SALE AND SERVICING AGREEMENT

EXHIBIT 10.2

 

 

SALE AND SERVICING

AGREEMENT

 

Among

 

M&I AUTO LOAN TRUST 2005-1

 

as

 

Trust

 

M&I DEALER AUTO SECURITIZATION, LLC

 

as

 

Seller

 

M&I MARSHALL & ILSLEY BANK

 

as Servicer

 

and

 

JPMORGAN CHASE BANK, N.A.

 

as Indenture Trustee

 

Dated as of November 22, 2005

 

 

TABLE OF CONTENTS

 

 

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(continued)

 

 

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TABLE OF CONTENTS

 

 

SALE AND SERVICING AGREEMENT dated as of November 22, 2005, (this “ Agreement ”) among M&I AUTO LOAN TRUST 2005-1, a Delaware statutory trust (the “ Trust ”), M&I DEALER AUTO SECURITIZATION, LLC, a Delaware limited liability company (in its capacity as seller, “ Seller ”), M&I MARSHALL & ILSLEY BANK, a banking corporation organized under the laws of the State of Wisconsin (“ M&I Bank ” and in its capacity as servicer, “ Servicer ”) and JPMorgan Chase Bank, N.A., a national banking association, (in its capacity as indenture trustee, “ Indenture Trustee ”).

 

WHEREAS, the Trust desires to purchase from Seller a portfolio of Receivables arising in connection with Motor Vehicle Loans secured by new and used automobiles and light trucks, which have been sold to Seller by JPMorgan Chase Bank, N.A. (“ JPMorgan ”), a national banking association (on behalf of Preferred Receivables Funding Corporation (“ PREFCO ”) and Falcon Asset Securitization Corporation (“ Falcon ”)), and by M&I Northwoods III LLC, a Delaware limited liability company (“ Northwoods ”) under the Purchase Agreement;

 

WHEREAS, Seller is willing to sell such Receivables to the Trust; and

 

WHEREAS, Servicer is willing to service such Receivables.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

ARTICLE I. DEFINITIONS.

 

SECTION 1.1. Definitions . Capitalized terms are used in this Agreement as defined in Appendix X to this Agreement.

 

SECTION 1.2. Other Interpretive Provisions . For purposes of this Agreement, unless the context otherwise requires: (a) accounting terms not otherwise defined in this Agreement, and accounting terms partly defined in this Agreement to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles; (b) terms defined in Article 9 of the UCC as in effect in the relevant jurisdiction and not otherwise defined in this Agreement are used as defined in that Article; (c) the words “hereof,” “herein” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) references to any Article, Section, Schedule, Appendix or Exhibit are references to Articles, Sections, Schedules, Appendices and Exhibits in or to this Agreement and references to any paragraph, subsection, clause or other subdivision within any Section or definition refer to such paragraph, subsection, clause or other subdivision of such Section or definition; (e) the term “including” means “including without limitation”; (f) except as otherwise expressly provided herein, references to any law or regulation refer to that law or regulation as amended from time to time and include any successor law or regulation; (g) references to any Person include that Person’s successors and assigns; and (h) headings are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.

 

ARTICLE II. CONVEYANCE OF RECEIVABLES.

 

SECTION 2.1. Conveyance of Receivables on the Closing Date . In consideration of the Trust’s delivery to, or upon the order of, Seller of all of the Notes and the Certificates on the Closing Date, Seller does hereby sell, transfer, assign, set over and otherwise convey to the Trust, without recourse, subject to the obligations herein (collectively, the “ Trust Property ”):

 

(a) all right, title and interest of Seller in and to the Receivables identified on the Schedule of Receivables delivered on the Closing Date, and all moneys received thereon after the Cutoff Date;

 

(b) all right, title and interest of Seller in the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables and any other interest of Seller in the Financed Vehicles and any other property that shall secure the Receivables;

 

(c) the interest of Seller in any proceeds with respect to the Receivables from claims on any Insurance Policies covering Financed Vehicles or the Obligors;

 

(d) rebates of premiums relating to Insurance Policies and rebates of other items such as extended warranties financed under the Receivables, in each case, to the extent the Servicer would, in accordance with its customary practices, apply such amounts to the Principal Balance of the related Receivable;

 

(e) the interest of Seller in any proceeds from (i) any Receivable repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach of representation or warranty in the related Dealer Agreement, (ii) a default by an Obligor resulting in the repossession of the Financed Vehicle under the applicable Motor Vehicle Loan or (iii) any Dealer Recourse or other rights relating to the Receivables under Dealer Agreements;

 

(f) all right, title and interest in all funds on deposit from time to time in the Certificate Distribution Account and the Trust Accounts, and in all investments and proceeds thereof (but excluding all investment income thereon);

 

(g) all right, title and interest of Seller under the Purchase Agreement;

 

(h) all right, title and interest of Seller in any instrument or document relating to the Receivables; and

 

(i) the proceeds of any and all of the foregoing.

 

SECTION 2.2. [RESERVED]

 

SECTION 2.3. Sale of Receivables . It is the express intention of Seller and the Trust that:

 

(a) the assignment and transfer herein contemplated constitute a sale of the Receivables and the other Trust Property described above, conveying good title thereto free and clear of any Liens, encumbrances, security interests or rights of other Persons, from Seller to the Trust; and

 

(b) the Receivables and the other Trust Property described above not be a part of Seller’s estate in the event of a bankruptcy or insolvency of Seller.

 

If, notwithstanding the intention of the Seller and the Trust, such conveyance is deemed to be a pledge in connection with a financing or is otherwise deemed not to be a sale: (i) the Seller hereby grants, and the parties intend that the Seller shall have granted, to the Trust a first priority perfected security interest in all of the Seller’ right (including the power to convey title thereto), title and interest in the items of the Trust Property and all proceeds of the foregoing to secure such pledge and the performance of the obligations of the Seller hereunder; (ii) this Agreement shall constitute a security agreement under applicable law and the Trust shall have all of the rights and remedies of a secured party and creditor under the UCC as in force in the relevant jurisdictions; (iii) the possession by the Trust or its agent of the Receivables Files and any other property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party” or possession by the Trust or a person designated by such Trust, for purposes of perfecting the security interest pursuant to the New York Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction; and (iv) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed to be notifications to, or acknowledgments, receipts or confirmations from, bailees or agents (as applicable) of the Trust for the purpose of perfecting such security interest under applicable law.

 

ARTICLE III. THE RECEIVABLES.

 

SECTION 3.1. Representations and Warranties as to Each Receivable on the Closing Date . Servicer hereby makes the following representations and warranties on the Closing Date as to each Receivable conveyed to the Seller pursuant to the Purchase Agreement on which the Trust shall rely in acquiring the Receivables. Unless otherwise indicated, such representations and warranties shall speak as of the Closing Date, but shall survive the transfer and assignment of the Receivables to the Trust and the pledge thereof to Indenture Trustee pursuant to the Indenture.

 

(a) Characteristics of Receivables . The Receivable has been fully and properly executed by the parties thereto and (i) has been originated by a Dealer in the ordinary course of such Dealer’s business to finance the retail sale by a Dealer of the related Financed Vehicle and has been purchased by M&I Bank, Dealer Finance or their predecessors in interest in the ordinary course of their business, (ii) was underwritten in accordance with M&I Bank’s underwriting standards, (iii) is secured by a valid, subsisting, binding and enforceable first priority perfected security interest in favor of Dealer Finance or M&I Bank in the Financed Vehicle (subject to administrative delays and clerical errors on the part of the applicable government agency and to any statutory or other Lien arising by operation of law after the Closing Date which is prior to such security interest), which security interest is assignable together with such Receivable, and has been so assigned to Seller, and subsequently assigned to the Trust pursuant to the Sale and Servicing Agreement, and pledged to Indenture Trustee pursuant to the Indenture, (iv) 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, (v) provided, at origination, for level monthly payments ( provided that the amount of the first or last payment may be minimally different and provided further that the Receivable may contain an introductory period of up to 3 months in which no monthly payment is due), which fully amortize the Initial Principal Balance over the original term, (vi) provides for interest at the Contract Rate specified in the Schedule of Receivables, (vii) was originated in the United States and (viii) constitutes “tangible chattel paper” as defined in the UCC.

