amount in
the manner specified in Section
4.5. For purposes of this Section 3.7, the
Purchase Amount shall consist in
part of a release by the Servicer of
all
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rights of reimbursement with respect to
Outstanding Advances on the
Receivable. The sole remedy of the Issuer,
the Owner Trustee, the Indenture
Trustee, the Noteholders or the
Certificateholders with respect to a breach
pursuant to Section 3.2, 3.5 or 3.6 shall
be to require the Servicer to
purchase Receivables pursuant to this
Section 3.7.
(b) With
respect to all Receivables purchased pursuant to this Section
3.7, the Issuer shall assign to the
Servicer or the Depositor, as applicable,
without recourse, representation or
warranty, all of the Issuer's right, title
and interest in and to such Receivables and
all security and documents
relating thereto.
SECTION
3.8 Servicer Fees. The Servicer shall be entitled to any
interest earned on the amounts deposited in
the Collection Account during each
Collection Period plus all late fees,
prepayment charges and other
administrative fees and expenses or similar
charges, if any, allowed by
applicable law and the terms of the
Receivables during each Collection Period
(the "Supplemental Servicing Fee"). The
Servicer also shall be entitled to the
Servicing Fee, as provided herein.
SECTION
3.9 Servicer's Certificate. On or prior to the Determination
Date for each Payment Date, the Servicer
shall deliver to the Depositor, the
Owner Trustee, each Note Paying Agent and
Certificate Paying Agent, the
Indenture Trustee and the Seller, with a
copy to the Rating Agencies, a
Servicer's Certificate containing all
information (including all specific
dollar amounts) necessary to make the
transfers and distributions pursuant to
Sections 4.3, 4.4, 4.5, 4.6 and 4.7, and
Section 8.2 of the Indenture for the
Collection Period preceding the date of
such Servicer's Certificate, together
with the written statements to be furnished
by the Owner Trustee to
Certificateholders pursuant to Section 4.9
and by the Indenture Trustee to the
Noteholders pursuant to Section 4.9 hereof
and Section 6.6 of the Indenture.
Receivables purchased or to be purchased by
the Servicer or the Depositor
shall be identified by the Servicer by the
Seller's account number with
respect to such Receivable (as specified in
the Schedule of Receivables).
SECTION
3.10 Annual Statement as to Compliance; Notice of Event of
Servicing Termination. (a) The Servicer
shall deliver to the Owner Trustee,
the Indenture Trustee and each Rating
Agency on or before March 31 of each
year beginning March 31, 2006, an Officer's
Certificate, with respect to the
preceding 12-month period (or such shorter
period in the case of the first
such certificate), stating that (i) a
review of the activities of the Servicer
during the preceding 12-month period (or
such shorter period in the case of
the first such certificate) and of its
performance under this Agreement has
been made under such officer's supervision
and (ii) to the best of such
officer's knowledge, based on such review,
the Servicer has fulfilled all its
obligations under this Agreement throughout
such period, or, if there has been
a default in the fulfillment of any such
obligation, specifying each such
default known to such officer and the
nature and status thereof. A copy of
such Officer's Certificate and the report
referred to in Section 3.11 may be
obtained by any Certificateholder by a
request in writing to the Owner
Trustee, or by any Noteholder or Person
certifying that it is a Note Owner by
a request in writing to the Indenture
Trustee, in either case addressed to the
applicable Corporate Trust Office. Upon the
telephone request of the Owner
Trustee, the Indenture Trustee shall
promptly furnish the Owner Trustee a list
of Noteholders as of the date specified by
the Owner Trustee. Notwithstanding
the foregoing in this Section 3.10(a), the
Servicer, in its sole discretion,
may
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deliver, in addition to or in lieu of the
Officer's Certificate referred to
above in this Section 3.10(a), the report
on compliance with servicing
criteria that would be required to be filed
in respect of the Trust under the
Exchange Act if periodic reports under
Section 15(d) of the Exchange Act, or
any successor provision thereto, were
required to be filed in respect of the
Trust.
(b) The
Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency promptly
after having obtained knowledge
thereof, but in no event later than five
(5) Business Days thereafter, written
notice in an Officer's Certificate of any
event which with the giving of
notice or lapse of time, or both, would
become an Event of Servicing
Termination under Section 7.1. The Seller
shall deliver to the Owner Trustee,
the Indenture Trustee and each Rating
Agency promptly after having obtained
knowledge thereof, but in no event later
than five (5) Business Days
thereafter, written notice in an Officer's
Certificate of any event which with
the giving of notice or lapse of time, or
both, would become an Event of
Servicing Termination under clause (a)(ii)
of Section 7.1.
