-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, McoDfhlMRCziRgAju0DCaWC8k2Hk++rhupVU2QPHalUyDSL7booF1o8xN8wz1ZO+ 2UOrxcIwuNLmUSTNFizVwg== 0000912057-95-008125.txt : 19951002 0000912057-95-008125.hdr.sgml : 19951002 ACCESSION NUMBER: 0000912057-95-008125 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT CORP CENTRAL INDEX KEY: 0000804269 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 752291093 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10667 FILM NUMBER: 95576845 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 817-332-70 MAIL ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: URCARCO INC DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED JUNE 30, 1995 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. [NO FEE REQUIRED] For the transition period from to Commission file number 1-10667
AMERICREDIT CORP. (Exact name of Registrant as specified in its charter) TEXAS 75-2291093 (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No.) 200 BAILEY AVENUE, FORT WORTH, TEXAS 76107 (Address of principal executive (Zip Code) offices)
Registrant's telephone number, including area code: (817) 332-7000 ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - -------------------------------------------------------- -------------------------------------------------------- Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None (Title of class) ------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of 26,494,594 shares of the Registrant's Common Stock held by non-affiliates based upon the closing price of the Registrant's Common Stock on the New York Stock Exchange on September 15, 1995 was approximately $324,558,777. For purposes of this computation, all officers, directors and 5 percent beneficial owners of the Registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates of the Registrant. There were 28,610,354 shares as of Common Stock, $.01 par value outstanding as of September 15, 1995. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report to Shareholders for the year ended June 30, 1995 ("the Annual Report") furnished to the Commission pursuant to Rule 14a-3(b) and the definitive Proxy Statement pertaining to the 1995 Annual Meeting of Shareholders ("the Proxy Statement") and filed pursuant to Regulation 14A are incorporated herein by reference into Parts II and IV, and Part III, respectively. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AMERICREDIT CORP. INDEX TO FORM 10-K
ITEM PAGE NO. No. - ---- ---- PART I 1. Business 3 2. Properties 14 3. Legal Proceedings 14 4. Submission of Matters to a Vote of Security Holders 14 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 15 6. Selected Financial Data 15 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 8. Financial Statements and Supplementary Data 15 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15 PART III 10. Directors and Executive Officers of the Registrant 16 11. Executive Compensation 16 12. Security Ownership of Certain Beneficial Owners and Management 16 13. Certain Relationships and Related Transactions 16 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17 SIGNATURES 18
-2- PART I ITEM 1. BUSINESS GENERAL AmeriCredit Corp. was incorporated in Texas on May 18, 1988 and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. The Company's predecessor began the Company's business in March 1987, and the business has been operated continuously since that time. As used herein, the term "Company" refers to the Company, its wholly owned subsidiaries and its predecessor corporation. The Company's principal executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, 76107 and its telephone number is (817) 332-7000. On July 22, 1992, the Company formed a subsidiary, AmeriCredit Financial Services, Inc. ("AFSI"), a Delaware corporation, to engage in the indirect consumer lending business. AFSI began operating in the indirect consumer lending business in September 1992. Through AFSI's branch offices and marketing representatives, the Company serves as a funding source for franchised and independent dealers to finance their customers' purchases of primarily used cars. The Company targets consumers who are typically unable to obtain financing from traditional sources. Consumer finance contracts originated by dealers which conform to the Company's credit policies are purchased by the Company, generally for a non-refundable acquisition fee and without recourse to the dealer. These consumer finance loans typically range in amount from $6,000 to $12,000, with repayment terms usually ranging from 24 to 60 months. The Company services its consumer loan portfolio at its central facility using automated loan servicing and collection systems. From April 1993 through January 1995, the Company, through another subsidiary, financed insurance premiums for consumers purchasing car insurance through independent insurance agents. The Company curtailed its activities in this business in order to concentrate its resources on the core indirect consumer lending business. The Company previously operated a chain of "we finance" used car retail lots in Texas, selling used cars and typically financing sales to its customers. However, in connection with a restructuring during the year ended June 30, 1993, the Company withdrew from the retail used car sales business effective December 31, 1992. The finance receivables originated in this previous business are referred to as the direct lending portfolio and are being liquidated over time as the contracts are collected or charged-off. INDIRECT CONSUMER FINANCE OPERATIONS -3- TARGET MARKET. The Company's indirect lending programs are designed to serve consumers who have limited access to traditional car financing. The Company's typical borrower may have had previous financial difficulties, but is now attempting to re-establish credit, or may not yet have an established credit history. Because the Company serves consumers who are unable to meet the credit standards imposed by most traditional car financing sources, the Company generally charges interest at rates which are higher than those charged by traditional car financing sources. The Company also expects to sustain a higher level of credit losses than that experienced by traditional car financing sources since the Company provides financing in a relatively high risk market. DEALER RELATIONSHIPS. When buying a car, consumers are customarily directed to a dealer's finance and insurance department to finalize their purchase agreement and review potential financing sources. If the consumer elects to pursue financing at a dealer, an application is taken for submission to the dealer's financing sources. The dealers are generally familiar with the lending policies of their financing sources and develop both traditional and secondary financing sources. In the event that a consumer may not qualify for traditional car financing, a dealer typically submits such buyer's application to one or more secondary financing sources, such as the Company, for approval and purchase. Since the Company is an indirect lender, the Company's financing programs are marketed directly to the dealers rather than to the consumer. The marketing process involves personal contacts with the owners, general managers and finance managers of the dealers and distribution of the Company's promotional materials. The Company also establishes relationships with dealers through referrals from other participating dealers. The Company has established relationships with a variety of car dealers located in the markets in which the Company has branch offices or marketing representatives. While the Company occasionally finances purchases of new cars, substantially all of the Company's finance receivables are originated in connection with consumers' purchases of used cars. Of the finance contracts purchased by the Company during the year ended June 30, 1995, approximately 68% were originated by manufacturer-franchised dealers with used car operations and 32% by independent dealers specializing in used car sales. The Company purchased contracts from 1,861 dealers during the year ended June 30, 1995. No dealer accounted for more than 10% of the total volume of contracts purchased by the Company for the year ended June 30, 1995. Prior to entering into a relationship with a dealer, the Company evaluates the dealer's operating history. The credit profile and performance of contracts purchased from a dealer are continually monitored to determine the viability of the Company's relationship with the dealer. Dealer relationships are maintained through frequent contacts by the Company's representatives and by providing a high level of service, including prompt and consistent credit application -4- processing, timely contract funding and competitive financing terms and fees. Finance contracts are generally purchased by the Company without recourse to the dealer, and accordingly, the dealer usually has no liability to the Company if the consumer defaults on the finance contract. To mitigate the Company's risk from potential credit losses, the Company typically charges the dealers an acquisition fee when purchasing finance contracts. Such acquisition fees are negotiated with dealers on a contract-by-contract basis and are non-refundable. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Recourse based upon such representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. The Company does not view recourse against the dealer on these representations and indemnities to be of material significance in its decision to purchase finance contracts from a dealer. BRANCH OFFICES. The Company's branch offices are responsible for solicitation and development of dealer relationships and execution of credit decisions. Branch locations are typically staffed by an area general manager, an assistant manager, and one or more dealer and customer service representatives. Larger branches may also have an additional assistant area manager and/or a dealer marketing representative. Area general managers are compensated with base salaries, annual incentives based on overall branch performance and stock option grants. The area general managers report to a regional vice president. The Company's regional vice presidents monitor branch office compliance with the Company's underwriting guidelines and review and approve transactions that exceed the underwriting guidelines. The Company's automated application processing system and loan accounting system provide the regional vice presidents access to credit application information and finance contract terms enabling them to consult with the area general managers on day to day credit decisions. The regional vice presidents also make periodic visits to the branch offices to conduct operating reviews. The regional vice presidents report to a senior vice president who in turn report to the Executive Vice President and Director of Consumer Finance Operations. As of June 30, 1995, the Company operated 31 indirect consumer finance branch offices in 20 states. The Company's branch offices are located in Dallas-Fort Worth, Houston, San Antonio, Phoenix, Colorado Springs, Denver, Salt Lake City, Atlanta, Chicago (2), Kansas City, San Jose, Indianapolis, Detroit, Oklahoma City, Las Vegas, St. Louis, San Diego, Nashville, Raleigh, Jacksonville, Norfolk, Baltimore, Tampa Bay, Charlotte, Greenville, Cleveland, Marlton (N.J.), Cincinnati, Charleston, and Newport News. -5- The Company selects markets for branch office locations based upon the availability of qualified area general managers and evaluation of regulatory, competitive and demographic factors. Branch offices are typically situated in office buildings which are accessible to local car dealers. MARKETING REPRESENTATIVES. The Company's marketing representatives are responsible for solicitation and development of dealer relationships in existing branch territories and in markets where the Company does not have a branch presence. Unlike the Company's area general managers, the marketing representatives do not have credit authority. Credit applications solicited by the marketing representatives are underwritten either at the branch office served by the marketing representatives or at the central purchasing office in Fort Worth, Texas. The Company's marketing representatives may be either employees or independent contractors. After a training and development period, the marketing representatives are compensated based primarily upon finance contract originations. FINANCE CONTRACT ACQUISITION. The Company purchases individual finance contracts through its branch offices based on a decentralized credit approval process tailored to local market conditions. The Company's central purchasing office, which underwrites applications solicited by certain marketing representatives, operates in a manner similar to the branch office network. All credit extensions are executed at the branch level. Each area general manager has a specific credit authority based upon their experience and historical loan portfolio results and credit scoring parameters. Extensions of credit outside these limits are reviewed and approved by a regional vice president. Although the credit approval process is decentralized, credit decisions are guided by the Company's credit scoring strategies and overall credit and underwriting policies and procedures. The Company has implemented a credit scoring system across its branch network to support the branch level judgmental credit approval process. The credit scoring system was developed by Fair Isaac & Co., Inc. from the Company's loan origination and portfolio databases. Credit scoring is used to prioritize applications for processing and to tailor loan pricing and structure to an empirical assessment of credit risk. While the Company employs a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations at the branch level in evaluating finance contracts for purchase could adversely affect the credit quality of the Company's loan portfolio. Loan application packages completed by prospective borrowers are received via facsimile at the branch offices from dealers. Application data is entered into -6- the Company's automated application processing system. A credit bureau report is automatically generated and a credit score is computed. Depending on the credit quality of the applicant, a customer service representative may then investigate the residence, employment and credit history of the applicant or forward the application package directly to the area general manager. In either case, the Company's credit policy requires that all applications be investigated prior to loan funding. The area general manager reviews the application package and determines whether to approve the application, approve the application subject to conditions that must be met, or deny the application. The area general manager considers many factors in arriving at a credit decision, including the applicant's credit score, capacity to pay, stability, character and intent to pay, the contract terms, and collateral value. In certain cases, a regional vice president may review and approve the area general manager's credit decision. The Company estimates that approximately 50% of applicants are denied credit by the Company typically because of their credit histories or because their income levels are not sufficient to support the proposed level of monthly car payments. Dealers are contacted regarding credit decisions by telefax and/or telephone. Declined applicants are also provided with appropriate notification of the decision. Once a credit approval has been received from the Company and any other financing sources to which the application package was submitted, the dealer selects a financing source. The ability of the financing source to provide a rapid credit decision and the amount of the contract fees and customer advance are of primary importance to the dealer in choosing a financing source. The interest rate in the finance contract is generally of secondary importance. Completed loan packages are sent by the dealers to the branch office. Loan terms are generally reverified with the consumer by branch personnel and the loan packages are forwarded to the Company's centralized loan services department where the package is scanned to create an electronic copy. Key original documents are stored in a fire-proof vault and the loan packages are further processed in an electronic environment. The loans are reviewed for proper documentation and regulatory compliance and are entered into the Company's loan accounting system. A daily loan report is generated for a final review by consumer finance operations management. Once cleared for funding by consumer finance operations management, the loan services department issues a check to the dealer. Upon funding of the contract, the Company acquires a perfected security interest in the car that was financed. All of the Company's finance contracts are fully amortizing with substantially equal monthly installments. Consumers receive monthly billing statements from the Company directing them to remit payments to the Company's lockbox bank for deposit into the Company's lockbox account. Payment receipt data is electronically transferred to the Company by the lockbox bank for posting to the loan accounting system. All payment processing and customer account maintenance is performed centrally by the loan services department. -7- COLLECTIONS AND REPOSSESSIONS. Collection activity on finance contracts is performed centrally by the Company's collection personnel ("collectors") located in Fort Worth, Texas. The collectors follow standardized collection policies and procedures. Collectors monitor the finance receivables portfolio through a computer assisted collection system and typically take action on delinquencies within a few days after delinquency occurs. A collector's action is usually telephone contact with the consumer utilizing the Company's automated predictive dialing system. This system dials multiple telephone numbers simultaneously based upon parameters set by management. When a telephone connection is made, the call is routed to a collector and the delinquent consumer's account information is displayed on a collector's computer terminal. The collector then attempts to work out the delinquency with the consumer. If a consumer continues to be delinquent, the Company's policy is to work out suitable payment arrangements with the consumer. However, if the consumer becomes seriously delinquent or deals in bad faith with the Company, the Company may ultimately have to repossess the consumer's car and generally will take prompt action to do so. Repossessions are handled by independent repossession firms engaged by the Company. All repossessions are approved by collection officers. The Company follows prescribed legal procedures for repossessions, which include peaceful repossession, one or more consumer notifications, a prescribed waiting period prior to disposition of the repossessed car, and return of personal items to the consumer. Upon repossession and after any prescribed waiting period, the repossessed car is typically sold at auction. The proceeds from the sale of the car at auction and any other recoveries are credited against the balance of the finance contract. Auction proceeds from the sale of repossessed cars and other recoveries are usually not sufficient to cover the outstanding balance of the finance contract, and the resulting deficiencies are charged-off against the Company's allowance for losses. The Company may pursue collection of deficiencies when it deems such action to be appropriate. INSURANCE AND OTHER PRODUCTS. The Company requires all consumers to obtain or provide evidence that they carry current comprehensive and collision insurance. Through a third party administrator, the Company tracks the insurance status of each finance contract and sends notices to consumers when collateral becomes uninsured. If no action is taken by the borrower to insure the collateral, continuing efforts are made to persuade the consumer to comply with the insurance requirements of the finance contract. Although it has the right, the Company rarely repossesses a car due to it being uninsured. The Company also does not generally force place insurance coverage and add the premium to the consumer's -8- obligation, although it has the right to do so under the terms of the finance contracts. In the event that the consumer fails to maintain insurance as required by the finance contract, the Company may be adversely affected in its ability to realize auction proceeds from the sale of repossessed cars if the car collateralizing the finance contract has been damaged or stolen. Further, uninsured damage or theft of the cars serving as collateral under the finance contracts can be expected to result in higher rates of default. The Company will also finance other insurance products including credit life, credit accident and health and extended service contracts at the option of the consumer. The consumer may obtain such products from sources provided by the Company, dealers or from other third parties. The Company may receive commissions and fees related to these products, but the Company does not assume any primary insurance risk. RISK MANAGEMENT. With its decentralized credit approval process, the Company has developed procedures to evaluate and supervise the operations of each branch office. The Company's centralized risk management department is responsible for monitoring the origination process and supporting the supervisory role of consumer finance operations management. This group tracks key variables via databases that contain loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories. The residual value of the collateral underlying the Company's loan portfolio is updated monthly with a loan by loan link to national wholesale auction values. This data is used for evaluating collateral disposition activities as well as for reserve analysis models. The risk management department prepares a periodic credit indicator package reviewing portfolio performance at various levels of detail including total company, branch and dealer. A sample of loans underwritten by each branch are reviewed periodically to audit compliance with policies and procedures. Various daily reports and analytical data are also generated by the Company's management information systems. This information is used to monitor credit quality as well as to constantly refine the structure and mix of new loan production. Projected portfolio returns are reviewed not only on a consolidated basis, but also at the branch, dealer and transaction levels. While the Company's risk management department is designed to minimize the risks inherent in a decentralized credit approval process, the risk of adverse contract purchases by the branch network cannot be eliminated. FUNDING STRATEGY. The Company requires a significant amount of capital to fund its indirect consumer finance lending activities. The primary sources of such funding have been the Company's bank line of credit and the issuance of automobile receivables-backed notes. -9- As of June 30, 1995, the Company has a line of credit arrangement with a group of banks under which the Company may borrow up to $125 million, subject to a defined borrowing base. The Company's funding strategy is to utilize the line of credit to fund new loan volume until the finance receivables accumulate to a size that can be pooled to access the asset-backed securities markets. During fiscal 1995, the Company completed two private placements of automobile receivables-backed notes. The Series 1994-A notes were issued in December 1994 and aggregated $51 million. The notes bear interest at 8.19%, are collateralized by a pool of indirect finance receivables originally totalling $56.7 million and have a final maturity date of December 1999. The Series 1995-A notes were issued in June 1995 and aggregated $99.2 million. The notes bear interest at 6.55%, are collateralized by a pool of indirect finance receivables originally totalling $106.7 million and have a final maturity date of September 2000. Each series of notes was issued by a wholly-owned special purpose subsidiary of the Company which holds the related finance receivables. Principal and interest on the notes are payable monthly from collections and recoveries on the specific pool of finance receivables. Both note series are rated "Aaa" by Moody's Investors Services, Inc. and "AAA" by Standard and Poor's Corp. Financial Security Assurance, Inc. issued financial guaranty insurance policies for the benefit of the noteholders of each series. Since the private placements completed in fiscal 1995 were structured as debt issuances by subsidiaries of the Company, the transactions were accounted for as borrowings. Accordingly, the finance receivables collateralizing the automobile receivables-backed notes remain on the Company's Consolidated Balance Sheets and the associated finance charges on the receivables are recognized as income over time as earned. The automobile receivables-backed notes are shown as liabilities on the Company's Consolidated Balance Sheets and the related interest paid to noteholders is recognized as expense over time as accrued. The Company anticipates that it will issue additional automobile receivables-backed securities in fiscal 1996 in order to fund its indirect consumer finance lending activities. The Company is considering structuring future issuances of automobile receivables-backed securities as sales of receivables to trust entities, which in turn would issue interest bearing certificates to investors. Structuring future transactions in this manner would result in recognition of a gain on sale of receivables based on the discounted present value of the difference between cash collections on the pool of finance receivables sold and costs and expenses such as servicing fees, principal and interest paid to certificate holders and transaction fees. -10- While management is analyzing various alternatives, no decision has yet been made as to the specific structure to be used for future transactions. There can be no assurance that structuring future issuances of automobile-backed receivables as sales of receivables would increase the Company's profitability or otherwise be advantageous to the Company. Further, regardless of the structure selected, there can be no assurance that funding will be available to the Company through the issuance of automobile receivables-backed securities, or if available, that it will be on terms acceptable to the Company. In addition, since the Company's funding strategy is dependent upon the issuance of interest bearing securities, increases in interest rates would adversely affect the Company's profitability. DISTRESSED RECEIVABLES JOINT VENTURES During December 1993, the Company entered into certain joint venture arrangements with third parties to acquire and collect distressed receivables portfolios. While the Company's capital investment in these joint ventures is not material, the Company has provided office facilities, computer systems and administrative support to the joint ventures. TRADE NAMES The Company has obtained federal trademark protection for the "AmeriCredit" name and the logo that incorporates the "AmeriCredit" name. COMPETITION The Company encounters strong competition in its segment of the market from other local, regional and national consumer finance companies, some of which have access to greater financial resources than the Company. As an indirect lender, the Company's financing programs are marketed directly to car dealers rather than to the consumer. The Company believes that there are numerous competitors providing, or capable of providing, financing through dealers for purchases of cars. Many of these competitors have long-standing relationships with car dealers. The principal competitive factors affecting a dealer's decision to offer finance contracts for sale to a particular financing source are the level of service including promptness and consistency of credit application processing, the timeliness of contract funding, the competitiveness of financing terms and fees and the financial stability of the funding source. The Company plans to expand its indirect consumer finance business by adding additional branch offices and expanding loan production capacity at existing branches. The success of this strategy is dependent upon the Company's ability to hire and retain qualified area general managers and other personnel and -11- develop relationships with more dealers. The Company confronts intense competition in attracting key personnel and establishing relationships with dealers. Dealers often already have favorable secondary financing sources, which may restrict the Company's ability to develop dealer relationships and delay the Company's growth. In addition, the competitive conditions in the Company's markets may result in a reduction in the contract fees that the Company charges the dealers or a decrease in contract acquisition volume, which would adversely affect the Company's profitability. Because the Company's target market consists of consumers who generally have limited access to traditional financing sources, the Company usually does not compete directly with banks, savings and loans, credit unions, the manufacturers' captive finance companies and other traditional sources of consumer credit. However, there can be no assurance that traditional financial institutions will not, in the future, become more active in providing financing to the Company's targeted customer base. REGULATION The Company's operations are subject to regulation, supervision, and licensing under various federal, state and local statutes, ordinances and regulations. In most states in which the Company operates, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation and restrictions on collection practices and creditors' rights. In certain states, the Company's branch offices are subject to periodic examination by state regulatory authorities. Some states in which the Company operates do not require special licensing or provide extensive regulation of the Company's business. The Company is also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require the Company to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system used by the Company must comply with the requirements for -12- such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. The dealers who originate car loans purchased by the Company also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with such statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on the Company. Management believes that it maintains all licenses and permits required for its current operations and is in substantial compliance with all applicable local, state, and federal regulations. There can be no assurance, however, that the Company will be able to maintain all requisite licenses and permits and the failure to satisfy those and other regulatory requirements could have a material adverse effect on the operations of the Company. Further, the adoption of additional, or the revision of existing rules and regulations could have a material adverse effect on the Company's business. As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other theories of liability, usury, wrongful repossession, fraud and discriminatory treatment of credit applicants. The Company, as the assignee of car loans originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. Management believes that the Company has taken prudent steps to address the litigation risks associated with its business activities. However, there can be no assurance that the Company will be able to successfully defend against all such consumer claims, or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company's business. EMPLOYEES At June 30, 1995, the Company employed 256 persons. EXECUTIVE OFFICERS The following sets forth certain data concerning the executive officers of the Company, all of whom are elected on an annual basis.
Name Age Position ---- --- -------- Clifton H. Morris, Jr. 60 Chairman of the Board, Chief Executive Officer and President
-13- Michael R. Barrington 36 Executive Vice President and Chief Operating Officer of the Company, President and Chief Operating Officer of AFSI Daniel E. Berce 41 Executive Vice President, Chief Financial Officer and Treasurer Chris A. Choate 32 Vice President, General Counsel and Secretary Edward H. Esstman 54 Senior Vice President and Chief Credit Officer of the Company, Executive Vice President, Director of Consumer Finance Operations of AFSI Michael T. Miller 34 Senior Vice President, Risk Management, Credit Policy and Planning of AFSI Preston A. Miller 31 Vice President and Controller
CLIFTON H. MORRIS, JR. has been Chairman of the Board and Chief Executive Officer of the Company since May 1988, and was also President of the Company from such date until April 1991 and from April 1992 to the present. Mr. Morris is also a director of Service Corporation International, a publicly held company which owns and operates funeral homes and related businesses, and Cash America International, Inc., a publicly held pawn brokerage company. MICHAEL R. BARRINGTON has been President and Chief Operating Officer of AFSI since AFSI's formation in July 1992. Mr. Barrington has also been Executive Vice President and Chief Operating Officer of the Company since November 1994 and Vice President of the Company from May 1991 until November 1994. From July 1989 until May 1991, Mr. Barrington was employed by the Company in various capacities, most recently as Vice President, Credit and Finance Operations. DANIEL E. BERCE is a certified public accountant and has been Executive Vice President, Chief Financial Officer and Treasurer for the Company since November 1994 and Vice President, Chief Financial Officer and Treasurer for the Company from May 1991 until November 1994. From May 1990 until May 1991, Mr. Berce was Vice President, Chief Financial Officer for the Company. CHRIS A. CHOATE has been Vice President, General Counsel and Secretary of the Company since November 1994 and General Counsel and Secretary of the Company from January 1993 until November 1994. From July 1991 until January 1993, Mr. Choate -14- was Assistant General Counsel. Prior to that, he was an associate with the law firm of Jones, Day, Reaves & Pogue in Dallas, Texas from January 1990 until July 1991. EDWARD H. ESSTMAN has been Executive Vice President, Director of Consumer Finance Operations of AFSI since November 1994 and Senior Vice President, Director of Consumer Finance of AFSI from AFSI's formation in July 1992 until November 1994. Mr. Esstman has also been Senior Vice President and Chief Credit Officer for the Company since November 1994. From April 1984 until June 1992, Mr. Esstman acted in various management capacities at Mercury Finance Company, most recently as Vice President of Administration. MICHAEL T. MILLER has been Senior Vice President, Risk Management, Credit Policy and Planning of AFSI since November 1994 and Vice President, Risk Management, Credit Policy and Planning of AFSI from AFSI's formation in July 1992 until November 1994. From May 1991 until July 1992, Mr. Miller was Manager of Credit Analysis of the Company. Prior to that, Mr. Miller was Assistant Vice President of Financial Planning and Analysis of Citicorp Mortgage and Acceptance Company and was with such Company for six years. PRESTON A. MILLER has been Vice President and Controller of the Company since November 1994 and was Controller of the Company from September 1989 until November 1994. -15- ITEM 2. PROPERTIES The Company's executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, in a 43,000 square foot building purchased by the Company in February 1994. A substantial portion of the office space in this facility is utilized by the Company for its collections, loan services, central purchasing, branch support and administrative activities. There is no debt outstanding against which the building has been pledged as collateral. All of the Company's branch office facilities are leased under lease agreements with original terms of two to four years. Such facilities are typically located in a suburban office building and consist of between 1,000 and 1,500 square feet of space. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various lawsuits in the normal course of business. In the opinion of management, resolution of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the fourth quarter ended June 30, 1995. -16- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company has never paid cash dividends on its common stock. The Company's bank line of credit contains certain restrictions on the payment of dividends. While the Company has an accumulated deficit at June 30, 1995, the Company presently intends to retain future earnings, if any, for purposes of funding operations. Information contained under the caption "Common Stock Data" in the Annual Report is incorporated herein by reference in further response to this Item 5. ITEM 6. SELECTED FINANCIAL DATA Information contained under the caption "Summary Financial and Operating Information" in the Annual Report is incorporated herein by reference in response to this Item 6. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information contained under the caption "Financial Review" in the Annual Report is incorporated herein by reference in response to this Item 7. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of the Company included in the Annual Report and information contained under the caption "Quarterly Data" in the Annual Report are incorporated herein by reference in response to this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company had no disagreements on accounting or financial disclosure matters with its independent accountants to report under this Item 9. -17- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information contained under the caption "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 10. See Item 1. "Business - Executive Officers" for information concerning executive officers. ITEM 11. EXECUTIVE COMPENSATION Information contained under the captions "Executive Compensation" and "Election of Directors", except the Report of the Compensation Committee on Executive Compensation and the Performance Graph, in the Proxy Statement is incorporated herein by reference in response to this Item 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information contained under the caption "Principal Shareholders and Stock Ownership of Management" in the Proxy Statement is incorporated herein by reference in response to this Item 12. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is no information requiring disclosure pursuant to Item 404 of Regulation S-K. Accordingly, no information is furnished in response to this Item 13. -18- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (1) The following Consolidated Financial Statements of the Company and Report of Independent Accountants are contained in the Annual Report and are incorporated herein by reference. CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of June 30, 1995 and 1994. Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993. Consolidated Statements of Shareholders' Equity for the years ended June 30, 1995, 1994 and 1993. Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1994 and 1993. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS (2) All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are either not required under the related instructions, are inapplicable, or the required information is included elsewhere in the Consolidated Financial Statements and incorporated herein by reference. (3) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Index to Exhibits on pages 16 and 17. (4) The Company did not file any reports on Form 8-K during the quarterly period ended June 30, 1995. -19- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 27, 1995. AmeriCredit Corp. BY: /s/ Clifton H. Morris, Jr. ----------------------------------- Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board, September 27, 1995 - ---------------------------- Chief Executive Officer Clifton H. Morris, Jr. and President /s/ Daniel E. Berce Executive Vice President, September 27, 1995 - ---------------------------- Chief Financial Officer Daniel E. Berce and Treasurer and Director /s/ Michael R. Barrington Executive Vice President, September 27, 1995 - ---------------------------- Chief Operating Officer Michael R. Barrington and Director /s/ James H. Greer Director September 27, 1995 - ---------------------------- James H. Greer /s/ Gerald W. Haddock Director September 27, 1995 - ---------------------------- Gerald W. Haddock /s/ Kenneth H. Jones, Jr. Director September 27, 1995 - ---------------------------- Kenneth H. Jones, Jr.
-20- INDEX TO EXHIBITS The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified below. Exhibits not required for this report have been omitted.
Exhibit Number Description ------- ----------- *3.1 -- Articles of Incorporation of the Company, filed May 18, 1988, and Articles of Amendment to Articles of Incorporation, filed August 24, 1988 (Exhibit 3.1) *3.2 -- Amendment to Articles of Incorporation, filed October 18, 1989 (Exhibit 3.2) ##3.3 -- Articles of Amendment to the Articles of Incorporation of the Company, filed November 12, 1992 (Exhibit 3.3) *3.4 -- Bylaws of the Company (Exhibit 3.4) #4.1 -- Specimen stock certificate evidencing the Common Stock (Exhibit 4.1) *10.1 -- 1989 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.4) *10.2 -- 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 10.5) **10.3 -- Amendment No. 1 to the 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 4.6) *10.4 -- 1987 Incentive Stock Option Plan for the Company (Exhibit 10.6) ***10.5 -- 1990 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.14) #10.6 -- 1991 Key Employee Stock Option Plan of the Company (Exhibit 10.10) #10.7 -- 1991 Non-employee Director Stock Option Plan of the Company (Exhibit 10.11) #10.8 -- Executive Employment Agreement, dated January 30, 1991, between the Company and Clifton H. Morris, Jr. (Exhibit 10.18) #10.9 -- Executive Employment Agreement, dated January 30, 1991, between the Company and Michael R. Barrington (Exhibit 10.19) #10.10 -- Executive Employment Agreement, dated January 30, 1991, between the Company and Daniel E. Berce (Exhibit 10.20) ##10.11 -- Executive Employment Agreement, dated May 20, 1993, between the Company and Edward H. Esstman (Exhibit 10.18) +10.12 -- Stock Option Purchase Agreement, dated April 4, 1994, between AmeriCredit Corp. and Rainwater Management Partners, Ltd. (Exhibit 10.16) ###10.13 -- Indenture, dated December 1, 1994, between AmeriCredit Receivables Finance Corp. and LaSalle National Bank as Trustee and Indenture Collateral Agent (Exhibit 10.1)
-21- ###10.14 -- Sale and Servicing Agreement, dated December 1, 1994, between AmeriCredit Receivables Finance Corp., AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank as Backup Servicer (Exhibit 10.2) @10.15 -- Indenture, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A and LaSalle National Bank as Trustee and Indenture Collateral Agent
-22- INDEX TO EXHIBITS (Continued) @10.16 -- Sale and Servicing Agreement, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A, AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank as Backup Servicer. @10.17 -- Restated Revolving Credit Agreement, dated June 2, 1995, between AmeriCredit Corp. and subsidiaries and First Interstate Bank of Texas, N.A., Bank One, Texas, N.A., LaSalle National Bank, The Daiwa Bank, Ltd., Harris Trust and Savings Bank, and Comerica Bank - Texas. ++10.18 -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp. @11.1 -- Schedule Re Computation of Per Share Earnings @13.1 -- 1995 Annual Report to Shareholders of the Company @21.1 -- Subsidiaries of the Company @23.1 -- Consent of Coopers & Lybrand, L.L.P. @27.1 -- Financial Data Schedule _____________________________________________________________________ * Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-31220 on Form S-1 filed by the Company with the Securities and Exchange Commission. ** Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-41203 on Form S-8 filed by the Company with the Securities and Exchange Commission. *** Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1990 filed by the Company with the Securities and Exchange Commission. # Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1991 filed by the Company with the Securities and Exchange Commission. ## Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1993 filed by the Company with the Securities and Exchange Commission. ### Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1994 filed by the Company with the Securities and Exchange Commission. + Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1994 filed by the Company with the Securities and Exchange Commission.
-23- ++ Incorporated by reference from the Company's Proxy Statement, dated September 28, 1995, for the year ended June 30, 1994 filed by the Company with the Securities and Exchange Commission. @ Filed herewith.