 

(b) Individual Characteristics . The Receivables have the following individual characteristics as of the Cutoff Date (i) each Receivable is secured by a Motor Vehicle; (ii) each Receivable has a Contract Rate of no less than 2.75% and not more than 16.97%; (iii) each Receivable had an original term to maturity of not more than 75 months and not less than 12 months and each Receivable has a remaining term to maturity, as of the Cutoff Date, of 6 months or more; (iv) each Receivable had an Initial Principal Balance less than or equal to $142,422.30; (v) each Receivable has a Cutoff Date Principal Balance of greater than or equal to $500; (vi) no Receivable has a scheduled maturity date later than December 17, 2011; (vii) no Receivable was more than 29 days past due as of the Cutoff Date; (viii) no Financed Vehicle was noted in the related records of M&I Bank as being the subject of any pending bankruptcy or insolvency proceeding as of the Cutoff Date; (ix) no Receivable is subject to a force placed Physical Damage Insurance Policy on the related Financed Vehicle; (x) each Receivable is a Simple Interest Receivable; and (xi) the Dealer of the Financed Vehicle has no participation in, or other right to receive, any proceeds of such Receivable. The Receivables were selected using selection procedures that were not intended to be adverse to the Seller.

 

(c) Schedule of Receivables . The information with respect to each Receivable set forth in the Schedule of Receivables delivered on the Closing Date, including (without limitation) the account number, the Cutoff Date Principal Balance, the maturity date and the Contract Rate, was true and correct in all material respects as of the close of business on the Cutoff Date.

 

(d) Compliance with Law . The Receivable and the sale of the related Financed Vehicle complied at the time it was originated or made, and will comply as of the Closing Date, in all material respects with all requirements of applicable federal, state and local laws, and regulations thereunder, including, to the extent applicable, 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, the Fair Debt Collection Practices Act, the Fair Credit Billing Act, Federal Reserve Board Regulations B and Z, the Servicemembers Civil Relief Act, state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and any other consumer credit, consumer protection, equal opportunity and disclosure laws applicable to that Receivable.

 

(e) Binding Obligation . The Receivable constitutes the genuine, legal, valid and binding payment obligation in writing of the Obligor, enforceable in all material respects by the holder thereof in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally, and the Receivable is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury.

 

(f) Lien in Force . The Receivable has not been satisfied, subordinated or rescinded nor has any action been taken by the Servicer which would have the effect of releasing the related Financed Vehicle from the Lien granted by the Receivable in whole or in part.

 

(g) No Amendment or Waiver . No material provision of the Receivable has been amended, waived, altered or modified in any respect, except such waivers as would be permitted under the Sale and Servicing Agreement and as are reflected in the Receivable File, and no amendment, waiver, alteration or modification causes such Receivable not to conform to the other representations or warranties contained in this Section 3.1 .

 

(h) No Liens . There are no Liens or claims, including Liens for work, labor, materials or unpaid state or federal taxes, relating to the Financed Vehicle securing the Receivable, that are or may be prior to or equal to the Lien granted by the Receivable.

 

(i) No Default . Except for payment delinquencies continuing for a period of less than 30 days as of the Cutoff Date, no default, breach, violation or event permitting acceleration under the terms of the Receivable exists and no continuing condition that with notice or lapse of time, or both, would constitute a default, breach, violation or event permitting acceleration under the terms of the Receivable has arisen.

 

(j) Insurance . The Receivable requires the Obligor to insure the Financed Vehicle under a Physical Damage Insurance Policy, pay the premiums for such insurance and keep such insurance in full force and effect.

 

(k) Good Title . It is the intention of the Seller that the transfer and assignment herein contemplated constitute a sale of the Receivables from the Seller to the Trust and that the beneficial interest in and title to the Receivables not be part of the Seller’s estate in the event of the filing of a bankruptcy petition or insolvency proceeding by or against the Seller under any bankruptcy or insolvency law. No Receivable has been sold, transferred, assigned, or pledged (i) by Northwoods and JPMorgan (as agent on behalf of PREFCO and Falcon) to any other person other than the Seller, and (ii) by the Seller to any other person other than the Trust. Immediately prior to the transfer and assignment herein contemplated, the Seller had good and marketable title to the Receivable free and clear of any Lien and had full right and power to transfer and assign the Receivable to the Trust and immediately upon the transfer and assignment of the Receivable to the Trust, the Trust shall have good and marketable title to the Receivable, free and clear of any Lien; and the Trust’s interest in the Receivable resulting from the transfer has been perfected under the UCC. All filings (including UCC filings) necessary in any jurisdiction, to give the Trust a first priority perfected ownership interest in the Receivables, and to give Indenture Trustee a first priority perfected security interest therein, shall have been filed or will be filed within ten days after the effective date of this Agreement by the Servicer in the appropriate filing offices with a copy to the Indenture Trustee of such filing. Upon such filing by the Servicer, the Indenture Trustee will have a first priority perfected security interest in the Receivables.

 

(l) Obligations . The Originator has duly fulfilled all material obligations on its part to be fulfilled under, or in connection with, the Receivable.

 

(m) Possession . There is only one original executed Receivable, and immediately prior to the Closing Date, the Servicer will have possession of such original executed Receivable.

 

(n) No Government Obligor . The Obligor on the Receivable is not the United States of America or any state thereof or any local government, or any agency, department, political subdivision or instrumentality of the United States of America or any state thereof or any local government.

 

(o) Marking Records . By the Closing Date, the Servicer shall have caused the portions of the Servicer’s electronic master record of Motor Vehicle Loans relating to the Receivables to be clearly and unambiguously marked to show that the Receivable is owned by the Trust in accordance with the terms of this Agreement.

 

(p) No Assignment . As of the Closing Date, neither M&I Bank nor any of its Affiliates shall have taken any action to convey any right to any Person that would result in such Person having a right to payments received under the Insurance Policies or Dealer Agreements, or payments due under the Receivable, that is senior to, or equal with, that of the Trust.

 

(q) Lawful Assignment . The Receivable has not been originated in, and is not subject to the laws of, any jurisdiction under which the sale, transfer or assignment of such Receivable hereunder or pursuant to transfers of the Notes or Certificates are unlawful, void or voidable. Neither M&I Bank nor any of its Affiliates has entered into any agreement with any Obligor that prohibits, restricts or conditions the assignment of any portion of the Receivables.

 

(r) Dealer Agreements . A Dealer Agreement for each Receivable is in effect whereby the Dealer warrants title to the Motor Vehicle and indemnifies the applicable Originator and its assigns against the unenforceability of each Receivable sold thereunder, and the rights of the applicable Originator thereunder, with regard to the Receivable sold hereunder, have been validly assigned to and are enforceable against the Dealer by the Seller, along with any Dealer Recourse.

 

(s) Composition of Receivable . No Receivable has a Principal Balance which includes capitalized interest, late charges or amounts attributable to the payment of the premium for any Physical Damage Insurance Policy.

 

(t) Database File . The information included with respect to each Receivable in the database file delivered pursuant to Section 4.9(b) of this Agreement is accurate and complete in all material respects.

 

(u) No Bankruptcies . No Obligor on any Receivable was noted in the related Receivable File as having filed for bankruptcy in a proceeding which remained undischarged as of the Cutoff Date.