SECTION
3.11 Annual Independent Certified Public Accountant's Report.
The Servicer shall cause a firm of
independent certified public accountants,
who may also render other services to the
Servicer, the Seller or the
Depositor, to deliver to the Owner Trustee
and the Indenture Trustee on or
before March 31 of each year beginning
March 31, 2006 with respect to the
prior calendar year (or such shorter period
in the case of the first such
report) a report addressed to the board of
directors of the Servicer and to
the Owner Trustee and the Indenture
Trustee, to the effect that such firm has
examined the automobile and light-duty
truck receivable servicing functions of
the Servicer for such period, including the
Servicer's procedures and records
relating to servicing of the Receivables
under this Agreement and that, on the
basis of such examination, such firm is of
the opinion that such servicing has
been conducted during such period in
compliance with this Agreement except for
(a) such exceptions as such firm believes
to be immaterial and (b) such other
exceptions as shall be set forth in such
firm's report. In addition, such
report shall state that such firm has
compared the mathematical calculations
of each amount set forth in the Servicer's
Certificates forwarded by the
Servicer pursuant to Section 3.9 during the
period covered by such report
(which shall be the preceding calendar year
or such shorter period in the case
of the first such report) with the
Servicer's computer reports which were the
source of such amounts and that on the
basis of such comparison, such firm is
of the opinion that such amounts are in
agreement, except for such exceptions
as such firm believes to be immaterial and
such other exceptions as shall be
set forth in such statement. In addition,
such report shall set forth the
procedures performed in conjunction with
the examination and shall contain a
statement of such firm as to the accuracy
of the amounts set forth in the
Servicer's Certificates delivered pursuant
to Section 3.9 in such period.
Notwithstanding the foregoing in this
Section 3.11, the Servicer, in its sole
discretion, may cause to be delivered, in
lieu of the report referred to above
in this Section 3.11, the attestation
report of a registered public accounting
firm that would be required to be filed in
respect of the Trust under the
Exchange Act if periodic reports under
Section 15(d) of the Exchange Act, or
any successor provision thereto, were
required to be filed in respect of the
Trust.
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The report
or attestation report, as applicable, will also indicate that
the firm is independent of the Servicer
within the meaning of the Code of
Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION
3.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to
the Certificateholders, the
Indenture Trustee and the Noteholders
access to the Receivable Files in such
cases where the Certificateholders, the
Indenture Trustee or the Noteholders
shall be required by applicable statutes or
regulations to review such
documentation. Access shall be afforded
without charge, but only upon
reasonable request and during the normal
business hours at the respective
offices of the Servicer. Nothing in this
Section 3.12 shall affect the
obligation of the Servicer to observe any
applicable law prohibiting
disclosure of information regarding the
Obligors, and the failure of the
Servicer to provide access to information
as a result of such obligation shall
not constitute a breach of this Section
3.12.
SECTION
3.13 Servicer Expenses. The Servicer shall be required to pay
all expenses incurred by it in connection
with its activities hereunder,
including fees, expenses (including counsel
fees and expenses) and
disbursements of the Owner Trustee and the
Indenture Trustee, independent
accountants, taxes imposed on the Servicer
and expenses incurred in connection
with distributions and reports to
Noteholders and Certificateholders.
SECTION
3.14 Insurance. The Servicer, in accordance with its customary
servicing procedures and underwriting
standards, shall require that each
Obligor shall have obtained and shall
maintain comprehensive and collision
insurance covering the related Financed
Vehicle as of the execution of the
Receivable. The Servicer shall enforce its
rights under the Receivables to
require the Obligors to maintain
comprehensive and collision insurance, in
accordance with the Servicer's customary
practices and procedures with respect
to comparable new or used automobile and
light-duty truck receivables that it
services for itself or others.
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS AND
CERTIFICATEHOLDERS
SECTION 4.1
Accounts. (a) The Servicer shall, prior to the Closing Date,
cause to be established and maintained an
Eligible Deposit Account in the name
"JPMorgan Chase Bank, National Association,
as Indenture Trustee, as secured
party from USAA Auto Owner Trust 2005-2",
initially at the corporate trust
department of the Indenture Trustee, which
shall be designated as the
"Collection Account". The Collection
Account shall be under the sole dominion
and control of the Indenture Trustee;
provided, that the Servicer may make
deposits to and direct the Indenture
Trustee in writing to make withdrawals
from the Collection Account in accordance
with the terms of the Basic
Documents. The Collection Account will be
established and maintained pursuant
to an account agreement which specifies New
York law as the governing law. In
addition, the Collection Account shall be
established and maintained at an
institution which agrees in writing that
for so long as the Notes are
outstanding it will comply with entitlement
orders (as defined in Article 8 of
the UCC) originated by the Indenture
Trustee
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without further consent of the Issuer. All
monies deposited from time to time
in the Collection Account shall be held by
the Indenture Trustee as secured
party for the benefit of the Noteholders
and, after payment in full of the
Notes, as agent of the Issuer and as part
of the Trust Property. All deposits
to and withdrawals from the Collection
Account shall be made only upon the
terms and conditions of the Basic
Documents.