EX-10.15 2 EXHIBIT 10.15 INDENTURE AMERICREDIT RECEIVABLES FINANCE CORP. 1995-A 6.55% Automobile Receivables-Backed Notes Series 1995-A --------------------------- INDENTURE Dated as of June 1, 1995 --------------------------- LaSalle National Bank Trustee and Indenture Collateral Agent TABLE OF CONTENTS PAGE ---- ARTICLE I Definitions and Incorporation by Reference. . . . . . . . . . . . . . . . 3 SECTION 1.1. Definitions. . . . . . . . . . . . . . . 3 SECTION 1.2. Rules of Construction. . . . . . . . . . 12 ARTICLE II The Notes. . . . . . . . . . . . . . . . 13 SECTION 2.1. Form . . . . . . . . . . . . . . . . . . 13 SECTION 2.2. Execution, Authentication and Delivery . 13 SECTION 2.3. Temporary Notes. . . . . . . . . . . . . 14 SECTION 2.4. Registration; Registration of Transfer and Exchange. . . . . . . . . . . . . 14 SECTION 2.6. Person Deemed Owner. . . . . . . . . . . 17 SECTION 2.7. Payment of Principal and Interest. . . . 17 SECTION 2.8. Cancellation . . . . . . . . . . . . . . 18 SECTION 2.9. Certain Transfer Restrictions. . . . . . 19 ARTICLE III Covenants. . . . . . . . . . . . . . . . 19 SECTION 3.1. Payment of Principal and Interest. . . . 19 SECTION 3.2. Maintenance of Office or Agency. . . . . 20 SECTION 3.3. Money for Payments To Be Held in Trust . 20 SECTION 3.4. Existence. . . . . . . . . . . . . . . . 22 SECTION 3.6. Opinions as to Trust Estate. . . . . . . 23 SECTION 3.7. Performance of Obligations; Servicing of Receivables . . . . . . . . . . . . . 24 SECTION 3.8. Negative Covenants . . . . . . . . . . . 25 SECTION 3.9. Annual Statement as to Compliance. . . . 26 SECTION 3.10. Consolidation and Disposition of i Assets. . . . . . . . . . . . . . . . 26 SECTION 3.11. Transferee of Issuer . . . . . . . . . . 27 SECTION 3.12. No Other Business. . . . . . . . . . . . 27 SECTION 3.13. No Borrowing . . . . . . . . . . . . . . 27 SECTION 3.14. Servicer's Obligations . . . . . . . . . 27 SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities . . . . . . . . . . . . . 27 SECTION 3.16. Capital Expenditures . . . . . . . . . . 28 SECTION 3.17. Restricted Payments. . . . . . . . . . . 28 SECTION 3.18. Notice of Events of Default. . . . . . . 28 SECTION 3.19. Further Instruments and Acts . . . . . . 28 SECTION 3.20. Compliance with Laws . . . . . . . . . . 28 SECTION 3.21. Amendments of Sale and Servicing Agreement . . . . . . . . . . . . . . 28 SECTION 3.22. Income Tax Characterization. . . . . . . 28 ARTICLE IV Satisfaction and Discharge . . . . . . . 29 SECTION 4.1. Satisfaction and Discharge of Indenture. 29 SECTION 4.2. Application of Trust Money . . . . . . . 30 SECTION 4.3. Payment of Moneys Held by Paying Agent . 30 ARTICLE V Remedies . . . . . . . . . . . . . . . . 31 SECTION 5.1. Events of Default. . . . . . . . . . . . 31 SECTION 5.2. Rights upon Event of Default . . . . . . 33 SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee; Authority of Controlling Party. . . . . . . . . 34 SECTION 5.4. Remedies . . . . . . . . . . . . . . . . 37 SECTION 5.5. Optional Preservation of the Receivables . . . . . . . . . . . . . 38 SECTION 5.6. Priorities . . . . . . . . . . . . . . . 38 SECTION 5.7. Limitation of Suits. . . . . . . . . . . 39 SECTION 5.8. Unconditional Rights of Noteholders To Receive Principal and Interest. . . . 40 SECTION 5.9. Restoration of Rights and Remedies . . . 40 SECTION 5.10. Rights and Remedies Cumulative . . . . . 41 SECTION 5.11. Delay or Omission Not a Waiver . . . . . 41 ii SECTION 5.12. Control by Noteholders . . . . . . . . . 41 SECTION 5.13. Waiver of Past Defaults. . . . . . . . . 42 SECTION 5.14. Undertaking for Costs. . . . . . . . . . 42 SECTION 5.15. Waiver of Stay or Extension Laws . . . . 43 SECTION 5.16. Action on Notes. . . . . . . . . . . . . 43 SECTION 5.17. Performance and Enforcement of Certain Obligations . . . . . . . . . . . . . 43 SECTION 5.18. Claims Under Policy. . . . . . . . . . . 44 SECTION 5.19. Preference Claims. . . . . . . . . . . . 46 ARTICLE VI The Trustee and the Indenture Collateral Agent. . . . . . . . . . . 47 SECTION 6.1. Duties of Trustee. . . . . . . . . . . . 47 SECTION 6.2. Rights of Trustee. . . . . . . . . . . . 50 SECTION 6.3. Individual Rights of Trustee . . . . . . 51 SECTION 6.4. Trustee's Disclaimer . . . . . . . . . . 52 SECTION 6.5. Notice of Defaults . . . . . . . . . . . 52 SECTION 6.6. Reports by Trustee to Holders. . . . . . 52 SECTION 6.7. Compensation and Indemnity . . . . . . . 52 SECTION 6.8. Replacement of Trustee . . . . . . . . . 53 SECTION 6.9. Successor Trustee by Merger. . . . . . . 55 SECTION 6.10. Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . 55 SECTION 6.11. Eligibility; Disqualification. . . . . . 57 SECTION 6.12. Appointment and Powers . . . . . . . . . 57 SECTION 6.13. Performance of Duties. . . . . . . . . . 58 SECTION 6.14. Limitation on Liability. . . . . . . . . 58 SECTION 6.15. Reliance upon Documents. . . . . . . . . 59 SECTION 6.16. Successor Indenture Collateral Agent . . 59 SECTION 6.17. Compensation and Indemnity . . . . . . . 61 SECTION 6.18. Representations and Warranties of the Indenture Collateral Agent. . . . . . 62 SECTION 6.19. Waiver of Setoffs. . . . . . . . . . . . 63 SECTION 6.20. Control by the Controlling Party . . . . 63 ARTICLE VII Noteholders' Lists and Reports . . . . . 63 iii SECTION 7.1. Issuer to Furnish Trustee Names and Addresses of Noteholders. . . . . . . 63 SECTION 7.2. Preservation of Information, Communications to Noteholders . . . . 63 SECTION 7.3. Reports by Issuer. . . . . . . . . . . . 64 ARTICLE VIII Accounts, Disbursements and Releases . . 64 SECTION 8.1. Collection of Money. . . . . . . . . . . 64 SECTION 8.2. Trust Accounts . . . . . . . . . . . . . 64 SECTION 8.3. General Provisions Regarding Accounts. . 65 ARTICLE IX Supplemental Indentures. . . . . . . . . 65 SECTION 9.1. Supplemental Indentures Without Consent of Noteholders. . . . . . . . . . . . 65 SECTION 9.2. Supplemental Indentures With Consent of Noteholders. . . . . . . . . . . . 67 SECTION 9.3. Execution of Supplemental Indentures . . 68 SECTION 9.4. Effect of Supplemental Indenture . . . . 69 SECTION 9.5. Reference in Notes to Supplemental Indentures. . . . . . . . . . . . . . 69 ARTICLE X Redemption of Notes. . . . . . . . . . . 69 SECTION 10.1. Redemption . . . . . . . . . . . . . . . 69 SECTION 10.2. Form of Redemption Notice. . . . . . . . 70 SECTION 10.3. Notes Payable on Redemption Date . . . . 70 ARTICLE XI Miscellaneous. . . . . . . . . . . . . . 70 SECTION 11.1. Compliance Certificates and Opinions, etc . . . . . . . . . . . . . . . . . 70 SECTION 11.2. Form of Documents Delivered to Trustee . 73 SECTION 11.3. Acts of Noteholders. . . . . . . . . . . 74 iv SECTION 11.4. Notices, etc. . . . . . . . . . . . . . 74 SECTION 11.5. Notices to Noteholders; Waiver. . . . . 76 SECTION 11.6. Alternate Payment and Notice Provisions. . . . . . . . . . . . . . 76 SECTION 11.7. Effect of Headings and Table of Contents. . . . . . . . . . . . . . . 77 SECTION 11.8. Successors and Assigns. . . . . . . . . 77 SECTION 11.9. Severability. . . . . . . . . . . . . . 77 SECTION 11.10. Benefits of Indenture . . . . . . . . . 77 SECTION 11.11. Legal Holidays. . . . . . . . . . . . . 77 SECTION 11.12. GOVERNING LAW . . . . . . . . . . . . . 77 SECTION 11.13. Counterparts. . . . . . . . . . . . . . 78 SECTION 11.14. Recording of Indenture. . . . . . . . . 78 SECTION 11.15. Trust Obligation. . . . . . . . . . . . 78 SECTION 11.16. No Petition . . . . . . . . . . . . . . 78 SECTION 11.17. Inspection. . . . . . . . . . . . . . . 78 Exhibit A - Schedule of Receivables Exhibit B - Form of Note v INDENTURE, dated as of June 1, 1995, between AMERICREDIT RECEIVABLES FINANCE CORP. 1995-A, a Delaware corporation (the "Issuer"), and LASALLE NATIONAL BANK, a national banking association, in its capacities as trustee (the "Trustee) and as Indenture Collateral Agent (as defined below) and not in its individual capacity. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer's 6.55% Automobile Receivables-Backed Notes (the "Notes"): As security for the payment and performance by the Issuer of its obligations under this Indenture and the Notes, the Issuer has agreed to assign the Indenture Collateral (as defined below) as collateral to the Indenture Collateral Agent for the benefit of the Trustee on behalf of the Noteholders. Financial Security Assurance Inc. (the "Security Insurer") has issued and delivered a financial guaranty insurance policy, dated the Closing Date (with endorsements, the "Policy"), pursuant to which the Security Insurer guarantees certain Scheduled Payments, as defined in the Policy. As an inducement to the Security Insurer to issue and deliver the Policy, the Issuer has executed and delivered the Insurance and Indemnity Agreement, dated as of June 1, 1995 (as amended from time to time, the "Insurance Agreement"), among the Security Insurer, the Issuer, AmeriCredit Receivables Corp., AmeriCredit Financial Services, Inc. and AmeriCredit Corp. As an additional inducement to the Security Insurer to issue the Policy, and as security for the performance by the Issuer of the Insurer Issuer Secured Obligations and as security for the performance by the Issuer of the Trustee Issuer Secured Obligations, the Issuer has agreed to assign the Indenture Collateral as collateral to the Indenture Collateral Agent for the benefit of the Issuer Secured Parties, as their respective interests may appear. GRANTING CLAUSE The Issuer hereby Grants to the Indenture Collateral Agent at the Closing Date, on behalf of and for the benefit of the Issuer Secured Parties to secure the performance of the respective Issuer Secured Obligations, all of the Issuer's right, title and interest in and to (a) the Receivables and all moneys paid or payable thereon or in respect thereof after May 31, 1995; (b) an assignment of the security interests of AFS in the Financed Vehicles; (c) the Insurance Policies and any proceeds from any Insurance Policies relating to the Receivables, the Obligors or the Financed Vehicles, including rebates of premiums, all Collateral Insurance and any Force-Placed Insurance; (d) rights of AFS or the Seller against Dealers with respect to the Receivables under the Dealer Agreements and the Dealer Assignments; (e) all items contained in the Receivable Files and any and all other documents that AFS keeps on file in accordance with its customary procedures relating to the Receivables, the Obligors or the Financed Vehicles, (f) property (including the right to receive future Liquidation Proceeds) that secures a Receivable and that has been acquired by or on behalf of the Seller or the Issuer pursuant to liquidation of such Receivable; (g) all funds on deposit from time to time in the Trust Accounts (as defined in the Sale and Servicing Agreement) and in all investments and proceeds thereof (including all income thereon and all amounts deposited in respect of Administrative Receivables and Warranty Receivables); (h) the Purchase Agreement, including the right assigned to the Issuer to cause AFS to repurchase Receivables from the Seller under certain circumstances; (i) the Sale and Servicing Agreement (including all rights of the Seller under the Purchase Agreement assigned to the Issuer pursuant to the Sale and Servicing Agreement); (j) the Trust Accounts and (k) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or in lieu of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any 2 time constitute all or part of or are included in the proceeds of any of the foregoing (collectively, the "Indenture Collateral"). The Indenture Collateral Agent, for the benefit of the Trustee on behalf of the Holders of the Notes and for the benefit of the Security Insurer acknowledges such Grant. The Trustee on behalf of the Holders of the Notes accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Holders of the Notes may be adequately and effectively protected. 3 ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. DEFINITIONS. (a) Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. "ACT" has the meaning specified in Section 11.3(a). "ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENT" means, the agreement by and between AmeriCredit Financial Services, Inc. and the Issuer dated as of June 1, 1995. "AFFILIATE" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AFS" means AmeriCredit Financial Services, Inc. "AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of the Issuer who is authorized to act for the Issuer in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Issuer to the Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter). "BUSINESS DAY" means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Fort Worth, Texas, New York, New York, Chicago, Illinois, or the principal place of business of any successor Servicer, successor Issuer, successor 4 Trustee or successor Indenture Collateral Agent are authorized or obligated by law, executive order or governmental decree to be closed. "CLOSING DATE" means June 21, 1995. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "CONTROLLING PARTY" means the Security Insurer, so long as no Insurer Default shall have occurred and be continuing and the Trustee for the benefit of the Noteholders, for so long as an Insurer Default shall have occurred and be continuing. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at date of the execution of this Indenture is located at 135 S. LaSalle Street, Suite 200, Chicago, Illinois 60603-4105 Attention: Asset-Backed Securities Trust Services Department; or at such other address as the Trustee may designate from time to time by notice to the Noteholders, the Security Insurer and the Issuer, or the principal corporate trust office of any successor Trustee (the address of which the successor Trustee will notify the Noteholders, the Security Insurer and the Issuer). "CUSTODIAN" means the AFS and any other Person named from time to time as custodian in any Custodian Agreement acting as agent for the Indenture Collateral Agent, which Person must be acceptable to the Controlling Party (the Custodian as of the Closing Date is acceptable to the Security Insurer as of the Closing Date). "CUSTODIAN AGREEMENT" means any Custodian Agreement from time to time in effect between the Custodian named therein and the Indenture Collateral Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, which Custodian Agreement and any amendments, supplements or modifications thereto shall be acceptable to the Controlling Party (the 5 Custodian Agreement which is effective on the Closing Date is acceptable to the Controlling Party). "DEFAULT" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "EVENT OF DEFAULT" has the meaning specified in Section 5.1. "EXECUTIVE OFFICER" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, any Vice President, any Responsible Officer, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "FINAL SCHEDULED DISTRIBUTION DATE" means September 12, 2000 (or, if such day is not a Business Day, the next Business Day thereafter). "FINAL SCHEDULED MATURITY DATE" means April 30, 2000. "GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create, and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Indenture Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Indenture Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the Granting party or otherwise and generally to do and receive anything that the Granting party is or may be entitled to do or receive thereunder or with respect thereto. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered on the Note Register. 6 "INDEBTEDNESS" means, with respect to any Person at any time, (a) indebtedness or liability of such Person for borrowed money whether or not evidenced by bonds, debentures, notes or other instruments, or for the deferred purchase price of property or services (including trade obligations); (b) obligations of such Person as lessee under leases which should have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (c) current liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of ERISA; (d) obligations issued for or liabilities incurred on the account of such Person; (e) obligations or liabilities of such Person arising under acceptance facilities; (f) obligations of such Person under any guarantees, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (g) obligations of such Person secured by any Lien on property or assets of such Person, whether or not the obligations have been assumed by such Person; or (h) obligations of such Person under any interest rate or currency exchange agreement. "INDENTURE" means this Indenture as amended or supplemented from time to time. "INDENTURE COLLATERAL" has the meaning specified in the Granting Clause of this Indenture. "INDENTURE COLLATERAL AGENT" means, initially, LaSalle National Bank, in its capacity as collateral agent on behalf of the Issuer Secured Parties, including its successors in interest, until and unless a successor Person shall have become the Indenture Collateral Agent pursuant to Section 6.16 hereof, and thereafter "Indenture Collateral Agent" shall mean such successor Person; provided however, that the Trustee and the Indenture Collateral Agent shall always be the same Person. "INDEPENDENT" means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor upon the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b) does 7 not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to the Indenture Collateral Agent under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.1, made by an Independent appraiser or other expert appointed by an Issuer Order and approved by the Indenture Collateral Agent in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "Independent" in this Indenture and that the signer is Independent within the meaning thereof. "INITIAL PURCHASE AGREEMENT" means the agreement dated as of June 1, 1995, between the Issuer and the initial purchaser of the Notes relating to the initial purchase of the Notes. "INSURANCE AGREEMENT" means the Insurance and Indemnity Agreement, dated as of June 1, 1995, among the Security Insurer, the Issuer, the Seller, AFS and AmeriCredit Corp. "INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" has the meaning specified therefor in the Insurance Agreement. "INSURER ISSUER SECURED OBLIGATIONS" means all amounts and obligations which the Issuer may at any time owe to or on behalf of the Security Insurer under this Indenture, the Insurance Agreement or any other Related Document. "ISSUER" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein each other obligor on the Notes. 8 "ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Trustee. "ISSUER SECURED OBLIGATIONS" means the Insurer Issuer Secured Obligations and the Trustee Issuer Secured Obligations. "ISSUER SECURED PARTIES" means each of the Trustee on behalf of the Noteholders in respect of the Trustee Issuer Secured Obligations and the Security Insurer in respect of the Insurer Issuer Secured Obligations. "LETTER AGREEMENT" has the meaning specified in Section 6.7. "LOCKBOX AGREEMENT" means the Tri-Party Remittance Processing Agreement, dated as of June 1, 1995, by and among AFS, First Interstate Bank of Texas, N.A., and the Indenture Collateral Agent, as such agreement may be amended or supplemented from time to time, unless the Trustee hereunder shall cease to be a party thereunder, or such agreement shall be terminated in accordance with its terms, in which event "Lockbox Agreement" shall mean such other agreement, in form and substance acceptable to the Controlling Party, among the Servicer, the Issuer, the Trustee and the Lockbox Bank. "MAJORITY NOTEHOLDER" means the holder of a Note Majority. "1994-A ISSUER STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, dated as of June 1, 1995, among the Security Insurer, the Seller and the Collateral Agent named therein, as the same may be amended from time to time. "1995-A ISSUER STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, dated as of June 1, 1995, among the Security Insurer, the Seller and the Collateral Agent named therein, as the same may be amended from time to time. "NOTE" means any of the 6.55% Automobile Receivables-Backed Notes Series 1995-A issued by the Issuer on the Closing Date. 9 "NOTE INTEREST RATE" means 6.55% per annum (computed on the basis of a 360-day year of twelve 30-day months). "NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified in Section 2.4. "NOTICE OF CLAIM" has the meaning specified in Section 5.18(b). "OFFICERS' CERTIFICATE" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.1, and delivered to, the Trustee. Unless otherwise specified, any reference in this Indenture to an Officers' Certificate shall be to an Officers' Certificate of any Authorized Officer of the Issuer. "OPINION OF COUNSEL" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be employees of or counsel to the Issuer and who shall be satisfactory to the Trustee and, if addressed to the Security Insurer, satisfactory to the Security Insurer, and which shall comply with any applicable requirements of Section 11.1, and shall be in form and substance satisfactory to the Trustee, and if addressed to the Security Insurer, satisfactory to the Security Insurer. "OUTSTANDING" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation; (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor, satisfactory to the Trustee, has been made); and 10 (iii) Notes in exchange for or in lieu of other Notes which have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Trustee is presented that any such Notes are held by a bona fide purchaser; PROVIDED, HOWEVER, that Notes which have been paid with proceeds of the Policy shall continue to remain Outstanding for purposes of this Indenture until the Security Insurer has been paid as subrogee hereunder or reimbursed pursuant to the Insurance Agreement as evidenced by a written notice from the Security Insurer delivered to the Trustee, and the Security Insurer shall be deemed to be the Holder thereof to the extent of any payments thereon made by the Security Insurer; PROVIDED, FURTHER, that in determining whether the Holders of the requisite Outstanding Amount of the Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Related Document, Notes owned by the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing Persons. "OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes Outstanding at the date of determination. "PAYING AGENT" means the Trustee or any other Person that meets the eligibility standards for the Trustee specified in Section 6.11 and, so long as no Insurer Default shall have occurred and be continuing, is consented to by the Security Insurer and is authorized by the Issuer to make the distributions from the Note Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. 11 "PAYMENT DATE" means a Distribution Date. "PERSON" means any individual, corporation, estate, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "POLICY" means the financial guaranty insurance policy issued by the Security Insurer with respect to the Notes, including any endorsements thereto, in the form of Exhibit E. "POLICY CLAIM AMOUNT" has the meaning specified in Section 5.18(a). "PREDECESSOR NOTE" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.5 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "PREFERENCE CLAIM" has the meaning specified in Section 5.19. "PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding. "RATING AGENCY" means each of Moody's and Standard & Poor's, so long as such Persons maintain a rating on the Notes; and if either Moody's or Standard & Poor's no longer maintains a rating on the Notes, such other nationally recognized statistical rating organization selected by the Issuer and (so long as an Insurer Default shall not have occurred and be continuing) acceptable to the Security Insurer. "RATING AGENCY CONDITION" means, with respect to any action, that each Rating Agency shall have been given 10 days prior notice thereof and that each of the Rating Agencies shall have notified the Seller, the Servicer, the 12 Security Insurer, the Trustee and the Issuer in writing that such action will not result in a reduction or withdrawal of the then current rating of the Notes and will not result in an increased capital charge to the Security Insurer. "RECEIVABLE" means any retail installment sale contract which shall appear on Schedule A to this Indenture. "RECEIVABLES PURCHASE AGREEMENT" means the Receivable Purchase Agreement and Assignment dated as of June 1, 1995, between the AFS and the Seller. "RECORD DATE" means, with respect to a Payment Date or Redemption Date, the close of business on the last Business Day immediately preceding such Payment Date or Redemption Date. "REDEMPTION DATE" means in the case of a redemption of the Notes pursuant to Section 10.1, the Payment Date specified by the Issuer pursuant to Section 10.1. "REDEMPTION PRICE" means in the case of a redemption of the Notes pursuant to Section 10.1, an amount equal to the principal amount of the Notes redeemed plus accrued and unpaid interest thereon at the Note Interest Rate to but excluding the Redemption Date. "REGISTERED HOLDER" means the Person in whose name a Note is registered on the Note Register on the applicable Record Date. "RELATED DOCUMENTS" means the Notes, the Receivables Purchase Agreement, the Sale and Servicing Agreement, the Custodian Agreement, the Administrative Services and Facilities Agreement, the Policy, the Spread Account Agreement, the Spread Account Agreement Supplement, the Insurance Agreement, the Indemnification Agreement (as defined in the Insurance Agreement), the Lockbox Agreement, the Stock Pledge Agreement, the 1994-A Issuer Stock Pledge Agreement, the 1995-A Issuer Stock Pledge Agreement and the Initial Purchase Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents" "its Related Documents" or by a similar expression. 13 "RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer of the Trustee assigned by the Trustee to administer its corporate trust affairs relating to the Trust Estate. "SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement, dated as of June 1, 1995, among the Issuer, the Seller, AFS, in its individual capacity and as the Servicer and the Backup Servicer. "SCHEDULE OF RECEIVABLES" means the listing of the Receivables set forth in Exhibit A. "SCHEDULED PAYMENTS" has the meaning specified therefor in the Policy. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SELLER" means Americredit Receivables Corp. "SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated as of December 1, 1994, among the Security Insurer, the Seller, the Collateral Agent and the trustees specified therein, as the same may be amended, supplemented or otherwise modified in accordance with the terms thereof. "SPREAD ACCOUNT AGREEMENT SUPPLEMENT" means the Series 1995-A Supplement to Spread Account Agreement, dated as of June 1, 1995, among FSA, the Seller and the Trustee. "STATE" means any one of the 50 states of the United States of America or the District of Columbia. "STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, dated as of December 1, 1994, among the Security Insurer, AFS and the Collateral Agent named therein, as the same may be amended from time to time. "TERMINATION DATE" means the latest of (i) the expiration of the Policy and the return of the Policy to the Security Insurer for cancellation, (ii) the date on which the Security Insurer shall have received payment and performance of all Insurer Issuer Secured Obligations and 14 (iii) the date on which the Trustee shall have received payment and performance of all Trustee Issuer Secured Obligations. "TRUST ESTATE" means all money, instruments, rights and other property that are subject or intended to be subject to the lien and security interest of this Indenture for the benefit of the Noteholders (including without limitation, the Indenture Collateral Granted to the Indenture Collateral Agent), including all proceeds thereof. "TRUSTEE" means LaSalle National Bank, a national banking association, as Trustee under this Indenture, or any successor Trustee under this Indenture. "TRUSTEE ISSUER SECURED OBLIGATIONS" means all amounts and obligations which the Issuer may at any time owe to or on behalf of the Trustee for the benefit of the Noteholders under this Indenture or the Notes. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time. (b) Capitalized terms used herein without definition shall have the respective meanings assigned to such terms in the Sale and Servicing Agreement. SECTION 1.2. RULES OF CONSTRUCTION. Unless otherwise specified: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; 15 (v) words in the singular include the plural and words in the plural include the singular; and (vi) references to Sections, Subsections, Schedules and Exhibits shall refer to such portions of this Indenture. ARTICLE II THE NOTES SECTION 2.1. FORM. The Notes and the Trustee's certificate of authentication shall be in substantially the forms set forth in Exhibit B, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit B are part of the terms of this Indenture. SECTION 2.2. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices 16 prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Trustee shall upon receipt of the Policy and Issuer Order authenticate and deliver Notes for original issue in an aggregate principal amount of $99,170,000. The aggregate principal amount of Notes outstanding at any time may not exceed that amount except as provided in Section 2.5. Each Note shall be dated the date of its authentication. The Notes shall be issuable as registered Notes in minimum denominations of $100,000 and in integral multiples of $1,000 in excess thereof. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.3. TEMPORARY NOTES. Pending the preparation of definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the definitive Notes in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.2, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive 17 Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.4. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers of Notes. The Trustee shall be "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.2, the Issuer shall execute, and the Trustee shall authenticate and the Noteholder shall obtain from the Trustee, in the name of the designated transferee or transferees, one or more new Notes in any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes in any authorized denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and the Noteholder shall obtain from the Trustee, the Notes which the Noteholder making the exchange is entitled to receive. 18 All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in The City of New York or the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and such other documents as the Trustee may require. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.3 not involving any transfer. SECTION 2.5. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any mutilated Note is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Trustee and the Security Insurer (unless an Insurer Default shall have occurred and be continuing) such security or indemnity as may be required by them to hold the Issuer, the Trustee and the Security Insurer harmless (except, in the case of The Prudential Insurance Company of America or any Affiliate thereof, a written agreement of indemnity from such Noteholder shall satisfy such requirement) then, in the absence of notice to the Issuer, the Note Registrar or the Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note; PROVIDED, HOWEVER, that if any such destroyed, lost or 19 stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer, the Security Insurer and the Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer or the Trustee may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Trustee or the Note Registrar) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 20 SECTION 2.6. PERSON DEEMED OWNER. Prior to due presentment for registration of transfer of any Note, the Issuer, the Trustee, the Security Insurer and any agent of the Issuer, the Trustee or the Security Insurer may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Security Insurer, the Trustee nor any agent of the Issuer or the Trustee shall be affected by notice to the contrary. SECTION 2.7. PAYMENT OF PRINCIPAL AND INTEREST. (a) The Notes shall accrue interest as provided in the form of the Note set forth in Exhibit B, and such interest shall be payable on each Payment Date as specified therein. Any installment of interest or principal, if any, payable on any Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the Record Date, by wire transfer (provided that the Noteholder has delivered to the Trustee in writing instructions with respect to effecting a wire transfer to such Noteholder) or if wire instructions have not been provided, by check mailed first-class, postage prepaid to such Person's address as it appears on the Note Register on such, Record Date, except for the final installment of principal payable with respect to such Note on a Payment Date or on the Final Scheduled Distribution Date (and except for the Redemption Price for any Note called for redemption pursuant to Section 10.1) which shall be payable as provided below. The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.3. (b) The principal of each Note shall be payable in installments on each Payment Date as provided in the form of Note set forth in Exhibit B. Notwithstanding the foregoing the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing so long as an Insurer Default shall not have occurred and be continuing or, if an Insurer Default shall have occurred and be continuing on the date on which an Event of Default shall have occurred and be 21 continuing and the Trustee or a Note Majority have declared the Notes to be immediately due and payable in the manner provided in Section 5.2. All principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto. The Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment; provided however, if The Prudential Insurance Company of America or if any Affiliate thereof is a Noteholder, the final installment shall be made without presentation and surrender of the Note to the Trustee. By purchase and acceptance of the Notes, the Prudential Insurance Company of America agrees to surrender the Notes to the Trustee within a reasonable period of time after receipt of such final installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.2. (c) Promptly following the date on which all principal of and interest on the Notes has been paid in full and the Notes have been surrendered to the Trustee, the Trustee shall, if the Security Insurer has paid any amount in respect of the Notes under the Policy which has not been reimbursed to it, deliver such surrendered Notes to the Security Insurer. SECTION 2.8. CANCELLATION. Subject to Section 2.7(c), all Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by the Trustee. Subject to Section 2.7(c), the Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall 22 be promptly canceled by the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section, except as expressly permitted by this Indenture. Subject to Section 2.7(c), all canceled Notes may be held or disposed of by the Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be destroyed or returned to it, provided that such Issuer Order is timely and the Notes have not been previously disposed of by the Trustee. SECTION 2.9. CERTAIN TRANSFER RESTRICTIONS. No Note may be sold or transferred (including, without limitation, by pledge or hypothecation) unless such sale or transfer is (i) pursuant to a registration under the Securities Act and the securities laws of applicable states, (ii) pursuant to Rule 144A of the Securities Act or (iii) exempt from the registration requirements of the Securities Act of 1933, as amended, and is exempt from registration under applicable state securities laws. The Issuer shall require, prior to any sale or other transfer of a Note, in order to assure compliance with the preceding sentence, that the Noteholder's prospective transferee certify to the Issuer and the Trustee in writing the facts surrounding such transfer in a representation letter in the form attached as Exhibit A or Exhibit B to the Issuer's Private Placement Memorandum dated June 21, 1995 or substantially in a form approved by the Issuer and the Trustee from time to time, as appropriately modified to reflect the facts applicable to such transfer and it being understood that such certificate is not intended to create additional restrictions on transfer of the Notes. Each such purchaser of the Notes shall be required to represent in such certificate that it is acquiring its Notes for its own account and not as nominee for undisclosed investors and not with a view to any "distribution" within the meaning of the Securities Act of 1933, as amended, and to agree in such certificate that it will not resell its Notes except as set forth above, and subject to the limitation on the number of Noteholders and other restrictions on transferability contained herein and in the Indenture. Neither the Issuer nor the Trustee is obligated to register the Notes under the Securities Act or any state securities laws. 23 In determining compliance with the transfer restrictions contained in this Section 2.9, the Trustee may rely upon an Opinion of Counsel, the cost of obtaining which shall be an expense of the holder of the Note to be transferred, provided, however, that no Opinion of Counsel shall be required if a Representation Letter has been delivered. ARTICLE III COVENANTS SECTION 3.1. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and punctually pay the principal and interest on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing the Issuer will cause to be distributed to the Noteholders all amounts on deposit in the Note Distribution Account on a Payment Date. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.2. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in Dover, Delaware, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.3. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Section 8.2, all payments of amounts due and payable with respect to any Notes that are to be made from 24 amounts withdrawn from the Note Distribution Account pursuant to Section 8.2(b) shall be made on behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts so withdrawn from the Note Distribution Account for payments of Notes shall be paid over to the Issuer. On, or before each Payment Date and Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Trustee) shall promptly notify the Trustee of its action or failure so to act. The Issuer will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee and the Security Insurer an instrument in which such Paying Agent shall agree with the Trustee (and if the Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Trustee notice of any default (of which it has actual knowledge) by the Issuer (or any other obligor upon the Notes) in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and 25 (v) on behalf of and at the direction of the Issuer, comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money held by the Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and upon Issuer Request with the consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) shall be deposited by the Trustee in the Collection Account; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that if such money or any portion thereof had been previously deposited by the Security Insurer or the Indenture Collateral Agent with the Trustee for the payment of principal or interest on the Notes, to the extent any amounts are owing to the Security Insurer, such amounts shall be paid promptly to the Security Insurer upon receipt of a written request by the Security Insurer to such effect, and PROVIDED, FURTHER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such 26 publication, any unclaimed balance of such money then remaining will be repaid to or for the account of the Issuer. The Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, making notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.4. EXISTENCE. The Issuer will keep in full effect its existence, rights and franchises as a corporation under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Indenture Collateral and each other instrument or agreement included in the Trust Estate. SECTION 3.5. PROTECTION OF TRUST ESTATE. The Issuer intends the security interest Granted pursuant to this Indenture in favor of the Issuer Secured Parties to be prior to all other liens in respect of the Trust Estate, and the Issuer shall take all actions necessary to obtain and maintain, in favor of the Indenture Collateral Agent, for the benefit of the Issuer Secured Parties, a first lien on and a first priority, perfected security interest in the Trust Estate. The Issuer will from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, all as prepared by the Servicer and delivered to the Issuer, and will take such other action necessary or advisable to: (i) grant more effectively all or any portion of the Trust Estate; 27 (ii) maintain the Trust Estate free and clear of all liens; (iii) maintain or preserve the lien and security interest (and the priority thereof) in favor of the Indenture Collateral Agent for the benefit of the Issuer Secured Parties created by this Indenture or carry out more effectively the purposes hereof; (iv) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (v) enforce any of the Indenture Collateral; (vi) preserve and defend title to the Trust Estate and the rights of the Indenture Collateral Agent in such Trust Estate against the claims of all persons and parties; and (vii) pay all taxes or assessments levied or assessed upon the Trust Estate when due. The Issuer hereby designates the Indenture Collateral Agent its agent and attorney-in-fact to execute any financing statement, continuation statement or other instrument required by the Indenture Collateral Agent pursuant to this Section. SECTION 3.6. OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date the Issuer shall furnish to the Trustee, the Indenture Collateral Agent and the Security Insurer an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto, and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements, as are necessary to perfect and make effective the first priority lien and security interest in favor of the Indenture Collateral Agent, for the benefit of the Issuer Secured Parties, created by this Indenture and reciting the details of such action, or stating that, in the opinion of such 28 counsel, no such action is necessary to make such lien and security interest effective. (b) On or before July 1, in each calendar year, beginning in 1996, the Issuer shall furnish to the Trustee, the Indenture Collateral Agent and the Security Insurer an Opinion of Counsel with respect to each jurisdiction in which a Uniform Commercial Code financing statement has been filed by the Issuer either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the first priority lien and security interest created by this Indenture and reciting the details of such action or stating that in the opinion of such counsel no such action is necessary to maintain such lien and security interest. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest of this Indenture until July 1 in the following calendar year. SECTION 3.7. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in this Indenture, the Sale and Servicing Agreement or such other instrument or agreement. (b) The Issuer may contract with other Persons acceptable to the Controlling Party to assist it in 29 performing its duties under this Indenture, and any performance of such duties by a Person identified to the Trustee and the Security Insurer in an Officers' Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the Related Documents and in the instruments and agreements included in the Trust Estate, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Sale and Servicing Agreement in accordance with and within the time periods provided for herein and therein. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Termination Event under the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee, the Security Insurer, the Noteholders, the Note Majority and the Rating Agencies thereof, and shall specify in such notice the action, if any, the Issuer is taking with respect thereto. If a Servicer Termination Event shall arise from the failure of the Servicer to perform any of its duties or obligations under the Sale and Servicing Agreement with respect to the Receivables, the Issuer shall take all reasonable steps available to it to remedy such failure. (e) If an Insurer Default shall have occurred and be continuing and if the Issuer has given notice of termination to the Servicer of the Servicer's rights and powers pursuant to Section 8.2 of the Sale and Servicing Agreement, as promptly as possible thereafter, the Issuer shall appoint, with the consent of the Holders of 66 2/3% of the Outstanding Amount, a successor servicer in accordance with Section 8.3 of the Sale and Servicing Agreement. (f) Upon any termination of the Servicer's rights and powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee. As soon as a successor Servicer is appointed, the Issuer shall notify the 30 Trustee of such appointment, specifying in such notice the name and address of such successor Servicer. (g) The Issuer agrees that it will not waive timely performance or observance by the Servicer, the Backup Servicer, the Seller or AFS of their respective duties under the Related Documents: (x) without the prior consent of the Controlling Party or (y) if the effect thereof would adversely affect the Holders of the Notes. SECTION 3.8. NEGATIVE COVENANTS. Until the Termination Date, the Issuer shall not: (i) except as expressly permitted by this Indenture, the Purchase Agreement or the Sale and Servicing Agreement, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Trust Estate, unless directed to do so by the Controlling Party; (ii) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien in favor of the Indenture Collateral Agent created by this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien in favor of the Indenture Collateral Agent created by this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise 31 by operation of law, in each case on a Financed Vehicle and arising solely as a result of an action or omission of the related Obligor), (C) permit the lien in favor of the Indenture Collateral Agent created by this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Trust Estate, or (D) amend, modify or fail to comply with the provisions of the Related Documents without the prior written consent of the Controlling Party. SECTION 3.9. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the Trustee, the Noteholders and the Security Insurer, within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year 1996), an Officers' Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that (i) a review of the activities of the Issuer during such year and of performance under this Indenture has been made under such Authorized Officer's supervision; and (ii) based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Authorized Officer and the nature and status thereof. SECTION 3.10. CONSOLIDATION AND DISPOSITION OF ASSETS. (a) The Issuer shall not consolidate or merge with or into any other Person. (b) The Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Trust Estate, to any Person (except as expressly permitted by this Indenture and the Related Documents). 32 SECTION 3.11. TRANSFEREE OF ISSUER. Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10(b), the Issuer will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Trustee stating that the Issuer is to be so released. SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the Receivables in the manner contemplated by this Indenture and the Related Documents and activities incidental thereto. After the Closing Date, the Issuer shall not fund the purchase of any new Receivables. SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any Indebtedness except for (i) the Notes, (ii) obligations owing from time to time to the Security Insurer under the Insurance Agreement and (iii) any other Indebtedness permitted by or arising under the Issuer's Related Documents. The proceeds of the Notes shall be used exclusively to fund the Issuer's purchase of the Receivables and the other assets specified in the Sale and Servicing Agreement, to fund the Spread Account and to pay the Issuer's organizational, transactional and start-up expenses. SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer to comply with Sections 3.9, 3.10 and 3.11 of the Sale and Servicing Agreement. SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuming another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or 33 agree contingently to do so) any stock, obligations, assets or securities of, any other interest in, or make any capital contribution to, any other Person. SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.17. RESTRICTED PAYMENTS. Except as expressly permitted by this Indenture or the Sale and Servicing Agreement, the Issuer shall not, directly or indirectly, (i) make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to its shareholder or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the Related Documents. SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the Trustee, the Security Insurer, the Noteholders and the Rating Agencies prompt written notice of each Event of Default hereunder, each default on the part of the Servicer or the Seller of its obligations under the Sale and Servicing Agreement and each default on the part of AFS of its obligations under the Purchase Agreement. SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee or the Security Insurer, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the requirements of all applicable laws, the non-compliance with which would, individually or in the aggregate, materially and adversely affect the ability of the Issuer to perform its obligations under the Notes, this Indenture or any Related Document. 34 SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT. The Issuer shall not agree to any amendment to Section 10.1 of the Sale and Servicing Agreement to eliminate the requirements thereunder that the Trustee or the Holders of the Notes consent to amendments thereto as provided therein. SECTION 3.22. INCOME TAX CHARACTERIZATION. For purposes of federal income, state and local income and franchise and any other income taxes, the Issuer directs the Trustee to treat the Notes as debt of the Issuer. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal, interest and premium, if any, thereon, (iv) Sections 3.3, 3.4, 3.5, 3.7, 3.8, 3.10, 3.12, 3.13, 3.20 and 3.21, (v) the rights, obligations and immunities of the Trustee hereunder (including the rights of the Trustee under Section 6.7 and the obligations of the Trustee under Section 4.2, 5.18 and 5.19) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either (1) all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.5 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the 35 Issuer or discharged from such trust, as provided in Section 3.3) have been delivered to the Trustee for cancellation and the Policy has expired and been returned to the Security Insurer for cancellation; or (2) all Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at the Final Scheduled Distribution Date within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Collateral Agent as part of the Trust Estate cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust in an Eligible Account in the name of the Indenture Collateral Agent for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation when due to the Final Scheduled Distribution Date or Redemption Date (if Notes shall have been called for redemption pursuant to Section 10.1), as the case may be; (B) the Issuer has paid or caused to be paid all Insurer Issuer Secured Obligations and all Trustee Issuer Secured Obligations; and (C) the Issuer has delivered to the Trustee, the Indenture Collateral Agent and the Security Insurer an 36 Officers' Certificate, an Opinion of Counsel and (if required by the Trustee, the Indenture Collateral Agent and the Security Insurer) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.1(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and the Rating Agency Condition has been satisfied. SECTION 4.2. APPLICATION OF TRUST MONEY. All moneys deposited with the Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest, but such moneys need not be segregated from other funds except to the extent required herein or in the Sale and Servicing Agreement or required by law and shall be held by the Trustee uninvested or invested in Eligible Investments which meet the criteria specified in (a)(i) of the definition of Eligible Investments. SECTION 4.3. PAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Trustee to be held and applied according to Section 3.3 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 4.4. RELEASE OF TRUST ESTATE. The Indenture Collateral Agent shall, on or after the Termination Date, release any remaining portion of the Trust Estate from the lien created by this Indenture and deposit in the Collection Account any funds then on deposit in any other Trust Account. The Indenture Collateral Agent shall release property from the lien created by this Indenture pursuant to this Section 4.4 only upon receipt of a written request of 37 the Issuer accompanied by an Officer's Certificate and an Opinion of Counsel. The Trustee shall surrender the Policy to the Security Insurer upon the expiration of the Term of the Policy (as defined in Section 1 of the Policy). ARTICLE V REMEDIES SECTION 5.1. EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of any interest on any Note when the same becomes due and payable, and such default shall continue for a period of five days (solely for purposes of this clause, a payment on the Notes funded by the Security Insurer or the Indenture Collateral Agent shall be deemed to be a payment made by the Issuer); or (ii) default in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable (solely for purposes of this clause, a payment on the Notes funded by the Security Insurer or the Indenture Collateral Agent shall be deemed to be a payment made by the Issuer); or (iii) so long as an Insurer Default shall not have occurred and be continuing an Insurance Agreement Event of Default shall have occurred; PROVIDED, HOWEVER, that the occurrence of an Insurance Agreement Event of Default may not form the basis of an Event of Default unless the Security Insurer shall, upon prior written notice to the Rating Agencies, have delivered to the Issuer and the Trustee and not rescinded a written 38 notice specifying that such Insurance Agreement Event of Default constitutes an Event of Default under this Indenture; (iv) so long as an Insurer Default shall have occurred and be continuing, default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with), or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 30 days after knowledge thereof by the Issuer or there shall have been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% of the Outstanding Amount of the Notes, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (v) so long as an Insurer Default shall have occurred and be continuing, the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and such 39 decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (vi) so long as an Insurer Default shall have occurred and be continuing, the commencement by the Issuer of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar Official of the Issuer or for any substantial part of the Trust Estate, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Trustee, the Noteholders and the Security Insurer, within five days after obtaining knowledge of the occurrence thereof, written notice in the form of an Officers' Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (iii), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.2. RIGHTS UPON EVENT OF DEFAULT. (a) If an Insurer Default shall not have occurred and be continuing and an Event of Default shall have occurred and be continuing the Notes shall become immediately due and payable at one hundred percent (100%) of their outstanding principal balance, together with accrued interest thereon. In the event of any acceleration of the Notes by operation of this Section 5.2, the Trustee shall continue to be entitled to make claims under the Policy pursuant to Section 5.18 hereof for Scheduled Payments on the Notes. Payments under the Policy following acceleration of the Notes shall be applied by the Trustee: 40 FIRST: to Noteholders for amounts due and unpaid on the Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest, and SECOND: to Noteholders for amounts due and unpaid on the Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal. (b) In the event the Notes are accelerated due to an Event of Default, the Security Insurer shall have the right (in addition to its obligation to pay Scheduled Payments on the Notes in accordance with the Policy), but not the obligation, to make payments under the Policy or otherwise of interest and principal due on the Notes, in whole or in part, on any date or dates following such acceleration as the Security Insurer, in its sole discretion, shall elect. In no event may the Security Insurer make distributions with respect to the Notes later than required by the Security Insurer's obligation to pay Scheduled Payments on the Notes in accordance with the Policy. (c) If an Insurer Default shall have occurred and be continuing and an Event of Default shall have occurred and be continuing the Trustee in its discretion may, or if so requested in writing by Holders holding Notes representing at least 66-2/3% of the aggregate outstanding principal amount of the Notes shall, upon prior written notice to the Rating Agencies, declare by written notice to the Issuer that the Notes become, whereupon they shall become, immediately due and payable at one hundred percent (100%) of their outstanding principal balance, together with accrued interest thereon. Notwithstanding anything to the contrary in this paragraph (c), if an Event of Default specified in Section 5.1(v) and (vi) shall occur and be continuing when an Insurer Default has occurred and is continuing the Notes shall become immediately due and payable at par, together with accrued interest thereon. 