 

(v) Amounts . The Original Pool Balance was $650,000,017.82

 

(w) Aggregate Characteristics . The Receivables had the following characteristics in the aggregate as of the Cutoff Date: (i) approximately 43% of the Original Pool Balance was attributable to loans for purchases of new Financed Vehicles, and approximately 57% of the

 

Original Pool Balance was attributable to loans for purchases of used Financed Vehicles; (ii) approximately 25% of the Original Pool Balance was attributable to Receivables the mailing addresses of the Obligors with respect to which are located in the State of Minnesota, 37.8% of the Original Pool Balance was attributable to Receivables the mailing addresses of the Obligors with respect to which are located in the State of Wisconsin, and no other state accounts for more than 15% of the Original Pool Balance; (iii) the weighted average Contract Rate of the Receivables was 6.534%; (iv) there are 43,128 Receivables being conveyed by Seller to the Trust; (v) the Cutoff Date Principal Balance of the Receivables was $650,000,017.82; (vi) the weighted average original term and weighted average remaining term of the Receivables were 63.07 months and 53.59 months, respectively; and (vii) 100% of the Receivables have their next scheduled payment date in either September, 2005, October, 2005, November, 2005 or December 2005 (other than those loans whose last payment was no more than $20 short of the scheduled payment and that payment, in accordance with the Servicer’s normal procedures, is not considered past due with regards to that scheduled payment and other than those Receivables that have been paid ahead as of the Cutoff Date).

 

(x) Perfection Representations . The Servicer hereby makes the perfection representations, warranties and covenants attached hereto as Schedule C to the Trust and the Trust shall be deemed to have relied on such representations, warranties and covenants in acquiring the Trust Property.

 

SECTION 3.2. [RESERVED]

 

SECTION 3.3. Purchase by Servicer upon Breach of Representation or Warranty . Seller, Servicer, Indenture Trustee or the Trust, as the case may be, shall inform the other parties to this Agreement promptly, in writing, upon the discovery (or, with respect to the Indenture Trustee or the Trust, upon actual knowledge of a Responsible Officer) of any breach or failure to be true of the representations or warranties made by the Servicer in Section 3.1 ; provided that such breach or failure materially and adversely affects the interests of the Trust and the Holders in any Receivables; and provided further that the failure to give such notice shall not affect any obligation of the Servicer. If the breach or failure shall not have been cured by the last day of the Collection Period which includes the 60th day (or if the Servicer elects, an earlier day) after the date on which Servicer becomes aware of, or receives written notice from the Trust or Indenture Trustee of, such breach or failure, and such breach or failure materially and adversely affects the interests of the Trust and the Holders in any Receivable, the Servicer shall purchase each such affected Receivable from the Trust on or before the Deposit Date following the end of the Collection Period, which includes the 60 ^th day after the date the Servicer became aware or was notified of such breach at a purchase price equal to the Purchase Amount for such Receivable, which amount shall be deposited in the Collection Account. Notwithstanding the foregoing, any such breach or failure with respect to the representations and warranties contained in Section 3.1 will not be deemed to have such a material and adverse effect with respect to a Receivable if the facts resulting in such breach or failure do not affect the ability of the Trust to receive and retain payment in full on such Receivable. In consideration of the purchase of a Receivable hereunder, the Servicer shall remit the Purchase Amount of such Receivable, no later than the close of business on the next Deposit Date, in the manner specified in Section 5.4 . The sole remedy (except as provided in Section 7.2 of this Agreement) of the Trust, the Indenture Trustee or the Holders with respect to a breach or failure to be true of the representations or warranties made by Servicer pursuant to Section 3.1 shall be to require the Servicer to purchase Receivables pursuant to this Section 3.3.

 

With respect to all Receivables purchased pursuant to this Section 3.3 , the Trust shall assign to the Servicer without recourse, representation or warranty all of the Trust’s right, title and interest in and to such Receivables and all security and documents relating thereto.

 

SECTION 3.4. Custodian of Receivable Files . (a)  Custody . To assure uniform quality in servicing the Receivables and to reduce administrative costs, the Trust, upon the execution and delivery of this Agreement, revocably appoints M&I Bank, as Custodian, as agent, and Custodian accepts such appointment, to act as agent on behalf of the Trust to maintain custody of the following documents or instruments, which are hereby constructively delivered to the Trust with respect to each Receivable (collectively, a “ Receivable File” ):

 

(i) the fully executed original Receivable;

 

(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 original certificate of title or confirmation of security interest, or such other documents as the applicable Originator keeps on file, in accordance with its customary procedures, evidencing the security interest of such Originator in the Financed Vehicle;

 

(iv) originals or true copies of all documents, instruments or writings relating to extensions, amendments or waivers of the Receivable or a photocopy thereof, or a record thereof on a computer file, diskette or on microfiche; and

 

(v) any and all other documents or electronic records that the applicable Originator keeps on file, in accordance with their customary procedures, relating to the Receivable, any Insurance Policies, the Obligor or the Financed Vehicle.

 

(b) Safekeeping . M&I Bank, in its capacity as Custodian, shall hold the Receivable Files as agent on behalf of the Trust and maintain such accurate and complete accounts, records and computer systems pertaining to each Receivable as shall enable Servicer and the Trust to comply with the terms and provisions of this Agreement applicable to them. In performing its duties as Custodian hereunder, Custodian shall act with reasonable care, exercising the degree of skill, attention and care that Custodian exercises with respect to receivable files relating to other similar motor vehicle loans owned and/or serviced by Custodian and that is consistent with industry standards. In accordance with its customary practice with respect to its retail installment sale contracts, Custodian 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, and shall maintain the Receivable Files in such a manner as shall enable the Trust and the Indenture Trustee to verify, if the Trust or the Indenture Trustee so elects, the accuracy of the record keeping of Custodian. Custodian shall promptly report to the Trust any failure on its part to hold the Receivable Files and maintain its accounts, records and computer systems as herein provided, and promptly take appropriate action to remedy any such failure. Custodian hereby acknowledges receipt of the Receivable File for each Receivable listed on the Schedule of Receivables. Nothing herein shall be deemed to require the Trust, the Owner Trustee or Indenture Trustee to verify the accuracy of the record keeping of the Custodian.

 

(c) Maintenance of and Access to Records . Custodian shall maintain each Receivable File at the location specified in Schedule B to this Agreement, or at such other office of Custodian within the United States (or, in the case of any successor Custodian, within the State in which its principal place of business is located) as shall be specified to the Trust by 30 days’ prior written notice. Custodian shall make available to the Trust, Indenture Trustee and their respective agents (or, when requested in writing by the Trust or Indenture Trustee, their respective attorneys or auditors) the Receivable Files and the related accounts, records and computer systems maintained by Custodian at such times as the Trust or Indenture Trustee shall instruct for purposes of inspecting, auditing or making copies of abstracts of the same, but only upon reasonable notice and during the normal business hours at the respective offices of Custodian.

 

(d) Release of Documents . Upon written instructions from Indenture Trustee (or, if no Notes are then Outstanding, the Trust), Custodian shall release any document in the Receivable Files to Indenture Trustee or the Trust or its respective agent or designee, as the case may be, at such place or places as Indenture Trustee or the Trust may designate, as soon thereafter as is practicable. Any document so released shall be handled by Indenture Trustee or the Trust with due care and returned to Custodian for safekeeping as soon as Indenture Trustee or the Trust or its respective agent or designee, as the case may be, shall have no further need therefor.

 

(e) Title to Receivables . Custodian agrees that, in respect of any Receivable File held by Custodian hereunder, Custodian will not at any time have or in any way attempt to assert any interest in such Receivable File or the related Receivable, other than solely for the purpose of collecting or enforcing the Receivable for the benefit of the Trust and that the entire equitable interest in such Receivable and the related Receivable File shall at all times be vested in the Trust.

 

(f) Instructions; Authority to Act . Custodian shall be deemed to have received proper instructions with respect to the Receivable Files upon its receipt of written instructions signed by an Authorized Officer of Indenture Trustee or the Trust, as applicable. A certified copy of excerpts of certain resolutions of the Board of Directors of Indenture Trustee or the Trust, as applicable, shall constitute conclusive evidence of the authority of any such Authorized Officer to act and shall be considered in full force and effect until receipt by Custodian of written notice to the contrary given by Indenture Trustee or the Trust, as applicable.