If the
Servicer is required to remit collections pursuant to the first
sentence of Section 4.2, all amounts held
in the Collection Account shall, to
the extent permitted by applicable law,
rules and regulations, be invested, as
directed in writing by the Servicer, by the
bank or trust company then
maintaining the Collection Account in
specified Permitted Investments that
mature not later than the Business Day
immediately prior to the Payment Date
for the Collection Period to which such
amounts relate (or in the case of the
Special Payment Date, the portion of such
funds needed to make the final
payment on the Class A-1 Notes shall mature
not later than the Business Day
immediately prior to the Special Payment
Date) and such Permitted Investments
shall be held to maturity. All interest and
other income (net of losses and
investment expenses) on funds on deposit in
the Collection Account shall be
withdrawn from the Collection Account at
the written direction of the Servicer
and shall be paid to the Servicer. The
Indenture Trustee shall not be liable
for investment losses in Permitted
Investments made in accordance with
directions from the Servicer. In the event
that the Collection Account is no
longer to be maintained at the corporate
trust department of the Indenture
Trustee, the Servicer shall, with the
Indenture Trustee's or Issuer's
assistance as necessary, cause an Eligible
Deposit Account to be established
as the Collection Account within ten (10)
Business Days (or such longer period
not to exceed thirty (30) calendar days as
to which each Rating Agency may
consent) and give written notice of the
location and account number of such
account to the Indenture Trustee.
(b) The
Servicer shall, prior to the Closing Date, establish and
maintain an administrative
subaccount within the Collection Account at the
bank or trust company then
maintaining the Collection Account, which
subaccount shall be designated as
the "Principal Distribution Account". The
Principal Distribution Account is
established and maintained solely for
administrative purposes.
(c) The
Servicer shall, prior to the Closing Date, cause an Eligible
Deposit Account to be established
and maintained, in the name "USAA Auto
Owner Trust 2005-2 Certificate
Distribution Account", initially at the
corporate trust department of the
Owner Trustee, which shall be designated as
the "Certificate Distribution
Account". The Certificate Distribution Account
shall be under the sole dominion
and control of the Owner Trustee. All monies
deposited from time to time in the
Certificate Distribution Account pursuant
to this Agreement and the
Indenture shall be held by the Owner Trustee as
part of the Trust Property and
shall be applied as provided in the Basic
Documents. In the event that the
Certificate Distribution Account is no
longer to be maintained at the
corporate trust department of the Owner
Trustee, the Servicer shall cause
an Eligible Deposit Account to be
established as the Certificate
Distribution Account within ten (10) Business
Days (or such longer period not to
exceed thirty (30) calendar days as to
which each Rating Agency may
consent) and give written notice of the location
and account number of such account
to the Owner Trustee. The Certificate
Distribution
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Account will be established and maintained
pursuant to an account agreement
which specifies New York law as the
governing law.
SECTION
4.2 Collections. The Servicer shall remit to the Collection
Account within two (2) Business Days of the
receipt thereof (i) all payments
by or on behalf of the Obligors (but
excluding Purchased Receivables) and (ii)
all Liquidation Proceeds, both as collected
during the Collection Period;
provided that the Bank, so long as it is
acting as the Servicer and no Event
of Servicing Termination has occurred and
is continuing, may make remittances
of collections on a less frequent basis
than that specified in the immediately
preceding sentence. It is understood that
such less frequent remittances may
be made only on the specific terms and
conditions set forth below in this
Section 4.2 and only for so long as such
terms and conditions are fulfilled.
Accordingly, notwithstanding the provisions
of the first sentence of this
Section 4.2, the Servicer shall remit
collections received during a Collection
Period to the Collection Account in
immediately available funds on the
Business Day preceding the related Payment
Date (or in the case of the Special
Payment Date, on the Business Day preceding
the Special Payment Date) but only
for so long as the Monthly Remittance
Condition is satisfied. The Owner
Trustee or the Indenture Trustee shall not
be deemed to have knowledge of any
event or circumstance in the definition of
Monthly Remittance Condition that
would require remittance by the Servicer to
the Collection Account within two
(2) Business Days of receipt as aforesaid
unless the Owner Trustee or the
Indenture Trustee has received written
notice of such event or circumstance
from the Seller or the Servicer in an
Officer's Certificate or from the
holders of Notes evidencing not less than
25% of the principal amount of the
Notes Outstanding or from the
Certificateholders of Certificates evidencing
not less than 25% of the Certificate
Balance or a Trustee Officer in the
Corporate Trust Office with knowledge
hereof or familiarity herewith has
actual knowledge of such event or
circumstance. For purposes of this Article
IV the phrase "payments by or on behalf of
Obligors" shall mean payments made
by Persons other than the Servicer or by
other means.