41 SECTION 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE; AUTHORITY OF CONTROLLING PARTY. (a) The Issuer covenants that if the Notes are accelerated following the occurrence of an Event of Default, the Issuer will, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Notes, the whole amount then due and payable on such Notes for principal and interest, with interest upon the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the Note Interest Rate and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel. (b) Each Issuer Secured Party hereby irrevocably and unconditionally appoints the Controlling Party as the true and lawful attorney-in-fact of such Issuer Secured Party for so long as such Issuer Secured Party is not the Controlling Party, with full power of substitution, to execute, acknowledge and deliver any notice, document, certificate, paper, pleading or instrument and to do in the name of the Controlling Party as well as in the name, place and stead of such Issuer Secured Party such acts, things and deeds for or on behalf of and in the name of such Issuer Secured Party under this Indenture (including specifically under Section 5.4) and under the Related Documents which such Issuer Secured Party could or might do or which may be necessary, desirable or convenient in such Controlling Party's sole discretion to effect the purposes contemplated hereunder and under the Related Documents and, without limitation, following the occurrence of an Event of Default, exercise full right, power and authority to take, or defer from taking, any and all acts with respect to the administration, maintenance or disposition of the Trust Estate. (c) If an Event of Default occurs and is continuing, the Trustee may at the direction of the Controlling Party (except as provided in Section 5.3(d) below), proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings 42 as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. (d) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its Property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal, interest and premium, if any, owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders 43 of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (f) All rights of action and of asserting claims under this Indenture or under any of the Notes or, if an Insurer Default shall have occurred and be continuing, under the Spread Account Agreement, may be enforced by the Trustee without the possession of any of the Notes or the production 44 thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. (g) In any Proceedings brought by the Trustee (including any Proceedings involving the interpretation of any provision of this Indenture or, if an Insurer Default shall have occurred and be continuing, under the Spread Account Agreement), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 5.4. REMEDIES. (a) If an Event of Default shall have occurred and be continuing the Controlling Party may (subject to Section 5.5): (i) institute Proceedings in its own name and as or on behalf of a trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due, (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; (iii) exercise any remedies of a secured party under the UCC and any other remedy available to the Trustee and take any other appropriate action to protect and enforce the rights and remedies of the Issuer Secured Parties; and (iv) direct the Indenture Collateral Agent to sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted 45 in any manner permitted by law; PROVIDED, HOWEVER, that, if the Trustee is the Controlling Party, the Trustee may not sell or otherwise liquidate the Trust Estate following an Event of Default, other than an Event of Default described in Section 5.1(i) or (ii), unless (A) the Holders of 100% of the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such sale or liquidation distributable to the Noteholders are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest or (C) the Trustee determines that the Trust Estate will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared due and payable, and the Trustee provides prior written notice to the Rating Agencies and obtains the consent of Holders of 66-2/3% of the Outstanding Amount of the Notes. In determining such sufficiency or insufficiency with respect to clause (B) and (C), the Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.5. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the Trustee is Controlling Party and if the Notes have been declared to be due and payable under Section 5.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Trustee may, but need not, elect to maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Trustee shall take such desire into account when determining whether or not to maintain possession of the Trust Estate. In determining whether to maintain possession of the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation 46 as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.6. PRIORITIES. (a) If the Trustee collects any money or property pursuant to this Article V (excluding any payments made under the Policy), or if the Indenture Collateral Agent delivers any money or property in respect of liquidation of the Trust Estate to the Trustee pursuant to Section 5.4(a)(iv), the Trustee shall pay out the money or property in the following order: FIRST: amounts due and owing and required to be distributed to the Servicer, the Trustee, the Lockbox Bank, the Custodian, the Backup Servicer, the Collateral Agent and the Indenture Collateral Agent, respectively, pursuant to priorities (i) and (ii) of Section 4.6 of the Sale and Servicing Agreement and not previously distributed, in the order of such priorities and without preference or priority of any kind within such priorities; SECOND: to Noteholders for amounts due and unpaid on the Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; THIRD: to Noteholders for amounts due and unpaid on the Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; FOURTH: amounts due and owing and required to be distributed to the Security Insurer pursuant to priority (v) of Section 4.6 of the Sale and Servicing Agreement and not previously distributed; and 47 FIFTH: to the Collateral Agent to be applied as provided in the Spread Account Agreement. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Issuer shall mail to each Noteholder and the Trustee a notice that states the record date, the payment date and the amount to be paid. SECTION 5.7. LIMITATION OF SUITS. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Trustee of a continuing Event of Default, (ii) the Holders of not less than 20% of the Outstanding Amount of the Notes have made written request to the Trustee to institute such Proceeding in respect of such Event of Default in its own name as Trustee hereunder; (iii) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request, (iv) the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; (v) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of 66 2/3% of the Outstanding Amount of the Notes; and (vi) an Insurer Default shall have occurred and be continuing; it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by 48 virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Outstanding Amount of the Notes, the Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture. SECTION 5.8. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder; PROVIDED, HOWEVER, that so long as an Insurer Default shall not have occurred and be continuing no such suit shall be instituted. SECTION 5.9. RESTORATION OF RIGHTS AND REMEDIES. If the Controlling Party or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Trustee or to such Noteholder, then and in every such case the Issuer, the Trustee and the Noteholders shall, subject to any determination in such Proceeding be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Noteholders shall continue as though no such Proceeding had been instituted. SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the 49 Controlling Party or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Controlling Party or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Noteholders, as the case may be. SECTION 5.12. CONTROL BY NOTEHOLDERS. If the Trustee is the Controlling Party, the Holders of 66 2/3% of the Outstanding Amount of the Notes shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee with respect to the Notes or exercising any trust or power conferred on the Trustee; provided that (i) such direction shall not be in conflict with any rule of law or with this Indenture; (ii) subject to the express terms of Section 5.4, any direction to the Trustee to sell or liquidate the Trust Estate shall be by the Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (iii) if the conditions set forth in Section 5.5 have been satisfied and the Trustee elects to retain the Trust Estate pursuant to such Section, then any direction to the Trustee by Holders of Notes representing less than 100% of the Outstanding Amount 50 of the Notes to sell or liquidate the Trust Estate shall be of no force and effect; and (iv) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction; PROVIDED, HOWEVER, that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.13. WAIVER OF PAST DEFAULTS. If an Insurer Default shall have occurred and be continuing, the Holders of Notes of not less than 66 2/3% of the Outstanding Amount of the Notes may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or interest on any of the Notes or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note. In the case of any such waiver, the Issuer, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' 51 fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (a) any suit instituted by the Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantages of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.16. ACTION ON NOTES. The Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. 52 SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a) Promptly following a request from the Trustee to do so and at the Seller's expense, the Issuer agrees to take all such lawful action as the Trustee may request to compel or secure the performance and observance by the Seller, the Servicer and AFS, as applicable of each of their obligations to the Issuer under or in connection with the Sale and Servicing Agreement or to the Seller under or in connection with the Purchase Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale and Servicing Agreement to the extent and in the manner directed by the Trustee, including the transmission of notices of default on the part of the Seller or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Seller or the Servicer of each of their obligations under the Sale and Servicing Agreement. (b) If the Trustee is Controlling Party and if an Event of Default has occurred and is continuing the Trustee may, and at the direction (which direction shall be in writing, including facsimile) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller or the Servicer under or in connection with the Sale and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. (c) Promptly following a request from the Trustee to do so and at the Seller's expense, the Issuer agrees to take all such lawful action as the Trustee may request to compel or secure the performance and observance by AFS of each of its obligations to the Seller under or in connection with the Purchase Agreement in accordance with the terms 53 thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Purchase Agreement to the extent and in the manner directed by the Trustee, including the transmission of notices of default on the part of the Seller thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by AFS of each of its obligations under the Purchase Agreement. (d) If the Trustee is Controlling Party and if an Event of Default has occurred and is continuing the Trustee may, and at the direction (which direction shall be in writing, including facsimile) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Seller against AFS under or in connection with the Purchase Agreement, including the right or power to take any action to compel or secure performance or observance by AFS of each of its obligations to the Seller thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Purchase Agreement, and any right of the Seller to take such action shall be suspended. SECTION 5.18. CLAIMS UNDER POLICY. (a) In the event that the Trustee has delivered a Deficiency Notice with respect to any Determination Date pursuant to Section 5.1 of the Sale and Servicing Agreement, the Trustee shall determine on the related Draw Date whether the sum of (i) the amount of Available Funds with respect to such Determination Date (as stated in the Servicer's Certificate with respect to such Determination Date), and (ii) the amount of the Deficiency Claim Amount, if any, distributed by the Collateral Agent pursuant to the Spread Account Agreement to the Trustee pursuant to a Deficiency Notice delivered with respect to such Payment Date (as stated in the certificate delivered on the immediately preceding Deficiency Claim Date to the Collateral Agent pursuant to Section 3.03(a) of the Spread Account Agreement) would be insufficient, after giving effect to the distributions required by Section 4.6(i)-(ii) of the Sale and Servicing Agreement, to pay the sum of the Noteholders' Interest Distributable Amount and the Noteholders' Principal Distributable Amount for the related Payment Date, then in 54 such event the Trustee shall furnish to the Security Insurer no later than 12:00 noon New York City time on the related Draw Date a completed Notice of Claim in the amount of the shortfall in amounts so available to pay the Noteholders' Interest Distributable Amount and the Noteholders' Principal Distributable Amount with respect to such Payment Date (the amount of any such shortfall being hereinafter referred to as the "Policy Claim Amount"). Amounts paid by the Security Insurer pursuant to a claim submitted under this Section 5.18(a) shall be deposited by the Trustee into the Note Distribution Account for payment to Noteholders on the related Payment Date. (b) Any notice delivered by the Trustee to the Security Insurer pursuant to subsection 5.18(a) shall specify the Policy Claim Amount claimed under the Policy and shall constitute a "Notice of Claim" under the Policy. In accordance with the provisions of the Policy, the Security Insurer is required to pay to the Trustee the Policy Claim Amount properly claimed thereunder by 12:00 noon, New York City time, on the later of (i) the third Business Day following receipt on a Business Day of the Notice of Claim, and (ii) the applicable Payment Date. Any payment made by the Security Insurer under the Policy shall be applied solely to the payment of the Notes, and for no other purpose. (c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder any Policy Claim Amount from the Security Insurer and (ii) deposit the same in the Note Distribution Account for distribution to Noteholders as provided in Section 3.1 or Section 5.2 of this Indenture. Any and all Policy Claim Amounts disbursed by the Trustee from claims made under the Policy shall not be considered payment by the Issuer or from the Spread Account with respect to such Notes, and shall not discharge the obligations of the Issuer with respect thereto. The Security Insurer shall, to the extent it makes any payment with respect to the Notes, become subrogated to the rights of the recipients of such payments to the extent of such payments. Subject to and conditioned upon any payment with respect to the Notes by or on behalf of the Security Insurer, the Trustee shall assign to the Security Insurer all rights to the payment of interest or principal with 55 respect to the Notes which are then due for payment to the extent of all payments made by the Security Insurer and the Security Insurer may exercise any option, vote, right, power or the like with respect to the Notes to the extent that it has made payment pursuant to the Policy. To evidence such subrogation, the Note Registrar shall note the Security Insurer's rights as subrogee upon the register of Noteholders upon receipt from the Security Insurer of proof of payment by the Security Insurer of any Noteholders' Interest Distributable Amount or Noteholders' Principal Distributable Amount and upon the surrender or presentment of any Note for payment, the Trustee shall stamp on such Note the legend "$[insert applicable amount] paid by Financial Security and the balance hereof has been cancelled and reissued." The foregoing subrogation shall in all cases be subject to the rights of the Noteholders to receive all Scheduled Payments in respect of the Notes. (d) The Trustee shall keep a complete and accurate record of all funds deposited by the Security Insurer into the Note Distribution Account and the allocation of such funds to payment of interest on and principal paid in respect of any Note. The Security Insurer shall have the right to inspect such records at reasonable times upon one Business Day's prior notice to the Trustee. (e) The Trustee shall be entitled to enforce on behalf of the Noteholders the obligations of the Security Insurer under the Policy. Notwithstanding any other provision of this Indenture or any Related Document, the Noteholders are not entitled to institute proceedings directly against the Security Insurer. SECTION 5.19. PREFERENCE CLAIMS. (a) In the event that the Trustee has received a certified copy of an order of the appropriate court that any Scheduled Payments paid on a Note has been avoided in whole or in part as a preference payment under applicable bankruptcy law, the Trustee shall so notify the Security Insurer, shall comply with the provisions of the Policy to obtain payment by the Security Insurer of such avoided payment, and shall, at the time it provides notice to the 56 Security Insurer, notify Holders of the Notes by mail that, in the event that any Noteholder's payment is so recoverable, such Noteholder will be entitled to payment pursuant to the terms of the Policy. The Trustee shall furnish to the Security Insurer its records evidencing the payments of principal of and interest on the Notes, if any, which have been made by the Trustee so recoverable or recoverable or recovered from Noteholders, and the dates on which such payments were made. Pursuant to the terms of the Policy, the Security Insurer will make such payment on behalf of the Noteholders to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order (as defined in the Policy) and not to the Trustee or any Noteholder directly (unless a Noteholder has previously paid such payment to the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in which case the Security Insurer will make such payment to the Trustee for distribution to such Noteholder upon proof of such payment reasonably satisfactory to the Security Insurer). (b) The Trustee shall promptly notify the Security Insurer of any proceeding or the institution of any action (of which the Trustee has actual knowledge) seeking the avoidance as a preferential transfer under applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (a "Preference Claim") of any distribution made with respect to the Notes. Each Holder, by its purchase of Notes, and the Trustee hereby agree that so long as an Insurer Default shall not have occurred and be continuing, the Security Insurer may at any time during the continuation of any proceeding relating to a Preference Claim direct all matters relating to such Preference Claim including, without limitation, (i) the direction of any appeal of any order relating to any Preference Claim and (ii) the posting of any surety, supersedeas or performance bond pending any such appeal at the expense of the Security Insurer, but subject to reimbursement as provided in the Insurance Agreement. In addition, and without limitation of the foregoing, as set forth in Section 5.18(c), the Security Insurer shall be subrogated to, and each Noteholder and the Trustee hereby delegate and assign, to the fullest extent permitted by law, the rights of the Trustee and each Noteholder in the conduct of any proceeding with respect to a Preference Claim, including, without limitation, all rights of any party to an 57 adversary proceeding action with respect to any court order issued in connection with any such Preference Claim. ARTICLE VI THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT SECTION 6.1. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and in the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; however, the Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture and, if applicable, the Spread Account Agreement and the Trustee's other Related Documents. (c) The Trustee may not be relieved from liability for its own grossly negligent action, its own grossly negligent failure to act or its own wilful misconduct, except that: 58 (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to any provision of this Indenture. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Sale and Servicing Agreement. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. (i) The Trustee shall, upon one Business Day's prior notice to the Trustee, permit any representative of the Noteholders, Security Insurer, or the Issuer, during the 59 Trustee's normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Notes, to make copies and extracts therefrom and to discuss the Trustee's affairs and actions, as such affairs and actions relate to the Trustee's duties with respect to the Notes, with the Trustee's officers and employees responsible for carrying out the Trustee's duties with respect to the Notes. (j) In no event shall the Trustee be required to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer, or any other party, under the Sale and Servicing Agreement except that LaSalle National Bank solely in its capacity as Backup Servicer shall perform and be responsible for such obligations during such time, if any, as the Backup Servicer shall be the successor to, and be vested with the rights, powers, duties and privileges of the Servicer in accordance with the terms of the Sale and Servicing Agreement. (k) The Trustee shall, and hereby agrees that it will, perform all of the obligations and duties required of it under the Sale and Servicing Agreement. (l) The Trustee shall, and hereby agrees that it will, hold the Policy in trust, and will hold any proceeds of any claim on the Policy in trust solely for the use and benefit of the Noteholders. The Trustee will deliver to the Rating Agency notice of any change made to the Policy prior to the Termination Date. (m) Without limiting the generality of this Section 6.1, the Trustee, in its capacity as Trustee, shall have no duty (i) to see to any recording, filing or depositing of this Indenture or any agreement referred to herein or any financing statement evidencing a security interest in the Financed Vehicles, or to see to the maintenance of any such recording or filing or depositing or to any recording, refiling or redepositing of any thereof, (ii) to see to any insurance of the Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii) to see to the payment or discharge of any tax, assessment or other governmental charge or any Lien or encumbrance of any kind owing with respect to, assessed or levied against any 60 part of the Trust, (iv) to confirm or verify the contents of any reports or certificates delivered to the Trustee pursuant to this Indenture or the Sale and Servicing Agreement believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties, or (v) to inspect the Financed Vehicles at any time or ascertain or inquire as to the performance or observance of any of the Issuer's, the Seller's or the Servicer's representations, warranties or covenants or the Servicer's duties and obligations as Servicer and as custodian of the Receivable Files under the Custodian Agreement. SECTION 6.2. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Other than with respect to actions required to be taken by the Trustee pursuant to Section 5.18 and 5.19, before the Trustee acts or refrains from acting, it may require an Officers' Certificate (with respect to factual matters) or an Opinion of Counsel, as applicable. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel, as applicable, or as directed by the requisite amount of Noteholders as provided herein. (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful misconduct, gross negligence or bad faith. 61 (e) The Trustee may consult with counsel experienced in such matters, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to institute, conduct or defend any litigation under this Indenture or in relation to this Indenture, at the request, order or direction of any of the Holders of Notes or the Controlling Party, pursuant to the provisions of this Indenture, unless such Holders of Notes or the Controlling Party shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; PROVIDED, HOWEVER, that the Trustee shall, upon the occurrence of an Event of Default (that has not been cured), exercise the rights and powers vested in it by this Indenture with reasonable care and skill. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Security Insurer (so long as no Insurer Default shall have occurred and be continuing) or (if an Insurer Default shall have occurred and be continuing) by the Holders of Notes evidencing not less than 25% of the Outstanding Amount thereof, PROVIDED, HOWEVER, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture or the Sale and Servicing Agreement, the Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding; the reasonable expense of every such examination shall be paid by the Person making such request, or, if paid by the Trustee, shall be reimbursed by the Person making such request upon demand. 62 SECTION 6.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Note Registrar, co-registrar or copaying agent may do the same with like rights. However, the Trustee is required to comply with Sections 6.11 and 6.12. SECTION 6.4. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Trust Estate or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication. SECTION 6.5. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Noteholder and the Security Insurer notice of the Default within 30 days after the Default becomes known to a Responsible Officer. Except in the case of a Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.6. REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall deliver to each Noteholder such information as the Issuer may direct it to provide and which information shall be provided to the Trustee by the Servicer to enable each Noteholder to prepare its federal and state income tax returns. SECTION 6.7. COMPENSATION AND INDEMNITY. (a) AFS, in a separate letter agreement (the "Letter Agreement"), has covenanted and agreed to pay to the Trustee, and the Trustee shall be entitled to, certain 63 annual fees, which shall not be limited by any law on compensation of a trustee of an express trust. In the Letter Agreement, AFS has also agreed to reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. Pursuant to the Letter Agreement, AFS has agreed to indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. (b) If notwithstanding the provisions of the Letter Agreement, AFS fails to pay any fee due to the Trustee pursuant to the terms of the Letter Agreement, the Trustee shall be entitled to a distribution in respect of such amount pursuant to Section 4.6(ii) of the Sale and Servicing Agreement. If notwithstanding the provisions of the Letter Agreement, AFS fails to make any payment or reimbursement due to the Trustee for any expense or claim for indemnification to which the Trustee is entitled pursuant to the terms of the Letter Agreement or this Indenture, the Trustee shall be entitled to a distribution in respect of such amount pursuant to priority SIXTH of Section 3.03(b) of the Spread Account Agreement (unless the Trustee is the Controlling Party). AFS' payment obligations to the Trustee pursuant to the Letter Agreement and this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(v) or (vi) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything else set forth in this Indenture or the Related Documents, the Trustee agrees that the obligations of the Issuer (but not AFS) to the Trustee hereunder and under the Related Documents shall be recourse to the Trust Estate only and specifically shall not be recourse to the assets of the Issuer. In addition, the Trustee agrees that its recourse to the Issuer, the Trust Estate, the Seller and amounts held pursuant to the Spread Account Agreement shall be limited to 64 the right to receive the distributions referred to in the first two sentences of this Section 6.7(b). SECTION 6.8. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by so notifying the Issuer, the Noteholders (if there is an Insurer Default) and the Security Insurer. The Issuer, may, with the consent of the Controlling Party, and, at the request of the Controlling Party shall, remove the Trustee, if: (i) the Trustee fails to comply with Section 6.11; (ii) a court having jurisdiction in the premises in respect of the Trustee in an involuntary case or proceeding under federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, shall have entered a decree or order granting relief or appointing a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar official) for the Trustee or for any substantial part of the Trustee's property, or ordering the winding-up or liquidation of the Trustee's affairs, provided any such decree or order shall have continued unstayed and in effect for a period of 60 consecutive days; (iii) the Trustee commences a voluntary case under any federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or other similar official) for the Trustee or for any substantial part of the Trustee's property, or makes any assignment for the benefit of creditors or fails generally to pay its debts as such debts become due or takes any corporate action in furtherance of any of the foregoing; 65 (iv) the Trustee otherwise becomes incapable of acting; or (v) the rating assigned to the long-term unsecured debt obligations of the Trustee (or the holding company thereof) by the Rating Agencies shall be lowered below the rating of "BBB", "Baa3" or equivalent rating or be withdrawn by either of the Rating Agencies. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly provide written notice of such event to the Rating Agency and shall appoint a successor Trustee acceptable to the Controlling Party. If the Issuer fails to appoint such a successor Trustee, the Controlling Party may appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Noteholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Controlling Party, the Issuer or the Holders of a majority in Outstanding Amount of the Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Trustee pursuant to this Section and payment of all fees and expenses owed to the outgoing Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the retiring Trustee 66 shall be entitled to payment or reimbursement of such amounts as such Person is entitled pursuant to Section 6.7. SECTION 6.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee, provided however, that such successor to the Trustee shall be subject to Section 6.8 of this Indenture and shall meet the minimum rating required by Section 6.8(v) and the eligibility requirements of Section 6.11 of this Indenture as of the date of such succession. If such surviving or transferee corporation does not meet such eligibility requirements, it may be removed pursuant to Section 6.8(i) hereof. The Trustee shall provide the Rating Agencies prompt notice of any such transaction. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Trust may at the time be located, the Trustee, with the consent of the Controlling Party and subject to the disqualifying conditions of Section 6.8 of this Indenture, shall have the power and may execute and deliver all 67 instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust, or any part hereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable, provided, however, that any such Person shall meet the minimum rating required by Section 6.8(v) of this Indenture as of the date of such appointment. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.8 hereof. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and 68 (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. (d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and have a rating on its long-term unsecured debt obligations at or above the level specified in Section 6.8(v) of this Indenture. The Trustee shall provide copies of such reports to the Security Insurer upon request. SECTION 6.12. APPOINTMENT AND POWERS. Subject to the terms and conditions hereof, each of the Issuer Secured Parties hereby appoints LaSalle National Bank as the Indenture Collateral Agent with respect to the Indenture 69 Collateral, and LaSalle National Bank hereby accepts such appointment and agrees to act as Indenture Collateral Agent with respect to the Indenture Collateral for the Issuer Secured Parties, to maintain custody and possession of such Indenture Collateral (except as otherwise provided hereunder) and to perform the other duties of the Indenture Collateral Agent in accordance with the provisions of this Indenture. Each Issuer Secured Party hereby authorizes the Indenture Collateral Agent to take such action on its behalf, and to exercise such rights, remedies, powers and privileges hereunder, as the Controlling Party may direct and as are specifically authorized to be exercised by the Indenture Collateral Agent by the terms hereof, together with such actions, rights, remedies, powers and privileges as are reasonably incidental thereto. The Indenture Collateral Agent shall act upon and in compliance with the written instructions of the Controlling Party delivered pursuant to this Indenture promptly following receipt of such written instructions; provided that the Indenture Collateral Agent shall not act in accordance with any instructions for which the Indenture Collateral Agent has not received reasonable indemnity. Receipt of such instructions shall not be a condition to the exercise by the Indenture Collateral Agent of its express duties hereunder, except where this Indenture provides that the Indenture Collateral Agent is permitted to act only following and in accordance with such instructions. SECTION 6.13. PERFORMANCE OF DUTIES. The Indenture Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Indenture and the other Related Documents to which the Indenture Collateral Agent is a party or as directed by the Controlling Party in accordance with this Indenture. The Indenture Collateral Agent shall not be required to take any action hereunder except at the written direction and with the indemnification of the Controlling Party. The Indenture Collateral Agent shall, and hereby agrees that it will, perform all of the duties and obligations required of it under the Sale and Servicing Agreement. SECTION 6.14. LIMITATION ON LIABILITY. Neither the Indenture Collateral Agent nor any of its directors, officers or employees, shall be liable for any action taken 70 or omitted to be taken by it or them hereunder, or in connection herewith, except that the Indenture Collateral Agent shall be liable for its gross negligence, bad faith or willful misconduct; nor shall the Indenture Collateral Agent be responsible for the validity, effectiveness, value, sufficiency or enforceability against the Issuer of this Indenture or any of the Indenture Collateral (or any part thereof). Notwithstanding any term or provision of this Indenture, the Indenture Collateral Agent shall incur no liability to Issuer or the Issuer Secured Parties for any action taken or omitted by the Indenture Collateral Agent in connection with the Indenture Collateral, except for the gross negligence or willful misconduct on the part of the Indenture Collateral Agent, and, further, shall incur no liability to the Issuer Secured Parties except for gross negligence or willful misconduct in carrying out its duties to the Issuer Secured Parties. Subject to Section 6.15, the Indenture Collateral Agent shall be protected and shall incur no liability to any such party in relying upon the accuracy, acting in reliance upon the contents, and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document reasonably believed by the Indenture Collateral Agent to be genuine and to have been duly executed by the appropriate signatory, and (absent actual knowledge to the contrary) the Indenture Collateral Agent shall not be required to make any independent investigation with respect thereto. The Indenture Collateral Agent shall at all times be free independently to establish to its reasonable satisfaction, but shall have no duty to independently verify, the existence or nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy hereunder or under any of the Related Documents. The Indenture Collateral Agent may consult with counsel, and shall not be liable for any action taken or omitted to be taken by it hereunder in good faith and in accordance with the written advice of such counsel. The Indenture Collateral Agent shall not be under any obligation to exercise any of the remedial rights or powers vested in it by this Indenture or to follow any direction from the Controlling Party unless it shall have received reasonable security or indemnity satisfactory to the Indenture Collateral Agent against the costs, expenses and liabilities which might be incurred by it. 71 SECTION 6.15. RELIANCE UPON DOCUMENTS. In the absence of bad faith or negligence on its part, the Indenture Collateral Agent shall be entitled to rely on any communication, instrument, paper or other document reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons and shall have no liability in acting, or omitting to act, where such action or omission to act is in reasonable reliance upon any statement or opinion contained in any such document or instrument. SECTION 6.16. SUCCESSOR INDENTURE COLLATERAL AGENT. (a) MERGER. Any Person into which the Indenture Collateral Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole or substantially as a whole, or any Person resulting from any such conversion, merger, consolidation, sale or transfer to which the Indenture Collateral Agent is a party, shall (provided it is otherwise qualified to serve as the Indenture Collateral Agent hereunder) be and become a successor Indenture Collateral Agent hereunder and be vested with all of the title to and interest in the Indenture Collateral and all of the trusts, powers, discretions, immunities, privileges and other matters as was its predecessor without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding, except to the extent, if any, that any such action is necessary to perfect, or continue the perfection of, the security interest of the Issuer Secured Parties in the Indenture Collateral, provided however, that the Trustee and the Indenture Collateral Agent shall always be the same Person. (b) RESIGNATION. The Indenture Collateral Agent and any successor Indenture Collateral Agent may resign at any time by so notifying the Issuer and the Security Insurer. (c) REMOVAL. The Indenture Collateral Agent may be removed by the Controlling Party at any time, with or without cause, by an instrument or concurrent instruments in writing delivered to the Indenture Collateral Agent, the 72 other Issuer Secured Party and the Issuer. A temporary successor may be removed at any time to allow a successor Indenture Collateral Agent to be appointed pursuant to subsection (d) below. Any removal pursuant to the provisions of this subsection (c) shall take effect only upon the date which is the latest of (i) the effective date of the appointment of a successor Indenture Collateral Agent and the acceptance in writing by such successor Indenture Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof, and (ii) receipt by the Controlling Party of an Opinion of Counsel to the effect described in Section 3.6. (d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the sole right to appoint each successor Indenture Collateral Agent. Every temporary or permanent successor Indenture Collateral Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Trustee, each Issuer Secured Party and the Issuer an instrument in writing accepting such appointment hereunder and the relevant predecessor shall execute, acknowledge and deliver such other documents and instruments as will effectuate the delivery of all Indenture Collateral to the successor Indenture Collateral Agent, whereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, duties and obligations of its predecessor. Such predecessor shall, nevertheless, on the written request of either Issuer Secured Party or the Issuer, execute and deliver an instrument transferring to such successor all the estates, properties, rights and powers of such predecessor hereunder. In the event that any instrument in writing from the Issuer or an Issuer Secured Party is reasonably required by a successor Indenture Collateral Agent to more fully and certainly vest in such successor the estates, properties, rights, powers, duties and obligations vested or intended to be vested hereunder in the Indenture Collateral Agent, any and all such written instruments shall, at the request of the temporary or permanent successor Indenture Collateral Agent, be forthwith executed, acknowledged and delivered by the Trustee or the Issuer, as the case may be. The designation of any successor Indenture Collateral Agent and the instrument or instruments removing any Indenture 73 Collateral Agent and appointing a successor hereunder, together with all other instruments provided for herein, shall be maintained with the records relating to the Indenture Collateral and, to the extent required by applicable law, filed or recorded by the successor Indenture Collateral Agent in each place where such filing or recording is necessary to effect the transfer of the Indenture Collateral to the successor Indenture Collateral Agent or to protect or continue the perfection of the security interests granted hereunder. SECTION 6.17. COMPENSATION AND INDEMNITY. (a) AFS, in a separate letter agreement or in the Letter Agreement (the "ICA Letter Agreement") has covenanted and agreed to pay to the Indenture Collateral Agent, and the Indenture Collateral Agent shall be entitled to certain annual fees, which shall not be limited by any law on compensation of an Indenture Collateral Agent of an express trust. In the ICA Letter Agreement, AFS has also agreed to reimburse the Indenture Collateral Agent for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Collateral Agent's agents, counsel, accountants and experts. Pursuant to the ICA Letter Agreement, AFS has agreed to indemnify the Indenture Collateral Agent against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. (b) If notwithstanding the provisions of the ICA Letter Agreement, AFS fails to pay any fee due to the Indenture Collateral Agent pursuant to the terms of the ICA Letter Agreement, the Indenture Collateral Agent shall be entitled to a distribution in respect of such amount pursuant to Section 4.6(ii) of the Sale and Servicing Agreement. If notwithstanding the provisions of the ICA Letter Agreement, AFS fails to make any payment or reimbursement due to the Indenture Collateral Agent for any expense or claim for indemnification to which the Indenture Collateral Agent is entitled pursuant to the terms of the ICA Letter Agreement, the Indenture Collateral Agent shall 74 be entitled to a distribution in respect of such amount pursuant either to priority SIXTH or priority SEVENTH of Section 3.03(b) of the Spread Account Agreement in accordance with the terms thereof (unless the Trustee is the Controlling Party). AFS's payment obligations to the Indenture Collateral Agent pursuant to the ICA Letter Agreement and this Section shall survive the discharge of this Indenture. When the Indenture Collateral Agent incurs expenses after the occurrence of a Default specified in Section 5.1(v) or (vi) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything else set forth in this Indenture or the Related Documents, the Indenture Collateral Agent agrees that the obligations of the Issuer to the Indenture Collateral Agent hereunder and under the Related Documents shall be limited recourse to amounts payable to the Indenture Collateral Agent pursuant to Section 4.6(ii) of the Sale and Service Agreement. In addition, the Indenture Collateral Agent agrees that its recourse to the Seller and amounts held pursuant to the Spread Account Agreement shall be limited to the right to receive the distributions referred to in the second sentence of this Section 6.17(b). SECTION 6.18. REPRESENTATIONS AND WARRANTIES OF THE INDENTURE COLLATERAL AGENT. The Indenture Collateral Agent represents and warrants to the Issuer and to each Issuer Secured Party as follows: (a) DUE ORGANIZATION. The Indenture Collateral Agent is a national banking association, duly organized, validly existing and in good standing under the laws of the United States and is duly authorized and licensed under applicable law to conduct its business as presently conducted. (b) CORPORATE POWER. The Indenture Collateral Agent has all requisite right, power and authority to execute and deliver this Indenture and to perform all of its duties as Indenture Collateral Agent hereunder. 75 (c) DUE AUTHORIZATION. The execution and delivery by the Indenture Collateral Agent of this Indenture and the other Transaction Documents to which it is a party, and the performance by the Indenture Collateral Agent of its duties hereunder and thereunder, have been duly authorized by all necessary corporate proceedings and no further approvals or filings, including any governmental approvals, are required for the valid execution and delivery by the Indenture Collateral Agent, or the performance by the Indenture Collateral Agent, of this Indenture and such other Related Documents. (d) VALID AND BINDING INDENTURE. The Indenture Collateral Agent has duly executed and delivered this Indenture and each other Related Document to which it is a party, and each of this Indenture and each such other Related Document constitutes the legal, valid and binding obligation of the Indenture Collateral Agent, enforceable against the Indenture Collateral Agent in accordance with its terms, except as (i) such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability. SECTION 6.19. WAIVER OF SETOFFS. The Indenture Collateral Agent hereby expressly waives any and all rights of setoff that the Indenture Collateral Agent may otherwise at any time have under applicable law with respect to any Trust Account and agrees that amounts in the Trust Accounts shall at all times be held and applied solely in accordance with the provisions hereof. SECTION 6.20. CONTROL BY THE CONTROLLING PARTY. The Indenture Collateral Agent shall comply with notices and instructions given by the Issuer only if accompanied by the written consent of the Controlling Party, except that if any Event of Default shall have occurred and be continuing, the Indenture Collateral Agent shall act upon and comply with, notices and instructions given by the Controlling Party alone in the place and stead of the Issuer. 76 ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.1. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a) on the Closing Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Notes as of the Closing Date, (b) at such other times as the Trustee may request in writing within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar, no such list shall be required to be furnished. The Trustee or, if the Trustee is not the Note Registrar, the Issuer shall furnish to the Security Insurer in writing on an annual basis on each March 31 and at such other times as the Security Insurer may request a copy of the list. SECTION 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS TO NOTEHOLDERS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders of Notes received by the Trustee in its capacity as Note Registrar. The Trustee may destroy any list furnished to it as provided in such Section 7.1 upon receipt of a new list so furnished. The Trustee shall make such list available to the Noteholders and the Security Insurer upon request. (b) Noteholders may communicate with other Noteholders with respect to their rights under this Indenture or under the Notes. 77 SECTION 7.3. REPORTS BY ISSUER. (a) The Issuer shall supply to the Trustee for mailing by the Trustee to all Noteholders, any information pertaining to the Issuer as the Issuer may determine to be reasonably necessary to afford Noteholders the ability to sell or transfer Notes pursuant to Rule 144A of the Securities Act. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on June 30 of each year. ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.1. COLLECTION OF MONEY. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Trustee pursuant to this Indenture. The Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of this Indenture or the Notes, the Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. SECTION 8.2. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the Indenture Collateral Agent shall establish and maintain, in the name of the Indenture Collateral Agent, for the benefit of the Noteholders, the Trust Accounts as provided in Section 4.1 of the Sale and Servicing Agreement. 78 (b) On each Payment Date and Redemption Date, the Trustee shall distribute amounts on deposit in the Note Distribution Account to Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal and interest, first to pay all accrued and unpaid interest, and then to pay principal on the Notes until the outstanding amount of the Notes is reduced to zero. SECTION 8.3. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no Default or Event of Default shall have occurred and be continuing all or a portion of the funds in the Trust Accounts shall be invested and reinvested by the Indenture Collateral Agent on behalf of the Issuer in Eligible Investments in accordance with the provisions of Section 4.1(c) of the Sale and Servicing Agreement. (b) Subject to Section 6.1(c), the Indenture Collateral Agent shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Collateral Agent's failure to make payments on such Eligible Investments issued by the Indenture Collateral Agent, in its commercial capacity as principal obligor and not as Indenture Collateral Agent, in accordance with their terms. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a) Without the consent of the Holders of any Notes but with the consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) and with prior notice to the Rating Agencies, the Issuer and the Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures 79 supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Collateral Agent any property subject or required to be subjected to the lien created by this Indenture, or to subject to the lien created by this Indenture additional property; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained; (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer, (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Collateral Agent; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; PROVIDED that such action shall not adversely affect the interests of the Holders of the Notes; or (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the 80 trusts hereunder by more than one trustee, pursuant to the requirements of Article VI. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) The Issuer and the Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Notes but with the consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) and with prior notice to the Rating Agencies, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder. SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies, with the consent of the Controlling Party enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture, PROVIDED, HOWEVER, that, subject to the express rights of the Security Insurer under the Related Documents, including its rights to agree to certain modifications of the Receivables pursuant to Section 3.2 of the Sale and Servicing Agreement and its rights referred to in Section 5.2(c), no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate 81 thereon or the Redemption Price with respect thereto, change the provision of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Trust Estate to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the second proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to Section 5.4; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Related Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the 82 calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the mandatory redemption of the Notes contained herein; or (vii) permit the creation of any lien ranking prior to or on a parity with the lien created by this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein, terminate the lien created by this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien created by this Indenture. The Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to this Section, the Trustee shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture, and including a copy of such supplemental indenture. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and subject to Sections 6.1 and 6.2 shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not 83 be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.4. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Trustee, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.5. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Trustee shall so determine, new notes so modified as to conform, in the opinion of the Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes. ARTICLE X REDEMPTION OF NOTES SECTION 10.1. REDEMPTION. In the event that the Servicer pursuant to Section 9.1 of the Sale and Servicing Agreement purchases the Receivables, the Notes are subject to redemption in whole, but not in part, on the Payment Date on which such repurchase occurs, for a purchase price equal to the Redemption Price. The Seller, the Servicer or the Issuer shall furnish the Security Insurer and the Rating 84 Agencies notice of such redemption. If the Notes are to be redeemed pursuant to this Section 10.1, the Issuer shall furnish notice of such election to the Trustee and to each Noteholder not later than 25 days prior to the Redemption Date and the Issuer shall deposit with the Trustee in the Note Distribution Account not less than seven days prior to the applicable Redemption Date, the Redemption Price of the Notes to be redeemed whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.2 to each Holder of the Notes. SECTION 10.2. FORM OF REDEMPTION NOTICE. Notice of redemption under Section 10.1 shall be given by the Trustee by first-class mail, postage prepaid, mailed not less than five days prior to the applicable Redemption Date to each Holder of Notes (or, upon request by a Noteholder which purchased the Notes on the Closing Date, by facsimile), as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder's address appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; and (iii) the place where such Notes are to be surrendered for payment of the Redemption Price (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.2). Notice of redemption of the Notes shall be given by the Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. SECTION 10.3. NOTES PAYABLE ON REDEMPTION DATE. The Notes to be redeemed shall, following notice of redemption (if any) as required by Section 10.2, on the Redemption Date 85 become due and payable at the Redemption Price and (unless the Issuer shall default in the payment of the Redemption Price) no interest shall accrue on the Redemption Price for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price. ARTICLE XI MISCELLANEOUS SECTION 11.1. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon an application or request by the Issuer to the Trustee or the Indenture Collateral Agent to take any action under any provision of this Indenture, the Issuer shall furnish to the Trustee or the Indenture Collateral Agent, as the case may be, and to the Security Insurer if the application or request is made to the Indenture Collateral Agent (i) an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which 86 the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit of any Indenture Collateral or other property or securities with the Indenture Collateral Agent that is to be made the basis for the release of any property subject to the lien created by this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or elsewhere in this Indenture, furnish to the Indenture Collateral Agent and the Security Insurer (so long as no Insurer Default shall have occurred and be continuing) an Officers' Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Indenture Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Indenture Collateral Agent and the Security Insurer an Officers' Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Collateral Agent and the Security Insurer an Independent Certificate as to the same matters, if the fair value to the Issuer of the property to be so deposited and of all other such property made the basis of any such withdrawal or release since the commencement of the then current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any 87 property so deposited, if the fair value thereof to the Issuer as set forth in the related Officers' Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Other than with respect to any release described in clause (A) or (B) of Section 11.1(b)(v), whenever any property or securities are to be released from the lien created by this Indenture, the Issuer shall also furnish to the Indenture Collateral Agent and the Security Insurer (so long as no Insurer Default shall have occurred and be continuing) an Officers' Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security created by this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Trustee and the Security Insurer an Officers' Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Collateral Agent and the Security Insurer an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property or securities (other than property described in clauses (A) or (B) of Section 11.1(b)(v)) released from the lien created by this Indenture since the commencement of the then current fiscal year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officers' Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding any other provision of this Section, the Issuer may without compliance with the other provisions of this Section (A) collect, liquidate, sell or 88 otherwise dispose of Receivables as and to the extent permitted or required by the Related Documents (including as provided in Section 3.1 of the Sale and Servicing Agreement) and (B) make cash payments out of the Trust Accounts as and to the extent permitted or required by the Related Documents. SECTION 11.2. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Seller or the Issuer, stating that the information with respect to such factual matters is in the possession of the Servicer, the Seller or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 89 Whenever in this Indenture, in connection with any application or certificate or report to the Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Trustees right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.3. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Trustee deems sufficient. 90 (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued-upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.4. NOTICES, ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to or filed with: (a) the Trustee by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, (b) the Issuer by the Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to the Issuer addressed to: AmeriCredit Receivables Finance Corp. 1995-A, 200 Bailey Avenue, Fort Worth, Texas 76107-1220, Attention: Chief Financial Officer, or at any other address previously furnished in writing to the Trustee by Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Trustee, or (c) the Security Insurer by the Issuer or the Trustee shall be sufficient for any purpose hereunder if in writing and mailed by registered mail or personally delivered or telexed or telecopied to the recipient as follows: 91 To the Security Insurer: Financial Security Assurance Inc. 350 Park Avenue New York, NY 10022 Attention: Surveillance Department Telex No.: (212) 688-3101 Confirmation: (212) 826-0100 Telecopy Nos.: (212) 339-3518 (212) 339-3529 (In each case in which notice or other communication to the Security Insurer refers to an Event of Default, a claim on the Policy or with respect to which failure on the part of the Security Insurer to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication should also be sent to the attention of the General Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED.") Notices required to be given to the Rating Agencies by the Issuer or the Trustee shall be in writing, personally delivered or mailed by certified mail, return receipt requested to (i) in the case of Moody's, at the following address: Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in the case of Standard & Poor's, at the following address: Standard & Poor's Corporation, 26 Broadway (20th Floor), New York, New York 10004, Attention of Asset Backed Surveillance Department; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 11.5. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of 92 such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. When this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 11.6. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Trustee a copy of each such agreement and the Trustee will cause payments to be made and notices to be given in accordance with such agreements. 93 SECTION 11.7. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.8. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.9. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.10. BENEFITS OF INDENTURE. The Security Insurer and its successors and assigns shall be a third-party beneficiary to the provisions of this Indenture, and shall be entitled to rely upon and directly to enforce such provisions of this Indenture so long as no Insurer Default shall have occurred and be continuing. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. The Security Insurer may disclaim any of its rights and powers under this Indenture (in which case the Trustee may exercise such right or power hereunder), but not its duties and obligations under the Policy, upon delivery of a written notice to the Trustee. SECTION 11.11. LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which 94 nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.13. COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.14. RECORDING OF INDENTURE. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Trustee or any other counsel reasonably acceptable to the Trustee, and the Controlling Party) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Trustee or the Indenture Collateral Agent under this Indenture or the Collateral Agent under the Spread Account Agreement. SECTION 11.15. TRUST OBLIGATION. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Trustee or of any successor or assign of the Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee has no such obligations in its individual capacity) and except that any 95 such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. SECTION 11.16. NO PETITION. The Trustee and the Indenture Collateral Agent, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Seller or the Issuer, or join in any institution against the Seller or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Related Documents. SECTION 11.17. INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Trustee or of the Security Insurer, during the Issuer's normal business hours, to examine all the books of account, records, reports, and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees, and independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized, all as of the day and year first above written. 96 AMERICREDIT RECEIVABLES FINANCE CORP. 1995-A By: -------------------------- Name: Preston A. Miller Title: Vice President and Controller LASALLE NATIONAL BANK, not in its individual capacity but solely as Trustee and Indenture Collateral Agent By: -------------------------- Name: Shashank Mishra Title: Vice President 97 EX-10.16 3 EXHIBIT 10.16 SALES AND SERVICING AGREEMENT SALE AND SERVICING AGREEMENT among AMERICREDIT RECEIVABLES FINANCE CORP. 1995-A Issuer AMERICREDIT FINANCIAL SERVICES, INC. In its individual capacity and as Servicer AMERICREDIT RECEIVABLES CORP. Seller and LASALLE NATIONAL BANK Backup Servicer dated as of June 1, 1995 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 1.4. Section References . . . . . . . . . . . . . . . . . . . . 16 SECTION 1.5. No Recourse. . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 1.6. Material Adverse Effect. . . . . . . . . . . . . . . . . . 16 ARTICLE II CONVEYANCE OF RECEIVABLES SECTION 2.1. Conveyance of Receivables. . . . . . . . . . . . . . . . . 16 SECTION 2.2. Custody of Receivable Files. . . . . . . . . . . . . . . . 17 SECTION 2.3. Conditions to Issuance by Issuer . . . . . . . . . . . . . 18 SECTION 2.4. Representations and Warranties of Seller . . . . . . . . . 18 SECTION 2.5. Repurchase of Receivables Upon Breach of Warranty. . . . . 20 SECTION 2.6. Nonpetition Covenant . . . . . . . . . . . . . . . . . . . 21 SECTION 2.7. Collecting Lien Certificates Not Delivered on the Closing Date . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.8. Issuer's Assignment of Administrative Receivables and Warranty Receivables . . . . . . . . . . . . . . . . 21 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . . . 23 SECTION 3.2. Collection of Receivable Payments; Modifications of Receivables; Lockbox Agreements. . . . . . . . . . . . . 24 SECTION 3.3. Realization Upon Receivables . . . . . . . . . . . . . . . 27 SECTION 3.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 3.5. Maintenance of Security Interests in Vehicles. . . . . . . 29 SECTION 3.6. Covenants, Representations, and Warranties of Servicer . . 30 SECTION 3.7. Purchase of Receivables Upon Breach of Covenant. . . . . . 32 i SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses by Servicer. . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . . . 33 SECTION 3.10. Annual Statement as to Compliance, Notice of Servicer Termination Event . . . . . . . . . . . . . . . 34 SECTION 3.11. Annual Independent Accountants' Report . . . . . . . . . . 34 SECTION 3.12. Access to Certain Documentation and Information Regarding Receivables. . . . . . . . . . . . 35 SECTION 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 3.14. Retention and Termination of Servicer. . . . . . . . . . . 36 SECTION 3.15. Duties of the Servicer under the Indenture . . . . . . . . 36 SECTION 3.16. Fidelity Bond and Errors and Omissions Policy. . . . . . . 37 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS SECTION 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.2. Collections. . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.3. Application of Collections . . . . . . . . . . . . . . . . 39 SECTION 4.4. Net Deposits . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 4.5. Additional Deposits. . . . . . . . . . . . . . . . . . . . 40 SECTION 4.6. Distributions. . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 4.7. Trustee as Agent . . . . . . . . . . . . . . . . . . . . . 41 SECTION 4.8. Statements to Noteholders. . . . . . . . . . . . . . . . . 41 SECTION 4.9. Eligible Accounts. . . . . . . . . . . . . . . . . . . . . 42 SECTION 4.10. Optional Deposits by the Security Insurer. . . . . . . . . 42 ARTICLE V THE SPREAD ACCOUNT SECTION 5.1. Withdrawals from Spread Account in respect of Deficiency Claim Amount . . . . . . . . . . . 43 SECTION 5.2. Withdrawals from Spread Account in respect of Noteholders' Excess Principal Distributable Amount or following the occurrence of an Insurer Default. . . . . . . . . . . . . . . . . . 43 ARTICLE VI THE SELLER SECTION 6.1. Liability of Seller. . . . . . . . . . . . . . . . . . . . 44 ii SECTION 6.2. Merger or Consolidation of, or Assumption of the Obligations of Seller; Amendment of Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . 44 SECTION 6.3. Limitation on Liability of Seller and Others . . . . . . . 45 SECTION 6.4. Seller May Own Notes . . . . . . . . . . . . . . . . . . . 45 ARTICLE VII SERVICER SECTION 7.1. Liability of Servicer; Indemnities . . . . . . . . . . . . 45 SECTION 7.2. Merger or Consolidation of, or Assumption of the Obligations of the Servicer or Backup Servicer . . . . . 46 SECTION 7.3. Limitation on Liability of Servicer, Backup Servicer and Others . . . . . . . . . . . . . . . 47 SECTION 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . . . 48 SECTION 7.5. Servicer and Backup Servicer Not to Resign . . . . . . . . 48 ARTICLE VIII SERVICER TERMINATION EVENTS SECTION 8.1. Servicer Termination Event . . . . . . . . . . . . . . . . 49 SECTION 8.2. Consequences of a Servicer Termination Event . . . . . . . 50 SECTION 8.3. Appointment of Successor . . . . . . . . . . . . . . . . . 51 SECTION 8.4. Notification to Noteholders. . . . . . . . . . . . . . . . 52 SECTION 8.5. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 52 ARTICLE IX TERMINATION SECTION 9.1. Optional Purchase of All Receivables . . . . . . . . . . . 53 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 10.2. Protection of Title to the Receivables and Other Conveyed Property. . . . . . . . . . . . . . . . . . . . 54 SECTION 10.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.4. Severability of Provisions . . . . . . . . . . . . . . . . 56 SECTION 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . 56 iii SECTION 10.6. Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 56 SECTION 10.7. Disclaimer by Security Insurer . . . . . . . . . . . . . . 56 SECTION 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.9. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 57 Schedule A Schedule of Receivables Schedule B Representations and Warranties of Seller and AFS Schedule C Servicing Policies and Procedures iv THIS SALE AND SERVICING AGREEMENT, dated as of June 1, 1995, is made among AmeriCredit Receivables Finance Corp. 1995-A, a Delaware corporation, as Issuer (the "Issuer"), AmeriCredit Receivables Corp., a Delaware corporation, as Seller (the "Seller"), AmeriCredit Financial Services, Inc., a Delaware corporation, in its individual capacity and as Servicer (in its individual capacity, "AFS"; in its capacity as Servicer, the "Servicer") and LaSalle National Bank, a national banking association, as Backup Servicer (the "Backup Servicer"). In consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINITIONS. All terms defined in the Spread Account Agreement or the Indenture (each as defined below) shall have the same meaning in this Agreement. Whenever capitalized and used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: 1994-A ISSUER STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of June 1, 1995, among the Security Insurer, the Seller and the Collateral Agent named therein, as the same may be amended from time to time. 1995-A ISSUER STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of June 1, 1995, among the Security Insurer, the Seller and the Collateral Agent named therein, as the same may be amended from time to time. ACCOUNTANTS' REPORT: The report of a firm of nationally recognized independent accountants described in Section 3.11. ACCOUNTING DATE: With respect to a Distribution Date, the last day of the Monthly Period immediately preceding such Distribution Date. ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a Receivable which the Servicer is required to purchase pursuant to Section 3.7 or which the Servicer has elected to purchase pursuant to Section 3.4(c) on the Deposit Date with respect to such Monthly Period. ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENTS: The agreement by and between AFS and the Issuer dated June 1, 1995 and the agreement by and between AFS and the Seller dated as of December 1, 1994. AFFILIATE: With respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. AGGREGATE PRINCIPAL BALANCE: With respect to the Closing Date, the Cutoff Date Principal Balance, and with respect to any Determination Date, the sum of the Principal Balances (computed as of the related Accounting Date) for all Receivables (other than (i) any Receivable that became a Liquidated Receivable during the related Monthly Period and (ii) any Receivable that the Seller or the Servicer is required to repurchase prior to the next Distribution Date). AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing Agreement, all amendments and supplements thereto and all exhibits and schedules to any of the foregoing. AMOUNT FINANCED: With respect to a Receivable, the aggregate amount initially advanced under such Receivable toward the purchase price of the Financed Vehicle and related costs, including amounts advanced in respect of accessories, insurance premiums, service and warranty contracts, other items customarily financed as part of retail automobile installment sale contracts or promissory notes, and related costs. The term "Amount Financed" shall not include any Insurance Add-On Amounts. ANNUAL PERCENTAGE RATE OR APR. With respect to a Receivable, the rate per annum of finance charges stated in such Receivable as the "annual percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If after the Closing Date, the rate per annum with respect to a Receivable as of the Closing Date is 2 reduced as a result of (i) an insolvency proceeding involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced rate. AVAILABLE FUNDS: With respect to any Determination Date, the sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase Amounts deposited in the Collection Account as of the related Deposit Date, and (iii) all income from investments of funds in the Trust Accounts during the prior Monthly Period. BACKUP SERVICER: LaSalle National Bank, or its successor in interest pursuant to Section 8.2, or such Person as shall have been appointed as Backup Servicer or successor Servicer pursuant to Section 8.3. BASIC SERVICING FEE: With respect to any Monthly Period, the fee payable to the Servicer for services rendered during such Monthly Period, which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied by the Aggregate Principal Balance with respect to the Determination Date falling in such Monthly Period. BASIC SERVICING FEE RATE: 2.50% per annum, payable monthly at one-twelfth of the annual rate. BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Fort Worth, Texas, New York, New York, Chicago, Illinois, or the principal place of business of any successor Servicer, successor Issuer, successor Trustee, successor Collateral Agent or successor Indenture Collateral Agent, are authorized or obligated by law, executive order or governmental decree to be closed. CALENDAR QUARTER: In any given year, the three month period beginning with the first day of the first month of such three month period and ending on the last day of the last month of such three month period, provided, that such three month period shall be any of January through March, April through June, July through September or October through December. CLOSING DATE: June 21, 1995. 3 COLLATERAL AGENT: The Collateral Agent named in the Spread Account Agreement, and any successor thereto pursuant to the terms of the Spread Account Agreement. COLLATERAL INSURANCE: The meaning set forth in Section 3.4(a). COLLECTED FUNDS: With respect to any Determination Date, the amount of funds in the Collection Account representing collections on the Receivables during the related Monthly Period, including all Liquidation Proceeds collected during the related Monthly Period (but excluding any Purchase Amounts). COLLECTION ACCOUNT: The account designated as the Collection Account in, and which is established and maintained pursuant to, Section 4.1(a) hereof. COLLECTION RECORDS: All manually prepared or computer generated records relating to collection efforts or payment histories with respect to the Receivables. COMPUTER TAPE: The computer tape generated on behalf of the Seller which provides information relating to the Receivables and which was used by the Seller and AFS in selecting the Receivables conveyed to the Issuer hereunder. CORPORATE TRUST OFFICE: The principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the Closing Date is located at 135 S. LaSalle Street, Suite 200, Chicago, Illinois 60603, Attention: Asset Backed Securities Trust Administration; the telecopy number for the Corporate Trust Office of the Trustee on the date of the execution of this Agreement is (312) 904-2084. CRAM DOWN LOSS: With respect to a Receivable, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the Principal Balance of such Receivable, the amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of such order. CREDIT ENHANCEMENT FEE: With respect to any Distribution Date, the amount to be paid to the Seller pursuant to Section 4.6(vi). 4 CUSTODIAN: AFS and any other Person named from time to time as custodian in any Custodian Agreement acting as agent for the Indenture Collateral Agent, which Person must be acceptable to the Controlling Party (the Custodian as of the Closing Date is acceptable to the Security Insurer as of the Closing Date). CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in effect between the Custodian named therein and the Indenture Collateral Agent, substantially in the form of Exhibit B hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, which Custodian Agreement and any amendments, supplements or modifications thereto shall be acceptable to the Controlling Party (the Custodian Agreement which is effective on the Closing Date is acceptable to the Controlling Party). CUTOFF DATE: May 31, 1995. CUTOFF DATE PRINCIPAL BALANCE: $107,793,984.35. DEALER: A seller of new or used automobiles or light trucks that originated one or more of the Receivables and sold the respective Receivable, directly or indirectly, to AFS under a Dealer Assignment. DEALER AGREEMENT: An agreement between AFS and a Dealer relating to the sale of retail installment sale contracts and installment notes to AFS and all documents and instruments relating thereto. DEALER ASSIGNMENT: With respect to a Receivable, the executed assignment executed by a Dealer conveying such Receivable to AFS. DEFICIENCY CLAIM AMOUNT: As defined in Section 5.1(a). DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the fourth Business Day immediately preceding such Distribution Date. DEFICIENCY NOTICE: As defined in Section 5.1(a). DEPOSIT DATE: With respect to any Monthly Period, the Business Day immediately preceding the related Determination Date. 5 DETERMINATION DATE: With respect to any Monthly Period, the earlier of (i) the fourth Business Day preceding the Distribution Date in the next calendar month, and (ii) the 5th day of the next calendar month, or if such 5th day is not a Business Day, the next succeeding Business Day. DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of (i) the Available Funds for such Distribution Date and (ii) the Deficiency Claim Amount, if any, received by the Trustee with respect to such Distribution Date. DISTRIBUTION DATE: The 12th day of each calendar month, or if such 12th day is not a Business Day, the next succeeding Business Day, commencing July 12, 1995 and including the Final Scheduled Distribution Date. DRAW DATE: With respect to any Distribution Date, the third Business Day immediately preceding such Distribution Date. ELECTRONIC LEDGER: The electronic master record of the retail installment sales contracts or installment loans of AFS. ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained with the corporate trust department of a depository institution acceptable to the Controlling Party, or (ii) a segregated direct deposit account maintained with a depository institution or trust company organized under the laws of the United States of America, or any of the States thereof, or the District of Columbia, having a certificate of deposit, short term deposit or commercial paper rating of at least "A-l+" by Standard & Poor's and "P-1" by Moody's and acceptable to the Controlling Party. ELIGIBLE INVESTMENTS: Any one or more of the following types of investments: (a) (i) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality of the United States the obligations of which are backed by the full faith and credit of the United States; and (ii) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, but only if, at the time of investment, such 6 obligations are assigned the highest credit rating by each Rating Agency; (b) demand or time deposits in, certificates of deposit of, demand notes of, or bankers' acceptances issued by any depository institution or trust company organized under the laws of the United States or any State and subject to supervision and examination by federal and/or State banking authorities (including, if applicable, the Trustee, the Issuer or any agent of either of them acting in their respective commercial capacities); provided that the short-term unsecured debt obligations of such depository institution or trust company at the time of such investment, or contractual commitment providing for such investment, are assigned the highest credit rating by each Rating Agency; (c) repurchase obligations pursuant to a written agreement (i) with respect to any obligation described in clause (a) above, where the Indenture Collateral Agent has taken actual or constructive delivery of such obligation in accordance with Section 4.1, and (ii) entered into with the corporate trust department of a depository institution or trust company organized under the laws of the United States or any State thereof, the deposits of which are insured by the Federal Deposit Insurance Corporation and the short-term unsecured debt obligations of which are rated "A-l+" by Standard & Poor's and "P-1" by Moody's (including, if applicable, the Trustee, or any agent of the Trustee acting in its commercial capacity); (d) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any State whose long-term unsecured debt obligations are assigned the highest credit rating by each Rating Agency at the time of such investment or contractual commitment providing for such investment; PROVIDED, HOWEVER, that securities issued by any particular corporation will not be Eligible Investments to the extent that an investment therein will cause the then outstanding principal amount of securities issued by such corporation and held in the Trust Accounts to exceed 10% of the Eligible Investments held in the Trust Accounts (with Eligible Investments held in the Trust Accounts valued at par); (e) commercial paper that (i) is payable in United States dollars and (ii) is rated in the highest credit rating category by each Rating Agency; 7 (f) units of money market funds rated in the highest credit rating category by each Rating Agency; provided that all Eligible Investments shall be held in the name of the Indenture Collateral Agent; or (g) any other demand or time deposit, obligation, security or investment as may be acceptable to the Rating Agencies and the Controlling Party, as evidenced by the prior written consent of the Controlling Party and the Rating Agencies, as may from time to time be confirmed in writing to the Trustee by the Controlling Party; PROVIDED, HOWEVER, that securities issued by any entity (except as provided in paragraph (a)) will not be Eligible Investments to the extent that an investment therein will cause the then outstanding principal amount of securities issued by such entity and held in the Trust Accounts to exceed $10 million (with Eligible Investments held in the Trust Accounts valued at par). Eligible Investments may be purchased by or through the Indenture Collateral Agent or any of its Affiliates. ELIGIBLE SERVICER: AFS, the Backup Servicer or another Person which at the time of its appointment as Servicer (i) is servicing a portfolio of motor vehicle retail installment sales contracts and/or motor vehicle installment loans, (ii) is legally qualified and has the capacity to service the Receivables, (iii) has demonstrated the ability professionally and competently to service a portfolio of motor vehicle retail installment sales contracts and/or motor vehicle installment loans similar to the Receivables with reasonable skill and care, (iv) is qualified and entitled to use, pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under this Agreement or otherwise has available software which is adequate to perform its duties and responsibilities under this Agreement and (v) has a minimum net worth of $50,000,000. EXCESS AMOUNTS: As determined with respect to Series 1995-A pursuant to the terms of the Spread Account Agreement. FINAL SCHEDULED DISTRIBUTION DATE: September 12, 2000 (or, if such day is not a Business Day, the next succeeding Business Day thereafter). FINAL SCHEDULED MATURITY DATE: April 30, 2000. 8 FINANCED VEHICLE: A new or used automobile or light truck, together with all accessories thereto, securing an Obligor's indebtedness under a Receivable. FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b). Indenture: The Indenture, dated as of June 1, 1995, between the Issuer, the Trustee and the Indenture Collateral Agent, as the same may be amended and supplemented from time to time. INDENTURE COLLATERAL AGENT: The Person acting as Indenture Collateral Agent under the Indenture, its successors in interest and any successor Indenture Collateral Agent under the Indenture. INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a). INITIAL PURCHASE AGREEMENT: The Purchase Agreement, dated as of June 9, 1995 between the Issuer and the Representative. INITIAL PURCHASERS: The purchasers named in the Initial Purchase Agreement. INSOLVENCY EVENT: With respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts 9 become due, or the taking of action by such Person in furtherance of any of the foregoing. INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the event that the Servicer obtains Force-Placed Insurance pursuant to Section 3.4. INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as of June 1, 1995, among the Security Insurer, the Issuer, the Seller, AFS and AmeriCredit Corp. INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as defined in the Insurance Agreement. INSURANCE POLICY: With respect to a Receivable, any insurance policy benefiting the holder of the Receivable providing loss or physical damage, credit life, credit disability, theft, mechanical breakdown or similar coverage with respect to the Financed Vehicle or the Obligor. INSURER DEFAULT: The occurrence and continuance of any of the following: (a) the Security Insurer shall have failed to make a payment required under the Policy; (b) The Security Insurer shall have (i) filed a petition or commenced any case or proceeding under any provision or chapter of the United States Bankruptcy Code, the New York State Insurance Law, or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made a general assignment for the benefit of its creditors, or (iii) had an order for relief entered against it under the United States Bankruptcy Code, the New York State Insurance Law, or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is final and nonappealable; or (c) a court of competent jurisdiction, the New York Department of Insurance or other competent regulatory authority shall have entered a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for the Security Insurer or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Security Insurer (or 10 the taking of possession of all or any material portion of the property of the Security Insurer). LIEN: Any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind, including tax liens, mechanics' liens and any liens that attach by operation of law. LIEN CERTIFICATE: With respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable state to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title. In any jurisdiction in which the original certificate of title is required to be given to the Obligor, the term "Lien Certificate" shall mean only a certificate or notification issued to a secured party. LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a Receivable as to which (i) 90 days have elapsed since the Servicer repossessed the Financed Vehicle, (ii) the Servicer has determined in good faith that all amounts it expects to recover have been received, or (ill) all or any portion of a Scheduled Payment shall have become 120 days or more delinquent. LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all amounts realized with respect to such Receivable (other than amounts withdrawn from the Spread Account or drawn, under the Policy) net of (i) reasonable expenses incurred by the Servicer in connection with the collection of such Receivable and the repossession and disposition of the Financed Vehicle and (ii) amounts that are required to be refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero. LOCKBOX ACCOUNT: The segregated account maintained on behalf of the Issuer by the Lockbox Bank in accordance with Section 3.2(d). LOCKBOX AGREEMENT: The Tri-Party Remittance Processing Agreement, dated as of June 1, 1995, by and among AFS, First Interstate Bank of Texas, N.A., and the Indenture Collateral Agent, as such agreement may be amended or supplemented from time to time, unless the Trustee hereunder shall cease to be a party thereunder, or such agreement shall be terminated in accordance with its terms, in which event "Lockbox Agreement" shall mean such other agreement, 11 in form and substance acceptable to the Controlling Party, among the Servicer, the Issuer, the Trustee and the Lockbox Bank. LOCKBOX BANK: A depository institution named by the Servicer and acceptable to the Controlling Party. MONTHLY PERIOD: With respect to a Distribution Date, the calendar month preceding the month in which such Distribution Date occurs (such calendar month being referred to as the "related" Monthly Period with respect to such Distribution Date). With respect to an Accounting Date, the calendar month in which such Accounting Date occurs is referred to herein as the "related" Monthly Period to such Accounting Date. MONTHLY RECORDS: All records and data maintained by the Servicer with respect to the Receivables, including the following with respect to each Receivable: the account number; the identity of the originating Dealer; Obligor name, Obligor address; Obligor home phone number; Obligor business phone number; original Principal Balance; original term; Annual Percentage Rate; current Principal Balance; current remaining term; origination date; first payment date; final scheduled payment date, next payment due date, date of most recent payment, new/used classification; collateral description; days currently delinquent; number of contract extensions (months) to date; amount, if any, of Force-Placed Insurance payable monthly; amount of the Scheduled Payment; current Insurance Policy expiration date; and past due late charges, if any. MOODY'S: Moody's Investors Service, Inc., or any successor thereto. NOTE BALANCE: As of any date of determination, the aggregate outstanding principal balance of the Notes, unless otherwise specified, after giving effect to any distribution in respect of principal on the Notes on such date. NOTE DISTRIBUTION ACCOUNT: The account designated as such, established and maintained pursuant to Section 4.1(c). NOTE INTEREST RATE: 6.55% per annum (computed on the basis of a 360-day year of twelve 30-day months). NOTE MAJORITY: Noteholders representing 66 2/3% of the outstanding principal balance of the Notes. 12 NOTE POOL FACTOR: With respect to any Distribution Date, an eight-digit decimal figure equal to the outstanding principal balance of the Notes as of such Distribution Date (after giving effect to all distributions on such date) divided by the original outstanding principal balance of the Notes as of the Closing Date. NOTEHOLDERS: registered holder of Notes NOTEHOLDERS' EXCESS PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to each Distribution Date (so long as an Insurer Default shall not have occurred and be continuing) to the extent of Excess Amounts with respect to such Distribution Date: (1) if such Distribution Date is a Trigger Date but an Insurance Agreement Event of Default has not occurred as of such Distribution Date, the lesser of (i) the amount such that the Aggregate Principal Balance as of the related Determination Date, PLUS the amount on deposit in the Spread Account on such Distribution Date after giving effect to deposits required to be made to and distributions to be made from the Spread Account on such Distribution Date in accordance with the terms of the Spread Account Agreement MINUS the Note Balance (after giving effect to distribution of the Noteholders' Principal Distributable Amount with respect to such Distribution Date) IS EQUAL to 20% of the Aggregate Principal Balance as of the related Determination Date and (ii) the Note Balance (after giving effect to distribution of the Noteholders' Principal Distributable Amount with respect to such Distribution Date); (2) if an Insurance Agreement Event of Default has occurred as of such Distribution Date, the Note Balance (after giving effect to distribution of the Noteholders' Principal Distributable Amount with respect to such Distribution Date); and (3) if such Distribution Date is not a Trigger Date, 0. NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL: With respect to any Distribution Date, the excess of the Noteholders' Monthly Interest Distributable Amount for the preceding Distribution Date and any outstanding Noteholders' Interest Carryover Shortfall on such preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Note Distribution Account on such preceding Distribution Date, plus interest on the amount of interest due but not paid to Noteholders on the preceding Distribution Date, to the extent permitted by law, at the Note Interest Rate from such preceding Distribution Date through the current Distribution Date. 13 NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Noteholders' Monthly Interest Distributable Amount for such Distribution Date and the Noteholders' Interest Carryover Shortfall for such Distribution Date. NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, 30 days of interest (or, in the case of the first Distribution Date, interest accrued from and including the Closing Date to but excluding such Distribution Date) at the Note Interest Rate on the outstanding principal balance of the Notes on the immediately preceding Distribution Date, after giving effect to all distributions of principal to Noteholders on such Distribution Date (or, in the case of the first Distribution Date, on the Closing Date). NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the amount equal to 92% of the sum of the following amounts with respect to the immediately preceding Monthly Period, in each case computed in accordance with the Simple Interest Method: (i) that portion of all collections on Receivables (other than Liquidated Receivables and Purchased Receivables) allocable to principal, including all full and partial principal prepayments, (ii) the Principal Balance (as of the related Accounting Date) of all Receivables that became Liquidated Receivables during the related Monthly Period or Monthly Periods (other than Purchased Receivables), (iii) the portion of the Purchase Amount allocable to principal of all Receivables that became Purchased Receivables as of the immediately preceding Accounting Date, and, in the sole discretion of the Security Insurer, provided no Insurer Default shall have occurred and be continuing, the Principal Balance as of the immediately preceding Accounting Date of all Receivables that were required to be purchased as of the immediately preceding Accounting Date but were not so purchased, and (iv) the aggregate amount of Cram Down Losses that shall have occurred during the related Monthly Period or Monthly Periods. NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of any Distribution Date, the excess of the sum of the Noteholders' Monthly Principal Distributable Amount and any outstanding Noteholders' Principal Carryover Shortfall from the preceding Distribution Date over the amount in respect of principal that is actually deposited in the Note Distribution Account on such Distribution Date. 14 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date (other than the Final Scheduled Distribution Date and so long as an Insurer Default shall not have occurred and be continuing), the sum of the Noteholders' Monthly Principal Distributable Amount for such Distribution Date, and any outstanding Noteholders' Principal Carryover Shortfall as of the close of business on the preceding Distribution Date; PROVIDED, HOWEVER, the Noteholders' Principal Distributable Amount shall not exceed the Note Balance prior to the distribution on such Distribution Date. The "Noteholders' Principal Distributable Amount" on the Final Scheduled Distribution Date will equal the Note Balance on the Final Scheduled Distribution Date prior to the distribution on such Distribution Date. NOTEHOLDERS' SPECIAL PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date while an Insurer Default shall have occurred and be continuing (other than the Final Scheduled Distribution Date), the sum of 100% of the sum of the amounts referred to in clauses (i) through (iv) of the definition of Noteholders' Monthly Principal Distributable Amount, PLUS, any outstanding Noteholders' Principal Carryover Shortfall as of the close of business on the preceding Distribution Date; PROVIDED, HOWEVER, the Noteholders' Special Principal Distributable Amount shall not exceed the Note Balance prior to the distribution on such Distribution Date. The "Noteholders' Special Principal Distributable Amount" on the Final Scheduled Distribution Date will equal the Note Balance on the Final Scheduled Distribution Date prior to the distribution on such Distribution Date. NOTES: 6.55% Automobile Receivables-Backed Notes issued pursuant to the Indenture. OBLIGOR: The purchaser or the co-purchasers of the Financed Vehicle and any other Person or Persons who are primarily or secondarily obligated to make payments under a Receivable. OPINION OF COUNSEL: A written opinion of counsel (who may be counsel to or an employee of the Servicer) acceptable in form and substance and from counsel acceptable to the Issuer and, if such opinion or a copy thereof is required to be delivered to the Trustee or the Security Insurer, acceptable to the Trustee or the Security Insurer, as applicable. ORIGINAL POOL BALANCE: As of any date, the Cutoff Date Principal Balance. 15 OTHER CONVEYED PROPERTY: All property conveyed by the Seller to the Issuer pursuant to this Agreement other than the Receivables. PERSON: Any legal person, including any individual, corporation, partnership, limited liability company, joint venture, estate, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity. POLICY: The financial guaranty insurance policy issued by the Security Insurer to the Trustee on behalf of the Noteholders, Policy No. 50376-N, including any endorsements thereto. PRINCIPAL BALANCE: With respect to any Receivable, as of any date, the Amount Financed minus (i) that portion of all amounts received on or prior to such date and allocable to principal in accordance with the Simple Interest Method, and (ii) any Cram Down Loss in respect of such Receivable. PURCHASE AGREEMENT: The Receivables Purchase Agreement and Assignment, dated as of June 1, 1995 between AFS and the Seller. PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance and all accrued and unpaid interest on the Receivable as of the Accounting Date on which the obligation to purchase such Receivable arises. PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable (including any Liquidated Receivable) that became a Warranty Receivable or Administrative Receivable as of such Accounting Date (or which AFS or the Servicer has elected to purchase as of an earlier Accounting Date, as permitted by Section 2.5 or 3.7), and as to which the Purchase Amount has been deposited in the Collection Account by the Seller, AFS or the Servicer, as applicable, on or before the related Deposit Date. RATING AGENCY: Each of Moody's and Standard & Poor's, so long as such Persons maintain a rating on the Notes; and if either Moody's or Standard & Poor's no longer maintains a rating on the Notes, such other nationally recognized statistical rating organization selected by the Seller, the Note Majority and (so long as an Insurer Default shall not have occurred and be continuing) acceptable to the Security Insurer. 16 RECEIVABLE: A retail installment sale contract or promissory note (and related security agreement) for a new or used automobile or light truck (and all accessories thereto) that is included in the Schedule of Receivables, and all rights and obligations under such a contract or note, but not including (i) any Liquidated Receivable (other than for purposes of calculating Noteholders' Distributable Amounts hereunder and for the purpose of determining the obligations pursuant to Section 2.5 and 3.7 to purchase Receivables), or (ii) any Purchased Receivable on or after the Accounting Date immediately preceding the Deposit Date on which payment of the Purchase Amount is made in connection therewith pursuant to Section 4.5. RECEIVABLE FILE: The documents, electronic entries, instruments and writings listed in Section 2.2 pertaining to a particular Receivable. REGISTRAR OF TITLES: With respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon. RELATED DOCUMENTS: The Indenture, the Notes, the Purchase Agreement, the Custodian Agreement, the Policy, the Spread Account Agreement, the Insurance Agreement, the Lockbox Agreement, the Stock Pledge Agreement, the 1994-A Issuer Stock Pledge Agreement, the 1995-A Issuer Stock Pledge Agreement, the Spread Account Agreement Supplement and the Initial Purchase Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. REPRESENTATIVE: CS First Boston Corporation, as representative of the Initial Purchasers. REPURCHASE EVENTS: The occurrence of a breach of any of AFS', the Seller's or the Servicer's representations and warranties in this Agreement or in the Purchase Agreement which requires the repurchase of a Receivable by AFS or the Seller pursuant to Section 2.5 or by the Servicer pursuant to Section 3.7. REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt obligations of "P-1" by Moody's and at least "A-l+" by Standard & Poor's (or such other rating as may be acceptable to the Rating Agencies and the Controlling Party). 17 RESPONSIBLE OFFICER: When used with respect to any Person that is not an individual, the President, any Vice-President or Assistant Vice-President or the Controller of such Person, or any other officer or employee having similar functions. SCHEDULE OF RECEIVABLES: The schedule of all retail installment sales contracts and promissory notes sold and transferred to the Issuer pursuant to this Agreement which is attached hereto as Schedule A, as such schedule may be amended from time to time, to reflect purchases and repurchases of Receivables. SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and Warranties attached hereto as Schedule B. SCHEDULED PAYMENT: With respect to any Monthly Period for any Receivable, the amount set forth in such Receivable as required to be paid by the Obligor in such Monthly Period. If after the Closing Date, the Obligor's obligation under a Receivable with respect to a Monthly Period has been modified so as to differ from the amount specified in such Receivable as a result of (i) the order of a court in an insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of the Receivable permitted by Section 3.2(b), the Scheduled Payment with respect to such Monthly Period shall refer to the Obligor's payment obligation with respect to such Monthly Period as so modified. SECURITY INSURER: Financial Security Assurance Inc., a monoline insurance company incorporated under the laws of the State of New York, or any successor thereto, as issuer of the Policy. SELLER: AmeriCredit Receivables Corp., a Delaware corporation, or its successor in interest pursuant to Section 6.2. SERIES: Any series of securities issued by the purchaser of additional pools of Receivables from the Seller. SERVICER: AmeriCredit Financial Services, Inc., a Delaware corporation, its successor in interest pursuant to Section 8.2 or, after any termination of the Servicer upon a Servicer Termination Event, the Backup Servicer or any other successor Servicer. SERVICER EXTENSION NOTICE: The notice delivered pursuant to Section 3.14. 