 

(g) Custodian’s Indemnification . Subject to Section 10.5 , Custodian shall indemnify and hold harmless the Trust, the Owner Trustee (individually and in such capacity) and Indenture Trustee (individually and in such capacity), and each of their respective officers, directors, employees and agents and the Holders from and against any and all liabilities, obligations, losses, compensatory damages, payments, costs or expenses (including reasonable legal fees and expenses if any) of any kind whatsoever that may be imposed on, incurred or asserted against the Trust, the Owner Trustee, Indenture Trustee or the Holders as the result of any act or omission of Custodian relating to the maintenance and custody of the Receivable Files; provided that

 

Custodian shall not be liable hereunder to the Trust, the Owner Trustee or Indenture Trustee to the extent that such liabilities, obligations, losses, compensatory damages, payments, costs or expenses result from the willful misfeasance, bad faith or negligence of the Trust, the Owner Trustee or Indenture Trustee, as the case may be. Indemnification under this subsection (g) shall survive termination of this Agreement and the resignation or removal of Owner Trustee or Indenture Trustee, as the case may be. If Custodian shall have made any indemnity payments to the Trust or Indenture Trustee pursuant to this Section 3.4 and the Trust, the Owner Trustee or Indenture Trustee thereafter shall collect any of such amounts from Persons other than Custodian, the Trust, the Owner Trustee or Indenture Trustee, as the case may be, shall, as soon as practicable following such receipt thereof, repay such amounts to Custodian, without interest.

 

(h) Effective Period and Termination . Servicer’s appointment as Custodian shall become effective as of the Cutoff Date and shall continue in full force and effect until terminated pursuant to this subsection (h) . If Servicer shall resign as Servicer in accordance with Section 7.5 or if all of the rights and obligations of Servicer shall have been terminated under Section 8.1 , the appointment of Servicer as Custodian hereunder may be terminated by the Trust or Indenture Trustee or by the Holders of Notes evidencing not less than 25% of the aggregate Outstanding Amount of the Notes of the Controlling Note Class (or, if no Notes are then Outstanding, the Holders of Certificates representing not less than 50% of the Certificate Percentage Interests), in each case in the same manner as the Trust or Indenture Trustee or such Holders may terminate the rights and obligations of Servicer under Section 8.1. As soon as practicable after any termination of such appointment Servicer shall deliver, or cause to be delivered, the Receivable Files to Indenture Trustee or the Trust, as applicable, or its respective agent or designee at such place or places as Indenture Trustee or the Trust, as applicable, may reasonably designate. Notwithstanding any termination of Servicer as Custodian hereunder (other than in connection with a termination resulting from the termination of Servicer, as such, pursuant to Section 8.1 ), from and after the date of such termination, and for so long as Servicer is acting as such pursuant to this Agreement, Indenture Trustee shall provide, or cause the successor Custodian to provide, access to the Receivable Files to Servicer, at such times as Servicer shall reasonably request, for the purpose of carrying out its duties and responsibilities with respect to the servicing of the Receivables hereunder.

 

(i) Delegation . Custodian may, at any time without notice or consent, delegate any or all of its duties under the Basic Documents to any Affiliate; provided that no such delegation shall relieve Custodian of its responsibility with respect to such duties and Custodian shall remain obligated and liable to the Trust and the Holders for its duties hereunder as if Custodian alone were performing such duties.

 

ARTICLE IV. ADMINISTRATION AND SERVICING OF RECEIVABLES.

 

SECTION 4.1. Duties of Servicer . (a) Servicer is hereby authorized to act as agent for the Trust and in such capacity shall manage, service, administer and make collections on the Receivables (other than Purchased Receivables), and perform the other actions required by Servicer under this Agreement, with reasonable care. Without limiting the standard set forth in the preceding sentence, Servicer shall use a degree of skill, attention and care that is not less than Servicer exercises with respect to comparable Motor Vehicle Loans that it services for itself or others and that is consistent with prudent industry standards. Servicer’s duties shall include the

 

collection and posting of all payments, responding to inquiries by Obligors on the Receivables, or by federal, state or local governmental authorities, investigating delinquencies, sending payment coupons or monthly invoices to Obligors, reporting required tax information to Obligors, accounting for Collections, furnishing monthly and annual statements to the Trust and Indenture Trustee with respect to distributions, providing collection and repossession services in the event of Obligor default and performing the other duties specified herein.

 

Without limiting the generality of the foregoing, Servicer is hereby authorized and empowered by the Trust to execute and deliver, on behalf of itself, Indenture Trustee, the Trust and the Holders, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables or to the Financed Vehicles, all in accordance with this Agreement; provided that notwithstanding the foregoing, Servicer shall not, except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount under any Receivable or waive the right to collect the unpaid balance of any Receivable from the Obligor, except in connection with a de minimis deficiency which Servicer would not attempt to collect in accordance with its customary procedures. If Servicer shall commence a legal proceeding to enforce a Receivable, the Trust shall thereupon be deemed to have automatically assigned such Receivable to Servicer, which assignment shall be solely for purposes of collection. The Trust shall furnish Servicer with any powers of attorney and other documents or instruments necessary or appropriate to enable Servicer to carry out its servicing and administrative duties hereunder.

 

(b) Servicer may, at any time without notice or consent, delegate (i) any or all duties under this Agreement to any Person that is an Affiliate of the Servicer, so long as M&I Bank acts as Servicer, or (ii) specific duties to sub-contractors who are in the business of performing such duties; provided that no such delegation shall relieve Servicer of its responsibility with respect to such duties and Servicer shall remain obligated and liable to the Indenture Trustee, the Trust and the Holders for servicing and administering the Receivables in accordance with this Agreement as if Servicer alone were performing such duties.

 

(c) The Servicer shall pay the Administrator the fee pursuant to the Administration Agreement.

 

(d) To the extent any documents are required to be filed or any certification is required to be made with respect to the Trust or the Notes pursuant to the Sarbanes-Oxley Act of 2002, the Seller shall prepare, execute and certify any such documents or certifications and is authorized to file such documents or certifications on behalf of the Trust and the Indenture Trustee shall make such filings on behalf of the Seller.

 

(e) The Issuer hereby authorizes the Servicer and the Seller, or either of them, to prepare, sign, certify and file any and all reports, statements and information respecting the Issuer and/or the Notes required to be filed pursuant to the Securities and Exchange Act of 1934, as amended, and the rules thereunder.

 

SECTION 4.2. Collection of Receivable Payments . (a) 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 otherwise act with respect to the Receivables, the Physical

 

Damage Insurance Policies, the Dealer Agreements and related property in such manner as will, in the reasonable judgment of Servicer, maximize the amount to be received by the Trust with respect thereto, in accordance with the standard of care required by Section 4.1 . Servicer shall be entitled to grant extensions, rebates or adjustments on a Receivable, or amend or modify any Receivable in accordance with its customary procedures if Servicer believes in good faith that such amendment or modification is in the Trust’s best interests; provided that Servicer may not, unless ordered by a court of competent jurisdiction or otherwise required by applicable law, (i) extend a Receivable beyond the Class B Final Scheduled Payment Date or (ii) reduce the Principal Balance or Contract Rate of any Receivable. Servicer may, in accordance with its customary standards, policies and procedures, (i) waive any prepayment charge, late payment charge, extension fee or any other fee that may be collected in the ordinary course of servicing a Receivable and (ii) treat a partial scheduled payment as being a full scheduled payment in the ordinary course of servicing a Receivable.

 

(b) If in the course of collecting payments under the Receivables, Servicer determines to set off any obligation of Servicer to an Obligor against an amount payable by the Obligor with respect to such Receivable, Servicer shall deposit the amount so set off in the Collection Account, no later than the close of business on the Deposit Date for the Collection Period in which the set-off occurs. All references herein to payments or Liquidation Proceeds collected by Servicer shall include amounts set-off by Servicer.