SECTION
4.3 Application of Collections. For the purposes of this
Agreement, as of the close of business on
the last day of each Collection
Period, all collections for the Collection
Period with respect to each
Receivable (other than a Purchased
Receivable) shall be applied by the
Servicer first to the amount of interest
accrued on such Receivable to the
date of receipt, then to reduce the
scheduled principal amount outstanding on
the Receivable to the extent of the
remaining scheduled payment and then to
any outstanding fees under the terms of the
Receivable. Amounts paid by the
Depositor, the Seller or the Servicer in
respect of Purchased Receivables
shall be allocated first to any interest
accrued on the related Receivable and
then to the Principal Balance of the
related Receivable.
SECTION
4.4 Advances. (a) As of each Determination Date, the Servicer
shall make a payment with respect to each
Receivable (other than a Defaulted
Receivable) equal to the excess, if any, of
(x) the product of the Principal
Balance of such Receivable as of the first
day of the related Collection
Period and one-twelfth of the Annual
Percentage Rate (as adjusted downward, as
the case may be, in accordance with the
Servicemembers Civil Relief Act or
pursuant to Section 3.2) on such Receivable
(calculated on the basis of a
360-day year of twelve 30-day months), over
(y) the interest actually received
by the Servicer with respect to such
Receivable from the Obligor or from
payment of the Purchase Amount during or
with respect to such Collection
Period. The Servicer shall deposit all such
Advances into the Collection
Account in
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immediately available funds no later than,
11:00 a.m. New York City time, on
the Determination Date. Notwithstanding the
foregoing, the Servicer may elect
not to make any Advance with respect to a
Receivable to the extent that the
Servicer, in its sole discretion, shall
determine that such Advance is not
recoverable from subsequent payments on
such Receivable or from withdrawals
from the Reserve Account. To the extent
that the amount set forth in clause
(y) above with respect to a Receivable is
greater than the amount set forth in
clause (x) above with respect thereto, such
excess amount shall be distributed
to the Servicer pursuant to Section 4.6(b).
In addition, in the event that a
Receivable becomes a Defaulted Receivable,
Outstanding Advances in respect of
that Receivable shall be reimbursed to the
extent of interest Collections with
respect to such Receivable and, if such
amounts are insufficient, from amounts
on deposit in the Reserve Account, and if
such amounts are not sufficient,
from amounts on deposit in the Collection
Account. The Servicer shall not make
any advance with respect to principal of
Receivables.
(b) The
Servicer shall deposit in the Collection Account the aggregate
Advances on the Receivables pursuant to
Section 4.4(a). To the extent that the
Servicer fails to make an Advance pursuant
to Section 4.4(a) on the date
required, the Servicer shall so notify the
Issuer and the Indenture Trustee in
writing specifying the amount of the
Advance and the Receivable to which such
Advance related, and the Indenture Trustee
shall withdraw such amount (or, if
determinable by the Servicer, such portion
of such amount as does not
represent advances for delinquent interest)
from the Reserve Account and
deposit such amount in the Collection
Account.
SECTION 4.5
Additional Deposits. (a) The Depositor and the Servicer
shall deposit in the Collection Account the
aggregate Purchase Amounts with
respect to Purchased Receivables pursuant
to Sections 2.3 and 3.7,
respectively, and the Servicer shall
deposit therein all Purchase Amounts to
be paid under Section 8.1. All such
deposits with respect to a Collection
Period shall be made, in immediately
available funds, on the Business Day
preceding the Payment Date related to such
Collection Period (or in the case
of the Special Payment Date, the Business
Day preceding the Special Payment
Date).
(b) The
Indenture Trustee, in accordance with the written instructions
of the Servicer, shall, on each Payment
Date, and the Special Payment Date to
the extent such amounts are for
distribution to the Class A-1 Notes, make a
withdrawal from the Reserve Account (i)
first, in an amount equal to the
Reserve Account Excess Amount for such
Payment Date and (ii) second, in an
amount equal to the amount (if positive)
calculated by the Servicer pursuant
to the second sentence of Section
4.6(b).