18 SERVICER TERMINATION EVENT: An event described in Section 8.1. SERVICER'S CERTIFICATE: With respect to each Determination Date, a certificate, completed by and executed on behalf of the Servicer, in accordance with Section 3.9, substantially in the form attached hereto as Exhibit E. SIMPLE INTEREST METHOD: The method of allocating a fixed level payment on an obligation between principal and interest, pursuant to which the portion of such payment that is allocated to interest is equal to the product of the fixed rate of interest on such obligation multiplied by the period of time (expressed as a fraction of a year, based on the actual number of days in the calendar month and 365 days in the calendar year) elapsed since the preceding payment under the obligation was made. SIMPLE INTEREST RECEIVABLE: A Receivable under which the portion of the payment allocable to interest and the portion allocable to principal is determined in accordance with the Simple Interest Method. SPREAD ACCOUNT: The Series 1995-A Spread Account established and maintained pursuant to the Spread Account Agreement. SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement, dated as of December 1, 1994, among the Security Insurer, the Seller, the Collateral Agent and the trustees specified therein, as the same may be amended, supplemented or otherwise modified in accordance with the terms thereof. SPREAD ACCOUNT AGREEMENT SUPPLEMENT: The Spread Account Agreement Supplement means the Series 1995-A Supplement to Spread Account Agreement dated as of June 1, 1995, among Security Insurer, the Seller and the Trustee. STANDARD & POOR'S: Standard & Poor's Rating Group, or any successor thereto. STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as of December 1, 1994, among the Security Insurer, AFS and the Collateral Agent named therein, as the same may be amended from time to time. 19 SUBCOLLECTION ACCOUNT: The account designated as the Subcollection Account in, and which is established and maintained pursuant to Section 4.2(a). SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all administrative fees, expenses and charges paid by or on behalf of Obligors collected on the Receivables during such Monthly Period, including late fees and other amounts deposited into the Collection Account in respect of the prepayment in full of a Receivable in excess of the sum of (i) the Principal Balance of such Receivable plus (ii) any amounts required to be remitted to Obligors in respect of such prepayment. TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the Supplemental Servicing Fee. TRIGGER DATE: A Distribution Date which occurs (i) on or after the date of occurrence of a Trigger Event and prior to the date, if any, on which such Trigger Event is Deemed Cured or (ii) on or after the date of occurrence of an Insurance Agreement Event of Default. TRIGGER NOTICE: As specified in Section 5.2. TRUST ACCOUNTS: The meaning specified in 4.1(c). TRUSTEE: The Person acting as Trustee under the Indenture, its successors in interest and any successor Trustee under the Indenture. UCC: The Uniform Commercial Code as in effect in the relevant jurisdiction. WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable which AFS has become obligated to repurchase pursuant to Section 2.5 on the Deposit Date with respect to such Monthly Period. Section 1.2. USAGE OF TERMS. With respect to all terms used in this Agreement, the singular includes the plural and the plural the singular, words importing any gender include the other gender, references to "writing" include printing typing lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance 20 with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the terms "include" or "including" mean "include without limitation" or "including without limitation." Section 1.3. CALCULATIONS. All calculations of the amount of interest accrued on the Notes and all calculations of the amount of the Basic Servicing Fee shall be made on the basis of a 360-day year consisting of twelve 30-day months. All references to the Principal Balance of a Receivable as of an Accounting Date shall refer to the close of business on such day. Section 1.4. SECTION REFERENCES. All references to Articles, Sections, paragraphs, subsections, exhibits and schedules shall be to such portions of this Agreement unless otherwise specified. Section 1.5. NO RECOURSE. No recourse may be taken, directly or indirectly, under this Agreement or any certificate or other writing delivered in connection herewith or therewith, against any stockholder, officer, or director, as such, of the Seller, AFS, the Servicer, the Trustee, the Backup Servicer or the Issuer or of any predecessor or successor of the Seller, AFS, the Servicer, the Trustee, the Backup Servicer or the Issuer. Section 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is to be made under this Agreement as to whether a given event, action, course of conduct or set of facts or circumstances could or would have a material adverse effect on the Issuer or the Noteholders (or any similar or analogous determination), such determination shall be made without taking into account the insurance provided by the Policy. ARTICLE II CONVEYANCE OF RECEIVABLES Section 2.1. CONVEYANCE OF RECEIVABLES. Subject to the terms and conditions of this Agreement, the Seller, pursuant to the mutually agreed upon terms contained herein, hereby sells, transfers, assigns, and otherwise conveys to the Issuer, without recourse (but without limitation of its obligations in this Agreement), all of the right, title and interest of the Seller in and to the Receivables, all monies payable thereon or in respect thereof after the Cutoff Date, the security interests of AFS in the 21 related Financed Vehicles, the Insurance Policies and any proceeds from any Insurance Policies relating to the Receivables, the Obligors or the related Financed Vehicles, including rebates of premiums, all Collateral Insurance and any Force-Placed Insurance relating to the Receivables, rights of AFS or the Seller against Dealers with respect to the Receivables under the Dealer Agreements and the Dealer Assignments, all items contained in the related Receivable Files, any and all other documents that AFS keeps on file in accordance with its customary procedures relating to the Receivables, the Obligors or the related Financed Vehicles, the rights of the Seller under the Purchase Agreement, property (including the right to receive future Liquidation Proceeds) that secures a Receivable and that has been acquired by or on behalf of the Seller or the Issuer pursuant to liquidation of such Receivable, all funds on deposit from time to time in the Trust Accounts (including all income thereon and all amounts deposited in respect of Administrative Receivables and Warranty Receivables) and all investments therein and proceeds thereof, all proceeds and investments of any of the foregoing, all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or in lieu of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing. It is the intention of the Seller that the transfer and assignment contemplated by this Agreement shall constitute a sale of the Receivables and Other Conveyed Property from the Seller to the Issuer and the beneficial interest in and title to the Receivables and the Other Conveyed Property shall not be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. In the event that, notwithstanding the intent of the Seller, the transfer and assignment contemplated hereby is held not to be a sale, this Agreement shall constitute a grant of a first priority security interest to the Issuer in the property referred to in this Section 2.1 for the benefit of the Noteholders. 22 Section 2.2. CUSTODY OF RECEIVABLE FILES. (a) In connection with the sale, transfer and assignment of the Receivables and the Other Conveyed Property to the Issuer pursuant to this Agreement and simultaneously with the execution and delivery of this Agreement, the Indenture Collateral Agent shall enter into the Custodian Agreement with the Custodian, dated as of June 1, 1995, pursuant to which the Indenture Collateral Agent shall revocably appoint the Custodian, and the Custodian shall accept such appointment, to act as the agent of the Indenture Collateral Agent as custodian of the following documents or instruments in its possession which shall be delivered to the Custodian as agent of the Indenture Collateral Agent on or before the Closing Date (with respect to each Receivable): (i) The fully executed original of the Receivable (together with any agreements modifying the Receivable, including without limitation any extension agreements); (ii) The original credit application, or a copy thereof, of each Obligor, fully executed by each such Obligor on AFS's customary form, or on a form approved by AFS, for such application, and (iii) The original certificate of title (when received) and otherwise such documents, if any, that AFS keeps on file in accordance with its customary procedures indicating that the Financed Vehicle is owned by the Obligor and subject to the interest of AFS as first lienholder or secured party (including any Lien Certificate received by AFS), or, if such original certificate of title has not yet been received, a copy of the application therefor, showing AFS as secured party. The Trustee may act as the Custodian, in which case the Trustee shall be deemed to have assumed the obligations of the Custodian specified in the Custodian Agreement, and the terms of Exhibit B shall be deemed incorporated by reference herein. (b) Upon payment in full of any Receivable, the Servicer will notify the Custodian pursuant to a certificate of an officer of the Servicer (which certificate shall include a statement to the effect that all amounts received in connection with such payments which are required to be deposited in the Collection Account pursuant to Section 3.1 have been so deposited) and shall request delivery of 23 the Receivable and Receivable File to the Servicer. From time to time as appropriate for servicing and enforcing any Receivable, the Custodian shall, upon written request of an officer of the Servicer and delivery to the Custodian of a receipt signed by such officer, cause the original Receivable and the related Receivable File to be released to the Servicer. The Servicer's receipt of a Receivable and/or Receivable File shall obligate the Servicer to return the original Receivable and the related Receivable File to the Custodian when its need by the Servicer has ceased unless the Receivable is repurchased as described in Section 2.5 or 3.7. Section 2.3. CONDITIONS TO ISSUANCE BY ISSUER. As conditions to Issuer's execution and delivery of the Notes on the Closing Date, the Issuer shall have received the following on or before the Closing Date: (a) The Schedule of Receivables certified by the President, Controller or Treasurer of the Seller; (b) The acknowledgement of the Custodian that it holds the Receivable File relating to each Receivable; (c) Copies of resolutions of the Board of Directors of the Seller approving the execution, delivery and performance of this Agreement, the Related Documents and the transactions contemplated hereby and thereby, certified by a Secretary or an Assistant Secretary of the Seller; (d) Copies of resolutions of the Board of Directors of AFS approving the execution, delivery and performance of this Agreement, the Related Documents and the transactions contemplated hereby and thereby, certified by a Secretary or an Assistant Secretary of AFS; (e) Evidence that all filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Indenture Collateral Agent a first priority perfected lien on, or ownership interest in, the Receivables and the Other Conveyed Property have been made, taken or performed; and (f) An executed copy of the Policy and Spread Account Agreement. 24 Section 2.4. REPRESENTATIONS AND WARRANTIES OF SELLER. By its execution of this Agreement, the Seller makes the following representations and warranties on which the Issuer relies in accepting the Receivables and the Other Conveyed Property and in issuing the Notes and upon which the Security Insurer relies in issuing the Policy. Unless otherwise specified, such representations and warranties speak as of the Closing Date, but shall survive the sale, transfer, and assignment of the Receivables to the Issuer. (a) SCHEDULE OF REPRESENTATIONS. The representations and warranties set forth on the Schedule of Representations attached hereto as Schedule B are true and correct. (b) ORGANIZATION AND GOOD STANDING. The Seller has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own and sell the Receivables and the Other Conveyed Property transferred to the Issuer. (c) DUE QUALIFICATION. The Seller is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals in all jurisdictions where the failure to do so would materially and adversely affect Seller's ability to transfer the Receivables and the Other Conveyed Property to the Issuer pursuant to this Agreement, or the validity or enforceability of the Receivables and the Other Conveyed Property or to perform Seller's obligations hereunder and under the Seller's Related Documents. (d) POWER AND AUTHORITY. The Seller has the power and authority to execute and deliver this Agreement and its Related Documents and to carry out its terms and their terms, respectively; the Seller has full power and authority to sell and assign the Receivables and the Other Conveyed Property to be sold and assigned to and deposited with the Issuer by it and has duly authorized such sale and assignment to the Issuer by all necessary corporate action; and the execution, delivery and performance of this Agreement and the Seller's Related Documents have been duly authorized by the Seller by all necessary corporate action. 25 (e) VALID SALE, BINDING OBLIGATIONS. This Agreement effects a valid sale, transfer and assignment of the Receivables and the Other Conveyed Property, enforceable against the Seller and creditors of and purchasers from the Seller; and this Agreement and the Seller's Related Documents, when duly executed and delivered, shall constitute legal, valid and binding obligations of the Seller enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the Related Documents and the fulfillment of the terms of this Agreement and the Related Documents shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under the certificate of incorporation or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, or violate any law, order, rule or regulation applicable to the Seller of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or any of its properties. (g) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the Seller's knowledge, threatened against the Seller or AFS, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Related Documents, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or any of the Related Documents, or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Notes. 26 (h) CHIEF EXECUTIVE OFFICE. The chief executive office of the Seller is at 200 Bailey Avenue, Fort Worth, Texas 76107-1220. Section 2.5. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. Concurrently with the execution and delivery of this Agreement, AFS and the Seller have entered into the Purchase Agreement the rights of the Seller under which have been assigned by the Seller to the Issuer. Under the Purchase Agreement AFS has made the same representations and warranties to the Seller with respect to the Receivables as those made by Seller pursuant to the Schedule of Representations, upon which the Issuer has relied in accepting the Other Conveyed Property and executing the Notes and upon which the Security Insurer has relied in issuing the Policy and upon which the Trustee has relied in authenticating the Notes. Upon discovery by any of AFS, the Seller, the Servicer, the Security Insurer, the Trustee or the Issuer of a breach of any of the representations and warranties of the Seller contained in Section 2.4 or of AFS in the Purchase Agreement, the Security Insurer or the Issuer in any Receivable (including any Liquidated Receivable), the party discovering such breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that the failure to give any such notice shall not affect any obligation of AFS or the Seller. As of the second Accounting Date (or, at AFS's election, the first Accounting Date) following its discovery or its receipt of notice of any breach of the representations and warranties set forth on the Schedule of Representations which materially and adversely affects the interests of the Noteholders, the Security Insurer or the Issuer in any Receivable (including any Liquidated Receivable) AFS or the Seller shall, unless such breach shall have been cured in all material respects, purchase such Receivable from the Issuer and, on or before the related Deposit Date, AFS shall pay the Purchase Amount to the Issuer pursuant to Section 4.5. It is understood and agreed that, except as set forth in this Section 2.5, the obligation of AFS to repurchase any Receivable as to which a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against AFS or the Seller for such breach available to the Security Insurer, the Trustee on behalf of the Noteholders or the Issuer. In addition to the foregoing and notwithstanding whether the related Receivable shall have been purchased by the Seller or AFS, AFS shall indemnify the Issuer, the Trustee, the Backup Servicer, the Collateral Agent, the Security Insurer, the Indenture Collateral Agent, the Issuer and the Noteholders against all costs, expenses, losses, damages, claims and liabilities, including 27 reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. Section 2.6. NONPETITION COVENANT. None of the Seller, the Servicer, the Issuer, the Backup Servicer nor AFS shall petition or otherwise invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer. Section 2.7. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING DATE. In the case of any Receivable in respect of which written evidence from the Dealer selling the related Financed Vehicle that the Lien Certificate for such Financed Vehicle showing AFS as first lienholder has been applied for from the Registrar of Titles was delivered to the Custodian on the Closing Date in lieu of a Lien Certificate, the Servicer shall use its best efforts to collect such Lien Certificate from the Registrar of Titles as promptly as practicable. If such Lien Certificate showing AFS as first lienholder is not received by the Custodian within 180 days after the Closing Date then the representation and warranty in paragraph 5 of the Schedule of Representations in respect of such Receivable shall be deemed to have been incorrect in a manner that materially and adversely affects the Noteholders, the Security Insurer and the Issuer. Section 2.8. ISSUER'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all Warranty Receivables purchased by the Servicer, the Seller or AFS, the Issuer shall take any and all actions reasonably requested by the Seller, AFS or Servicer, at the expense of the requesting party, to assign, without recourse, representation or warranty, to the Seller, AFS or the Servicer, as applicable, all the Issuer's right, title and interest in and to such purchased Receivable, all monies due thereon, the security interests in the related Financed Vehicles, proceeds from any Insurance Policies, proceeds from recourse against Dealers on such Receivables and the interests of the Issuer in certain rebates of premiums and other amounts relating to the Insurance Policies and any documents relating thereto, such assignment being an assignment 28 outright and not for security; and the Seller, AFS or the Servicer, as applicable, shall thereupon own such Receivable, and all such security and documents, free of any further obligation to the Issuer, the Trustee, the Security Insurer, the Indenture Collateral Agent, the Noteholders or the Issuer with respect thereto. Section 2.9. SPECIAL PURPOSE ENTITY. (a) The Seller shall conduct its business solely in its own name through its duly authorized officers or agents so as not to mislead others as to the identity of the entity with which those others are concerned, and particularly will use its best efforts to avoid the appearance of conducting business on behalf of any affiliate thereof or that the assets of the Seller are available to pay the creditors of AFS or AmeriCredit Corp. or any affiliate thereof. Without limiting the generality of the foregoing, all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made solely in the name of the Seller. (b) The Seller shall maintain corporate records and books of account separate from those of AFS and AmeriCredit Corp., and the affiliates thereof. The Seller's books and records shall clearly reflect the transfer of the Receivables to the Issuer. (c) The Seller shall obtain proper authorization from its Board of Directors of all corporate action requiring such authorization, meetings of the Board of Directors of the Seller shall be held not less frequently than one time per annum. (d) The Seller shall obtain proper authorization from its shareholders of all corporate action requiring shareholder approval, meetings of the shareholders of the Seller shall be held not less frequently than one time per annum. (e) Although the organizational expenses of the Seller have been paid by AFS, the Seller shall pay its own operating expenses and liabilities from its own funds. (f) The annual financial statements of the Seller shall disclose the effects of the Seller's transactions in accordance with generally accepted accounting principles and shall disclose that the assets of the Seller are not available to pay creditors of AmeriCredit Corp. or the AFS or any affiliate thereof. 29 (g) The resolutions, agreements and other instruments of the Seller underlying the transactions described in the Insurance Agreement and in the other Transaction Documents shall be continuously maintained by the Seller as official records of the Seller, separately identified and held apart from the records of AmeriCredit Corp. and AFS and each affiliate thereof. (h) The Seller shall maintain an arm's-length relationship with AmeriCredit Corp. and AFS and the affiliates thereof, and will not hold itself out as being liable for the debts of AmeriCredit Corp. or AFS or any affiliate thereof. (i) The Seller shall keep its assets and liabilities wholly separate from those of all other entities, including, but not limited to AmeriCredit Corp. and AFS and the affiliates thereof. (j) The books and records of the Seller will be maintained at the address designated herein for receipt of notices, unless the Seller shall otherwise advise the parties hereto in writing. Section 2.10. RESTRICTIONS ON LIENS. The Seller shall not (i) create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to cause or permit in the future (upon the happening of a contingency or otherwise) the creation, incurrence or existence of any Lien or restriction on transferability of the Receivables except for the Lien in favor of the Trustee for the benefit of the Noteholders and Financial Security, the Lien imposed by the Spread Account Agreement in favor of the Indenture Collateral Agent for the benefit of the Trustee and Financial Security, and the restrictions on transferability imposed by this Agreement or (ii) sign or file under the Uniform Commercial Code of any jurisdiction any financing statement which names AFS, the Seller or the Issuer as a debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, with respect to the Receivables, except in each case any such instrument solely securing the rights and preserving the Lien of the Indenture Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security. Section 2.11. CREATION OF INDEBTEDNESS; GUARANTEES. The Seller shall not create, incur, assume or suffer to exist any indebtedness other than indebtedness guaranteed or approved in writing by Financial Security other than the Transaction Documents. Without the prior written consent in writing of Financial Security, the Seller shall not assume guarantee, endorse or otherwise be or 30 become directly or contingently liable for the obligations of any Person by, among other things, agreeing to purchase any obligation of another Person, agreeing to advance funds to such Person or causing or assisting such Person to maintain any amount of capital. Section 2.12. OTHER ACTIVITIES. The Seller shall not: (a) sell, transfer, exchange or otherwise dispose of any of its assets except as permitted under the Transaction Documents; or (b) engage in any business or activity other than in connection with this Agreement, the Spread Account Agreement and as permitted by its certificate of incorporation. ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES Section 3.1. DUTIES OF THE SERVICER. The Servicer is hereby authorized to act as agent for the Issuer and in such capacity shall manage, service, administer and make collections on the Receivables, and perform the other actions required by the Servicer under this Agreement. The Servicer agrees that its servicing of the Receivables shall be carried out in accordance with customary and usual procedures of institutions which service motor vehicle retail installment sales contracts and, to the extent more exacting, the degree of skill and attention that the Servicer exercises from time to time with respect to all comparable motor vehicle receivables that it services for itself or others. In performing such duties, so long as AFS is the Servicer, it shall comply with the policies and procedures attached hereto as Schedule C. The Servicer's duties shall include, without limitation, collection and posting of all payments, responding to inquiries of Obligors on the Receivables, investigating delinquencies, sending payment coupons to Obligors, reporting any required tax information to Obligors, monitoring the collateral, complying with the terms of the Lockbox Agreement, accounting for collections and furnishing monthly and annual statements to the Issuer, the Trustee and the Security Insurer with respect to distributions, monitoring the status of Insurance Policies with respect to the Financed Vehicles and performing the other duties specified herein. The Servicer shall also administer and enforce all rights and responsibilities of the holder of the Receivables provided for in the Dealer Agreements (and shall maintain possession of the Dealer Agreements, to the extent it is necessary to do so), the Dealer Assignments and 31 the Insurance Policies, to the extent that such Dealer Agreements, Dealer Assignments and Insurance Policies relate to the Receivables, the Financed Vehicles or the Obligors. To the extent consistent with the standards, policies and procedures otherwise required hereby, the Servicer shall follow its customary standards, policies, and procedures and shall have full power and authority, acting alone, to do any and all things in connection with such managing, servicing, administration and collection that it may deem necessary or desirable. Without limiting the generality of the foregoing, the Servicer is hereby authorized and empowered by the Issuer to execute and deliver, on behalf of the Issuer, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables and with respect to the Financed Vehicles; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not, except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount under any Receivable or waive the right to collect the unpaid balance of any Receivable from the Obligor. The Servicer is hereby authorized to commence, in its own name or in the name of the Issuer (provided the Servicer has obtained the Issuer's consent, which consent shall not be unreasonably withheld), a legal proceeding to enforce a Receivable pursuant to Section 3.3 or to commence or participate in any other legal proceeding (including, without limitation, a bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or participates in such a legal proceeding in its own name, the Issuer shall thereupon be deemed to have automatically assigned such Receivable to the Servicer solely for purposes of commencing or participating in any such proceeding as a party or claimant, and the Servicer is authorized and empowered by the Issuer to execute and deliver in the Servicer's name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding. The Issuer shall furnish the Servicer with any powers of attorney and other documents which the Servicer may reasonably request and which the Servicer deems necessary or appropriate and take any other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement. 32 Section 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES; LOCKBOX AGREEMENTS. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due, and shall follow such collection procedures as it follows with respect to all comparable automobile receivables that it services for itself or others and otherwise act with respect to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance Policies and the Other Conveyed Property in such manner as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Issuer with respect thereto. The Servicer is authorized in its discretion to waive any prepayment charge, late payment charge or any other similar fees that may be collected in the ordinary course of servicing any Receivable. (b) The Servicer may at any time agree to a modification or amendment of a Receivable in order to (i) change the Obligor's regular due date to a date within the Monthly Period in which such due date occurs or (ii) re-amortize the scheduled payments on the Receivable following a partial prepayment of principal. (c) The Servicer may grant payment extensions on, or other modifications or amendments to, a Receivable (in addition to those modifications permitted by Section 3.2(b)) in accordance with its customary procedures if the Servicer believes in good faith that such extension, modification or amendment is necessary to avoid a default on such Receivable, will maximize the amount to be received by the Issuer with respect to such Receivable, and is otherwise in the best interests of the Issuer; PROVIDED, HOWEVER, that: (i) The aggregate period of all extensions on a Receivable shall not exceed four months; (ii) In no event may a Receivable be extended beyond the Monthly Period immediately preceding the Final Scheduled Distribution Date; (iii) So long as an Insurer Default shall not have occurred and be continuing, the Servicer shall not amend or modify a Receivable (except as provided in Section 3.2(b) and this Section 3.2(c)) without the consent of the Security 33 Insurer or a Note Majority (if an Insurer Default shall have occurred and be continuing); (iv) The aggregate Principal Balance of Receivables which may be extended during any Calendar Quarter shall not exceed 4.0% of the aggregate Principal Balance of Receivables as of the Accounting Date immediately prior to the first day of such Calendar Quarter; and (v) No such extension, modification or amendment shall be granted more than 90 days after the Closing Date if such action would have the effect of causing such Receivable to be deemed to have been exchanged for another Receivable within the meaning of Section 1001 of the Internal Revenue Code of 1986, as amended, or any proposed, temporary or final Treasury Regulations issued thereunder. (d) The Servicer shall use its best efforts to cause Obligors to make all payments on the Receivables, whether by check or by direct debit of the Obligor's bank account, to be made directly to one or more Lockbox Banks, acting as agent for the Issuer pursuant to a Lockbox Agreement. The Servicer shall use its best efforts to cause any Lockbox Bank to deposit all payments on the Receivables in the Lockbox Account no later than the Business Day after receipt, and to cause all amounts credited to the Lockbox Account on account of such payments to be transferred to the Collection Account no later than the second Business Day after receipt of such payments. The Lockbox Account shall be a demand deposit account held by the Lockbox Bank, or at the request of the Controlling Party, an Eligible Account satisfying clause (i) of the definition thereof. Prior to the Closing Date, the Servicer shall have notified each Obligor that makes its payments on the Receivables by check to make such payments thereafter directly to the Lockbox Bank (except in the case of Obligors that have already been making such payments to the Lockbox Bank), and shall have provided each such Obligor with remittance advices in order to enable such Obligors to make such payments directly to the Lockbox Bank for deposit into the Lockbox Account, and the Servicer will continue, not less often than every three months, to so notify those Obligors who have failed to make payments to the Lockbox Bank. If and to the extent requested by the Controlling Party, the Servicer shall request each Obligor that makes payment on the Receivables by direct debit of such Obligor's bank account, to execute a new authorization for 34 automatic payment which in the judgment of the Controlling Party is sufficient to authorize direct debit by the Lockbox Bank on behalf of the Issuer. If at any time, the Lockbox Bank is unable to directly debit an Obligor's bank account that makes payment on the Receivables by direct debit and if such inability is not cured within 15 days or cannot be cured by execution by the Obligor of a new authorization for automatic payment, the Servicer shall notify such Obligor that it cannot make payment by direct debit and must thereafter make payment by check. Notwithstanding any Lockbox Agreement, or any of the provisions of this Agreement relating to the Lockbox Agreement, the Servicer shall remain obligated and liable to the Issuer, Trustee and Noteholders for servicing and administering the Receivables and the Other Conveyed Property in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue thereof, PROVIDED, HOWEVER, that the foregoing shall not apply to any Backup Servicer for so long as a Lockbox Bank is performing its obligations pursuant to the terms of a Lockbox Agreement. In the event of a termination of the Servicer, the successor Servicer shall assume all of the rights and obligations of the outgoing Servicer under the Lockbox Agreement. In such event, the successor Servicer shall be deemed to have assumed all of the outgoing Servicer's interest therein and to have replaced the outgoing Servicer as a party to each such Lockbox Agreement to the same extent as if such Lockbox Agreement had been assigned to the successor Servicer, except that the outgoing Servicer shall not thereby be relieved of any liability or obligations on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer shall, upon request of the Issuer, but at the expense of the outgoing Servicer, deliver to the successor Servicer all documents and records relating to each such Lockbox Agreement and an accounting of amounts collected and held by the Lockbox Bank and otherwise use its best efforts to effect the orderly and efficient transfer of any Lockbox Agreement to the successor Servicer. In the event that the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) or a Note Majority (if an Insurer Default shall have occurred and be continuing) elects to change the identity of the Lockbox Bank, the outgoing Servicer, at its expense, shall cause the Lockbox Bank to deliver, at the direction of the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) or a Note Majority (if an Insurer Default shall have 35 occurred and be continuing) to the Issuer or a successor Lockbox Bank, all documents and records relating to the Receivables and all amounts held (or thereafter received) by the Lockbox Bank (together with an accounting of such amounts) and shall otherwise use its best efforts to effect the orderly and efficient transfer of the lockbox arrangements and the Servicer shall notify the Obligors to make payments to the Lockbox established by the successor. (e) The Servicer shall remit all payments by or on behalf of the Obligors received directly by the Servicer to the Subcollection Account or to the Lockbox Bank for deposit into the Collection Account, in either case, without deposit into any intervening account and as soon as practicable, but in no event later than the Business Day after receipt thereof. Section 3.3. REALIZATION UPON RECEIVABLES. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall use its best efforts to repossess (or otherwise comparably convert the ownership of) and liquidate any Financed Vehicle securing a Receivable with respect to which the Servicer has determined that payments thereunder are not likely to be resumed, as soon as is practicable after default on such Receivable but in no event later than the date on which all or any portion of a Scheduled Payment has become 91 days delinquent; provided, however, that the Servicer may elect not to repossess a Financed Vehicle within such time period if in its good faith judgment it determines that the proceeds ultimately recoverable with respect to such Receivable would be increased by forbearance. The Servicer is authorized to follow such customary practices and procedures as it shall deem necessary or advisable, consistent with the standard of care required by Section 3.1, which practices and procedures may include reasonable efforts to realize upon any recourse to Dealers, the sale of the related Financed Vehicle at public or private sale, the submission of claims under an Insurance Policy and other actions by the Servicer in order to realize upon such a Receivable. The foregoing is subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair and/or repossession shall increase the proceeds of liquidation of the related Receivable by an amount greater than the amount of such expenses. All amounts received upon liquidation of a Financed Vehicle shall be remitted directly by the Servicer to 36 the Subcollection Account without deposit into any intervening account as soon as practicable, but in no event later than the Business Day after receipt thereof. The Servicer shall be entitled to recover all reasonable expenses incurred by it in the course of repossessing and liquidating a Financed Vehicle into cash proceeds, but only out of the cash proceeds of such Financed Vehicle, any deficiency obtained from the Obligor or any amounts received from the related Dealer, which amounts in reimbursement may be retained by the Servicer (and shall not be required to be deposited as provided in Section 3.2(e)) to the extent of such expenses. The Servicer shall pay on behalf of the Issuer any personal property taxes assessed on repossessed Financed Vehicles. The Servicer shall be entitled to reimbursement of any such tax from Liquidation Proceeds with respect to such Receivable. (b) If the Servicer elects to commence a legal proceeding to enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed to be an automatic assignment from the Issuer to the Servicer of the rights under such Dealer Agreement and Dealer Assignment for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment on the grounds that it is not a real party in interest or a Person entitled to enforce the Dealer Agreement or Dealer Assignment, the Issuer, at the Servicer's expense, or the Seller, at the Seller's expense, shall take such steps as the Servicer deems necessary to enforce the Dealer Agreement or Dealer Assignment, including bringing suit in its name or the name of the Seller or of the Issuer and the Indenture Collateral Agent for the benefit of the Issuer Secured Parties. All amounts recovered shall be remitted directly by the Servicer as provided in Section 3.2(e). Section 3.4. INSURANCE. (a) The Servicer shall require, in accordance with its customary servicing policies and procedures, that each Financed Vehicle be insured by the related Obligor under the Insurance Policies referred to in Paragraph 24 of the Schedule of Representations and Warranties and shall monitor the status of such physical loss and damage insurance coverage thereafter, in accordance with its customary servicing procedures. Each Receivable requires the Obligor to maintain such physical loss and damage insurance, naming AFS and its successors and assigns as additional insureds, and permits the holder of such Receivable to obtain physical loss and damage insurance at the expense of the 37 Obligor if the Obligor fails to maintain such insurance. If the Servicer shall determine that an Obligor has failed to obtain or maintain a physical loss and damage Insurance Policy covering the related Financed Vehicle which satisfies the conditions set forth in clause (i)(a) of such Paragraph 24 (including, without limitation, during the repossession of such Financed Vehicle) the Servicer may enforce the rights of the holder of the Receivable under the Receivable to require the Obligor to obtain such physical loss and damage insurance in accordance with its customary servicing policies and procedures. The Servicer may maintain a vendor's single interest or other collateral protection insurance policy with respect to all Financed Vehicles ("Collateral Insurance") which policy shall by its terms insure against physical loss and damage in the event any Obligor fails to maintain physical loss and damage insurance with respect to the related Financed Vehicle. All policies of Collateral Insurance shall be endorsed with clauses providing for loss payable to the Servicer. Costs incurred by the Servicer in maintaining such Collateral Insurance shall be paid by the Servicer. (b) The Servicer may, if an Obligor fails to obtain or maintain a physical loss and damage Insurance Policy, obtain insurance with respect to the related Financed Vehicle and advance on behalf of such Obligor, as required under the terms of the insurance policy, the premiums for such insurance (such insurance being referred to herein as "Force-Placed Insurance"). All policies of Force-Placed Insurance shall be endorsed with clauses providing for loss payable to the Servicer. Any cost incurred by the Servicer in maintaining such Force-Placed Insurance shall only be recoverable out of premiums paid by the Obligors or Liquidation Proceeds with respect to the Receivable, as provided in Section 3.4(c). (c) In connection with any Force-Placed Insurance obtained hereunder, the Servicer may, in the manner and to the extent permitted by applicable law, require the Obligors to repay the entire premium to the Servicer. In no event shall the Servicer include the amount of the premium in the Amount Financed under the Receivable. For all purposes of this Agreement, the Insurance Add-On Amount with respect to any Receivable having Force-Placed Insurance will be treated as a separate obligation of the Obligor and will not be added to the Principal Balance of such Receivable, and amounts allocable thereto will not be available for distribution on the Notes. The Servicer shall retain and separately administer the right to receive payments from Obligors 38 with respect to Insurance Add-On Amounts or rebates of Forced-Placed insurance premiums. If an Obligor makes a payment with respect to a Receivable having Force-Placed Insurance, but the Servicer is unable to determine whether the payment is allocable to the Receivable or to the Insurance Add-On Amount, the payment shall be applied first to any unpaid Scheduled Payments and then to the Insurance Add-On Amount. Liquidation Proceeds on any Receivable will be used first to pay the Principal Balance and accrued interest on such Receivable and then to pay the related Insurance Add-On Amount. If an Obligor under a Receivable with respect to which the Servicer has placed Force-Placed Insurance fails to make scheduled payments of such Insurance Add-On Amount as due, and the Servicer has determined that eventual payment of the Insurance Add-On Amount is unlikely, the Servicer may, but shall not be required to, purchase such Receivable from the Issuer for the Purchase Amount on any subsequent Deposit Date. Any such Receivable, and any Receivable with respect to which the Servicer has placed Force-Placed Insurance which has been paid in full (excluding any Insurance Add-On Amounts) will be assigned to the Servicer. (d) The Servicer may sue to enforce or collect upon the Insurance Policies, in its own name, if possible, or as agent of the Issuer. If the Servicer elects to commence a legal proceeding to enforce an Insurance Policy, the act of commencement shall be deemed to be an automatic assignment of the rights of the Issuer under such Insurance Policy to the Servicer for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce an Insurance Policy on the grounds that it is not a real party in interest or a holder entitled to enforce the Insurance Policy, the Issuer, at the Servicer's expense, or the Seller, at the Seller's expense, shall take such steps as the Servicer deems necessary to enforce such Insurance Policy, including bringing suit in its name or the name of the Issuer and the Indenture Collateral Agent for the benefit of the Issuer Secured Parties. (e) The Servicer will cause itself and may cause the Issuer to be named as named insured under all policies of Collateral Insurance. Section 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. (a) Consistent with the policies and procedures required by this Agreement, the Servicer shall take such steps on behalf of the Issuer as are necessary to maintain perfection of the security 39 interest created by each Receivable in the related Financed Vehicle, including but not limited to obtaining the execution by the Obligors and the recording, registering, filing, re-recording, re-filing, and re-registering of all security agreements, financing statements and continuation statements as are necessary to maintain the security interest granted by the Obligors under the respective Receivables. The Indenture Collateral Agent hereby authorizes the Servicer, and the Servicer agrees, to take any and all steps necessary to re-perfect such security interest on behalf of the Issuer as necessary because of the relocation of a Financed Vehicle or for any other reason. In the event that the assignment of a Receivable to the 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 perfect a security interest in the related Financed Vehicle in favor of the Indenture Collateral Agent, the Servicer hereby agrees that AFS's designation as the secured party on the certificate of title is in its capacity as agent of the Indenture Collateral Agent. (b) Upon the occurrence of an Insurance Agreement Event of Default, the Security Insurer may (so long as an Insurer Default shall not have occurred and be continuing) instruct the Trustee and the Servicer to take or cause to be taken, or, if an Insurer Default shall have occurred, upon the occurrence of a Servicer Termination Event, the Trustee and the Servicer shall take or cause to be taken such action as may, in the opinion of counsel to the Controlling Party, be necessary to perfect or re-perfect the security interests in the Financed Vehicles securing the Receivables in the name of the Issuer by amending the title documents of such Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Controlling Party, be necessary or prudent. AFS hereby agrees to pay all expenses related to such perfection or reperfection and to take all action necessary therefor. In addition, prior to the occurrence of an Insurance Agreement Event of Default, the Controlling Party may instruct the Trustee and the Servicer to take or cause to be taken such action as may, in the opinion of counsel to the Controlling Party, be necessary to perfect or re-perfect the security interest in the Financed Vehicles underlying the Receivables in the name of the Issuer, including by amending the title documents of such Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Controlling Party, be necessary or prudent; PROVIDED, HOWEVER, that if the Controlling Party requests 40 that the title documents be amended prior to the occurrence of an Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer or the Trustee in connection with such action shall be reimbursed to the Servicer or the Trustee, as applicable, by the Controlling Party. AFS hereby appoints the Trustee as its attorney-in-fact to take any and all steps required to be performed by AFS pursuant to this Section 3.5(b), including execution of certificates of title or any other documents in the name and stead of AFS, and the Trustee hereby accepts such appointment. Section 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER. By its execution and delivery of this Agreement, the Servicer makes the following representations, warranties and covenants on which the Issuer relies in accepting the Receivables and issuing the Notes, on which the Trustee relies in authenticating the Notes and on which the Security Insurer relies in issuing the Policy. (a) The Servicer covenants as follows: (i) LIENS IN FORCE. The Financed Vehicle securing each Receivable shall not be released in whole or in part from the security interest granted by the Receivable, except upon payment in full of the Receivable or as otherwise contemplated herein; (ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the rights of the Issuer or the Noteholders in the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance Policies or the Other Conveyed Property; and (iii) NO AMENDMENTS. The Servicer shall not extend or otherwise amend the terms of any Receivable, except in accordance with Section 3.2. (iv) RESTRICTIONS ON LIENS. The Servicer shall not (i) create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to cause or permit in the future (upon the happening of a contingency or otherwise) the creation, incurrence or existence of any Lien or restriction on transferability of the Receivables except for the Lien in favor of the Trustee for the benefit of the Noteholders and Financial Security, the Lien imposed by the Spread Account Agreement in favor of the Indenture Collateral Agent for the benefit of the Trustee and Financial Security, and the 41 restrictions on transferability imposed by this Agreement or (ii) sign or file under the Uniform Commercial Code of any jurisdiction any financing statement which names AFS, the Servicer or the Issuer as a debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, with respect to the Receivables, except in each case any such instrument solely securing the rights and preserving the Lien of the Indenture Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security. (b) The Servicer represents, warrants and covenants as of the Closing Date as to itself: (i) REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth on the Schedule of Representations attached hereto as Schedule B are true and correct, provided that such representations and warranties contained therein and herein shall not apply to any entity other than AFS; (ii) ORGANIZATION AND GOOD STANDING. The Servicer has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with power, authority and legal right to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to enter into and perform its obligations under this Agreement; (iii) DUE QUALIFICATION. The Servicer is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement) requires or shall require such qualification; (iv) POWER AND AUTHORITY. The Servicer has the power and authority to execute and deliver this Agreement and its Related Documents and to carry out its terms and their terms, respectively, and the execution, delivery and performance of this Agreement and the Servicer's Related Documents have been duly authorized by the Servicer by all necessary corporate action; 42 (v) BINDING OBLIGATION. This Agreement and the Servicer's Related Documents shall constitute legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law; (vi) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the Servicer's Related Documents, and the fulfillment of the terms of this Agreement and the Servicer's Related Documents, shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, or violate any law, order, rule or regulation applicable to the Servicer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or any of its properties; (vii) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the Servicer's knowledge, threatened against the Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Servicer or its properties (A) asserting the invalidity of this Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Related Documents, or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement or any of the Related Documents or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Notes; 43 (viii) NO CONSENTS. The Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement which has not already been obtained. Section 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon discovery by any of the Servicer, the Security Insurer, the Issuer or the Trustee of a breach of any of the covenants set forth in Sections 3.5(a) or 3.6(a), the party discovering such breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that the failure to give any such notice shall not affect any obligation of AFS as Servicer under this Section 3.7. As of the second Accounting Date following its discovery or receipt of notice of any breach of any covenant set forth in Sections 3.5(a) or 3.6(a) which materially and adversely affects the interests of the Noteholders, the Issuer or the Security Insurer in any Receivable (including any Liquidated Receivable) (or, at AFS's election, the first Accounting Date so following), AFS shall, unless such breach shall have been cured in all material respects, purchase from the Issuer the Receivable affected by such breach and, on the related Deposit Date, AFS shall pay the related Purchase Amount. It is understood and agreed that the obligation of AFS to purchase any Receivable (including any Liquidated Receivable) with respect to which such a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against AFS for such breach available to the Security Insurer, the Noteholders, the Issuer or the Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that AFS shall indemnify the Issuer, the Backup Servicer, the Collateral Agent, the Security Insurer, the Trustee and the Noteholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. Section 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER. On each Distribution Date, the Servicer shall be entitled to receive out of the Collection Account the Basic Servicing Fee and any Supplemental Servicing Fee for the related Monthly Period pursuant to Section 4.6. The Servicer shall be required to pay all expenses incurred by it in connection with 44 its activities under this Agreement (including taxes imposed on the Servicer, expenses incurred in connection with distributions and reports made by the Servicer to Noteholders or the Security Insurer and all other fees and expenses of the Issuer, except taxes levied or assessed against the Issuer, and claims against the Issuer in respect of indemnification, which taxes and claims in respect of indemnification against the Issuer are expressly stated to be for the account of AFS). The Servicer shall be liable for the fees and expenses of the Issuer, the Indenture Collateral Agent, the Trustee, the Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and any fees under the Lockbox Agreement) and the Independent Accountants. Notwithstanding the foregoing if the Servicer shall not be AFS, a successor to AFS as Servicer permitted by Section 7.2 shall not be liable for taxes levied or assessed against the Issuer or claims against the Issuer in respect of indemnification. Section 3.9. SERVICER'S CERTIFICATE. No later than 10:00 am. New York City time on each Determination Date, the Servicer shall deliver to the Issuer, the Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent and each Rating Agency a Servicer's Certificate executed by a Responsible Officer of the Servicer containing among other things, (i) all information necessary to enable the Trustee to make any withdrawal and deposit required by Section 5.1, to give any notice required by Section 5.1(b), to make the distributions required by Sections 4.6, (ii) all information necessary to enable the Trustee to send the statements to Noteholders and the Security Insurer required by Section 4.8, (iii) a listing of all Warranty Receivables and Administrative Receivables purchased as of the related Deposit Date, identifying the Receivables so purchased and (iv) all information necessary to enable the Trustee to reconcile all deposits to, and withdrawals from, the Collection Account for the related Monthly Period and Distribution Date, including the accounting required by Section 4.8. Receivables purchased by the Servicer or by the Seller or AFS on the related Deposit Date and each Receivable which became a Liquidated Receivable or which was paid in full during the related Monthly Period shall be identified by account number (as set forth in the Schedule of Receivables). A copy of such certificate may be obtained by any Noteholder by a request in writing to the Trustee addressed to the Corporate Trust Office. In addition to the information set forth in the preceding sentence, the Servicer's Certificate delivered to the Security Insurer, the Collateral Agent and the Trustee on the Determination Date shall also contain the following information: (a) the 45 Delinquency Ratio, Average Delinquency Ratio, Default Ratio, Average Default Ratio, Net Loss Ratio and Average Net Loss Ratio for such Determination Date; (b) whether any Trigger Event has occurred as of such Determination Date; (c) whether any Trigger Event that may have occurred as of a prior Determination Date is Deemed Cured as of such Determination Date; and (d) whether to the knowledge of the Servicer an Insurance Agreement Event of Default has occurred. Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF SERVICER TERMINATION EVENT. (a) The Servicer shall deliver to the Issuer, the Trustee, the Backup Servicer, the Security Insurer, the Noteholders and each Rating Agency, on or before October 31 (or 120 days after the end of the Servicer's fiscal year, if other than June 30) of each year, beginning on October 31, 1996, an officer's certificate signed by any Responsible Officer of the Servicer, dated as of June 30 (or other applicable date) of such year, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or such other period as shall have elapsed from the Closing Date to the date of the first such certificate) and of its performance under this Agreement has been made under such officer's supervision, and (ii) to such officer's knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement throughout such period, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof. (b) The Servicer shall deliver to the Issuer, the Trustee, the Backup Servicer, the Security Insurer, the Noteholders, the Collateral Agent, and each Rating Agency, promptly after having obtained knowledge thereof, but in no event later than two (2) Business Days thereafter, written notice in an officer's certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under Section 8.1(a). The Seller or the Servicer shall deliver to the Issuer, the Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent, the Servicer or the Seller (as applicable) and each Rating Agency promptly after having obtained knowledge thereof, but in no event later than two (2) Business Days thereafter, written notice in an officer's certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under any other clause of Section 8.1. 46 Section 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The Servicer shall cause a firm of nationally recognized independent certified public accountants (the "Independent Accountants"), who may also render other services to the Servicer or to the Seller, to deliver to the Issuer, the Trustee, the Backup Servicer, the Security Insurer and each Rating Agency, on or before October 31 (or 120 days after the end of the Servicer's fiscal year, if other than June 30) of each year, beginning on October 31, 1996, with respect to the twelve months ended the immediately preceding June 30 (or other applicable date) (or such other period as shall have elapsed from the Closing Date to the date of such certificate), a statement (the "Accountants' Report") addressed to the Board of Directors of the Servicer, to the Issuer, the Trustee, the Backup Servicer and to the Security Insurer, to the effect that such firm has audited the books and records of the Servicer and issued its report thereon in connection with the audit report on the financial statements of AmeriCredit Corp. and that (1) such audit was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (2) the firm is independent of the Seller and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants, and (3) a review in accordance with agreed upon procedures was made of three randomly selected Servicer's Certificates including the delinquency, default and loss statistics required to be specified therein and except as disclosed in the Accountants' Report, no exceptions or errors in the Servicer's Certificates were found. (b) A copy of the Accountants' Report may be obtained by any Noteholder by a request in writing to the Trustee addressed to the Corporate Trust Office. Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING RECEIVABLES. The Servicer shall provide to representatives of the Issuer, Trustee, the Backup Servicer, the Noteholders and the Security Insurer reasonable access to the documentation regarding the Receivables. In each case, such access shall be afforded without charge but only upon reasonable request and during normal business hours. Nothing in this Section shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access as 47 provided in this Section as a result of such obligation shall not constitute a breach of this Section. Section 3.13. MONTHLY TAPE. On or before the third Business Day, but in no event later than the fifth calendar day, of each month, the Servicer will deliver to the Trustee and the Backup Servicer a computer tape and a diskette (or any other electronic transmission acceptable to the Trustee and the Backup Servicer) in a format acceptable to the Trustee and the Backup Servicer containing the information with respect to the Receivables as of the preceding Accounting Date necessary for preparation of the Servicer's Certificate relating to the immediately succeeding Determination Date and necessary to determine the application of collections as provided in Section 4.3. The Backup Servicer shall use such tape or diskette (or other electronic transmission acceptable to the Trustee and the Backup Servicer) to verify the Servicer's Certificate delivered by the Servicer, and the Backup Servicer shall certify to the Controlling Party that it has verified the Servicer's Certificate in accordance with this Section 3.13 and shall notify the Servicer and the Controlling Party of any discrepancies, in each case, on or before the second Business Day following the Determination Date. In the event that the Backup Servicer reports any discrepancies, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancies prior to the related Distribution Date, but in the absence of a reconciliation, the Servicer's Certificate shall control for the purpose of calculations and distributions with respect to the related Distribution Date. In the event that the Backup Servicer and the Servicer are unable to reconcile discrepancies with respect to a Servicer's Certificate by the related Distribution Date, the Servicer shall cause the Independent Accountants, at the Servicer's expense, to audit the Servicer's Certificate and, prior to the third Business Day, but in no event later than the fifth calendar day, of the following month, reconcile the discrepancies. The effect, if any, of such reconciliation shall be reflected in the Servicer's Certificate for such next succeeding Determination Date. In addition, upon the occurrence of a Servicer Termination Event the Servicer shall, if so requested by the Controlling Party deliver to the Backup Servicer its Collection Records and its Monthly Records within 15 days after demand therefor and a computer tape containing as of the close of business on the date of demand all of the data maintained by the Servicer in computer format in connection with servicing the Receivables. Other than the duties specifically set forth in this Agreement, the Backup Servicer shall have no obligations hereunder, including, without limitation, to 48 supervise, verify, monitor or administer the performance of the Servicer. The Backup Servicer shall have no liability for any actions taken or omitted by the Servicer. Section 3.14. RETENTION AND TERMINATION OF SERVICER. The Servicer hereby covenants and agrees to act as such under this Agreement for an initial term, commencing on the Closing Date and ending on September 30, 1995, which term shall be extendible by the Controlling Party for successive quarterly terms ending on each successive December 31, March 31, June 30 and September 30 (or, pursuant to revocable written standing instructions from time to time to the Servicer, the Trustee and the Issuer, for any specified number of terms greater than one), until the Notes are paid in full. Each such notice (including each notice pursuant to standing instructions, which shall be deemed delivered at the end of successive quarterly terms for so long as such instructions are in effect) (a "Servicer Extension Notice") shall be delivered by the Security Insurer to the Issuer, the Trustee and the Servicer. The Servicer hereby agrees that, as of the date hereof and upon its receipt of any such Servicer Extension Notice, the Servicer shall become bound, for the initial term beginning on the Closing Date and for the duration of the term covered by such Servicer Extension Notice, to continue as the Servicer subject to and in accordance with the other provisions of this Agreement. Until such time as an Insurer Default shall have occurred and be continuing the Trustee agrees that if as of the fifteenth day prior to the last day of any term of the Servicer the Trustee shall not have received any Servicer Extension Notice from the Security Insurer, the Trustee will, within five days thereafter, give written notice of such non-receipt to the Issuer, the Security Insurer and the Servicer. Section 3.15. DUTIES OF THE SERVICER UNDER THE INDENTURE. The Servicer (or AFS, as noted below if it is not the Servicer hereunder) shall, and hereby agrees that it will, perform on behalf of the Issuer the following duties of the Issuer under the Indenture (references are to the applicable Sections in the Indenture): (a) the direction to the Paying Agents, if any, to deposit moneys with the Trustee (Section 3.3); (b) the Servicer, or AFS if AFS is not the Servicer hereunder, with respect to the obtaining and preservation of the Issuer's qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity 49 and enforceability of the Indenture, the Notes, the Indenture Collateral and each other instrument and agreement included in the Trust Estate (Section 3.4); (c) the preparation of all supplements, amendments, financing statements, continuation statements, instruments of further assurance and other instruments, in accordance with Section 3.5 of the Indenture, necessary to protect the Trust Estate (Section 3.5); (d) the delivery of the Opinion of Counsel on the Closing Date and the annual delivery of Opinions of Counsel, in accordance with Section 3.6 of the Indenture, as to the Trust Estate, and the annual delivery of the Officers' Certificate and certain other statements, in accordance with Section 3.9 of the Indenture, as to compliance with the Indenture (Sections 3.6 and 3.9); (e) the preparation and obtaining of documents and instruments required for the release of the Issuer from its obligations under the Indenture (Section 3.10(b)); (f) the monitoring of the Issuer's obligations as to the satisfaction and discharge of the Indenture and the preparation of an Officers' Certificate and the obtaining of the Opinion of Counsel and the Independent Certificate relating thereto (Section 4.1); (g) the preparation of any written instruments required to confirm more fully the authority of any co-trustee or separate trustee and any written instruments necessary in connection with the resignation or removal of any co-trustee or separate trustee (Sections 6.8 and 6.10); (h) the preparation of Issuer Orders, Officers' Certificates and Opinions of Counsel and all other actions necessary with respect to investment and reinvestment of funds in the Trust Accounts (Sections 8.2 and 8.3); (i) the preparation of Issuer Orders and the obtaining of Opinions of Counsel with respect to the execution of supplemental indentures (Sections 9.1, 9.2 and 9.3); (j) the preparation of all Officers' Certificates, Opinions of Counsel and Independent Certificates with respect to any requests by the Issuer to the Trustee or the Indenture Collateral Agent to take any action under the Indenture (Section 11.1(a)); 50 (k) the preparation and delivery of Officers' Certificates and the obtaining of Independent Certificates, if necessary, for the release of property from the lien of the Indenture (Section 11.1(b)); and (l) the recording of the Indenture, if applicable (Section 11.15). Section 3.16. FIDELITY BOND AND ERRORS AND OMISSIONS POLICY. The Servicer has obtained, and shall continue to maintain in full force and effect, a Fidelity Bond and Errors and Omissions Policy of a type and in such amount as is customary for servicers engaged in the business of servicing automobile receivables. ARTICLE IV DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS Section 4.1. TRUST ACCOUNTS. (a) The Indenture Collateral Agent shall establish the Collection Account in the name of the Indenture Collateral Agent for the benefit of the Issuer Secured Parties (as defined in the Indenture). The Collection Account shall be a segregated trust account established by the Indenture Collateral Agent with a depository institution acceptable to the Controlling Party, and initially maintained with the Indenture Collateral Agent. (b) The Indenture Collateral Agent shall establish the Note Distribution Account in the name of the Indenture Collateral Agent for the benefit of the Issuer Secured Parties. The Note Distribution Account shall be a segregated trust account established by the Indenture Collateral Agent with a depository institution acceptable to the Controlling Party, and initially maintained with the Indenture Collateral Agent. (c) All amounts held in the Collection Account and the Note Distribution Account (collectively, the "Trust Accounts") shall, to the extent permitted by applicable laws, rules and regulations, be invested by the Indenture Collateral Agent, as directed by the Servicer (or, if the Servicer fails to so direct, as directed by the Controlling Party), in Eligible Investments that, in the case of amounts held in the Collection Account and the Note Distribution Account mature not later than one Business Day prior to the Distribution Date for the Monthly Period to which such amounts 51 relate. Any such written direction shall certify that any such investment is authorized by this Section 4.1. Investments in Eligible Investments shall be made in the name of the Indenture Collateral Agent on behalf of the Issuer, and such investments shall not be sold or disposed of prior to their maturity. Any investment of funds in the Trust Accounts shall be made in Eligible Investments held by a financial institution with respect to which (a) such institution has noted the Indenture Collateral Agent's interest therein by book entry or otherwise and (b) a confirmation of the Indenture Collateral Agent's interest has been sent to the Indenture Collateral Agent by such institution, provided that such Eligible Investments are (i) specific certificated securities (as such term is used in the Texas UCC, and (ii) either (A) in the possession of such institution or (B) in the possession of a clearing corporation as such term is used in the New York UCC and the Texas UCC, registered in the name of such clearing corporation, not endorsed for collection or surrender or any other purpose not involving transfer, not containing any evidence of a right or interest inconsistent with the Indenture Collateral Agent's security interest therein, and held by such clearing corporation in an account of such institution. Subject to the other provisions hereof, the Indenture Collateral Agent shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Indenture Collateral Agent or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Indenture Collateral Agent in a manner which complies with this Section 4.1. All interest, dividends, gains upon sale and other income from, or earnings on, investments of funds in the Trust Accounts shall be deposited in the Collection Account and distributed on the next Distribution Date pursuant to Section 4.6 hereof. The Servicer shall deposit in the applicable Trust Account an amount equal to any net loss on such investments immediately as realized. (d) On the Closing Date, the Servicer shall deliver to the Trustee for deposit in the Collection Account (i) all Scheduled Payments and prepayments of Receivables received by the Servicer after the Cutoff Date and on or prior to the Business Day immediately preceding the Closing Date or received by the Lockbox Bank after the Cutoff Date and on or prior to the second Business Day immediately preceding the Closing Date and (ii) all Liquidation Proceeds and proceeds of Insurance Policies realized in respect of a Financed Vehicle and applied by the Servicer after the Cutoff Date. 52 Section 4.2. COLLECTIONS. (a) The Servicer shall establish the Subcollection Account in the name of the Indenture Collateral Agent for the benefit of the Noteholders. The Subcollection Account shall be an Eligible Account satisfying clause (i) of the definition of "Eligible Account," and shall initially be established with First Interstate Bank, N.A. The Servicer shall remit directly to the Subcollection Account without deposit into any intervening account all payments by or on behalf of the Obligors on the Receivables and all Liquidation Proceeds received by the Servicer, in each case, as soon as practicable, but in no event later than the Business Day after receipt thereof. Within two days of deposit of payments into the Subcollection Account, the Servicer shall cause all amounts credited to the Subcollection Account on account of such payments to be transferred to the Collection Account. Amounts in the Subcollection Account shall not be invested. (b) Notwithstanding the provisions of subsection (a) hereof, the Servicer will be entitled to be reimbursed from amounts on deposit in the Collection Account with respect to a Monthly Period for amounts previously deposited in the Collection Account but later determined by the Servicer or the Lockbox Bank to have resulted from mistaken deposits or postings or checks returned for insufficient funds. The amount to be reimbursed hereunder shall be paid to the Servicer on the related Distribution Date pursuant to Section 4.6(i) upon certification by the Servicer of such amounts and the provision of such information to the Trustee and the Security Insurer as may be necessary in the opinion of the Trustee and the Security Insurer to verify the accuracy of such certification. In the event that the Security Insurer has not received evidence satisfactory to it of the Servicer's entitlement to reimbursement pursuant to this Section 4.2(b), the Security Insurer shall (unless an Insurer Default shall have occurred and be continuing) give the Trustee notice to such effect, following receipt of which the Trustee shall not make a distribution to the Servicer in respect of such amount pursuant to Section 4.6, or if the Servicer prior thereto has been reimbursed pursuant to Section 4.6 or Section 4.8, the Trustee shall withhold such amounts from amounts otherwise distributable to the Servicer on the next succeeding Distribution Date. Section 4.3. APPLICATION OF COLLECTIONS. For the purposes of this Agreement, all collections for a Monthly Period shall be applied by the Servicer as follows: 53 (a) With respect to each Receivable, payments by or on behalf of the Obligor thereof (other than of Supplemental Servicing Fees with respect to such Receivable, to the extent collected) shall be applied to interest and principal with respect to such Receivable in accordance with the Simple Interest Method, whether or not such Receivable is a Simple Interest Receivable. With respect to each Liquidated Receivable, Liquidation Proceeds shall be applied to interest and principal with respect to such Receivable in accordance with the Simple Interest Method. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to a Liquidated Receivable. (b) With respect to each Receivable that has become a Purchased Receivable on any Deposit Date, the Purchase Amount shall be applied, for purposes of this Agreement only, to interest and principal on the Receivable in accordance with the Simple Interest Method as if the Purchase Amount had been paid by the Obligor on the Accounting Date. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to a Purchased Receivable. Nothing contained herein shall relieve any Obligor of any obligation relating to any Receivable. (c) All amounts collected that are payable to the Servicer as Supplemental Servicing Fees hereunder shall be deposited in the Collection Account and paid to the Servicer in accordance with Section 4.6(i). (d) All payments by or on behalf of an Obligor received with respect to any Purchased Receivable after the Accounting Date immediately preceding the Deposit Date on which the Purchase Amount was paid by the Seller, AFS or the Servicer shall be paid to the Seller, AFS or the Servicer, respectively, and shall not be included in the Available Funds. Section 4.4. NET DEPOSITS. Subject to payment by the Servicer of amounts otherwise payable pursuant to Section 4.6(ii) and provided that no Servicer Termination Event shall have occurred and be continuing with respect to such Servicer, the Servicer may make the remittances to be made by it pursuant to Sections 4.2, 4.3 and 4.5 net of amounts (which amounts may be netted prior to any such remittance for a Monthly Period) to be distributed to it pursuant to Sections 3.8,4.2(b) and 4.6(i); PROVIDED, HOWEVER, that the Servicer shall account for all of such amounts in the related Servicer's Certificate as if such amounts were deposited and distributed separately, and, PROVIDED, FURTHER that if an error is 54 made by the Servicer in calculating the amount to be deposited or retained by it, with the result that an amount less than required is deposited in the Collection Account, the Servicer shall make a payment of the deficiency to the Collection Account, immediately upon becoming aware, or receiving notice from the Trustee, of such error. Section 4.5. ADDITIONAL DEPOSITS. On or before each Deposit Date, the Servicer, the Seller or AFS shall deposit in the Collection Account the aggregate Purchase Amounts with respect to Administrative Receivables and Warranty Receivables, respectively. All such deposits of Purchase Amounts shall be made in immediately available funds. On or before each Draw Date, the Trustee shall deposit in the Collection Account any amounts delivered to the Trustee by the Collateral Agent pursuant to Section 5.1. Section 4.6. DISTRIBUTIONS. On each Distribution Date, the Trustee shall (based on the information contained in the Servicer's Certificate delivered on the related Determination Date) distribute the following amounts and in the following order of priority: (i) first, from the Distribution Amount, to the Servicer, the Basic Servicing Fee for the related Monthly Period, any Supplemental Servicing Fees for the related Monthly Period, and any amounts specified in Section 4.2(b); (ii) second, from the Distribution Amount, to the Trustee, any accrued and unpaid fees and expenses of the Trustee in accordance with the Indenture; to any Lockbox Bank, Custodian, Backup Servicer, Collateral Agent, or Indenture Collateral Agent (including the Issuer or Trustee if acting in any such additional capacity), any accrued and unpaid fees and expenses (in each case, to the extent such Person has not previously received such amount from the Servicer or AFS); (iii) third, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Noteholders' Interest Distributable Amount for such Distribution Date; (iv) fourth, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Noteholders' Principal Distributable Amount for such Distribution Date or, when an Insurer Default shall have occurred and be continuing the Noteholders' Special Principal Distributable Amount for such Distribution Date; 55 (v) fifth, from the Distribution Amount, to the Security Insurer, to the extent of any amounts owing to the Security Insurer under the Insurance Agreement and not paid, whether or not AFS is also obligated to pay such amounts; and (vi) sixth, any remaining Available Funds to the Collateral Agent for deposit in the Spread Account, such amounts representing the Credit Enhancement Fee payable on a subordinated basis to the Seller. Section 4.7. TRUSTEE AS AGENT. The Trustee, in making distributions as provided in this Agreement, shall act solely on behalf of and as agent for the Noteholders. SECTION 4.8. STATEMENTS TO NOTEHOLDERS. On each Distribution Date, the Trustee shall include with each distribution to each Noteholder, a statement (which statement shall also be provided to the Security Insurer and to each Rating Agency) based on information in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 3.9, setting forth for the Monthly Period relating to such Distribution Date the following information: (i) the amount of such distribution allocable to principal; (ii) the amount of such distribution allocable to interest; (iii) the amount of such distribution payable out of amounts withdrawn from the Spread Account or pursuant to a claim on the Policy and the amount remaining in the Spread Account; (iv) the outstanding principal balance of the Notes (after giving effect to distributions made on such Payment Date); (v) the amount of fees paid by the Trustee with respect to such Monthly Period; (vi) the Note Pool Factor (after giving effect to distributions made on such Distribution Date); 56 (vii) the Delinquency Ratio, Average Delinquency Ratio, Default Ratio, Average Default Ratio, Net Loss Ratio and Average Net Loss Ratio for such Determination Date; (viii) whether any Trigger Event has occurred as of such Determination Date; (ix) whether any Trigger Event that may have occurred as of a prior Determination Date is Deemed Cured as of such Determination Date; (x) whether to the knowledge of the Servicer an Insurance Agreement Event of Default has occurred. Each amount set forth pursuant to subclauses (i) through (iv) above may be expressed as a dollar amount per $1,000 of original principal balance of a Note. Section 4.9. ELIGIBLE ACCOUNTS. Any account which is required to be established as an Eligible Account pursuant to this Agreement and which ceases to be an Eligible Account shall within 5 Business Days (or such longer period, not to exceed 30 days, as to which each Rating Agency and the Security Insurer may consent) be established as a new account which shall be an Eligible Account and any cash and/or any investments shall be transferred to such new account. Section 4.10. OPTIONAL DEPOSITS BY THE SECURITY INSURER. The Security Insurer shall at any time, and from time to time, have the option (but shall not be required) to deliver amounts to the Trustee for any of the following purposes as specified to the Trustee: (1) to provide funds in respect of the payment of fees or expenses of any Person referenced in Section 4.6(ii), (2) as a component of Available Funds for distribution on a Distribution Date in reduction of the Note Balance to the extent that but for such distribution the Note Balance would exceed the Aggregate Principal Balance as of the related Determination Date, and (3) as a component of Available Funds for distribution on a Distribution Date in respect of the Noteholders' Interest Distributable Amount or Noteholders' Principal Distributable Amount for such Distribution Date, to the extent that without such distribution a draw would be made on the Policy on such Distribution Date. 57 ARTICLE V THE SPREAD ACCOUNT Section 5.1. WITHDRAWALS FROM SPREAD ACCOUNT IN RESPECT OF DEFICIENCY CLAIM AMOUNT. (a) In the event that the Servicer's Certificate with respect to any Determination Date shall state that the sum of the amount of the Available Funds deposited in the Collection Account with respect to such Determination Date is less than the sum of the amounts payable on the related Distribution Date pursuant to clauses (i) through (v) of Section 4.6 for the related Distribution Date (such deficiency being a "Deficiency Claim Amount") then on the Deficiency Claim Date immediately preceding such Distribution Date, the Trustee shall deliver to the Collateral Agent, the Security Insurer, the Issuer and the Servicer, by hand delivery, telex or facsimile transmission, a written notice (a "Deficiency Notice") specifying the Deficiency Claim Amount for such Distribution Date. (b) Any Deficiency Notice shall be delivered by 10:00 am., New York City time, on the Deficiency Claim Date immediately preceding such Distribution Date. The Deficiency Claim Amount (to the extent of the funds available to be distributed pursuant to the Spread Account Agreement) distributed by the Collateral Agent to the Trustee pursuant to a Deficiency Notice shall be deposited by the Trustee into the Collection Account pursuant to Section 4.5 on such Deficiency Claim Date. Section 5.2. WITHDRAWALS FROM SPREAD ACCOUNT IN RESPECT OF NOTEHOLDERS' EXCESS PRINCIPAL DISTRIBUTABLE AMOUNT OR FOLLOWING THE OCCURRENCE OF AN INSURER DEFAULT. (a) So long as an Insurer Default shall not have occurred and be continuing, in the event that the Servicer's Certificate with respect to any Determination Date shall state that the next succeeding Distribution Date is a Trigger Date, or in the event that the Trustee has received notice from the Security Insurer of the occurrence of an Insurance Agreement Event of Default, no later than 10 a.m. New York City time on the Deficiency Claim Date immediately preceding such Distribution Date, the Trustee shall deliver to the Collateral Agent, the Security Insurer, the Issuer and the Servicer, by hand delivery, telex or facsimile transmission, a written notice (a "Trigger Notice"). Such Trigger 58 Notice shall state that such Distribution Date is a Trigger Date, and for the purpose of the Collateral Agent's calculation of the Noteholders' Excess Principal Distributable Amount, shall state the Aggregate Principal Balance as of the related Determination Date and the Note Balance (after giving effect to distribution of the Noteholders' Principal Distributable Amount with respect to such Distribution Date). Upon receipt of the Noteholders' Excess Principal Distributable Amount, the Trustee shall deposit such amount directly into the Note Distribution Account. (b) So long as an Insurer Default shall have occurred and be continuing, no later than 10 a.m. New York City time on each Deficiency Claim Date, the Trustee shall deliver to the Collateral Agent, the Security Insurer, the Issuer and the Servicer, by hand delivery, telex or facsimile transmission, a notice requesting the Collateral Agent to deliver on the next succeeding Distribution Date to the Trustee all amounts, if any, on deposit in the Spread Account, including amounts, if any, deposited into the Spread Account on such Distribution Date. Upon receipt of any such amounts, the Trustee shall deposit such amounts directly into the Note Distribution Account. ARTICLE VI THE SELLER Section 6.1. LIABILITY OF SELLER. (a) The Seller shall be liable hereunder only to the extent of the obligations in this Agreement specifically undertaken by the Seller and the representations made by the Seller. Section 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION. (a) The Seller shall not merge or consolidate with any other Person or permit any other Person to become the successor to the Seller's business without the prior written consent of the Controlling Party. The certificate of incorporation of any corporation (i) into which the Seller may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Seller shall be a party, or (iii) succeeding to the business of Seller, shall contain provisions relating to limitations on business and other matters substantively identical 59 to those contained in the Seller's certificate of incorporation. Any such successor corporation shall execute an agreement of assumption of every obligation of the Seller under this Agreement and each Related Document and, whether or not such assumption agreement is executed, shall be the successor to the Seller under this Agreement without the execution or filing of any document or any further act on the part of any of the parties to this Agreement. The Seller shall provide prompt notice of any merger, consolidation or succession pursuant to this Section 6.2 to the Issuer, the Trustee, the Security Insurer, the Noteholders and the Rating Agencies. Notwithstanding the foregoing, the Seller shall not merge or consolidate with any other Person or permit any other Person to become a successor to the Seller's business, unless (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 2.4 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become a Servicer Termination Event shall have occurred and be continuing, (y) the Seller shall have delivered to the Issuer, the Trustee and the Security Insurer an officer's certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 6.2 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) the Seller shall have delivered to the Issuer, the Trustee and the Security Insurer an Opinion of Counsel, stating, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Issuer in the Receivables and the Other Conveyed Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest. (b) The Seller hereby agrees that it shall not (i) take any action prohibited by Article XVI of its certificate of incorporation or (ii) without the prior written consent of the Issuer and the Trustee and the Controlling Party and without giving prior written notice to the Rating Agencies, amend Article III, Article IX, Article XIV or Article XVI of its certificate of incorporation. Section 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller and any director or officer or employee or agent of the 60 Seller may rely in good faith on the advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. The Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations as Seller of the Receivables under this Agreement and that in its opinion may involve it in any expense or liability. Section 6.4. SELLER MAY OWN NOTES. Each of the Seller and any Affiliate of the Seller may in its individual or any other capacity become the owner or pledgee of Notes with the same rights as it would have if it were not the Seller or an Affiliate thereof except as otherwise specifically provided herein or in the Related Documents. Notes so owned by or pledged to the Seller or such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement or any Related Document, without preference, priority, or distinction as among all of the Notes, PROVIDED THAT any Notes owned by the Seller or any Affiliate thereof, during the time such Notes are owned by them, shall be without voting rights for any purpose set forth in this Agreement or any Related Document. The Seller shall notify the Issuer, the Trustee and the Security Insurer promptly after it or any of its Affiliates become the owner or pledgee of a Note. ARTICLE VII SERVICER Section 7.1. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer (in its capacity as such and, in the case of AFS, without limitation of its obligations under the Purchase Agreement) shall be liable hereunder only to the extent of the obligations in this Agreement specifically undertaken by the Servicer and the representations made by the Servicer. (b) The Servicer shall defend, indemnify and hold harmless the Issuer, the Trustee, the Indenture Collateral Agent, the Backup Servicer, the Security Insurer, their respective officers, directors, agents and employees, and the Noteholders from and against any and all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel and expenses of litigation arising out of or resulting from the use, ownership or operation by the Servicer or any Affiliate thereof of any Financed Vehicle; 61 (c) The Servicer shall indemnify, defend and hold harmless the Issuer, the Trustee, the Indenture Collateral Agent, the Backup Servicer, the Security Insurer, their respective officers, directors, agents and employees and the Noteholders from and against any taxes that may at any time be asserted against any of such parties with respect to the transactions contemplated in this Agreement, including, without limitation, any sales, gross receipts, tangible or intangible personal property, privilege or license taxes (but not including any federal or other income taxes, including franchise taxes asserted with respect to, and as of the date of, the sale of the Receivables and the Other Conveyed Property to the Issuer or the issuance and original sale of the Notes) and costs and expenses in defending against the same; and (d) The Servicer shall indemnify, defend and hold harmless the Issuer, the Trustee, the Indenture Collateral Agent, the Backup Servicer, the Security Insurer, their respective officers, directors, agents and employees and the Noteholders from and against any and all costs, expenses, losses, claims, damages, and liabilities to the extent that such cost, expense, loss, claim, damage, or liability arose out of, or was imposed upon the Issuer, the Trustee, the Backup Servicer, the Security Insurer or the Noteholders by reason of the breach of this Agreement by the Servicer, the negligence, misfeasance, or bad faith of the Servicer in the performance of its duties under this Agreement or by reason of reckless disregard of its obligations and duties under this Agreement. (e) Indemnification under this Article shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Servicer has made any indemnity payments pursuant to this Article and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Servicer, without interest. (f) AFS, in its individual capacity, hereby acknowledges that the indemnification provisions in the Purchase Agreement benefiting the Issuer, the Trustee and the Backup Servicer are enforceable by each hereunder. Section 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF THE SERVICER OR BACKUP SERVICER. (a) AFS shall not merge or consolidate with any other person, convey, transfer or lease substantially all its assets as an 62 entirety to another Person, or permit any other Person to become the successor to AFS's business unless, after the merger, consolidation, conveyance, transfer, lease or succession, the successor or surviving entity shall be capable of fulfilling the duties of AFS contained in this Agreement and shall be acceptable to the Controlling Party, and, if an Insurer Default shall have occurred and be continuing, shall be an Eligible Servicer. Any corporation into which AFS may be merged or consolidated, (ii) resulting from any merger or consolidation to which AFS shall be a party, (iii) which acquires by conveyance, transfer, or lease substantially all of the assets of AFS, or (iv) succeeding to the business of AFS, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of AFS under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to AFS under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release AFS from any obligation. AFS shall provide notice of any merger, consolidation or succession pursuant to this Section 7.2(a) to the Issuer, the Trustee, the Noteholders, the Security Insurer and each Rating Agency. Notwithstanding the foregoing, AFS shall not merge or consolidate with any other Person or permit any other Person to become a successor to AFS's business, unless (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.6 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become an Insurance Agreement Event of Default shall have occurred and be continuing, (y) AFS shall have delivered to the Issuer, the Trustee and the Security Insurer an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 7.2(a) and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) AFS shall have delivered to the Issuer, the Trustee and the Security Insurer an Opinion of Counsel, stating in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Issuer in the Receivables and the Other Conveyed Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest. 63 (b) Any corporation (i) into which the Backup Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer or lease substantially all of the assets of the Backup Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of the Backup Servicer under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Backup Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release the Backup Servicer from any obligation. Section 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND OTHERS. (a) Neither AFS, the Backup Servicer nor any of the directors or officers or employees or agents of AFS or Backup Servicer shall be under any liability to the Issuer or the Noteholders, except as provided in this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not protect AFS, the Backup Servicer or any such person against any liability that would otherwise be imposed by reason of a breach of this Agreement or willful misfeasance, bad faith or negligence (excluding errors in judgment) in the performance of duties; PROVIDED FURTHER that this provision shall not affect any liability to indemnify the Issuer and the Trustee for costs, taxes, expenses, claims, liabilities, losses or damages paid by the Issuer or the Trustee, each in its individual capacity. AFS, the Backup Servicer and any director, officer, employee or agent of AFS or Backup Servicer may rely in good faith on the written advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. (b) The Backup Servicer shall not be liable for any obligation of the Servicer contained in this Agreement, and the Issuer, the Trustee, the Seller, the Security Insurer and the Noteholders shall look only to the Servicer to perform such obligations. 64 (c) The parties expressly acknowledge and consent to LaSalle National Bank acting in the possible dual capacity of Backup Servicer or successor Servicer and in the capacities as Trustee and Indenture Collateral Agent. LaSalle National Bank may, in such dual capacity, discharge its separate functions fully, without hinderance or regard to conflict of interest principles, duty of loyalty principles or other breach of fiduciary duties to the extent that any such conflict or breach arises from the performance by LaSalle of express duties set forth in the this Agreement in any of such capacities, all of which defenses, claims or assertions are hereby expressly waived by the other parties hereto except in the case of gross negligence and willful misconduct by LaSalle National Bank . Section 7.4. DELEGATION OF DUTIES. The Servicer may delegate duties under this Agreement to an Affiliate of AFS with the prior written consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing), the Trustee, the Issuer and the Backup Servicer. The Servicer also may at any time perform the specific duty of repossession of Financed Vehicles through sub-contractors who are in the business of servicing automotive receivables and the specific duty of tracking Financed Vehicles' insurance through sub-contractors, in each case, without the consent of the Security Insurer and may perform other specific duties through such sub-contractors in accordance with Servicer's customary servicing policies and procedures, with the prior consent of the Security Insurer; PROVIDED, HOWEVER, that no such delegation or sub-contracting duties by the Servicer shall relieve the Servicer of its responsibility with respect to such duties. So long as no Insurer Default shall have occurred and be continuing neither AFS or any party acting as Servicer hereunder shall appoint any subservicer hereunder without the prior written consent of the Security Insurer, the Trustee, the Issuer and the Backup Servicer. Section 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the provisions of Section 7.2, neither the Servicer nor the Backup Servicer shall resign from the obligations and duties imposed on it by this Agreement as Servicer or Backup Servicer except upon a determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner which would have a material adverse effect on the Servicer or the Backup Servicer, as the case may be, and the Security Insurer (so long as an Insurer Default shall not have occurred and 65 be continuing) or a Note Majority (if an Insurer Default shall have occurred and be continuing) does not elect to waive the obligations of the Servicer or the Backup Servicer, as the case may be, to perform the duties which render it legally unable to act or to delegate those duties to another Person. Any such determination permitting the resignation of the Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to such effect delivered and acceptable to the Issuer, the Trustee and the Security Insurer (unless an Insurer Default shall have occurred and be continuing). No resignation of the Servicer shall become effective until, so long as no Insurer Default shall have occurred and be continuing the Backup Servicer or an entity acceptable to the Security Insurer shall have assumed the responsibilities and obligations of the Servicer or, if an Insurer Default shall have occurred and be continuing, the Backup Servicer or a successor Servicer that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Servicer. No resignation of the Backup Servicer shall become effective until, so long as no Insurer Default shall have occurred and be continuing, an entity acceptable to the Security Insurer shall have assumed the responsibilities and obligations of the Backup Servicer or, if an Insurer Default shall have occurred and be continuing a Person that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup Servicer is not appointed within 60 days after the Backup Servicer has given notice of its resignation and has provided the Opinion of Counsel required by this Section 7.5, the Backup Servicer may petition a court for its removal. ARTICLE VIII SERVICER TERMINATION EVENTS Section 8.1. SERVICER TERMINATION EVENT. For purposes of this Agreement, each of the following shall constitute a "Servicer Termination Event": (a) Any failure by the Servicer to deliver to the Trustee for distribution to Noteholders any proceeds or payment required to be so delivered under the terms of this Agreement (or, if AFS is the Servicer, the Purchase Agreement) that continues unremedied for a period of two Business Days (one Business Day with respect to payment of Purchase Amounts) after written notice is received by the Servicer from the Trustee or (unless an Insurer Default shall 66 have occurred and be continuing) the Security Insurer or after discovery of such failure by a Responsible Officer of the Servicer; (b) Failure by the Servicer to deliver to the Trustee, the Issuer and (so long as an Insurer Default shall not have occurred and be continuing) the Security Insurer the Servicer's Certificate by the fourth Business Day prior to the Distribution Date, or failure on the part of the Servicer to observe its covenants and agreements set forth in Section 7.2(a); (c) Failure on the part of the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement (or, if AFS is the Servicer, the Purchase Agreement), which failure (i) materially and adversely affects the rights of Noteholders (determined without regard to the availability of funds under the Policy), or of the Security Insurer (unless an Insurer Default shall have occurred and be continuing), and (ii) continues unremedied for a period of 30 days after knowledge thereof by the Servicer or after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Issuer, the Trustee or the Security Insurer (or, if an Insurer Default shall have occurred and be continuing any Noteholder); (d) The entry of a decree or order for relief by a court or regulatory authority having jurisdiction in respect of the Servicer in an involuntary case under the federal bankruptcy laws, as now or hereafter in effect, or another present or future, federal bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Servicer or of any substantial part of its property or ordering the winding up or liquidation of the affairs of the Servicer and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days or the commencement of an involuntary case under the federal bankruptcy laws, as now or hereinafter in effect, or another present or future federal or state bankruptcy, insolvency or similar law and such case is not dismissed within 60 days; or (e) The commencement by the Servicer of a voluntary case under the federal bankruptcy laws, as now or hereafter in effect, or any other present or future, federal or state, bankruptcy, insolvency or similar law, or the consent by the Servicer to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar 67 official of the Servicer or of any substantial part of its property or the making by the Servicer of an assignment for the benefit of creditors or the failure by the Servicer generally to pay its debts as such debts become due or the taking of corporate action by the Servicer in furtherance of any of the foregoing; or (f) Any representation, warranty or statement of the Servicer made in this Agreement or any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect in any material respect as of the time when the same shall have been made (excluding, however, any representation or warranty set forth in Section 2.4(a)), and the incorrectness of such representation, warranty or statement has a material adverse effect on the Issuer and, within 30 days after knowledge thereof by the Servicer or after written notice thereof shall have been given to the Servicer by the Issuer, the Trustee or the Security Insurer (or, if an Insurer Default shall have occurred and be continuing, a Noteholder), the circumstances or condition in respect of which such representation, warranty or statement was incorrect shall not have been eliminated or otherwise cured; or (g) So long as an Insurer Default shall not have occurred and be continuing, the Security Insurer shall not have delivered a Servicer Extension Notice pursuant to Section 3.14; or (h) So long as an Insurer Default shall not have occurred and be continuing, an Insurance Agreement Event of Default or under any other Insurance and Indemnity Agreement relating to any Series an Event of Default thereunder shall have occurred; or (i) A claim is made under the Policy. Section 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a Servicer Termination Event shall occur and be continuing, the Security Insurer (or, if an Insurer Default shall have occurred and be continuing either the Trustee, (to the extent it has knowledge thereof) the Issuer or a Note Majority), by notice given in writing to the Servicer (and to the Trustee and the Issuer if given by the Security Insurer or the Noteholders) or by non-extension of the term of the Servicer as referred to in Section 3.14 may terminate all of the rights and obligations of the Servicer under this Agreement. On or after the receipt by the Servicer of such written notice or upon termination of the term of the Servicer, all authority, power, obligations and responsibilities of the Servicer under this Agreement, whether with respect to the Notes or the 68 Other Conveyed Property or otherwise, automatically shall pass to, be vested in and become obligations and responsibilities of the Backup Servicer (or such other successor Servicer appointed by the Controlling Party); PROVIDED, HOWEVER, that the successor Servicer shall have no liability with respect to any obligation which was required to be performed by the terminated Servicer prior to the date that the successor Servicer becomes the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer. The successor Servicer is authorized and empowered by this Agreement to execute and deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and the Other Conveyed Property and related documents to show the Issuer as lienholder or secured party on the related Lien Certificates, or otherwise. The terminated Servicer agrees to cooperate with the successor Servicer in effecting the termination of the responsibilities and rights of the terminated Servicer under this Agreement, including, without limitation, the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held by the terminated Servicer for deposit, or have been deposited by the terminated Servicer, in the Collection Account or thereafter received with respect to the Receivables and the delivery to the successor Servicer of all Receivable Files, Monthly Records and Collection Records and a computer tape in readable form as of the most recent Business Day containing all information necessary to enable the successor Servicer or a successor Servicer to service the Receivables and the Other Conveyed Property. If requested by the Controlling Party, the successor Servicer shall terminate the Lockbox Agreement and direct the Obligors to make all payments under the Receivables directly to the successor Servicer (in which event the successor Servicer shall process such payments in accordance with Section 3.2(e)), or to a lockbox established by the successor Servicer at the direction of the Controlling Party, at the successor Servicer's expense. The terminated Servicer shall grant the Issuer, the Trustee, the successor Servicer and the Controlling Party reasonable access to the terminated Servicer's premises at the terminated Servicer's expense. Section 8.3. APPOINTMENT OF SUCCESSOR. (a) On and after the time the Servicer receives a notice of termination pursuant to Section 8.2, upon non-extension of the 69 servicing term as referred to in Section 3.14, or upon the resignation of the Servicer pursuant to Section 7.5, the Backup Servicer (unless the Security Insurer shall have exercised its option pursuant to Section 8.3(b) to appoint an alternate successor Servicer) shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for in this Agreement, and shall be subject to all the rights, responsibilities, restrictions, duties, liabilities and termination provisions relating thereto placed on the Servicer by the terms and provisions of this Agreement except as otherwise stated herein. The Issuer and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. If a successor Servicer is acting as Servicer hereunder, it shall be subject to term-to-term servicing as referred to in Section 3.14 and to termination under Section 8.2 upon the occurrence of any Servicer Termination Event applicable to it as Servicer. (b) The Controlling Party may exercise at any time its right to appoint as Backup Servicer or as successor to the Servicer a Person other than the Person serving as Backup Servicer at the time, and (without limiting its obligations under the Policies) shall have no liability to the Issuer, the Trustee, AFS, the Seller, the Person then serving as Backup Servicer, any Noteholders or any other Person if it does so. Notwithstanding the above, if the Backup Servicer shall be legally unable or unwilling to act as Servicer, and an Insurer Default shall have occurred and be continuing, the Backup Servicer, the Trustee, a Note Majority or the Issuer may petition a court of competent jurisdiction to appoint any Eligible Servicer as the successor to the Servicer. Pending appointment pursuant to the preceding sentence, the Backup Servicer shall act as successor Servicer unless it is legally unable to do so, in which event the outgoing Servicer shall continue to act as Servicer until a successor has been appointed and accepted such appointment. Subject to Section 7.5, no provision of this Agreement shall be construed as relieving the Backup Servicer of its obligation to succeed as successor Servicer upon the termination of the Servicer pursuant to Section 8.2, the resignation of the Servicer pursuant to Section 7.5 or the non-extension of the servicing term of the Servicer, as referred to in Section 3.14. If upon the termination of the Servicer pursuant to Section 8.2 or the resignation of the Servicer pursuant to Section 7.5, the Controlling Party appoints a successor Servicer other than the Backup Servicer, the Backup Servicer shall not be relieved of its duties as Backup Servicer hereunder. 