 

SECTION 4.3. Realization upon Receivables . On behalf of the Trust, Servicer shall charge off a Receivable in accordance with its customary standards (and, in no event later than 150 days after a Receivable shall have become delinquent) and shall use reasonable efforts, consistent with its customary standards, to repossess and liquidate the Financed Vehicle securing any Defaulted Receivable as soon as feasible after such Receivable becomes a Defaulted Receivable, in accordance with the standard of care required by Section 4.1 . In taking such action, Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of Motor Vehicle Loans, and as are otherwise consistent with the standard of care required under Section 4.1 , which shall include exercising any rights under the Dealer Agreements and selling the Financed Vehicle at public or private sale. Servicer shall be entitled to recover all reasonable expenses incurred by it in the course of repossessing and liquidating a Financed Vehicle into cash proceeds or pursuing any deficiency claim against the related Obligor, but only out of the cash proceeds of such Financed Vehicle or any deficiency obtained from the Obligor. The foregoing shall be subject to the provision that, in any case in which a Financed Vehicle shall have suffered damage, Servicer, consistent with its customary servicing procedures, shall not expend funds in connection with the repair or the repossession of such Financed Vehicle unless it shall determine, consistent with its customary servicing procedures, that such repair and/or repossession will increase the Liquidation Proceeds of the related Receivable by an amount equal to or greater than the amount of such expenses.

 

If Servicer elects to commence a legal proceeding to enforce a Dealer Agreement, the act of commencement shall be deemed to be an automatic assignment from the Trust to Servicer of the rights under such Dealer Agreement. If, however, in any enforcement suit or legal proceeding, it is held that Servicer may not enforce a Dealer Agreement on the grounds that it is not a real party in interest or a Person entitled to enforce the Dealer Agreement, the Trust and the Indenture Trustee, subject to the Indenture, at Servicer’s expense, shall take such steps as Servicer deems necessary to enforce the Dealer Agreement, including bringing suit in the name of the Trust or Indenture Trustee.

 

SECTION 4.4. Physical Damage Insurance . (a) The Receivables require that each Financed Vehicle be insured under a Physical Damage Insurance Policy. It is understood that Servicer is not required to track and will not “force-place” any Physical Damage Insurance Policy on any Financed Vehicle.

 

(b) Servicer may sue to enforce or collect upon the Physical Damage Insurance Policies, in its own name, if possible, or as agent for the Trust. If Servicer elects to commence a legal proceeding to enforce a Physical Damage Insurance Policy, the act of commencement shall be deemed to be an automatic assignment of the rights of the Trust under such Physical Damage Insurance Policy to Servicer for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that Servicer may not enforce a Physical Damage Insurance Policy on the grounds that it is not a real party in interest or a holder entitled to enforce the Physical Damage Insurance Policy, the Trust and the Indenture Trustee, subject to the Indenture, at Servicer’s expense and written direction, shall take such steps as Servicer deems necessary to enforce such Physical Damage Insurance Policy, including bringing suit in the Trust’s name or the name of the Indenture Trustee. Servicer shall make all claims and enforce its rights under any lender’s single interest insurance policy (to the extent such claims or rights relate to Receivables) for the benefit of the Trust and shall treat as Collections all related proceeds of such policies.

 

SECTION 4.5. Maintenance of Security Interests in Financed Vehicles . Servicer, in accordance with the standard of care required under Section 4.1 , shall take such reasonable steps as are necessary and as are consistent with its customary business practices to maintain perfection of the security interest created by each Receivable in the related Financed Vehicle for the benefit of the Trust and the Indenture Trustee. The Trust hereby authorizes Servicer, and Servicer hereby agrees, to take such reasonable steps as are necessary and as are consistent with its customary business practices to re-perfect such security interest on behalf of the Trust in the event Servicer receives notice of the relocation of a Financed Vehicle.

 

SECTION 4.6. Covenants of Servicer . Servicer makes the following covenants on which the Trust relies in acquiring the Receivables:

 

(a) Security Interest to Remain in Force . Servicer shall not release any Financed Vehicle from the security interest granted by the related Receivable in whole or in part, except upon payment in full of the Receivable or as otherwise contemplated herein.

 

(b) No Impairment . Servicer shall not impair in any material respect the rights of the Trust or the Holders in the Receivables, the Dealer Agreements or the Physical Damage Insurance Policies or, subject to clause (c)  below, otherwise amend or alter the terms thereof if, as a result of such amendment or alteration, the interests of the Trust and the Holders hereunder would be materially adversely affected.

 

(c) Amendments . Servicer shall not amend or otherwise modify any Receivable (including the grant of any extension thereunder), except in accordance with Section 4.2.

 

SECTION 4.7. Purchase by Servicer upon Breach of Covenant . Seller, Servicer, Indenture Trustee or the Trust, as the case may be, shall inform the other parties promptly, in writing, upon the discovery (or, in the case of the Indenture Trustee or the Trust, upon actual knowledge of a Responsible Officer) of any breach by Servicer of its covenants under Section 4.5 or 4.6 ; provided that the failure to give such notice shall not affect any obligation of Servicer. Unless the breach shall have been cured by the last day of the Collection Period which includes the 60th day (or an earlier day, if Servicer so elects) after the date on which Servicer becomes aware of, or receives written notice of, such breach, and such breach materially and adversely affects the interests of the Trust and the Holders in any Receivable, Servicer shall purchase such Receivable from the Trust on or before the Deposit Date following the end of the Collection Period, which includes the 60 ^th day after the date the Servicer became aware or was notified of such breach at a purchase price equal to the Purchase Amount for such Receivable, which amount shall be deposited in the Collection Account prior to noon, New York City time on such date of purchase. In consideration of the purchase of a Receivable hereunder, Servicer shall remit the Purchase Amount of such Receivable in the manner specified in Section 5.4 . The sole remedy (except as provided in Section 7.2 ) of the Trust, Owner Trustee, Indenture Trustee or the Holders against Servicer with respect to a breach pursuant to Section 4.5 or 4.6 shall be to require Servicer to purchase Receivables pursuant to this Section 4.7 .

 

With respect to all Receivables purchased pursuant to this Section 4.7 , the Trust shall assign to Servicer, without recourse, representation or warranty, all of the Trust’s right, title and interest in and to such Receivables and all security and documents relating thereto.

 

SECTION 4.8. Servicing Fee . On each Payment Date, the Trust shall pay to the Servicer the Servicing Fee with respect to the immediately preceding Collection Period as compensation for its services in accordance with Section 5.5(c) . The Servicer shall also be entitled to retain any extension fees and certain non-sufficient funds charges and other administrative fees or similar charges allowed by applicable law with respect to Receivables collected (from whatever source) on the Receivables (the “ Supplemental Servicing Fee ”). It is understood and agreed that Available Collections shall not include any amounts retained by Servicer which constitute Supplemental Servicing Fees. The Servicing Fee in respect of a Collection Period (together with any portion of the Servicing Fee that remains unpaid from prior Payment Dates), if the Rating Agency Condition is satisfied, may be paid at the beginning of such Collection Period out of Collections for such Collection Period.

 

SECTION 4.9. Servicer’s Report. (a) Before 10:00 a.m. (Central time), on each Determination Date, Servicer shall deliver to the Trust, Indenture Trustee, each Paying Agent and Seller, with a copy to the Rating Agencies, a Servicer’s Report substantially in the form of Exhibit A, containing all information necessary to make the transfers and distributions pursuant to Sections 5.4 and 5.5 (including amounts required to be transferred from the Reserve Account to the Collection Account) for the Collection Period preceding the date of such Servicer’s Report together with all information necessary for the Trust to send statements to Certificateholders pursuant to Section 5.6 and Indenture Trustee to send copies of statements received by the Indenture Trustee to Noteholders pursuant to the Indenture and Section 5.6 of this Agreement. Receivables to be purchased by the Servicer shall be identified by Servicer by account number with respect to such Receivable (as specified in the Schedule of Receivables ).

 

(b) Servicer shall provide Indenture Trustee with a database file for the Receivables at or prior to the Closing Date (but with information as of the close of business on the Cutoff Date).

 

SECTION 4.10. Annual Statement as to Compliance; Notice of Default . (a) Servicer shall deliver to the Trust, Indenture Trustee and each Rating Agency, on or before March 31 of each year beginning on March 31, 2006, an Officer’s Certificate, dated as of December 31 of the preceding year, stating that (i) a review of the activities of Servicer during the preceding 12-month period (or, in the case of the first such report, during the period from the Closing Date to December 31, 2005) 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, Servicer has fulfilled all its obligations in all material respects under this Agreement throughout such year or, if there exists any uncured default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof.