SECTION
4.6 Distributions. (a) On each Payment Date, the Indenture
Trustee shall cause the transfer and
distribution of the amounts set forth in
the Servicer's Certificate for such Payment
Date from the Collection Account
to the Servicer, in immediately available
funds, for repayment of Outstanding
Advances pursuant to Section 4.4(a).
(b) The
Servicer shall on or before each Determination Date calculate
the Available Collections, the Reserve
Account Excess Amount, the Available
Funds, the Servicing Fee and all unpaid
Servicing Fees from prior Collection
Periods, if any, the Accrued Class A Note
Interest,
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the Accrued Class B Certificate Interest,
the Priority Note Principal Payment,
if any, and the Regular Principal
Distribution Amount. In addition, the
Servicer shall calculate on or before each
Determination Date the difference,
if any, between the Total Required Payment
and the Available Funds and,
pursuant to Section 4.5(b), the Indenture
Trustee shall withdraw funds from
the Reserve Account in an amount equal to
the lesser of such difference (if
positive) or the balance of such Reserve
Account.
(c) On
each Payment Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained
in the Servicer's Certificate
delivered on or before the related
Determination Date pursuant to Section
3.9), to make the following withdrawals
from the Collection Account and make
deposits, distributions and payments, to
the extent of Available Funds for
such Payment Date (plus funds, if any,
deposited in the Collection Account
from the Reserve Account pursuant to
Section 4.5(b)), in the following order
of priority:
(i) first, to the Servicer, the Servicing Fee and all unpaid
Servicing
Fees from prior Collection Periods;
(ii) second, to the Noteholders, the Accrued Class A Note
Interest
for such
Payment Date; provided that if there are not sufficient funds
available
to pay the entire amount of the Accrued Class A Note Interest,
the
amounts available shall be applied to the payment of such
interest
on the
Class A Notes on a pro rata basis;
(iii) third, to the Noteholders, the Priority Note Principal
Payment,
if any, for such Payment Date to be distributed in the same
priority
as described under Section 4.6(d) of this Agreement;
(iv) fourth,
to the Certificate Distribution Account, the
Accrued
Class B Certificate Interest for such Payment Date;
(v) fifth, to the Principal Distribution Account, the Regular
Principal
Distribution Amount (less any amounts distributed under clause
(iii)
above) for such Payment Date;
(vi) sixth, if such Payment Date is a Final Scheduled Payment
Date
for any
Class, to the Principal Distribution Account, the amount
necessary
to reduce the remaining principal amount of such Class to zero
after
giving effect to the amount, if any, to be applied on such
Payment
Date to
such Class from funds deposited pursuant to clauses (iii) and
(v)
above;
(vii) seventh, to the Reserve Account, the amount, if any,
required
to reinstate the amount in the Reserve Account up to the
Specified
Reserve Balance for such Payment Date;
(viii) eighth, to the Indenture Trustee and the Owner Trustee,
all
amounts
due for fees, expenses and indemnification pursuant to Section
6.7 of the
Indenture and Section 7.1 of the Trust Agreement,
respectively, and not previously paid; and
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(ix) ninth, to the
Depositor, any remaining Available Funds for
such
Payment Date.
Notwithstanding the foregoing in this Section 4.6(c),
(A) if the Class A Notes have been accelerated after an Event
of Default specified in Section 5.1(iii) of the Indenture, then
the
Available Funds shall instead be applied in the following order
of
priority:
(1) to the Indenture Trustee and the Owner Trustee, all
amounts due for fees, expenses and indemnification
under Section 6.7 of the Indenture, Section 7.1 of the
Trust Agreement and Section 6.2 of this Agreement,
respectively, and not previously paid;
(2) to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(3) to the Noteholders, the Accrued Class A Note Interest
for such Payment Date; provided that if there are not
sufficient funds available to pay the entire amount of
the Accrued Class A Note Interest, the amounts
available shall be applied to the payment of such
interest on the Class A Notes on a pro rata basis;
(4) to the Noteholders, the Priority Note Principal
Payment, if any, for such Payment Date to be
distributed in the same manner as described under
Section 4.6(d) of this Agreement;
(5) to the Certificate Distribution Account, the Accrued
Class B Certificate Interest for such Payment
Date;
(6) first, to the holders of the Class A-1 Notes in
reduction of principal until the principal amount of
the Class A-1 Notes has been paid in full and then to
the holders of the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes on a pro rata basis in
reduction of principal until the principal amount of
such Class A Notes has been paid in full;
(7) to the Certificate Distribution Account, the
Certificate Balance of the Class B Certificates; and
(8) to the Depositor, any remaining Available Funds for
such Payment Date; and
(B) if the Class A Notes have been accelerated after an Event
of Default specified in Section 5.1(i), (ii), (iv) or (v) of
the
Indenture, then the Available Funds shall instead be applied in
the
following order of priority:
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(1) to the Indenture Trustee and the Owner Trustee, all
amounts due for fees, expenses and indemnification
under Section 6.7 of the Indenture, Section 7.1 of the
Trust Agreement and Section 6.2 of this Agreement,
respectively, and not previously paid;
(2) to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(3) to the Noteholders, the Accrued Class A Note Interest
for such Payment Date; provided that if there are not
sufficient funds available to pay the entire amount of
the Accrued Class A Note Interest, the amounts
available shall be applied to the payment of such
interest on the Class A Notes on a pro rata basis;
(4) first, to the holders of the Class A-1 Notes in
reduction of principal until the principal amount of
the Class A-1 Notes has been paid in full and then to
the holders of the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes on a pro rata basis in
reduction of principal until the principal amount of
such Class A Notes has been paid in full;
(5) to the Certificate Distribution Account, the sum of
(x) the Accrued Class B Certificate Interest for such
Payment
Date and (y) the Certificate Balance of the
Class B Certificates; and
(6) to the Depositor, any remaining Available Funds for
such Payment Date.