70 (c) Any successor Servicer shall be entitled to such compensation (whether payable out of the Collection Account or otherwise) as the Servicer would have been entitled to under this Agreement if the Servicer had not resigned or been terminated hereunder. If any successor Servicer is appointed as a result of the Backup Servicer's refusal (in breach of the terms of this Agreement) to act as Servicer although it is legally able to do so, the Security Insurer and such successor Servicer may agree on reasonable additional compensation to be paid to such successor Servicer by the Backup Servicer, which additional compensation shall be paid by such breaching Backup Servicer in its individual capacity and solely out of its own funds. If any successor Servicer is appointed for any reason other than the Backup Servicer's refusal to act as Servicer although legally able to do so, the Security Insurer and such successor Servicer may agree on additional compensation to be paid to such successor Servicer, which additional compensation shall be payable as provided in the Spread Account Agreement and shall in no event exceed $150,000. In addition, any successor Servicer shall be entitled, as provided in the Spread Account Agreement, to reasonable transition expenses incurred in acting as successor Servicer. Section 8.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination of, or appointment of a successor to, the Servicer pursuant to this Article VIII, the Issuer shall give prompt written notice thereof to each Rating Agency, and the Trustee shall give prompt written notice thereof to Noteholders at their respective addresses appearing in the Note Register. Section 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer or (if an Insurer Default shall have occurred and be continuing) a Note Majority may, on behalf of all Holders of Notes, waive any default by the Servicer in the performance of its obligations hereunder and its consequences. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Termination Event arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon. 71 ARTICLE IX TERMINATION Section 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES. On each Determination Date as of which the outstanding principal balance of the Notes is equal to or less than 10% of the original principal amount of the Notes, the Servicer shall have the option to purchase the Receivables (with the consent of the Security Insurer, if a claim has previously been made under the Policy or if such purchase would result in a claim on the Policy or if such purchase would result in any amount owing and remaining unpaid under the Transaction Documents to the Security Insurer or any other Person). To exercise such option, the Servicer shall pay the aggregate Purchase Amounts for the Receivables and shall succeed to all interests in and to the Receivables; PROVIDED, HOWEVER, that the amount to be paid for such purchase (as set forth in the following sentence) shall be sufficient to pay the full amount of principal and interest then due and payable on the Notes. The party exercising such option to repurchase shall deposit the aggregate Purchase Amounts for the Receivables into the Collection Account, and the Trustee shall distribute the amounts so deposited in accordance with Section 4.6. ARTICLE X MISCELLANEOUS PROVISIONS Section 10.1. AMENDMENT. (a) This Agreement may be amended by the Seller, the Servicer and the Issuer, with the prior written consent of the Trustee and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) but without the consent of any of the Noteholders, (i) to cure any ambiguity, (ii) to correct or supplement any provisions in this Agreement or (iii) for the purpose of adding any provision to or changing in any manner or eliminating any provision of this Agreement or of modifying in any manner the rights of the Noteholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of the Noteholders. (b) This Agreement may also be amended from time to time by the Seller, the Servicer and the Issuer with the prior written consent of the Trustee and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) and with 72 the consent of a Note Majority (which consent of any Holder of a Note given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holder and on all future Holders of such Note and of any Note issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Note) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Holders of Notes; PROVIDED, HOWEVER, that, subject to the express rights of the Security Insurer under the Related Documents, including its rights to agree to certain modifications of the Receivables pursuant to Section 3.2 and its rights to cause the Indenture Collateral Agent to liquidate the Collateral under the circumstances and subject to the provisions of Section 5.04 of the Indenture, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions required to be made on any Note or the Note Interest Rate, (b) amend any provisions of Section 4.6 in such a manner as to affect the priority of payment of interest or principal to Noteholders, or (c) reduce the aforesaid percentage required to consent to any such amendment or any waiver hereunder, without the consent of the Holders of all Notes then outstanding. (c) Prior to the execution of any such amendment or consent, the Issuer shall furnish written notification of the substance of such amendment or consent to each Rating Agency. (d) Promptly after the execution of any such amendment or consent, the Issuer shall furnish written notification of the substance of such amendment or consent to the Trustee. (e) Prior to the execution of any amendment to this Agreement, the Issuer shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement, in addition to the Opinion of Counsel referred to in Section 10.2(i). The Issuer may, but shall not be obligated to, enter into any such amendment which affects the Issuer's own rights, duties or immunities under this Agreement or otherwise. Section 10.2. PROTECTION OF TITLE TO THE RECEIVABLES AND OTHER CONVEYED PROPERTY. 73 (a) The Servicer shall execute and file such financing statements and cause to be executed and filed such continuation and other statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer and the Indenture Collateral Agent in the Receivables and Other Conveyed Property and in the proceeds thereof. The Servicer shall deliver (or cause to be delivered) to the Issuer, the Indenture Collateral Agent and the Security Insurer file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) Neither the Seller, the Servicer nor the Issuer shall change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed by the Seller in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given the Issuer, the Trustee and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) at least 60 days prior written notice thereof, and shall promptly file appropriate amendments to all previously filed financing statements and continuation statements. (c) Each of the Seller, the Servicer and the Issuer shall give the Trustee and the Security Insurer at least 60 days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. The Servicer shall at all times maintain each office from which it services Receivables and its principal executive office within the United States of America. (d) The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each Receivable and the amounts from time to time deposited in the Collection Account in respect of such Receivable. (e) The Servicer shall maintain its computer systems so that, from and after the time of sale under this Agreement of the Receivables to the Issuer, the Servicer's master computer records (including any backup archives) that refer to any Receivable 74 indicate clearly (with reference to the Issuer) that the Receivable is owned by the Issuer. Indication of the Issuer's ownership of a Receivable shall be deleted from or modified on the Servicer's computer systems when, and only when, the Receivable has been paid in full or repurchased by the Seller or Servicer. (f) If at any time the Seller or the Servicer proposes to sell, grant a security interest in, or otherwise transfer any interest in automotive receivables to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or printouts (including any restored from backup archives) that, if they refer in any manner whatsoever to any Receivable, indicate clearly that such Receivable has been sold and is owned by the Issuer unless such Receivable has been paid in full or repurchased by the Seller or Servicer. (g) The Servicer shall permit the Issuer, the Trustee, the Backup Servicer, the Noteholders, the Security Insurer and their respective agents, at any time to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Receivables or any other portion of the Other Conveyed Property. (h) The Servicer shall furnish to the Issuer, the Trustee, the Backup Servicer and the Security Insurer at any time upon request a list of all Receivables then held by Issuer, together with a reconciliation of such list to the Schedule of Receivables and to each of the Servicer's Certificates furnished before such request indicating removal of Receivables from the Issuer. Upon request, the Servicer shall furnish a copy of any list to the Seller. The Issuer shall hold any such list and Schedule of Receivables for examination by interested parties during normal business hours at the offices of the Servicer upon reasonable notice by such Persons of their desire to conduct an examination. (i) The Seller and the Servicer shall deliver to the Issuer, the Trustee and the Security Insurer simultaneously with the execution and delivery of this Agreement and of each amendment thereto and upon the occurrence of the events giving rise to an obligation to give notice pursuant to Section 10.2(b) or (c), an Opinion of Counsel either (a) stating that, in the opinion of such Counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Issuer and the Indenture Collateral Agent in the Receivables and the Other Conveyed Property, and 75 reciting, the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (b) stating that, in the opinion of such counsel, no such action is necessary to preserve and protect such interest. (j) The Servicer shall deliver to the Issuer, the Trustee and the Security Insurer, on or before July 1 of each calendar year commencing in 1996, an Opinion of Counsel, either (a) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Issuer and the Indenture Collateral Agent in the Receivables and the Other Conveyed Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (b) stating that, in the opinion of such counsel, no action shall be necessary to preserve and protect such interest. Section 10.3. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of conflicts of laws thereof and the obligations, rights and remedies of the parties under this Agreement shall be determined in accordance with such laws. Section 10.4. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Notes or the rights of the Holders thereof. Section 10.5. ASSIGNMENT. Notwithstanding anything to the contrary contained in this Agreement, except as provided in Section 7.2 or Section 8.2 (and as provided in the provisions of the Agreement concerning the resignation of the Servicer and the Backup Servicer), this Agreement may not be assigned by the Seller or the Servicer without the prior written consent of the Issuer, the Trustee and the Security Insurer (or, if an Insurer Default shall have occurred and be continuing, the Issuer, the Trustee and a Note Majority). Section 10.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the parties 76 hereto and their respective successors and permitted assigns. The Security Insurer and its successors and assigns shall be a third-party beneficiary to the provisions of this Agreement, and shall be entitled to rely upon and directly to enforce such provisions of this Agreement so long as no Insurer Default shall have occurred and be continuing. Nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and permitted assigns, any benefit or any legal or equitable right, remedy or claim under this Agreement. Except as expressly stated otherwise herein or in the Related Documents, any right of the Security Insurer to direct, appoint, consent to, approve of, or take any action under this Agreement, shall be a right exercised by the Security Insurer in its sole and absolute discretion. Section 10.7. DISCLAIMER BY SECURITY INSURER. The Security Insurer may disclaim any of its rights and powers under this Agreement (but not its duties and obligations under the Policy) upon delivery of a written notice to the Issuer and the Trustee. Section 10.8. COUNTERPARTS. For the purpose of facilitating its execution and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 10.9. NOTICES. All demands, notices and communications under this Agreement shall be in writing, personally delivered or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of AFS, the Seller or the Servicer, at the following address: AmeriCredit Receivables Finance Corp. 1995-A, 200 Bailey Avenue, Fort Worth, Texas 76107-1220, Attention: Chief Financial Officer, (b) in the case of the Trustee and, for so long as the Trustee is the Backup Servicer or the Collateral Agent, at LaSalle National Bank, 135 S. LaSalle Street, Suite 200, Chicago, Illinois 60603-4105, Attention: Asset-Backed Securities Trust Services Department, (c) in the case of each Rating Agency, 99 Church Street, New York, New York 10007, Attention: ABS Monitoring Department (for Moody's) and 26 Broadway, New York, New York 10004 (for Standard & Poor's), Attention: Asset-Backed Surveillance), and (d) in the case of the Security Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention: Surveillance Department, Telex No.: (212) 688-3103, Confirmation: (212) 826-0100, 77 Telecopy Nos.: (212)339-3518, (212)339-3529, (in each case in which notice or other communication to Financial Security refers to an Event of Default, a claim on the Policy or with respect to which failure on the part of Financial Security to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication should also be sent to the attention of the General Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), or at such other address as shall be designated by any such party in a written notice to the other parties. Any notice required or permitted to be mailed to a Noteholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Note Register (as the case may be), and any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Noteholder receives such notice. 78 IN WITNESS WHEREOF, the Issuer, the Seller, AFS, the Servicer and the Backup Servicer have caused this Sale and Servicing Agreement to be duly executed by their respective officers as of the day and year first above written. ISSUER: AMERICREDIT RECEIVABLES FINANCE CORP. 1995-A By _______________________________________ Name: Preston A. Miller Title: Vice President and Controller SELLER: AMERICREDIT RECEIVABLES CORP. By _______________________________________ Name: Preston A. Miller Title: Vice President and Controller AMERICREDIT FINANCIAL SERVICES, INC. In its individual capacity and as Servicer By _______________________________________ Name: Preston A. Miller Title: Vice President and Controller BACKUP SERVICER: LASALLE NATIONAL BANK By _______________________________________ Name: ____________________________________ Title: Corporate Trust Officer 79 80 Acknowledged and Accepted: LASALLE NATIONAL BANK, not in individual capacity but as Trustee, By ___________________________________ Name: Title: Corporate Trust Officer FINANCIAL SECURITY ASSURANCE INC. By ___________________________________ Name: Title: Authorized Officer 81 SCHEDULE A SCHEDULE OF RECEIVABLES A-1 SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER AND AFS 1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary course of such Dealer's business in accordance with AFS's credit policies and such Dealer had all necessary licenses and permits to originate Receivables in the state where such Dealer was located, was fully and properly executed by the parties thereto, was purchased by AFS from such Dealer under an existing Dealer Agreement or pursuant to a Dealer Assignment with AFS and was validly assigned by such Dealer to AFS pursuant to a Dealer Assignment, (B) was purchased by the Seller from AFS and was validly assigned by AFS to the Seller pursuant to the Purchase Agreement, (C) contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization against the collateral security, (D) is a Receivable which provides for level monthly payments (provided that the period in the first Monthly Period and the payment in the final Monthly Period of the Receivable may be minimally different from the normal period and level payment) which, if made when due, shall fully amortize the Amount Financed over the original term and (E) has not been amended or collections with respect to which waived, other than as evidenced in the Receivable File relating thereto. 2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by a Dealer and was sold by the Dealer to AFS without any fraud or misrepresentation on the part of such Dealer in either case. 3. COMPLIANCE WITH LAW. All requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Moss-Magnuson Warranty Act, the Federal Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act of 1940, each applicable state Motor Vehicle Retail Installment Sales Act, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit opportunity and disclosure laws) in respect of the Receivables and the Financed Vehicles, have been complied with in all material respects, and each Receivable and the sale of the B-1 Financed Vehicle evidenced by each Receivable complied at the time it was originated or made and now complies in all material respects with all applicable legal requirements. 4. ORIGINATION. Each Receivable was originated in the United States. 5. BINDING OBLIGATION. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may be modified by the application after the Cutoff Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to each Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. 6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of America or any State or any agency, department, subdivision or instrumentality thereof. 7. OBLIGOR BANKRUPTCY. At the Cutoff Date no Obligor had been identified on the records of AFS as being the subject of a current bankruptcy proceeding. 8. SCHEDULE OF RECEIVABLES. The information set forth in the Schedule of Receivables has been produced from the Electronic Ledger and was true and correct in all material respects as of the close of business on the Cutoff Date. 9. MARKING RECORDS. By the Closing Date, AFS and the Seller will have caused the portions of the Electronic Ledger relating to the Receivables to be clearly and unambiguously marked to show that the Receivables have been sold to Seller by AFS, resold by Seller to the Issuer and pledged by the Issuer to the Indenture Collateral Agent in accordance with the terms of the Indenture. 10. COMPUTER TAPE. The Computer Tape made available by AFS and the Seller to the Issuer on the Closing Date was complete and B-2 accurate as of the Cutoff Date and includes a description of the same Receivables that are described in the Schedule of Receivables. 11. ADVERSE SELECTION. No selection procedures adverse to the Noteholders were utilized in selecting the Receivables from those receivables owned by AFS which met the selection criteria contained in the Sale and Servicing Agreement. 12. CHATTEL PAPER. The Receivables constitute chattel paper within the meaning of the UCC as in effect in the States of Texas and New York. 13. ONE ORIGINAL. There is only one original executed copy of each Receivable. 14. RECEIVABLE FILES COMPLETE. There exists a Receivable File pertaining to each Receivable and such Receivable File contains (a) a fully executed original of the Receivable, (b) the original executed credit application, or a copy thereof and (c) the original Lien Certificate or application therefor. Each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form have been properly filled in and each form has otherwise been correctly prepared. The complete Receivable File for each Receivable currently is in the possession of the Custodian. 15. RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, and the Financed Vehicle securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. No terms of any Receivable have been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the Receivable File. No Receivable has been modified as a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. 16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under this Agreement or pursuant to transfers of the Notes. 17. GOOD TITLE. Immediately prior to the conveyance of the Receivables pursuant to the Purchase Agreement, AFS was the sole owner of and had good and indefeasible title thereto, free and B-3 clear of any Lien; immediately prior to the conveyance of the Receivables to the Issuer pursuant to this Agreement, the Seller was the sole owner thereof and had good and indefeasible title thereto, free of any Lien and, upon execution and delivery of this Agreement by the Seller, and the pledge of the Receivables by the Issuer under the Indenture, the Indenture Collateral Agent shall have good and indefeasible title to and will be the sole owner of such Receivables, free of any Lien. No Dealer has a participation in, or other right to receive, proceeds of any Receivable. Neither AFS nor the Seller has taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies or the related Dealer Agreements or Dealer Assignments or to payments due under such Receivables. 18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable created or shall create a valid, binding and enforceable first priority security interest in favor of AFS in the Financed Vehicle. The Lien Certificate and original certificate of title for each Financed Vehicle show, or if a new or replacement Lien Certificate is being applied for with respect to such Financed Vehicle the Lien Certificate will be received within 180 days of the Closing Date and will show AFS named as the original secured party under each Receivable as the holder of a first priority security interest in such Financed Vehicle. With respect to each Receivable for which the Lien Certificate has not yet been returned from the Registrar of Titles, AFS has received written evidence from the related Dealer that such Lien Certificate showing AFS as first lienholder has been applied for. AFS's security interest has been validly assigned by AFS to the Seller and by the Seller to the Issuer pursuant to this Agreement. Immediately after the sale, transfer and assignment thereof by the Seller to the Issuer and the subsequent pledge thereof by the Issuer to the Indenture Collateral Agent, each Receivable will be secured by an enforceable and perfected first priority security interest in the Financed Vehicle in favor of the Indenture Collateral Agent as secured party, which security interest is prior to all other Liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor or materials affecting a Financed Vehicle). As of the Cutoff Date there were no Liens or claims for taxes, work, labor or materials affecting a Financed Vehicle which are or may be Liens prior or equal to the Liens of the related Receivable. B-4 19. ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Indenture Collateral Agent a first priority perfected lien on, or ownership interest in, the Receivables and the proceeds thereof and the Other Conveyed Property have been made, taken or performed. 20. NO IMPAIRMENT. Neither AFS nor the Seller has done anything to convey any right to any Person that would result in such Person having a right to payments due under the Receivable or otherwise to impair the rights of the Issuer, the Security Insurer, the Indenture Collateral Agent, the Trustee and the Noteholders in any Receivable or the proceeds thereof. 21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to the Seller with respect to such Receivable. 22. NO DEFENSES. No Receivable is subject to any right of rescission, setoff, counterclaim or defense and no such right has been asserted or threatened with respect to any Receivable. 23. NO DEFAULT. There has been no default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies of not more than 30 days), and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing. As of the Cutoff Date no Financed Vehicle had been repossessed. 24. INSURANCE. At the time of a purchase of a Receivable by AFS from a Dealer, each Financed Vehicle is required to be covered by a comprehensive and collision insurance policy (i) in an amount at least equal to the lesser of (a) its maximum insurable value or (b) the principal amount due from the Obligor under the related Receivable, (ii) naming AFS as loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. Each Receivable requires the Obligor to maintain physical loss and damage insurance, naming AFS and its successors and assigns as additional insured parties, and each B-5 Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. No Financed Vehicle is insured under a policy of Force-Placed Insurance on the Cutoff Date. 25. PAST DUE. At the Cutoff Date no Receivable was more than 30 days past due. 26. REMAINING PRINCIPAL BALANCE. At the Cutoff Date each Receivable had a remaining principal balance equal to or greater than $250.00 and the Principal Balance of each Receivable set forth in the Schedule of Receivables is true and accurate in all material respects. 27. FINAL SCHEDULED PAYMENT DATE. No Receivable has a final scheduled payment date after April 30, 2000. 28. CERTAIN CHARACTERISTICS. (A) Each Receivable had a remaining maturity, as of the Cutoff Date, of not more than 59 months; (B) each Receivable had an original maturity of not more than 60 months; (C) each Receivable had a remaining Principal Balance as of the Cutoff Date of at least $250.00 and not more than $28,000; (D) each Receivable has an Annual Percentage Rate of at least 14.0% and not more than 33.0%; (E) no Receivable was more than 30 days past due as of the Cutoff Date and (F) no funds have been advanced by the Seller, AFS, any Dealer, or anyone acting on behalf of any of them in order to cause any Receivable to qualify under clause (E) above. B-6 SCHEDULE C SERVICING POLICIES AND PROCEDURES NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE COMPLIANCE WITH STATE COLLECTION LAWS IS REQUIRED OF ALL AMERICREDIT COLLECTION PERSONNEL. ADDITIONALLY, AMERICREDIT HAS CHOSEN TO FOLLOW THE GUIDELINES OF THE FEDERAL FAIR DEBT COLLECTION PRACTICES ACT (FDCPA). THE COLLECTION PROCESS Customer is issued a monthly billing statement 16 to 20 days before payment is due. A. All accounts are issued to the Computer Assisted Collection System (CACS) at 5 days delinquent or at such other dates of delinquency as determined by historical payment patterns of the account. B. Accounts are then segregated into two groups, those less than 30 days delinquent and those over 30 days delinquent. C. Accounts less than 30 days delinquent are further segregated into accounts that have good residential and business phone numbers and those that do not. D. For those that have good phone numbers, they are assigned to the Melita Group. E. For those without good phone numbers, they are assigned to the front-end collector. F. In both groups, all reasonable collection efforts are made to avoid the account rolling over 30 days delinquent, including the use of collection letters. Collection Letters may be utilized between 15 and 25 days delinquent. G. At the time the account reaches 31 days delinquent, it is assigned to a mid-range collector. At this time the collector identifies the necessity of any default notification required by state law. C-1 H. Once the account exceeds 60 days in delinquency, it is assigned to a hard-core collector. The hard-core collector then continues the collection effort. If the account cannot be resolved through normal collection efforts, i.e. satisfactory payment arrangements, then the account may be submitted for repossession approval, either voluntary or by an approved outside contractor or if necessary for sequestration approval. All repossessions and sequestrations must be approved by the Director of Collections or an Assistant Vice President. I. CACS allows the individual collector to accurately document and update each account pertaining to telephone calls and correspondence created as a result of contact with the customer. REPOSSESSIONS If repossession of the collateral occurs, whether voluntary or involuntary, the following steps are taken: A. Notification of repossession to proper authorities when necessary. B. Inventory of all personal property is taken and a condition report is done on the vehicle. Pictures are also taken of the vehicle. C. Written notification, as required by state law, to customer(s) concerning their rights of redemption or reinstatement along with information on how to obtain any personal property that was in the vehicle at the time of repossession. D. Written request to the originating dealer for all refunds due for dealer adds. E. Collateral disposition through public or private sale, (dictated by state law), in a commercially reasonable manner, whenever possible through a Manheim or Adessa Auto Auction. F. After the collateral is liquidated, the debtor(s) is notified in writing of the deficiency balance owed, if any. USE OF DUE DATE CHANGES C-2 Due dates may be changed subject to the following conditions: A. The account is contractually current or will be brought current with the due date change. B. Due date changes cannot exceed the total of 15 days over the life of the contract. C. The first installment payment has been paid in full. D. Only one date change in a twelve month period. E. Any exceptions to the above stated policy must be approved by the Director of Collections or an Assistant Vice President. USE OF PAYMENT DEFERMENTS A payment deferral is offered to customers who have encountered TEMPORARY financial difficulties. A. Minimum of six payments have been made on the account. B. The account will be brought current with the deferment, but not paid ahead. C. A deferment fee is collected on all transactions. D. Only one deferment transaction can be performed in a twelve month period. E. No more than two payments may be deferred in a twelve month period, and no more than eight total payments may be deferred over the life of the loan. F. Any exceptions to the above stated policy must be approved by the Director of Collections or Assistant Vice President. CHARGE-OFFS A. When a Post Repossession Notice is generated on an account, the account is partially charged-off on the date that the notice legally expires. The partial charge-off calculation is based on the expected residual value of the vehicle at time of sale. Adjustments to the account are made once final liquidation of the vehicle occurs. C-3 B. It is AmeriCredit's policy that any account that is not successfully recovered by 180 days delinquent is submitted to the Director of Collections for approval and charge-off. C. The current AmeriCredit policy on bankrupt accounts is to carry the account until 365 days delinquent and then submit to the Director of Collections for approval and charge-off. We are currently modifying the bankruptcy policy to reflect a partial charge-off of the unsecured portion in a Chapter 13 bankruptcy at the time of confirmation of the plan or 180 days delinquent, whichever comes first. DEFICIENCY COLLECTIONS A. Contact is made with the customer in an attempt to establish acceptable payment arrangements or settlements on the account. B. If the customer is unwilling to do so, AmeriCredit may invoke any legal collection remedy that the state allows, i.e., judgements, garnishments, etc. C-4 EX-10.17 4 EXHIBIT 10.17 RESTATED REVOLVING CREDIT AGREEMEMT RESTATED REVOLVING CREDIT AGREEMENT This Restated Revolving Credit Agreement (this "Loan Agreement") is entered into by and among AMERICREDIT CORP., a Texas corporation ("Company"), AMERICREDIT FINANCIAL SERVICES, INC., a Delaware corporation, AMERICREDIT OPERATING CO., INC., a Delaware corporation, AMERICREDIT PREMIUM FINANCE, INC., a Delaware corporation, and ACF INVESTMENT CORP., a Delaware corporation, and FIRST INTERSTATE BANK OF TEXAS, N.A., BANK ONE, TEXAS, N.A., LASALLE NATIONAL BANK, THE DAIWA BANK, LTD., HARRIS TRUST AND SAVINGS BANK, and COMERICA BANK-TEXAS (collectively, the "Banks"), FIRST INTERSTATE BANK OF TEXAS, N.A., as agent for the Banks ("Agent") and BANK ONE, TEXAS, N.A. ("Co-Agent"). W I T N E S S E T H: WHEREAS, AmeriCredit Corp., AmeriCredit Financial Services, Inc., Agent and certain of Banks entered into that one certain Revolving Credit Agreement dated September 21, 1994 (the "Prior Loan Agreement"); and WHEREAS, AmeriCredit Corp., AmeriCredit Financial Services, Inc., AmeriCredit Operating Co., Inc. (individually, a "Borrower" and collectively, the "Borrowers"), Guarantors, Agent and Banks have agreed to amend and restate the Prior Loan Agreement in its entirety. NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the parties hereto do hereby agree to amend and restate the Prior Loan Agreement in its entirety as follows: ARTICLE I DEFINITION OF TERMS For the purposes of this Loan Agreement, unless the context requires otherwise, the following terms shall have the respective meanings assigned to them in this Article I below: "ADJUSTED INTERBANK RATE" shall, with respect to each Interest Period, mean on any day thereof the quotient of (a) the Interbank Offered Rate with respect to such Interest Period, DIVIDED BY (b) the remainder of 1.00 MINUS the Eurodollar Reserve Requirement in effect on such day. "ADVANCE" shall have the meaning assigned to it in Section 2.01 hereof. "AFFILIATE" of any designated Person means any Person that has a relationship with the designated Person whereby either of such Persons directly or indirectly controls or is controlled by or is under common control with the other, or holds or beneficially owns five percent (5%) or more of any class of voting securities of the other. For this purpose, "control" means the power, direct or indirect, of one Person to direct or cause direction of the management and policies of another, whether by contract, through voting securities or otherwise. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate of another solely by reason of such Person's being a participant in a joint operating group or joint undivided ownership group. "ARBITRATION PROGRAM" shall have the meaning assigned to it in Article XI hereof. "BANKS" shall mean First Interstate Bank of Texas, N.A. and all other banks which are parties to this Loan Agreement or any amendment thereto. "BORROWERS" shall mean AmeriCredit Corp., a Texas corporation, AmeriCredit Financial Services, Inc., a Delaware corporation, and AmeriCredit Operating Co., Inc., a Delaware corporation. "BUSINESS DAY" shall mean a day upon which business is transacted by national banks in Fort Worth, Texas and New York, New York. "CAPITAL EXPENDITURES" shall mean, for any specified period, the aggregate of all gross expenditures during such period for any assets, or for improvements, replacements, substitutions or additions therefor or thereto, which are capitalized on the consolidated balance sheet of the Company, including the balance sheet amount of any capitalized lease obligations incurred during such period. "CAPITAL LEASE" shall mean, as of any date, any lease of property, real or personal, which would be capitalized on a balance sheet of the lessee prepared as of such date, in accordance with GAAP. "CAPITAL LEASE OBLIGATION" shall mean any rental obligation which, under GAAP, is or will be required to be capitalized on the books of the Company or any Subsidiary, taken at the amount thereof accounted for as indebtedness (net of interest expense) in accordance with GAAP. "CASH FLOW" shall mean, for any period, the sum of Net Income, depreciation and amortization. "CONSEQUENTIAL LOSS" shall, with respect to the payment by any of Borrowers or any of Guarantors of all or any portion of the then outstanding principal amount of any Bank's Eurodollar Advance on a day other than the last day of the Interest Period related thereto, mean any loss, cost or expense incurred by such Bank as a result of the timing of such payment or in redepositing such principal amount, including the sum of (i) the interest which, but for such payment, such Bank would have earned in respect of such principal amount so paid, for the remainder of the Interest Period applicable to such sum, reduced, if such Bank is able to redeposit such principal amount so paid for the balance of such Interest Period, by the interest earned by such Bank as a result of so redepositing such principal amount PLUS (ii) any expense or penalty incurred by such Bank on redepositing such principal amount. "CONSOLIDATED" shall mean the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person's Consolidated financial statements, financial position, financial condition, liabilities, etc., refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries. "CONTROLLED GROUP" shall mean (i) the controlled group of corporations as defined in section 1563 of the United States Internal Revenue Code of 1986, as amended, or (ii) the group of trades or business under common control as defined in section 414(c) of the United States Internal Revenue Code of 1986, as amended, of which Company is part or may become a part. "DEALER" shall mean a retail vendor of motor vehicles from which AmeriCredit Financial Services, Inc. acquires Finance Contracts which is not an Affiliate of any of Borrowers. "DEALER DISCOUNT" shall mean, with respect to a Finance Contract, the amount equal to the difference between (i) the face amount of the Finance Contract, less unearned interest or finance charges and fees, and (ii) the amount of cash advanced to the Dealer for the purchase of such Finance Contract. -2- "DELINQUENT LOANS" shall mean Indirect Loans having an installment payment or final payment which is more than 60 days past due (without regard to any grace period) on a contractual basis prior to any repossession of the related vehicle. "DIVIDENDS" , in respect of any corporation, shall mean: (1) Cash distributions or any other distributions on, or in respect of, any class of capital stock of such corporation, except for distributions made solely in shares of stock of the same class; and (2) Any and all funds, cash or other payments made in respect of the redemption, repurchase or acquisition of such stock, unless such stock shall be redeemed or acquired through the exchange of such stock with stock of the same class. "DOLLARS" and the sign "$" shall mean lawful currency of the United States of America. "DOMESTIC FINANCE CONTRACT" shall mean a Finance Contract that is denominated and payable only in Dollars. "ELIGIBLE FINANCE CONTRACT" shall mean a Finance Contract, (i) that is secured by an Eligible Vehicle, (ii) that represents a Domestic Finance Contract to an Obligor (other than an Affiliate of Borrower), (iii) that was originated by a Dealer unless otherwise consented to in writing by the Agent (which consent shall not be unreasonably withheld), (iv) that is not delinquent (without regard to any stated grace period) more than thirty (30) days on a contractual basis prior to any repossession of the related Eligible Vehicle, (v) that has not been modified in any respect, unless the Finance Contract constitutes an Eligible Modified Finance Contract, (vi) in respect of which the related Eligible Vehicle has not been repossessed, (vii) that is not a Stayed Loan, (viii) that, as set forth in a written opinion, in form and substance, and from legal counsel, reasonably satisfactory to the Agent, constitutes chattel paper in which a security interest may be perfected under the UCC of the applicable jurisdiction by filing financing statements and making a notation of the security interests on the chattel paper and without taking possession of either the agreements evidencing such Finance Contract or related certificates of title. (ix) that is not subject to a Lien in favor of a Person other than the Agent on behalf of the Banks and that is not subject to a Securitization; and (x) in respect of which the representations and warranties set forth in the Security Agreement are true. -3- "ELIGIBLE MODIFIED FINANCE CONTRACT" shall mean a Finance Contract that has been modified in any way which affects the contractual timing or amount of any installment payment due under such Finance Contract and which satisfies each of the following conditions: (1) no installment payment was more than sixty (60) days past due at the time of any modification, (2) no modification extended the original maturity date by more than ninety (90) days, (3) no modification caused a permanent reduction in any monthly installment payment by more than five percent (5%), (4) the modification did not permit the deferral of more than two (2) installment payments, (5) not more than one (1) modification involving the deferral of two (2) installment payments or not more than two (2) modifications involving the deferral of one (1) installment payment has occurred during any twelve (12) month period, and (6) is otherwise an Eligible Finance Contract. "ELIGIBLE VEHICLE" shall mean a new or used motor vehicle that (i) to the best of any Borrower's knowledge is not acquired for use in a commercial enterprise or as part of a fleet, and (ii) in respect of which any of Borrowers (a) has, within forty five (45) days following the date of a Finance Contract, properly filed an application seeking to obtain legal title or a first priority lien under the applicable provisions of the motor vehicle or other similar law of the applicable jurisdiction and (b) has or obtains, within one hundred fifty (150) days following the date of a Finance Contract, legal title or a first priority lien under applicable provisions of the motor vehicle or other similar law of the applicable jurisdiction. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, together with all regulations issued pursuant thereto. "ENVIRONMENTAL CLAIM" shall mean any written notice by any Person alleging potential liability or responsibility for (a) any removal or remedial action, including, without limitation, any clean-up, removal or treatment of any Hazardous Material or any action to prevent or minimize the release or movement of any Hazardous Materials through or in the air, soil, surface water, ground water or other property, (b) damage to the environment, or costs with respect thereto, or (c) personal injury (including sickness, disease or death), resulting from or based upon (i) the presence, release or movement (including sudden or nonsudden, accidental or nonaccidental, leaks or spills) of any Hazardous Material at, in or from the environment or any property, whether or not owned by the Company, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or any permit issued to Company or any of its Subsidiaries pursuant to any Environmental Law. "ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Recourse Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.), as such laws have been or hereafter may be amended or supplemented, and any and all analogous future federal, or present and future state or local laws, and similar laws of jurisdictions other than the United States, to which Company or any of its Subsidiaries or any of its or their properties are subject. "EURODOLLAR ADVANCE" shall mean any principal amount under a Note with respect to which the interest rate is calculated by reference to the Adjusted Interbank Rate for a particular Interest Period. "EURODOLLAR BORROWING" shall mean any Borrowing composed of Eurodollar Advances. "EURODOLLAR BUSINESS DAY" shall mean a Business Day on which dealings in Dollars are carried out in the London Interbank market. "EURODOLLAR RESERVE REQUIREMENT" shall, on any day, mean that percentage (expressed as a decimal fraction rounded up to the nearest 1/100th) which is in effect on such day, as provided by the Board of Governors of the Federal Reserve System (or any successor governmental body) applied for determining the maximum reserve requirements (including without limitation, basic, supplemental, marginal and emergency reserves) under Regulation D with respect to "Eurocurrency liabilities" as currently defined in Regulation D, or under any similar or successor regulation with respect -4- to Eurocurrency liabilities or Eurocurrency funding. Each determination by Agent of the Eurodollar Reserve Requirement shall, in the absence of manifest error, be conclusive and binding. "EVENT OF DEFAULT" shall have the meaning assigned to it in Article X hereof. "FDIC" shall mean the Federal Deposit Insurance Corporation (or any successor thereof). "FEDERAL FUNDS RATE" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by Agent. "FINANCE CONTRACT" shall mean a motor vehicle installment sales contract assigned to AmeriCredit Financial Services, Inc. that is secured by title to, security interests in, or liens on a motor vehicle under applicable provisions of the motor vehicle or other similar law of the jurisdiction in which the motor vehicle is titled and registered by the purchaser at the time the contract is originated. "FIXED CHARGE COVERAGE RATIO" shall mean Net Income before interest, taxes, depreciation and amortization plus rental expense under operating leases less Investment Income DIVIDED BY the sum of interest expense and rental expense under operating leases less Investment Income. "FLOATING BASE ADVANCE" shall mean any principal amount under a Note with respect to which the interest rate is calculated by reference to the Floating Base Rate. "FLOATING BASE BORROWING" shall mean any Borrowing composed of Floating Base Advances. "FLOATING BASE RATE" shall mean the greater of (a) the Floating Prime Rate in effect from day to day or (b) the Federal Funds Rate plus one half of one percent (.5%). "FLOATING PRIME RATE" shall mean, on any date, the rate of interest per annum quoted by First Interstate Bank of Texas, N.A., from time to time as its prime commercial rate of interest (it being understood that Banks may from time to time extend credit to other borrowers at rates of interest varying from, and having no relationship to, such prime commercial rate). "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" shall mean those generally accepted accounting principles and practices which are recognized as such by the American Institute of Certified Public Accountants pursuant to its Statement on Auditing Standards No. 69 and which are consistently applied for all periods after the date hereof so as to properly reflect the financial condition, and the results of operations and cash flows of Company on a consolidated basis, except that any accounting principle or practice required to be changed by the American Institute of Certified Public Accountants in order to continue as a generally accepted accounting principle or practice may so be changed. "GUARANTOR" shall mean any of the Guarantors. "GUARANTORS" shall mean AmeriCredit Premium Finance, Inc., a Delaware corporation, and ACF Investment Corp., a Delaware corporation, and any other corporation which executes a Guaranty Agreement after the date of this Loan Agreement. -5- "GUARANTY" of any Person shall mean any contract, agreement or understanding of such Person pursuant to which such Person guarantees, or in effect guarantees, any Indebtedness of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, including without limitation agreements: (1) to purchase such Indebtedness or any property constituting security therefor; (2) to advance or supply funds (a) for the purchase or payment of such Indebtedness, or (b) to maintain working capital or other balance sheet conditions, or otherwise to advance or make available funds for the purchase or payment of such Indebtedness; (3) to purchase property, securities or services primarily for the purpose of assuring the holder of such Indebtedness of the ability of the Primary Obligor to make payment of the Indebtedness; or (4) otherwise to assure the holder of the Indebtedness of the Primary Obligor against loss in respect thereof; EXCEPT THAT "Guaranty" shall not include the endorsement by Company or a Subsidiary in the ordinary course of business of negotiable instruments or documents for deposit or collection. "GUARANTY AGREEMENT" shall mean the guaranty agreement executed by the Guarantors, in the form of EXHIBIT C hereto, as the same may be amended or supplemented from time to time. "HAZARDOUS MATERIALS" shall mean those substances which are regulated by or form the basis of liability under any Environmental Laws. "INDEBTEDNESS" shall mean, with respect to any person, all indebtedness, obligations and liabilities of such Person, including without limitation: (1) all "liabilities" which would be reflected on a balance sheet of such Person, prepared in accordance with Generally Accepted Accounting Principles; (2) all obligations of such Person in respect of any Capital Lease; and (3) all obligations of such Person in respect of any Guaranty. "INDIRECT LOAN" shall mean any Finance Contract or promissory note received for or in connection with the financing of the sale of a motor vehicle by a third party Dealer. "INTERBANK OFFERED RATE" shall mean, with respect to each Interest Period, that rate of interest determined by Agent on the basis of the offered rates for deposits in Dollars commencing on the first day of such Interest Period which appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time two (2) Eurodollar Business Days preceding the first day of such Interest Period, such deposits being for a period of time equal to or comparable to such Interest Period and in an amount equal to or comparable to the principal amount of the Eurodollar Loan to which such Interest Period relates. If at least two (2) such offered rates appear on the Reuters Screen LIBO Page, the rate in respect to the applicable Interest Period will be the arithmetic mean of such offered rates. If fewer than two (2) offered rates appear, the rate in respect of such Interest Period will be determined on the basis of the rates at which deposits in Dollars are offered by Agent (at approximately 11:00 a.m. London time, on the day that is two (2) Eurodollar Business Days prior to the first day of such Interest Period) to first-class banks in the London Interbank eurodollar market for delivery on the first day of such Interest Period, such deposits being for a period of time equal or comparable to such Interest Period and in an amount equal to or comparable to the principal amount of the Eurodollar Loan to which such Interest Period relates. -6- "INTEREST PERIOD" shall mean, with respect to a Eurodollar Advance, a period commencing: (i) on the borrowing date of such Eurodollar Advance made pursuant to Section 2.02 of this Loan Agreement; or (ii) on the Conversion Date pertaining to such Eurodollar Advance, if such Eurodollar Advance is made pursuant to a conversion as described in Section 2.02(c) hereof; or (iii) on the date of borrowing specified in the Request for Borrowing in the case of a rollover to a successive Interest Period, and ending one (1), two (2) or three (3) months thereafter (in the case of a Eurodollar Advance), as Company shall elect in accordance with Section 2.02(c) of this Loan Agreement; provided, that: (A) any Interest Period which would otherwise end on a day which is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day UNLESS such Eurodollar Business Day falls in another calendar month in which case such Interest Period shall end on the next preceding Eurodollar Business Day; (B) any Interest Period which begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month or at the end of such Interest Period) shall, subject to clause (A) above, end on the last Eurodollar Business Day of a calendar month; and (C) if the Interest Period for any Eurodollar Advance