 

(b) Servicer shall deliver to the Trust, Indenture Trustee and the Rating Agencies, 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 constitutes, or with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under Section 8.1.

 

SECTION 4.11. Annual Independent Certified Public Accountants’ Report. The Servicer shall cause a firm of independent certified public accountants (who may also render other services to the Servicer or Seller and their Affiliates) to deliver to the Seller and the Trust, with a copy to the Indenture Trustee, on or before March 31 of each year beginning on March 31, 2006, (i) a report to the effect that such firm has examined the Servicer’s assertion that it has complied with its established minimum servicing standards or (ii) a report of agreed upon procedures, in each case for the twelve months ended December 31 of the preceding year (or, in the case of the first such certificate, from the Closing Date until December 31, 2005), and that such examination was made in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence about the Servicer’s compliance with those requirements and performing such other procedures as such accountants considered necessary in the circumstances. Additionally, separately obtain representation from the firm of independent certified public accountants that the firm is independent of Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

 

In the event such firm requires the Indenture Trustee or the Trust to agree to the procedures performed by such firm, Servicer shall direct the Indenture Trustee or the Trust, as the case may be, in writing to so agree; it being understood and agreed that the Indenture Trustee or the Trust, as the case may be, will deliver such letter of agreement in conclusive reliance upon the direction of Servicer, and the Indenture Trustee or the Trust, as the case may be, need not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.

 

The Accountants’ Report required by this Section 4.11(a) may be replaced at the election of the Servicer by any similar report or certification using standards that are now or in the future

 

in use by servicers of retail installment sale contracts or direct purchase money loans and that otherwise comply with any rule, regulation, “no action” letter or similar guidance promulgated by the Securities and Exchange Commission, including Regulation AB of the Commission.

 

SECTION 4.12. Access to Certain Documentation and Information Regarding Receivable s. Servicer shall provide to the Trust, Indenture Trustee, Bank Regulatory Authorities, and the supervisory agents and examiners of Bank Regulatory Authorities access to the Receivable Files, as to the latter in such cases where the Bank Regulatory Authorities shall be required by applicable statutes or regulations to review such documentation as demonstrated by evidence satisfactory to Servicer in its reasonable judgment. Access shall be afforded without charge, but only upon reasonable request and during the normal business hours at the respective offices of Servicer. Nothing in this Section 4.12 shall affect the obligation of Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors and the failure of Servicer to provide access to information as a result of such obligation shall not constitute a breach of this Section 4.12 .

 

SECTION 4.13. Reports to the Rating Agencies . Servicer shall deliver to each Rating Agency a copy of all reports or notices furnished or delivered pursuant to this Article and a copy of any amendments, supplements or modifications to this Agreement and any other information reasonably requested by such Rating Agency to monitor this transaction. Notwithstanding the foregoing, the Servicer need not deliver a copy of the report described in Section 4.11 to a Rating Agency unless such Rating Agency complies with the procedures of the related accounting firm regarding agreement by a recipient to the procedures performed by such firm.

 

SECTION 4.14. Servicer Expenses . Except as otherwise provided herein, Servicer shall be required to pay: (i) all expenses incurred by it in connection with its activities hereunder, as well as fees and disbursements of the Owner Trustee, Indenture Trustee, independent accountants, taxes imposed on Servicer and expenses incurred in connection with distributions and reports to Certificateholders and Noteholders; (ii) all expenses in connection with the perfection as against third parties of the Seller’s, the Trust’s and the Indenture Trustee’s right, title and interest in and to the Receivables; (iii) such fee as set forth in Section 4 of the Administration Agreement to the Administrator as compensation for its services thereunder; and (iv) expenses of Northwoods incident to the performance of its obligations under the Purchase Agreement.

 

ARTICLE V. DISTRIBUTIONS; ACCOUNTS;

STATEMENTS TO CERTIFICATEHOLDERS

AND NOTEHOLDERS; ADVANCES.

 

SECTION 5.1. Establishment of Accounts . (a) Servicer shall cause to be established:

 

(i) For the benefit of the Noteholders and the Certificateholders, in the name of Indenture Trustee, an Eligible Deposit Account (the “ Collection Account ”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders, which Eligible Deposit Account shall be established by and maintained with the Indenture Trustee or its designee.

 

(ii) For the benefit of the Noteholders, in the name of Indenture Trustee, an Eligible Deposit Account (the “ Principal Distribution Account ”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders, which Eligible Deposit Account shall be established by and maintained with the Indenture Trustee or its designee.

 

(b) Funds on deposit in the Collection Account and the Principal Distribution Account shall be invested by Indenture Trustee and by the Trust with respect to the Certificate Distribution Account (or any custodian with respect to funds on deposit in any such account) in Eligible Investments selected in writing by Servicer and of which Servicer provides notification (pursuant to standing instructions or otherwise); provided that it is understood and agreed that neither Servicer, Indenture Trustee nor Owner Trustee shall be liable for any loss arising from such investment in Eligible Investments. All such Eligible Investments shall be held by or on behalf of Indenture Trustee for the benefit of the Noteholders and the Certificateholders or by the Trust for the benefit of Certificateholders, as applicable; provided that on each Payment Date all interest and other investment income (net of losses and investment expenses) on funds on deposit in the Trust Accounts shall be distributed to Servicer and shall not be available to pay the distributions provided for in Section 5.5 and shall not otherwise be subject to any claims or rights of Holders. Funds on deposit in the Trust Accounts shall be invested in Eligible Investments that will mature so that such funds will be available at the close of business on the Business Day prior to the Deposit Date preceding the next Payment Date; provided that with the approval of the Indenture Trustee, funds on deposit in the Trust Accounts may be invested in Eligible Investments that mature on the day prior to such Payment Date except for investments specified under subparagraph (d) of “Eligible Investments”. No Eligible Investment shall be sold or otherwise disposed of prior to its scheduled maturity unless a default occurs with respect to such Eligible Investment and Servicer directs Indenture Trustee in writing to dispose of such Eligible Investment. Funds deposited in the Trust Accounts or Certificate Distribution Account by 10:00 a.m. (Central time) on a Deposit Date shall be invested overnight.

 

(c) Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (excluding investment income thereon) and all such funds, investments and proceeds shall be part of the Owner Trust Estate. Except as otherwise provided herein, the Trust Accounts shall be under the sole dominion and control of Indenture Trustee for the benefit of the Noteholders and the Certificateholders; provided , however, the Indenture Trustee shall not be charged with any obligation for the benefit of the Certificateholders except as provided by the terms of this Agreement. If, at any time, any of the Trust Accounts or the Certificate Distribution Account ceases to be an Eligible Deposit Account, the Servicer or the Trust, as applicable, shall within 10 Business Days (or such longer period as to which each Rating Agency may consent) establish a new Trust Account or Certificate Distribution Account, as applicable, as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Trust Account or new Certificate Distribution Account, as applicable . In connection with the foregoing, Servicer agrees that, in the event that the Collection Account is not an account with Indenture Trustee or its designee, Servicer shall notify Indenture Trustee in writing promptly upon the Collection Account ceasing to be an Eligible Deposit Account.

 

(d) With respect to the Trust Account Property, Servicer and the Indenture Trustee agree that:

 

(i) any Trust Account Property that is held in deposit accounts shall be held solely in the Eligible Deposit Accounts and, except as otherwise provided herein, each such Eligible Deposit Account shall be subject to the exclusive custody and control of Indenture Trustee, and, except as otherwise provided in the Basic Documents, Indenture Trustee and its designee shall have sole signature authority with respect thereto;

 

(ii) any Trust Account Property that constitutes Physical Property shall be delivered to Indenture Trustee or its designee, in accordance with paragraph (a)  of the definition of “Delivery” and shall be held, pending maturity or disposition, solely by Indenture Trustee or such designee;

 

(iii) any Trust Account Property that is an “uncertificated security” under Article 8 of the UCC and that is not governed by clause (ii)  above shall be delivered to Indenture Trustee or its designee in accordance with paragraph (c)  of the definition of “Delivery” and shall be maintained by Indenture Trustee or such designee, pending maturity or disposition, through continued registration of Indenture Trustee’s (or its designee’s) ownership of such security.