(d) If the
Notes have not been accelerated because of an Event of
Default, then on each Payment Date the
Servicer shall instruct the Indenture
Trustee (based on the information contained
in the Servicer's Certificate
delivered on or before the related
Determination Date pursuant to Section
3.9), to withdraw the funds deposited in
the Principal Distribution Account on
such Payment Date and make distributions
and payments in the following order
of priority:
(i) first, to
the holders of the Class A-1 Notes on a pro rata
basis in reduction of principal until the principal amount
of the Class A-1 Notes has been paid in full;
(ii) second, to the
holders of the Class A-2 Notes on a pro rata
basis in reduction of principal until the principal amount
of the Class A-2 Notes has been paid in full;
(iii) third, to the holders of the Class A-3 Notes on a pro
rata
basis in reduction of principal until the principal amount
of the Class A-3 Notes has been paid in full;
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<PAGE>
(iv) fourth, to the
holders of the Class A-4 Notes on a pro rata
basis in reduction of principal until the principal amount
of the Class A-4 Notes has been paid in full; and
(v) fifth, to
the Certificate Distribution Account in reduction
of the Certificate Balance of the Class B Certificates until
the Certificate Balance of the Class B Certificates has been
reduced to zero.
Any funds remaining on deposit in the
Principal Distribution Account shall be
paid to the Indenture Trustee and the Owner
Trustee to the extent, if any, of
amounts due to them hereunder that are
unpaid and then to the Depositor.
If the Notes have been accelerated because of an Event of
Default,
then on each Payment Date the Servicer
shall instruct the Indenture Trustee
(based on the information contained in the
Servicer's Certificate delivered on
or before the related Determination Date
pursuant to Section 3.9), to withdraw
the funds deposited in the Principal
Distribution Account on such Payment Date
and pay them to the holders of the Class
A-1 Notes until the principal amount
of the Class A-1 Notes has been paid in
full and then to the holders of the
Class A-2 Notes, Class A-3 Notes and Class
A-4 Notes on a pro rata basis in
reduction of principal until the principal
amount of the Notes has been paid
in full.
(e) Notwithstanding anything to the contrary continued herein,
with respect to the Special Payment Date,
the instructions provided by the
Servicer to the Indenture Trustee pursuant
to Section 4.6(c) and Section
4.6(d) (based on the information contained
in the Servicer's Certificate
delivered on or before the related
Determination Date pursuant to Section 3.9)
shall specify that on the Special Payment
Date, distributions shall be made
from the Collection Account and the
Principal Distribution Account in respect
of the Class A-1 Notes. The portion of the
Available Funds (plus funds, if
any, deposited in the Collection Account
from the Reserve Account pursuant to
Section 4.5(b)) distributed from the
Collection Account and the Principal
Distribution Account in respect of the
Class A-1 Notes on the Special Payment
Date, shall be allocated in the order and
priority set forth in Section 4.6(c)
and Section 4.6(d) as though such amounts
were to be distributed on the July
2006 Payment Date.
SECTION
4.7 Reserve Account. (a) (i) The Servicer shall, prior to the
Closing Date, cause to be established and
maintained an Eligible Deposit
Account in the name "JPMorgan Chase Bank,
National Association, as Indenture
Trustee, as secured party from USAA Auto
Owner Trust 2005-2", initially at the
corporate trust department of the Indenture
Trustee, which shall be designated
as the "Reserve Account" (the Reserve
Account, together with the Collection
Account (including the Principal
Distribution Account), the "Trust Accounts").