 

(iv) any Trust Account Property that is a book-entry security held through the Federal Reserve System pursuant to Federal book-entry regulations shall be delivered in accordance with paragraph (b)  of the definition of “Delivery” and shall be maintained by Indenture Trustee or its designee or a financial intermediary (as such term is defined in Section 8-313(4) of the UCC) acting solely for Indenture Trustee or such designee, pending maturity or disposition, through continued book-entry registration of such Trust Account Property as described in such paragraph; and

 

Effective upon Delivery of any Trust Account Property, Servicer shall be deemed to have represented that it has purchased such Trust Account Property for value, in good faith and without notice of any adverse claim thereto.

 

SECTION 5.2. Collections. Servicer shall remit all Collections within two Business Days of receipt thereof to the Collection Account (other than any amounts constituting Supplemental Servicing Fees) and all Liquidation Proceeds. Notwithstanding the foregoing, if M&I Bank is the Servicer and (i) M&I Bank shall have the Required Rating or (ii) Indenture Trustee shall have received written notice from each of the Rating Agencies that the then outstanding rating on the Notes would not be lowered, qualified or withdrawn as a result, Servicer may deposit all amounts referred to above received during any Collection Period into the Collection Account not later than 11:00 a.m. (New York time) on the Deposit Date with respect to such Collection Period; provided that (i) if a Servicer Termination Event has occurred and is continuing, (ii) Servicer has been terminated as such pursuant to Section 8.1 or (iii) Servicer ceases to have the Required Rating, Servicer shall deposit such amounts (including any amounts then being held by Servicer) into the Collection Account as provided in the preceding sentence.

 

SECTION 5.3. [RESERVED]

 

SECTION 5.4. Additional Deposits . Servicer shall deposit or cause to be deposited in the Collection Account the aggregate Purchase Amounts with respect to Purchased Receivables and Servicer shall deposit therein all amounts, if any, to be paid under Section 9.1 . All such deposits shall be made not later than the 11:00 a.m. (New York time) on the Deposit Date following the end of the related Collection Period.

 

SECTION 5.5. Distributions . (a) On or before 11:00 a.m. (New York time) on the Deposit Date related to each Payment Date, Servicer shall instruct Indenture Trustee in writing (based solely on the information contained in the Servicer’s Report delivered on the related Determination Date pursuant to Section 4.9 ) to withdraw from the Reserve Account and deposit in the Collection Account, and Indenture Trustee shall so withdraw and deposit in the Collection Account by 11:00 a.m. (New York time) on such Deposit Date, the Reserve Account Excess Amount, if any, and the Reserve Account Transfer Amount, if any, for such Payment Date.

 

(b) [RESERVED]

 

(c) Subject to the last paragraph of this Section 5.5(c) and prior to any acceleration of the Notes pursuant to Section 5.2 of the Indenture, on or before 11:00 a.m. (New York time) on each Payment Date, the Indenture Trustee (based solely on the information contained in the Servicer’s Report delivered on the related Determination Date pursuant to Section 4.9 ) shall make the following deposits, distributions and payments from the Collection Account for such Payment Date, to the extent of the Total Distribution Amount in the following order of priority:

 

(i) first, to the Servicer (or any predecessor Servicer, if applicable) for reimbursement of all Outstanding Simple Interest Advances;

 

(ii) second, to the Servicer, the Servicing Fee and all unpaid Servicing Fees from prior Collection Periods;

 

(iii) third, pro rata (based on the amount of interest due on each class relative to the total amount of interest due to the holders of the notes), to the Class A Noteholders, to pay the Accrued Class A Note Interest;

 

(iv) fourth, to the Principal Distribution Account for distribution to the Noteholders pursuant to Section 5.5(d) of this Agreement, the First Priority Principal Distribution Amount, if any;

 

(v) fifth, to the Class B Noteholders, the Accrued Class B Note Interest;

 

(vi) sixth, to the Principal Distribution Account for distribution to the Noteholders pursuant to Section 5.5(d) of this Agreement, the Regular Principal Distribution Amount, if any;

 

(vii) seventh, to the Reserve Account, the amount, if any, required to reinstate the amount in the Reserve Account (other than interest income and earnings) up to the Specified Reserve Balance; and

 

(viii) eighth, to the Certificate Distribution Account, the Total Distribution Amount remaining on deposit in the Collection Account.

 

Notwithstanding any other provision of this Section 5.5 , following the occurrence and during the continuation of an Event of Default specified in Section 5.1(a) , 5.1(b) , 5.1(d) or 5.1(e) of the Indenture which has resulted in an acceleration of the Notes (or following the occurrence of any such event after an Event of Default specified in Section 5.1(c) of the Indenture has occurred and the Trust has been liquidated), the Servicer shall instruct the Indenture Trustee at or before aforesaid time to transfer the funds on deposit in the Collection Account pursuant to Section 5.4(b) of the Indenture.

 

In the event that the Collection Account is maintained with an institution other than Indenture Trustee, Servicer shall instruct and cause such institution to make all deposits and distributions pursuant to this Section 5.5(c) on the related Payment Date.

 

(d) On each Payment Date, prior to any acceleration of the Notes pursuant to Section 5.2 of the Indenture, the Indenture Trustee (based on the information contained in the Servicer’s Report delivered on or before the related Determination Date pursuant to Section 4.9 ) shall withdraw the funds on deposit in the Principal Distribution Account with respect to the Collection Period preceding such Payment Date and make distributions and payments in the following order of priority:

 

(i) first, to the Noteholders of the Class A-1 Notes in reduction of principal until the principal amount of the Outstanding Class A-1 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class A-1 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-1 Notes on a pro rata basis;

 

(ii) second, to the Noteholders of the Class A-2 Notes in reduction of principal until the principal amount of the Outstanding Class A-2 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class A-2 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-2 Notes on a pro rata basis;

 

(iii) third, to the Noteholders of the Class A-3 Notes in reduction of principal until the principal amount of the Outstanding Class A-3 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class A-3 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-3 Notes on a pro rata basis;

 

(iv) fourth, to the Noteholders of the Class A-4 Notes in reduction of principal until the principal amount of the Outstanding Class A-4 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class A-4 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-4 Notes on a pro rata basis; and

 

(v) fifth, to the Noteholders of the Class B Notes in reduction of principal until the principal amount of the Outstanding Class B Notes has been paid in full; provided that if

 

there are not sufficient funds available to pay the principal amount of the Outstanding Class B Notes in full, the amounts available shall be applied to the payment of principal on the Class B Notes on a pro rata basis.

 

(e) Indenture Trustee shall continue to perform its duties under this Agreement until the Outstanding Amount of the Notes has been reduced to zero and the Indenture has been discharged in accordance with its terms. The protections, immunities and standard of care afforded the Indenture Trustee under the Indenture shall apply to the performance of its duties hereunder.

 

SECTION 5.6. Statements to Certificateholders and Noteholders . On each Determination Date, Servicer shall provide to Indenture Trustee (with a copy to each Rating Agency) written instructions for Indenture Trustee to forward to each Noteholder of record, to each Paying Agent, if any, and to Owner Trustee for Owner Trustee to forward on each Payment Date to each Certificateholder of record, a statement prepared by the Servicer setting forth at least the following information (based on the information contained in the Servicer’s Report delivered on the related Determination Date pursuant to Section 4.9 ) as to the Notes and the Certificates to the extent applicable:

 

(a) the amount of such distribution allocable to principal of each class of Notes;

 

(b) the amount of such distribution allocable to interest on or with respect to each class of Notes;

 

(c) the Reserve Account Transfer Amount, if any, for such Payment Date, the Specified Reserve Balance for such Payment Date, the amount deposited into the Reserve Account on such Payment Date, and the balance of the Reserve Account (if any) on such Payment Date, after giving effect to changes therein on such Payment Date;

 

(d) the First Priority Principal Distribution Amount and the Regular Principal Distribution Amount for such Payment Date;

 

(e) the amount of the Servicing Fee paid to Servicer with respect to the related Collection Period and with respect to previously accrued and unpaid Servicing Fees;

 

(f) the Class A Noteholders’ Interest Carryover Shortfall and Class B Noteholders’ Interest Carryover Shortfall, if any, and the change in such amounts from the preceding statement;

 

(g) the amount of any previously due and unpaid payment of principal on the Notes, and the change in such amount from that of the prior Payment Date;

 

(h) the aggregate outstanding principal balance of each class of the Notes and the Note Pool Factor for each such class after giving effect to payments allocated to principal reported under clause (a)  above;

 

(i) the aggregate Purchase Amounts paid by Servicer with respect to the related Collection Period;

 

(j) the Pool Balance as of the close of business on the last day of the preceding Collection Period;

 

(k) the number, and aggregate Principal Balance outstanding, of Receivables past due 30-59, 60-89 and 90 and over days;

 

(l) the weighted average Contract Rates of the Receivables, weighted based on the Principal Balance of each such Receivable as of the last day of the related Collection Period;

 

(m) the weighted average remaining term to maturity of the Receivables, weighted based on the Principal Balance of each such Receivable as of the last day of the related Collection Period;

 

(n) the amount of the aggregate Principal Balances of any Receivables that became Defaulted Receivables, if any, during such Collection Period;

 

(o) the aggregate net losses on the Receivables incurred during the period from the Cutoff Date to and including the last day of the related Collection Period;

 

(p) the amount distributed to Certificateholders; and

 

(q) the amount of Outstanding Simple Interest Advances on such Payment Date.

 

Each amount set forth pursuant to paragraph (a), (b), (e)  or (f)  above relating to the Notes shall be expressed as a dollar amount per $1,000 of the Initial Principal Balance of the Notes (or Class thereof).

 

SECTION 5.7. Net Deposits . As an administrative convenience, unless Servicer is required to remit Collections within two Business Days of receipt thereof, Servicer will be permitted to make the deposit of Collections and Purchase Amounts for or with respect to a Collection Period net of distributions to be made to Servicer with respect to such Collection Period. Servicer, however, will account to the Trust, Indenture Trustee, the Noteholders and the Certificateholders as if all deposits, distributions and transfers were made individually.

 

SECTION 5.8. Reserve Account . (a) On or before the Closing Date pursuant to Section 8.6 of the Indenture, the Trust shall establish or cause to be established in the name of the Indenture Trustee, as secured party of and agent for the Noteholders and Certificateholders, an Eligible Deposit Account (the “ Reserve Account ”). The Reserve Account and any amounts therein shall be pledged to the Indenture Trustee and held for the benefit of the Noteholders and Certificateholders. The Reserve Account shall be established by and maintained with the Indenture Trustee or its designee (the “ Securities Intermediary ”).

 

(b) On the Closing Date, the Seller shall purchase investments meeting the requirements of subparagraph (c)  of the definition of Eligible Investments and having a principal amount on the Closing Date equal to the Reserve Account Deposit Amount (the “ Reserve Account Deposit ”) and shall transfer the Reserve Account Deposit to the Trust. Immediately upon receipt of the Reserve Account Deposit on the Closing Date, the Trust shall deliver the Reserve Account Deposit to the Indenture Trustee and the Indenture Trustee shall deposit the Reserve Account Deposit into the Reserve Account.

 

SECTION 5.9. Monthly Advances . On or before 11:00 a.m. (New York time) on each Deposit Date, the Servicer shall deposit into the Collection Account the Simple Interest Advance for the related Payment Date. The Servicer shall not make any advance with respect to principal of any Simple Interest Receivable and the Servicer shall only make advances of interest with respect to any Receivable to the extent that the Servicer, in accordance with its customary servicing procedures, shall determine that such advance shall be recoverable from subsequent collections or recoveries on such Receivable.

 

ARTICLE VI. SELLER

 

SECTION 6.1. Representations of Seller . On the Closing Date, Seller makes the following representations to each of the parties hereto on which the Trust is deemed to have relied in acquiring the Receivables and the other properties and rights included in the Owner Trust Estate and the Indenture Trustee is deemed to have relied in accepting administration of its trusts. The representations speak as of the execution and delivery of this Agreement and shall survive the sale of the Receivables to the Trust and the pledge thereof to Indenture Trustee pursuant to the Indenture.

 

(a) Organization and Good Standing . Seller has been duly organized and is validly existing as a Delaware limited liability company in good standing under the laws of the State of Delaware, with the power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted and had at all relevant times, and has, full power, authority and legal right to acquire, own and sell the Receivables and the other properties and rights included in the Owner Trust Estate assigned to the Trust pursuant to Article II.

 

(b) Due Qualification . Seller is duly qualified to do business as a limited liability company in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, except where the failure to so obtain would not have a material adverse impact either on Seller, the transactions contemplated in the Basic Documents or the Receivables.

 

(c) Power and Authority . Seller has the power, authority and legal right to execute and deliver this Agreement and the Basic Documents to which it is a party and to carry out their respective terms and to sell and assign the property to be sold and assigned to and deposited with the Trust as the Owner Trust Estate; and the execution, delivery and performance of this Agreement and the Basic Documents to which it is a party have been duly authorized by Seller by all necessary action.

 

(d) No Consent Required . No approval, authorization, consent, license or other order or action of, or filing or registration with, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance of this Agreement or the Basic Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, other than (i) as may be required under the blue sky or securities laws of any State or the Securities Act of 1933, as amended, and (ii) the filing of UCC financing statements.

 

(e) Valid Sale; Binding Obligation . Seller intends this Agreement to effect a valid sale, transfer, and assignment of the Receivables and the other properties and rights included in the Owner Trust Estate conveyed by Seller to the Trust hereunder, enforceable against creditors of and purchasers from Seller; and each of this Agreement and the Basic Documents to which it is a party constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its respective terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws affecting enforcement of the rights of creditors generally and to equitable limitations on the availability of specific remedies.

 

(f) No Violation . The execution, delivery and performance by Seller of this Agreement and the Basic Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby will not conflict with, result in any material breach of any of the terms and provisions of, constitute (with or without notice or lapse of time) a material default under or result in the creation or imposition of any Lien upon any of its material properties pursuant to the terms of, (i) the limited liability company agreement of Seller, (ii) any material indenture, contract, lease, mortgage, deed of trust or other instrument or agreement to which Seller is a party or by which Seller is bound, or (iii) any law, order, rule or regulation applicable to Seller of any federal or state regulatory body, any court, administrative agency, or other governmental instrumentality having jurisdiction over Seller.

 

(g) No Proceedings . There are no proceedings or investigations pending, or, to the knowledge of Seller, threatened, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality having jurisdiction over Seller or its properties: (i) asserting the invalidity of this Agreement, any other Basic Document, the Notes or the Certificates, (ii) seeking to prevent the issuance of the Notes or Certificates or the consummation of any of the transactions contemplated by this Agreement or any other Basic Document, (iii) seeking any determination or ruling that might materially and adversely affect the performance by Seller of its obligations under, or the validity or enforceability of, this Agreement, any other Basic Document, the Notes or the Certificates, to the extent applicable, or (iv) that may materially and adversely affect the federal or state income, excise franchise or similar tax attributes of the Trust, the Notes or the Certificates.

 

(h) Chief Executive Office . The chief executive office of Seller is 770 North Water Street NW5, Milwaukee, Wisconsin 53202.

 

(i) Good Title . Immediately prior to the transfer and assignment herein contemplated, the Seller had good and marketable title to the Receivables free and clear of any lien and had full right and power to transfer and assign the Receivables to the Trust.

 

SECTION 6.2. Continued Existence . During the term of this Agreement, subject to Section 6.4, Seller will keep in full force and effect its existence, rights and franchises as a limited liabili