The Reserve Account shall be under the sole
dominion and control of the
Indenture Trustee; provided, that the
Servicer may make deposits to the
Reserve Account in accordance with the
Basic Documents. The Reserve Account
will be established and maintained pursuant
to an account agreement which
specifies New York law as the governing
law. In addition, the Reserve Account
shall be established and maintained at an
institution which agrees in writing
that for so long as the Notes are
Outstanding it will comply with entitlement
orders (as defined in Article 8 of the UCC)
originated by the Indenture
Trustee without further consent of the
Issuer. On the Closing Date,
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the Depositor shall deposit the Reserve
Initial Deposit into the Reserve
Account. The Reserve Account and all
amounts, securities, investments,
financial assets and other property
deposited in or credited to the Reserve
Account (such amounts, the "Reserve Account
Property") shall be held by the
Indenture Trustee as secured party for the
benefit of the Noteholders and,
after payment in full of the Notes, as
agent of the Owner Trustee and as part
of the Trust Property, and all deposits to
and withdrawals from there from
shall be made only upon the terms and
conditions of the Basic Documents.
The
Reserve Account Property shall, to the extent permitted by
applicable law, rules and regulations, be
invested, as directed in writing by
the Depositor, by the bank or trust company
then maintaining the Reserve
Account in Permitted Investments that
mature not later than the next Payment
Date (or in the case of the Special Payment
Date, the portion of such funds
needed to make final payment on the Class
A-1 Notes shall mature not later
than the Business Day immediately prior to
the Special Payment Date) or such
later date that satisfies the Rating Agency
Condition, and such Permitted
Investments shall be held to maturity. If
JPMorgan Chase Bank, National
Association is the Indenture Trustee, in
the absence of written direction, all
funds shall be retained uninvested. All
interest and other income (net of
losses and investment expenses) on funds on
deposit in the Reserve Account
shall be deposited therein. The Indenture
Trustee shall not be liable for
investment losses in Permitted Investments
made in accordance with directions
from the Depositor. In the event the
Reserve Account is no longer to be
maintained at the corporate trust
department of the Indenture Trustee, the
Servicer shall, with the Indenture
Trustee's or Owner Trustee's assistance as
necessary, cause an Eligible Deposit
Account to be established as the Reserve
Account within ten (10) Business Days (or
such longer period not to exceed
thirty (30) calendar days as to which each
Rating Agency may consent) and give
written notice of the location and account
number of such account to the
Indenture Trustee.
(ii) With respect to Reserve Account Property:
(A) any Reserve Account Property that is a "financial asset"
as defined in Section 8-102(a)(9) of the UCC shall be
physically
delivered to, or credited to an account in the name of, the
institution maintaining the Reserve Account in accordance with
such
institution's customary procedures such that such institution
establishes a "securities entitlement" in favor of the
Indenture
Trustee with respect thereto; and
(B) any Reserve Account Property that is held in deposit
accounts shall be held solely in the name of the Indenture
Trustee
at one or more depository institutions having the Required
Rating
and each such deposit account shall be subject to the exclusive
custody and
control of the Indenture Trustee and the Indenture
Trustee shall have sole signature authority with respect
thereto.
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(iii) Except for any deposit accounts specified in clause
(ii)(B)
above, the
Reserve Account shall only be invested in securities or in
other
assets which the institution maintaining the Reserve Account
agrees to
treat as "financial assets" as defined in Section 8-102(a)(9)
of the
UCC.
(b) If the
Servicer pursuant to Section 4.4 determines on or before any
Determination Date that it is required to
make an Advance and does not do so
from its own funds, the Servicer shall
promptly instruct the Indenture Trustee
in writing to draw funds, in an amount
specified by the Servicer, from the
Reserve Account and deposit them in the
Collection Account to cover any
shortfall. Such payment shall be deemed to
have been made by the Servicer
pursuant to Section 4.4 for purposes of
making distributions pursuant to this
Agreement, but shall not otherwise satisfy
the Servicer's obligation to
deliver the amount of the Advances to the
Indenture Trustee, and the Servicer
shall within two (2) Business Days replace
any funds in the Reserve Account so
used.
(c)
Following the payment in full of the aggregate principal amount
of
the Notes and the Certificate Balance and
of all other amounts owing or to be
distributed hereunder or under the
Indenture or the Trust Agreement to
Noteholders and Certificateholders, the
Indenture Trustee and the Owner
Trustee and the termination of the Trust,
any remaining Reserve Account
Property shall be distributed to the
Depositor.
(d) The
Depositor shall be permitted to sell, transfer, convey or
assign
in any manner its rights in the Reserve
Account under Section 4.7(c), together
with its rights to receive amounts under
Sections 4.6(c) and 4.6(d) of this
Agreement and Sections 5.4(b)(v), 8.2(c)
and 8.2(d) of the Indenture in
accordance with the priority of payments,
provided that each of the following
conditions shall be satisfied:
(i) the Rating Agency Condition is satisfied with respect to
such
action;
(ii) such action shall not, as evidenced by an Opinion of
Counsel,
cause the
Issuer to be characterized as an association (or a publicly
traded
partnership) taxable as a corporation for federal income tax
purposes;
and
(iii) the transferee or assignee agrees in writing to take
positions
for federal income tax purposes consistent with the federal
income tax
positions taken previously by the Depositor.
SECTION
4.8 Net Deposits. For so long as (i) the Bank shall be the
Servicer and (ii) the Servicer shall be
entitled pursuant to Section 4.2 to
remit collections on a monthly basis rather
than within two (2) Business Days
of receipt, the Bank may make the
remittances pursuant to Sections 4.2 and 4.5
above, net of amounts to be distributed to
the Bank pursuant to Section
4.6(c). Nonetheless, the Servicer shall
account for all of the above described
remittances and distributions except for
the Supplemental Servicing Fee in the
Servicer's Certificate as if the amounts
were deposited and/or transferred
separately.
SECTION
4.9 Statements to Noteholders and Certificateholders. On the
Business Day prior to each Payment Date (or
in the case of the Special Payment
Date, on the Business Day
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prior to the Special Payment Date), the
Servicer shall provide to the
Indenture Trustee (with copies to the
Rating Agencies and each Note Paying
Agent) for the Indenture Trustee to make
available to each Noteholder of
record as of the most recent Record Date
and to the Owner Trustee (with copies
to the Rating Agencies and to each
Certificate Paying Agent) for the Owner
Trustee to forward to each
Certificateholder of record as of the most recent
Record Date a statement based on
information in the Servicer's Certificate
furnished pursuant to Section 3.9, setting
forth for the Collection Period
relating to such Payment Date the following
information as to the Notes and
the Certificates to the extent
applicable:
(i) the amount of such distribution allocable to principal
allocable
to the Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest
allocable
to the Notes and the Certificates;
(iii) the amount of such distribution allocable to draws from
the
Reserve
Account, if any;
(iv) the Pool Balance as of the close of business on the last
day
of the
preceding Collection Period;
(v) the Specified Reserve Balance as of such Payment Date;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to
the related Collection Period and the amount of any unpaid
Servicing
Fees and the change in such amount from that of the prior
Payment
Date;
(vii) the amounts of the Class A Noteholders' Interest
Carryover
Shortfall
and the Class B Certificateholders' Interest Carryover
Shortfall,
if any, on such Payment Date and the change in such amounts
from the
preceding Payment Date;
(viii) the aggregate outstanding principal amount of each Class
of
Notes, the
Note Pool Factor for each Class of Notes, the Certificate
Balance
and the Certificate Pool Factor as of such Payment Date;
(ix) the amount of any previously due and unpaid payment of
principal
of the Notes or of the Certificate Balance, as applicable, and
the change
in such amount from that of the prior Payment Date;
(x) the Note Pool Factor and the Certificate Pool Factor for
such
Payment
Date;
(xi) the balance of the Reserve Account on such Payment Date,
after
giving effect to distributions made on such Payment Date and
the
change in
such balance from the preceding Payment Date;
(xii) [reserved];
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(xiii) the aggregate Purchase Amount of Receivables repurchased
by
the
Depositor or the Seller or purchased by the Servicer, if any,
with
respect to
the related Collection Period;
(xiv) the amount of Advances, if any, on such Payment Date;
(xv) the aggregate Collections for the related Collection
Period;
and
(xvi) the aggregate Principal Balance of the Receivables that
became
designated as Defaulted Receivables during the related
Collection
Period.
In
addition, such statements may be posted by the Indenture Trustee
on
its website at www.jpmorgan.com/sfr.
Each
amount set forth on the Payment Date statement pursuant to
clauses
(i), (ii), (vi), (vii) and (ix) above shall
be expressed as a dollar amount
per $1,000 of original principal amount of
a Note or original Certificate
Balance of a Certificate, as
applicable.
ARTICLE V
THE DEPOSITOR
SECTION
5.1 Representations, Warranties and Covenants of Depositor.
(a) The
Depositor makes the following representations and warranties on
which the Issuer is deemed to have relied
in acquiring the Trust Property. The
representations and warranties speak as of
the execution and d