would otherwise end after the Revolving Credit Termination Date such Interest Period shall end on the Revolving Credit Termination Date. "INVESTMENT" shall mean any direct or indirect purchase or other acquisition of, or a beneficial interest in, capital stock or other securities of any other Person, or any direct or indirect loan, advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution to or investment in any other Person, including without limitation the incurrence or sufferance of Indebtedness or accounts receivable of any other Person which are not current assets or do not arise from sales to that other Person in the ordinary course of business. "INVESTMENT INCOME" shall mean interest and dividends on the Company's cash, cash equivalents, restricted cash or investment securities as recorded on Company's Consolidated balance sheet. "LAW" shall mean all statutes, laws, ordinances, rules, regulations, orders, writs, injunctions or decrees of any Tribunal. "LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement or other similar form of public notice under the Laws of any jurisdiction. "LOAN DOCUMENTS" shall mean this Loan Agreement, the Notes, (including any renewals, extensions and refundings thereof), the Security Agreement, the Guaranty Agreement, and any agreements or documents (and with respect to this Loan Agreement, and such other agreements and documents, any amendments or supplements thereto or modifications thereof) executed or delivered pursuant to the terms of this Loan Agreement. -7- "LOAN LOSS RESERVE" shall mean the allowance for losses relating to Indirect Loans as shown on the Consolidated financial statements of the Company prepared in accordance with Generally Accepted Accounting Principles. "MAJORITY BANKS" shall mean, at any time, Banks holding Notes representing at least sixty-six and 2/3 percent (66 2/3%) of the aggregate unpaid principal amount of the aggregate Revolving Credit Loans or if no Revolving Credit Loans are at the time outstanding, Banks having at least sixty-six and 2/3 percent (66 2/3%) of the Total Revolving Credit Commitment. "MATERIAL ADVERSE EFFECT" shall mean any act, circumstance, or event that (i) could have any adverse effect whatsoever upon the validity or enforceability of the Loan Documents, (ii) causes or, with notice or lapse of time, or both, could cause an Event of Default under this Loan Agreement, (iii) is or reasonably could be expected to be material and adverse to the financial condition or business operations of the Company and its Subsidiaries on a Consolidated basis, or (iv) could reasonably be expected to impair the ability of any of Borrowers to perform their respective obligations under the Loan Documents in any material respect. "MAXIMUM RATE" shall mean, on any day, the highest nonusurious rate of interest (if any) permitted by applicable law on such day. Banks hereby notify Borrowers that, and disclose to Borrowers that, for purposes of Tex. Rev. Civ. Stat. Ann. Art. 5069-1.04, as it may from time to time be amended, the "applicable rate ceiling" shall be the "indicated rate" ceiling from time to time in effect as limited by Art. 5069-1.04(b); provided, however, that to the extent permitted by applicable law, Banks reserve the right to change the "applicable rate ceiling" from time to time by further notice and disclosure to Borrowers; and, provided further, that the "highest nonusurious rate of interest permitted by applicable law" for purposes of this Loan Agreement and the Notes shall not be limited to the applicable rate ceiling under Art. 5069-1.04 if federal laws or other state laws now or hereafter in effect and applicable to this Loan Agreement and the Notes (and the interest contracted for, charged and collected hereunder or thereunder) shall permit a higher rate of interest. "NET AMOUNT" shall mean with respect to Eligible Finance Contracts, as of any date, the outstanding face amount thereof as of such date, MINUS (1) (without duplication) to the extent included in the face amount thereof, unearned interest or finance charges with respect to future periods (or reserves with respect to unearned interest or finance charges) and (2) the aggregate amount by which the aggregate unpaid principal balance of Eligible Finance Contracts which have been modified during the preceding three (3) month period exceeds three and one-half percent (3.5%) of the aggregate unpaid principal balance of all Eligible Finance Contracts. "NET CREDIT LOSSES" shall mean, for any period, the actual aggregate amount of principal of Indirect Loans charged off prior to the application of the Dealer Discount or reserves during such period LESS the aggregate amount of Recoveries on Indirect Loans during such period. "NET INCOME" or "NET LOSS" shall mean, with respect to any period, the consolidated net earnings or net loss, as the case may be, of Company and its Subsidiaries for such period as determined in accordance with GAAP. "NET INDIRECT LOANS" shall mean the aggregate amount of all Indirect Loans LESS the amount of unearned finance charges. "NOTES" shall mean the promissory notes executed by Borrowers and delivered pursuant to the terms of this Loan Agreement, together with any renewals, extensions or modifications thereof. "Note" shall mean any of the Notes. "OBLIGATIONS" shall mean all present and future indebtedness, obligations, and liabilities of Borrowers to Banks or any of Banks, and all renewals and extensions thereof, or any part thereof, arising pursuant to this Loan Agreement or represented by the Notes, and all interest accruing thereon, and reasonable attorneys' fees incurred in the enforcement or collection thereof, regardless of whether such indebtedness, obligations and liabilities -8- are direct, indirect, fixed, contingent, joint, several or joint and several; together with all indebtedness, obligations and liabilities of Borrowers evidenced or arising pursuant to any of the other Loan Documents, and all renewals and extensions thereof, or part thereof. "OBLIGOR" shall mean any one or more individuals (other than a Dealer) who are liable in whole or in part on a Finance Contract (determined without regard to limitations, if any, on recourse). "OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the Company by its Chief Executive Officer, President, one of its Executive Vice Presidents, its Chief Financial Officer or its Controller. "PAST DUE RATE" shall mean the lesser of (a) the Floating Base Rate in effect from day-to-day, plus five percent (5.0%), or (b) the Maximum Rate. "PBGC" shall mean the Pension Benefit Guaranty Corporation, and any successor to all or any of the Pension Benefit Guaranty Corporation's functions under ERISA. "PERCENTAGE" shall mean, with respect to any Bank, such Bank's proportionate share of the Total Revolving Credit Commitment, as set forth in Section 2.01 opposite its name under the heading "Revolving Commitment Percentage." "PERMITTED LIENS" shall mean: (i) Liens on equipment and fixed assets, including purchase money Liens, relating to or securing obligations in an aggregate amount not to exceed one million dollars ($1,000,000); (ii) pledges or deposits made to secure payment of Worker's Compensation (or to participate in any fund in connection with Worker's Compensation), unemployment insurance, pensions or social security programs; (iii) Liens imposed by mandatory provisions of law such as for materialmen's, mechanics, warehousemen's and other like Liens arising in the ordinary course of business, securing Indebtedness whose payment is not yet due unless the same are being contested in good faith and for which adequate reserves have been provided; (iv) Liens for taxes, assessments and governmental charges or levies imposed upon a Person or upon such Person's income or profits or property, if the same are not yet due and payable or if the same are being contested in good faith and as to which adequate reserves have been provided; (v) good faith deposits in connection with tenders, leases, real estate bids or contracts (other than contracts involving the borrowing of money unless such Liens are otherwise Permitted Liens), pledges or deposits to secure public or statutory obligations, deposits to secure (or in lieu of) surety, stay, appeal or customs bonds and deposits to secure the payment of taxes, assessments, customs duties or other similar charges; and (vi) encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, provided that such do not impair the use of such property for the uses intended, and none of which is violated by Company or any of its Subsidiaries in connection with existing or proposed structures or land use. "PERSON" shall mean and include an individual, partnership, joint venture, corporation, trust, Tribunal, unincorporated organization or government or any department, agency or political subdivision thereof. "PLAN" shall mean an employee benefit plan or other plan maintained by Company for employees of Company and any of its Subsidiaries and/or covered by Title IV of ERISA, or subject to the minimum funding standards under Section 412 of the Internal Revenue Code of 1986, as amended. "RECOVERIES" shall mean amounts realized on the sale of collateral, rebates on ancillary products and collections on charged-off deficiencies and proceeds of insurance claims related to the collateral less direct costs of repossession. "REGULATION U" shall mean Regulation U promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other regulation hereafter promulgated by said Board to replace the prior Regulation U and having substantially the same function. -9- "REGULATION X" shall mean Regulation X promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any other regulation hereafter promulgated by said Board to replace the prior Regulation X and having substantially the same function. "REGULATORY DEFECT" shall mean (i) any failure of any of Borrowers or any of the Guarantors to comply with any of the rules, regulations and other requirements as contemplated in Section 7.11 hereof which would have a Material Adverse Effect, and/or (ii) any unfavorable examination report shall be received by any of Borrowers or any of the Guarantors from any regulatory or similar Tribunal regarding any of the businesses or activities in which the Borrowers and Guarantors are engaged, if such report would have a Material Adverse Effect. "REVOLVING COMMITMENT" shall have the meaning assigned to it in Section 2.01 hereof. "REVOLVING CREDIT BORROWING BASE" shall mean, as of any date of calculation, an amount equal to eighty percent (80%) of the Net Amount of Eligible Finance Contracts pledged to the Agent for the benefit of the Banks pursuant to the Security Agreement; provided, however, if the ratio of the aggregate Dealer Discount to Net Indirect Loans originated in a trailing three (3) month period exceeds eight percent (8.0%), such Revolving Credit Borrowing Base advance rate percentage of the Net Amount of Eligible Finance Contracts shall be reduced by two percentage points for each full percentage point that the ratio of the aggregate Dealer Discount to Net Indirect Loans originated in a trailing three (3) month period, as of any date of calculation, exceeds eight percent (8.0%). "REVOLVING CREDIT LOANS" shall have the meaning assigned to it in Section 2.01 hereof. "REVOLVING CREDIT TERMINATION DATE" shall mean May 31, 1996. "SECURITIZATION" shall mean a transaction wherein an identified pool of Finance Contracts and related documents are sold, pledged or conveyed by AmeriCredit Financial Services, Inc., or an Affiliate thereof, to a trustee, grantor trust or other special purpose financing entity as collateral security for the issuance by AmeriCredit Financial Services, Inc. or such Affiliate of notes, certificates or other evidence of indebtedness. "SECURITY AGREEMENT" shall mean the Restated Security Agreement, dated as of June 2, 1995, delivered by Borrowers to the Agent for the benefit of the Banks, granting the security interests in certain of the properties and assets of each of Borrowers described therein, as amended or supplemented from time to time. "STAYED LOAN" shall mean a Finance Contract: (i) as to which an Obligor obligated on such Finance Contract (any such Obligor, together with its Subsidiaries, herein, collectively, the "Applicable Obligor"), shall file a petition or seek relief under or take advantage of any insolvency law; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator, custodian or conservator of itself or of the whole or substantially all of its property; file or consent to a petition under any chapter of the United States Bankruptcy Code, as amended (11 U.S.C. Section 101 ET SEQ.), or file a petition or seek relief under or take advantage of any other similar law or statute of the United States of America, any state thereof or any foreign country; or (ii) as to which a court of competent jurisdiction shall enter an order, judgment or decree appointing or authorizing a receiver, trustee, liquidator, custodian or conservator of the Applicable Obligor or of the whole or substantially all of its property, or enter an order for relief against the Applicable Obligor in any case commenced under any chapter of the United States Bankruptcy Code, as amended, -10- or grant relief under any similar law or statute of the United States of America, any state thereof or any foreign country; or as to which, under the provisions of any law for the relief or aid of debtors, a court of competent jurisdiction or a receiver, trustee, liquidator, custodian or conservator shall assume custody or control or take possession of the Applicable Obligor or of the whole or substantially all of its property; or as to which there is commenced against the Applicable Obligor any proceeding for any of the foregoing relief or as to which a petition is filed against the Applicable Obligor under any chapter of the United States Bankruptcy Code, as amended, or under any other similar law or statute of the United States of America or any state thereof or any foreign country and such proceeding or petition remains undismissed for a period of 60 days; or as to which the applicable Obligor by any act indicates its consent to, approval of or acquiescence in any such proceeding or petition; PROVIDED, HOWEVER, that a Finance Contract shall cease to be a Stayed Loan at such time as so long as (A) all principal, interest and other amounts theretofore due and payable according to the terms of such Finance Contract (as such terms have been approved, adjusted and/or confirmed pursuant to court order or otherwise in any proceeding referred to in clause (i) or (ii) of this definition) have been irrevocably paid to or collected or received by Borrower and all such amounts thereafter due and payable shall be paid to or collected or received by the Borrower when due (or within any stated grace period) and (B) such Finance Contract shall be secured to the same extent as before such Finance Contract first became a Stayed Loan and no dispute regarding the existence, validity or priority of such security shall be pending in any court or asserted in any pending appeal. "SUBSIDIARY" shall mean, as to any particular parent corporation, any corporation of which more than fifty percent (by number of votes) of the Voting Stock shall be owned by such parent corporation and/or one or more corporations which themselves have more than fifty percent (by number of votes) of their Voting Stock owned by such parent corporation. As used herein, the term "Subsidiary" shall also mean any "Subsidiary" of the Company. "TAXES" shall mean all taxes, levies, assessments, fees, withholdings or other charges at any time imposed by any Laws or Tribunal. "TANGIBLE NET WORTH" shall mean, as of any date, the total shareholders' equity (including capital stock both common and preferred, additional paid-in capital and retained earnings after deducting treasury stock) which would appear on a consolidated balance sheet of Company prepared as of such date in accordance with Generally Accepted Accounting Principles LESS intangible assets which would appear on a consolidated balance sheet of Company prepared as of such date in accordance with General Accepted Accounting Principles. "TRIBUNAL" shall mean any municipal, state, commonwealth, federal, foreign, territorial or other court, governmental body, subdivision, agency, department, commission, board or bureau or instrumentality. "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code as then in effect in that jurisdiction. References to terms defined in the UCC shall mean such terms in the UCC as in effect in such jurisdiction. "VOTING STOCK" shall mean, with respect to any Subsidiary, any shares of any class of stock of such Subsidiary having general voting power under ordinary circumstances to elect a majority of the Board of Directors of such Subsidiary irrespective of whether at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined in this Loan Agreement shall have the above-defined meanings when used in the Notes or any Loan Documents, certificate, report or other document made or delivered pursuant to this Loan Agreement, unless the context therein shall otherwise require. -11- (b) Defined terms used herein in the singular shall import the plural and VICE VERSA. (c) The words "hereof," "herein," "hereunder" and similar terms when used in this Loan Agreement shall refer to this Loan Agreement as a whole and not to any particular provision of this Loan Agreement. (d) All financial and other accounting terms not otherwise defined herein shall be defined and calculated in accordance with Generally Accepted Accounting Principles consistently applied. -12- ARTICLE II REVOLVING CREDIT LOANS 2.01. REVOLVING CREDIT COMMITMENT. (a) REVOLVING LOAN COMMITMENTS. Subject to the terms and conditions of this Loan Agreement and the Revolving Credit Borrowing Base limitation in Section 2.01(b), each Bank severally agrees to extend to Borrowers, from the date hereof through the Revolving Credit Termination Date (the "Revolving Credit Period"), a revolving line of credit which shall not exceed at any one time outstanding the amount set forth opposite its name below (for each Bank, such amount is hereinafter referred to as its "Revolving Commitment"): Revolving Commitment Revolving Percentage Banks Commitment (Rounded) ----- ---------- ---------- First Interstate Bank of Texas, N.A. $35,000,000 28.0% Bank One, Texas, N.A. 30,000,000 24.0% LaSalle National Bank 20,000,000 16.0% The Daiwa Bank, Ltd. 15,000,000 12.0% Harris Trust and Savings Bank 10,000,000 8.0% Comerica Bank-Texas 15,000,000 12.0% $125,000,000 100.00% ============ ======= No Bank shall be obligated to make any Advance under this Section 2.01 and Section 2.02 if, immediately after giving effect thereto, the aggregate amount of all indebtedness and obligations of Borrowers to such Bank under Section 2.01 and Section 2.02 exceeds the lesser of (a) such Bank's Revolving Commitment or (b) an amount equal to such Bank's Percentage TIMES the Revolving Credit Borrowing Base in effect at such time. Within the limits of this Section 2.01, during the Revolving Credit Period, Borrowers may borrow, prepay pursuant to Section 3.03 hereof and reborrow under this Section 2.01; provided, however, the total number of unpaid Eurodollar Borrowings shall not exceed five (5) at any time. Each Borrowing pursuant to this Section 2.01 and Section 2.02 shall be funded ratably by Banks in proportion to their respective Percentages. Each advance made by a Bank under Section 2.01 and Section 2.02 is herein called an "Advance"; all Advances made by a Bank hereunder are herein collectively called a "Revolving Credit Loan"; the aggregate unpaid principal balance of all Advances made by Banks hereunder are herein collectively called the "Revolving Credit Loans"; and the combined Advances made by Banks on any given day are herein collectively called a "Revolving Borrowing". The "Total Revolving Credit Commitment" shall be one hundred twenty-five million dollars ($125,000,000). (b) BORROWING BASE LIMITATION. The maximum aggregate amount outstanding at any time under the Revolving Credit Loans shall not exceed the Revolving Credit Borrowing Base then in effect. (c) BORROWING BASE DEFICIENCY. If the aggregate unpaid principal balance of the Revolving Credit Loans shall at any time exceed the Revolving Credit Borrowing Base then in effect (the "Borrowing Base Deficiency"), Borrowers shall pay to Agent within one (1) Business Day -13- of the date of the earlier of the most recent Borrowing Base Certificate which discloses a Borrowing Base Deficiency or the date of notification to Borrowers by Agent of the existence of a Borrowing Base Deficiency an amount equal to such Borrowing Base Deficiency so that the aggregate unpaid principal balance of the Revolving Credit Loans (after giving effect to such payment) is not in excess of the Revolving Credit Borrowing Base then in effect. (d) LOAN ORIGINATION FEE. At the time of execution of this Agreement, Borrowers shall pay to each Bank, including Agent, a loan origination fee in an amount equal to three sixteenths of one percent (.1875%) of the Revolving Commitment of each such Bank. (e) UNUSED LINE FEE. In addition to the payments provided for in Article III hereof, Borrowers shall pay to Agent, for the account of each Bank, on the first day of each fiscal quarter of Company beginning July 1, 1995 during the period ending on the Revolving Credit Termination Date a loan commitment fee at the rate of three eighths of one percent (.375%) per annum (calculated on the basis of a year consisting of 360 days) of the average daily amount of each such Bank's Revolving Credit Commitment which was unused during the immediately preceding fiscal quarter of Company. Borrowers and Banks acknowledge and agree that the commitment fees payable hereunder are bona fide commitment fees and are intended as reasonable compensation to Banks for committing to make funds available to Borrowers as described herein and for no other purpose. 2.02. MANNER OF REVOLVING BORROWING. (a) REQUEST FOR REVOLVING BORROWING. Each request by Company to Agent for a Revolving Borrowing under Section 2.01 hereof (a "Request for Revolving Borrowing") shall be in writing and specify the aggregate amount of such requested Revolving Borrowing, the requested date of such Revolving Borrowing, and, when the Request for Revolving Borrowing specifies a Eurodollar Borrowing, the Interest Period which shall be applicable thereto; provided, however, that the aggregate number of unpaid Eurodollar Borrowings shall not exceed five (5) at any time. Company shall furnish to Agent the Request for Revolving Borrowing by at least 11:00 a.m. (Fort Worth time) three (3) Eurodollar Business Days prior to the requested Eurodollar Borrowing date (which must be a Eurodollar Business Day) and by at least 11:00 a.m. (Fort Worth time) on the requested borrowing date (which must be a Business Day) for a Floating Base Advance. Any Request for Revolving Borrowing shall: (i) in the case of a Floating Base Borrowing, be in the form attached hereto as EXHIBIT "C," and (ii) in the case of a Eurodollar Borrowing, be in the form attached hereto as EXHIBIT "D." Each Floating Base Borrowing shall be in an aggregate principal amount of one hundred thousand dollars ($100,000.00) or any integral multiple of one hundred thousand dollars ($100,000.00). Each Eurodollar Borrowing shall be in an amount of at least one million dollars ($1,000,000.00) or any higher integral multiple of $1,000,000.00. Prior to making a Request for Revolving Borrowing, Company may (without specifying whether the anticipated Revolving Borrowing shall be a Floating Base Borrowing or Eurodollar Borrowing) request that Agent provide Company with the most recent InterBank Offered Rate available to Agent. Agent shall endeavor to provide such quoted rates to Company on the date of such request. Each Request for Revolving Borrowing shall be irrevocable and binding on Borrowers and, in respect of the Revolving Borrowing specified in such Request for Revolving Borrowing, Borrowers shall indemnify each Bank against any cost, loss or expense incurred by such Bank as a result of any failure to fulfill, on or before the date specified for such Revolving Borrowing, the conditions to such Advance set forth herein, including without limitation, any cost, loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by Bank to fund the Advance to be made by Bank as part of such Revolving Borrowing when such Advance, as a result of such failure, is not made on such date. After receiving a Request for Revolving Borrowing in the manner provided herein, Agent shall promptly notify each Bank by telephone (confirmed immediately by telecopy, telex or cable), telecopy, telex or cable of the amount of the Revolving Borrowing and such Bank's pro rata share of such Revolving Borrowing, the date on which the Revolving Borrowing is to be made, the interest option selected and, if applicable, the Interest Period selected. -14- (b) FUNDING. Each Bank shall, before 1:00 P.M. (Fort Worth time) on the date of such Revolving Borrowing specified in the notice received from Agent pursuant to Section 2.02(a), deposit such Bank's ratable portion of such Revolving Borrowing in immediately available funds to Agent's account. Upon fulfillment of all applicable conditions set forth herein and after receipt by Agent of such funds, Agent shall pay or deliver such proceeds to or upon the order of Company at the principal office of Agent in immediately available funds. The failure of any Bank to make any Advance required to be made by it hereunder shall not relieve any other Bank of its obligation to make its Advance hereunder. If any Bank shall fail to provide its ratable portion of such funds and if all conditions to such Revolving Borrowing shall have been satisfied, the Agent will make available such funds as shall have been received by it from the other Banks, in accordance with this Section 2.02(b). Neither Agent nor any Bank shall be responsible for the performance by any other Bank of its obligations hereunder. In the event of any failure by a Bank to make an Advance required hereunder, the other Banks may (but shall not be required to) purchase (on a pro rata basis, according to their respective Percentages) such Bank's Revolving Credit Note. Upon the failure of a Bank to make an Advance required to be made by it hereunder, the Agent shall use good faith efforts to obtain one or more banks, acceptable to Borrowers and Agent, to replace such Bank, but neither the Agent nor any other Bank shall have any liability or obligation whatsoever as a result of the failure to obtain a replacement for such Bank. Unless the Agent shall have received notice from a Bank prior to the date of any Revolving Borrowing that such Bank will not make available to the Agent such Bank's ratable portion of such Revolving Borrowing, the Agent may assume that such Bank has made such portion available to the Agent on the date of such Revolving Borrowing in accordance with Section 2.02(b) and the Agent may, in reliance upon such assumption, make available to or on behalf of Borrowers on such date a corresponding amount. If and to the extent such Bank shall not have so made such ratable portion available to the Agent, such Bank severally agrees to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to or on behalf of Company until the date such amount is repaid to the Agent at the rate per annum equal to the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Advance as part of such Revolving Borrowing for purposes of this Agreement. (c) SELECTION OF INTEREST OPTION. Upon making a Request for Revolving Borrowing under Section 2.02(a) hereof, Company shall advise Agent as to whether the Borrowing shall be (i) a Eurodollar Borrowing, in which case Company shall specify the applicable Interest Period therefor, or (ii) a Floating Base Borrowing. At least three (3) Eurodollar Business Days prior to the termination of each Interest Period with respect to a Eurodollar Borrowing (whether such termination occurs before or after the Revolving Credit Termination Date) Company shall give Agent written notice (the "Rollover Notice") of the interest option which shall be applicable to such Borrowing upon the expiration of such Interest Period. If Company shall specify that such Borrowing shall be a Eurodollar Borrowing, such Rollover Notice shall also specify the length of the succeeding Interest Period selected by Company with respect to such Borrowing. Each Rollover Notice shall be irrevocable and effective upon notification thereof to Agent. If the required Rollover Notice shall not have been timely received by Agent prior to the expiration of the then relevant Interest Period, then Borrowers shall be deemed to have elected to have such Borrowing be a Floating Base Borrowing. With respect to any Floating Base Borrowing, Borrowers shall have the right, on any Eurodollar Business Day (a "Conversion Date") to convert such Floating Base Borrowing to a Eurodollar Borrowing by giving Agent a Rollover Notice of such selection at least three (3) Eurodollar Business Days prior to such Conversion Date. Notwithstanding anything to the contrary contained herein, Company shall have no right to request a Eurodollar Borrowing if (1) an Event of Default has occurred and is continuing or (2) the interest rate applicable thereto under Section 2.03 hereof would exceed the Maximum Rate in effect on the first day of the Interest Period applicable to such Eurodollar Borrowing. 2.03. INTEREST RATE. The unpaid principal of each Floating Base Advance shall bear interest from the date of advance until paid at a rate per annum which shall from day to day, be equal to the lesser of: (a) the Floating Base Rate or (b) the Maximum Rate. The unpaid principal of each Eurodollar Advance shall bear interest from the date of advance until paid at a rate per annum which shall be equal to the lesser of (a) the sum of the Adjusted Interbank Rate for the applicable Interest Period, plus one and 65/100 percent (1.65%) or (b) the Maximum Rate. All past due principal of, and to the extent permitted by applicable law, interest on the Notes shall bear interest at the Past Due Rate. Notwithstanding -15- the foregoing, the unpaid principal balance of the Notes shall bear interest as provided in Section 3.04(b) hereof, upon the occurrence of the circumstances described in such section. ARTICLE III NOTES AND INTEREST RATE PAYMENTS 3.01. PROMISSORY NOTES. The Advances under Section 2.02(a) and Section 2.02(b) hereof by a Bank shall be evidenced by a promissory note (each a "Note" and collectively, the "Notes") of Borrowers, which Note shall (i) be dated the date hereof, (ii) be in the amount of such Bank's Revolving Credit Commitment, (iii) be payable to the order of such Bank at the office of Agent, (iv) bear interest in accordance with Section 2.03 hereof, and (v) be in the form of EXHIBIT "A" attached hereto with blanks appropriately completed in conformity herewith. Notwithstanding the principal amount of any Bank's Note as stated on the face thereof, the amount of principal actually owing on such Note at any given time shall be in the aggregate of all Advances theretofore made to Borrowers hereunder, less all payments of principal theretofore actually received hereunder by Bank. Each Bank is authorized, but is not required, to endorse on the schedule attached to its Note appropriate notations evidencing the date and amount of each Advance as well as the amount of each payment made by Borrowers hereunder. 3.02. PRINCIPAL PAYMENTS ON REVOLVING CREDIT LOANS. Subject to Article X, the unpaid principal amount of each Note, and all accrued but unpaid interest thereon, shall be due and payable on the Revolving Credit Termination Date. 3.03. PREPAYMENTS. (a) OPTIONAL PREPAYMENTS. Borrowers may, without premium or penalty, prepay the principal of the Notes then outstanding, in whole or in part, at any time or from time to time; provided, however, that (i) each prepayment of less than the full outstanding principal balance of the Note shall be in an amount equal to one hundred thousand dollars ($100,000.00) or an integral multiple thereof, and (ii) if Borrowers shall prepay the principal of any Eurodollar Advance on any date other than the last day of the Interest Period applicable thereto, Borrowers shall make the payments required by Section 4.05 hereof. (b) GENERAL PREPAYMENT PROVISIONS. Any prepayment of a Note hereunder shall be (i) made together with interest accrued (through the date of such prepayment) on the principal amount prepaid, and (ii) applied first to accrued interest and then to principal. 3.04. PAYMENT OF INTEREST ON THE NOTES. (a) REVOLVING CREDIT NOTES. The interest on the unpaid principal amount of each Floating Base Advance under each Note shall be payable monthly as it accrues on the first Business Day of each month commencing July 1, 1995, and on the Revolving Credit Termination Date. Interest on the unpaid principal amount of each Eurodollar Advance under each Note shall be payable on the last day of such Interest Period. Should any installment of interest become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day. (b) RECAPTURE RATE. If, on any interest payment date, Agent does not receive interest (for the account of any Bank) on such Bank's Note computed (as if no Maximum Rate limitations were applicable) at the applicable contract rate described herein, because the applicable contract rate exceeds or has exceeded the Maximum Rate, then Borrowers shall, upon the written demand of Agent or such Bank, pay to such Bank, in addition to interest otherwise required hereunder, on each interest payment date thereafter, the Excess Interest Amount (hereinafter defined) calculated as of such later interest payment date; provided, however, that in no event shall Borrowers be required to pay, for any appropriate computation period, interest at -16- a rate exceeding the Maximum Rate effective during such period. The term "Excess Interest Amount" shall mean, on any date, with respect to the Note of any Bank, the amount by which (a) the amount of all interest which would have accrued prior to such date on the principal of such Note (had the applicable contract rate(s) described herein at all times been in effect, without limitation by the Maximum Rate) EXCEEDS (b) the aggregate amount of interest actually paid to such Bank on such Note on or prior to such date. 3.05. CALCULATION OF INTEREST RATES. Interest on the unpaid principal of each Eurodollar Advance shall be calculated on the basis of the actual days elapsed in a year consisting of 360 days. Interest on the unpaid principal of each Floating Base Advance shall be calculated on the basis of the actual days elapsed in a year consisting of 360 days. 3.06. MANNER AND APPLICATION OF PAYMENTS. All payments of principal of, and interest on, any Note shall be made by Borrowers to Agent before 11:00 a.m. (Fort Worth time), in Federal or other immediately available funds at Agent's principal banking office in Fort Worth. Should the principal of, or any installment of the principal or interest on, any Note, become due and payable on a day other than a Business Day or a Eurodollar Business Day, as the case may be, the maturity thereof shall be extended to the next succeeding Business Day or Eurodollar Business Day, as the case may be. Each payment received by the Agent hereunder for the account of a Bank shall be promptly distributed by Agent to such Bank. All payments made on any Note shall be credited, to the extent of the amount thereof, in the following manner: (i) first, against the amount of interest accrued and unpaid on the Note as of the date of such payment; (ii) second, against all principal (if any) due and owing on the Note; (iii) third, as a prepayment of outstanding Floating Prime Advances under the Note; and (iv) fourth, as a prepayment of outstanding Eurodollar Advances under the Note. Subject to the foregoing, payments and prepayments of principal of the Notes shall be applied to such outstanding Floating Base Advances and Eurodollar Advances under the Notes as Borrowers shall select; provided, however, that Borrowers shall select Floating Base Advances and Eurodollar Advances to be repaid in a manner designated to minimize the Consequential Loss, if any, resulting from such payments; and provided further that, if Borrowers shall fail to select the Floating Base Advances and Eurodollar Advances to which such payments are to be applied, or if an Event of Default has occurred and is continuing at the time of such payment, then Agent shall apply the payment first to Floating Base Advances and then to Eurodollar Advances. 3.07. PRO RATA TREATMENT. Each payment received by Agent hereunder for account of Banks or any of them on the Notes shall be distributed to each Bank entitled to share in such payment, PRO RATA in proportion to the then unpaid principal balance of the Note of each Bank. Unless Agent shall have received notice from Borrowers prior to the date on which any payment is due to Banks hereunder that Borrowers will not make such payment in full, Agent may assume that Borrowers have made such payment in full to Agent on such date and Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent Borrowers shall not have so made such payment in full to Agent, each Bank shall repay to Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to Agent, at the Federal Funds Rate. 3.08. LENDING OFFICE. Each Bank may (a) designate its principal office or a foreign branch, subsidiary or affiliate of such Bank as its lending office (and the office to whose accounts payments are to be credited) for any Eurodollar Advance, (b) designate its principal office or a domestic branch, subsidiary or affiliate as its lending office (and the office to whose accounts payments are to be credited) for any Floating Base Advance and (c) change its lending offices from time to time by notice to Agent and Borrowers; provided, however, no Bank shall designate a foreign branch without the consent of Borrowers if such designation would subject interest payments hereunder to withholding for Taxes. In such event, such Bank shall continue to hold the Note evidencing its loans for the benefit and account of such foreign branch, subsidiary or affiliate. Each Bank shall be entitled to fund all or any portion of its Revolving Credit Loan in any manner that it deems appropriate, but for the purposes of this Agreement such Bank shall, regardless of such Bank's actual means of funding, be deemed to have funded its Loan in accordance with the interest option from time to time selected by Borrowers for such Borrowing. -17- 3.09. TAXES. (a) Any and all payments by Borrowers hereunder or under the Notes shall be made, in accordance with Section 3.06, free and clear of and without deduction for any and all present or future Taxes, excluding, in the case of each Bank and Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or Agent (as the case may be) is organized or is or should be qualified to do business or any political subdivision thereof and, in the case of each Bank Taxes imposed on its income and franchise taxes imposed on it by the jurisdiction of such Bank's lending office or any political subdivision thereof. If Borrowers shall be required by law to deduct any Taxes (i.e., Taxes for which any Borrower is responsible under the preceding sentence) from or in respect of any sum payable hereunder or under any Note to any Bank or Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.09) such Bank or Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrowers shall make such deductions and (iii) Borrowers shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, Borrowers agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Loan Documents from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or the other Loan Documents (hereinafter referred to as "Other Taxes"). (c) Borrowers will indemnify each Bank and Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.09) paid by such Bank or Agent (as the case may be) or any liability (including penalties and interest) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date such Bank or Agent makes written demand therefor. (d) Within thirty (30) days after the date of any payment of Taxes, Borrowers will furnish to Agent, at its address referred to in Section 13.02, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement of Company hereunder, the agreements and obligations of Borrowers contained in this Section 3.09 shall survive the payment in full of the Obligation. (f) Each Bank agrees to use good faith efforts to carry out its obligations under this Loan Agreement in such a way as to reduce the amount of Taxes attributable to the Revolving Credit Loans, including the use of a different lending office, as long as in the good faith opinion of such Bank such actions would not have a material adverse effect upon it. 3.10. SHARING OF PAYMENTS. If any Bank shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it in excess of its ratable share of payments on account of the Advances make by all Banks, such Bank shall forthwith purchase from the other Banks such participations in the Advances made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them, PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount equal to such Bank's ratable share (according to the proportion of (i) the amount of such Bank's required repayment, to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount recovered. Borrowers agree that any Bank so purchasing a participation from another Bank pursuant to this Section 3.10 may, to the fullest extent permitted by law exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of Borrowers in the amount of such participation. -18- ARTICLE IV SPECIAL PROVISIONS FOR EURODOLLAR LOANS 4.01. INADEQUACY OF EURODOLLAR LOAN PRICING. If with respect to an Interest Period for any Eurodollar Borrowing: (i) Agent determines that, by reason of circumstances affecting the Interbank Eurodollar market generally, deposits in Dollars (in the applicable amounts) are not being offered to Banks in the Interbank Eurodollar market for such Interest Period, or (ii) Majority Banks advise Agent that the Interbank Offered Rate as determined by Agent will not adequately and fairly reflect the cost to such Banks of maintaining or funding the Eurodollar Borrowing for such Interest Period, then Agent shall forthwith give notice thereof to Borrowers, whereupon, until Agent notifies Borrowers that the circumstances giving rise to such suspension no longer exist, (a) the obligation of Banks to make Eurodollar Advances shall be suspended and (b) Borrowers shall either (i) repay in full the then outstanding principal amount of the Eurodollar Advances, together with accrued interest thereon on the last day of the then current Interest Period applicable to such Eurodollar Advances, or (ii) convert such Eurodollar Advances to Floating Base Advances in accordance with Section 2.02(c) of this Loan Agreement on the last day of the then current Interest Period applicable to each such Eurodollar Advance. 4.02. ILLEGALITY. If, after the date of this Loan Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Tribunal, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank to make, maintain or fund its Eurodollar Advances, and such Bank shall so notify Agent, Agent shall forthwith give notice thereof to Banks and Borrowers. Before giving any notice pursuant to this Subsection, such Bank shall designate a different Eurodollar lending office if such designation will avoid the need for giving such notice and will not be materially disadvantageous to such Bank (as determined in good faith by such Bank). Upon receipt of such notice, Borrowers shall either (i) repay in full the then outstanding principal amount of the Eurodollar Advance of such Bank, together with accrued interest thereon, or (ii) convert such Eurodollar Advance to a Floating Prime Advance, in either case on (a) the last day of the then current Interest Period applicable to such Eurodollar Advance if such Bank may lawfully continue to maintain and fund such Eurodollar Advance to such day or (b) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Advance to such day. 4.03. INCREASED COSTS FOR EURODOLLAR LOANS. If any Tribunal, central bank or other comparable authority, shall at any time after the date of this Agreement impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System but excluding any reserve requirement included in the Eurodollar Reserve Requirement of such Bank), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank, or shall impose on any Bank (or its Eurodollar lending office) or the Interbank eurodollar market any other condition affecting its Eurodollar Advances, any Note, or its obligation to make Eurodollar Advances; and the result of any of the foregoing is to increase the cost to such Bank of making or maintaining its Eurodollar Advances, or to reduce the amount of any sum received or receivable by such Bank under this Agreement or the Note by an amount reasonably deemed by such Bank to be material; then, within five (5) days after demand by such Bank (with a copy to Agent), Borrowers shall pay to Agent, for the account of such Bank, such additional amount or amounts as will compensate such Bank for such increased cost or reduction. Each Bank will promptly notify Borrowers and Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. If any Bank demands compensation under this Section, then Borrowers may at any time, upon at least five (5) Business Days' prior notice to such Bank through Agent, either (i) repay in full the then outstanding Eurodollar Advances of such Bank, together with accrued interest thereon to the date of prepayment or (ii) convert such Eurodollar Advances to Floating Base Advances in accordance with the provisions of this Loan Agreement; provided, however, that Borrowers shall be liable for any Consequential Loss arising pursuant to such -19- actions. Each Bank agrees to use good faith efforts to carry out its obligations under this Loan Agreement in such a way as to reduce the amount of Taxes attributable to the Revolving Credit Loans, including the use of a different lending office, as long as in the good faith opinion of such Bank such actions would not have a material adverse effect upon it. 4.04. EFFECT ON INTEREST OPTIONS. If notice has been given pursuant to Section 4.02 or Section 4.03 requiring the Eurodollar Advances of any Bank to be repaid or converted, then unless and until such Bank notifies Borrowers that the circumstances giving rise to such repayment no longer apply, all Advances shall be Floating Prime Advances. If such Bank notifies Borrowers that the circumstances giving rise to such repayment no longer apply, Borrowers may thereafter select Advances to be Eurodollar Advances in accordance with Section 2.02(c) of this Loan Agreement. 4.05. PAYMENTS NOT AT END OF INTEREST PERIOD. If Borrowers make any payment of principal with respect to any Eurodollar Borrowing on any day other than the last day of an Interest Period applicable to such Eurodollar Borrowing, then Borrowers shall reimburse each Bank on demand the Consequential Loss incurred by it as a result of the timing of such payment. A certificate of each Bank setting forth the basis for the determination of the amount of Consequential Loss shall be delivered to Borrowers through Agent and shall, in the absence of manifest error, be conclusive and binding. Any conversion of a Eurodollar Borrowing to a Floating Base Borrowing on any day other than the last day of the Interest Period for such Eurodollar Borrowing shall be deemed a payment for purposes of this Section. ARTICLE V SECURITY 5.01. LIENS AND SECURITY INTERESTS. The Obligations and the Notes shall be secured by a first priority security interest in all Finance Contracts evidencing Indirect Loans (except Finance Contracts subject to a Securitization which has been approved by Majority Banks) and the proceeds of the Finance Contracts received by Borrowers as a result of a Securitization. 5.02. GUARANTY DOCUMENTS. To secure the Obligations and the Notes, each of the Guarantors shall execute and deliver to Agent the Guaranty Agreements. ARTICLE VI CONDITIONS PRECEDENT 6.01. INITIAL ADVANCES. The obligation of each Bank to make the Revolving Credit Loan herein provided for and the initial Advances thereunder is subject to the condition precedent that, on or before the date of such Advance, Agent shall have received for each Bank the following, each dated the date of such Advance, in form and substance satisfactory to Agent and such Bank: (a) REVOLVING CREDIT NOTES. A duly executed promissory note, drawn to the order of each Bank, in the form of EXHIBIT A attached hereto with appropriate insertions. (b) SECURITY AGREEMENT. Security agreement executed by Borrowers covering all now existing and hereafter arising Finance Contracts evidencing Indirect Loans except Finance Contracts subject to a Securitization which has been approved by Majority Banks. (c) FINANCING STATEMENTS. Financing statements executed by each of Borrowers covering all now existing and hereafter arising Finance Contracts evidencing Indirect Loans except Finance Contracts subject to a Securitization which has been approved by Majority Banks. -20- (d) GUARANTY AGREEMENT. The Guaranty Agreement in the form of EXHIBIT B executed by AmeriCredit Premium Finance, Inc. and ACF Investment Corp. (e) AGENT'S FEE AGREEMENT. Agent's fee agreement between Borrowers and Agent and the agent's fee payable to Agent. (f) BORROWING BASE. A borrowing base certificate satisfying the requirements of Section 8.01. (g) ARTICLES OF INCORPORATION OF BORROWERS. A copy of the Articles of Incorporation of each of Borrowers and all amendments thereto. (h) BYLAWS OF BORROWERS. A certified copy of the bylaws of each of Borrowers. (i) RESOLUTIONS OF BORROWERS. Resolutions of each of Borrowers authorizing the execution of this Loan Agreement duly adopted by the Board of Directors of each of Borrowers and accompanied by a certificate of the Secretary of Company stating that such resolutions are true and correct, have not been altered or repealed and are in full force and effect. (j) INCUMBENCY CERTIFICATE OF BORROWERS. An incumbency certificate with respect to each of Borrowers executed by the appropriate officers of such Borrower. (k) CERTIFICATES OF EXISTENCE AND ACCOUNT STATUS FOR BORROWERS. A current certificate of existence and good standing from the State of incorporation of each of Borrowers and a current certificate of account status from the Comptroller of Public Accounts of the State of Texas. (l) AUTHORITY TO TRANSACT BUSINESS. Certificate evidencing the authority of each of Borrowers to conduct or transact business in the State of Texas and in all other states in which any of them conducts or transacts business. (m) ARTICLES OF INCORPORATION OF THE GUARANTORS. A copy of the Articles of Incorporation of each of the Guarantors and all amendments thereto. (n) BYLAWS OF EACH GUARANTOR. A certified copy of the bylaws of each of the Guarantors. (o) RESOLUTIONS OF EACH GUARANTOR. Resolutions of each one of the Guarantors approving the execution of the Guaranty Agreement duly adopted by the Board of Directors of each of such Guarantors and accompanied by a certificate of the Secretary of each of such Guarantors stating that such resolutions are true and correct, have not been altered or repealed and are in full force and effect. (p) INCUMBENCY CERTIFICATES OF GUARANTORS. An incumbency certificate with respect to each Guarantor executed by the appropriate officers of each such Guarantor. (q) CERTIFICATES OF EXISTENCE AND ACCOUNT STATUS FOR EACH GUARANTOR. A current certificate of existence from the state of incorporation of each Guarantor and a certificate of account status from the Comptroller of Public Accounts of the State of Texas for each Guarantor. (r) AUTHORITY TO TRANSACT BUSINESS. Certificate evidencing the authority of each Guarantor to conduct or transact business in each state in which each such Guarantor conducts or transacts business. (s) OPINION OF COUNSEL. An executed opinion of counsel to Borrowers and each of the Guarantors. -21- (t) LOAN ORIGINATION FEES. The loan origination fees described in Section 2.01(d). 6.02. ALL ADVANCES. The obligations of each Bank to make any Advance under this Loan Agreement (including the initial Advance) shall be subject to the following conditions precedent: (a) NO DEFAULTS. As of the date of the making of such Advance, there exists no Event of Default or event which with notice or lapse of time or both could constitute an Event of Default. (b) COMPLIANCE WITH LOAN AGREEMENT. Company shall have performed and complied in all material respects with all agreements and conditions contained herein and in the Loan Documents which are required to be performed or complied with by Company before or at the date of such Advance or conversion. (c) REQUEST FOR BORROWING. In the case of any Borrowing, Agent shall have received from Company a Request for Borrowing in the form of EXHIBIT "C" or EXHIBIT "D" attached hereto, dated as of the date of such Advance and signed by an authorized officer of Company, all of the statements of which shall be true and correct, certifying that, as of the date thereof, (i) all of the representations and warranties of Borrowers contained in this Loan Agreement and each of the Loan Documents executed by Borrowers are true and correct, (ii) no event has occurred and is continuing, or would result from the Advance, which constitutes an Event of Default or which, with the lapse of time or giving of notice or both, would constitute an Event of Default, and (iii) such other facts as Agent may reasonably request. (d) NO MATERIAL ADVERSE CHANGE. As of the date of making such Advance, no change has occurred in the business or financial condition of the Company and its Subsidiaries on a Consolidated basis which causes or could cause a Material Adverse Effect. (e) REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in Article VII (other than the representations and warranties contained in Section 7.07) hereof shall be true in all material respects on the date of making of such Advance, with the same force and effect as though made on and as of that date. (f) BANKRUPTCY PROCEEDINGS. No proceeding or case under the United States Bankruptcy Code shall have been commenced by or against any of Borrowers or any Guarantor. (g) FINANCING STATEMENTS. If requested and prepared by Agent but not less frequently than monthly, AmeriCredit Financial Services, Inc. shall have executed and delivered to Agent financing statements covering all Finance Contracts evidencing Indirect Loans except Finance Contracts subject to a Securitization which has been approved by Majority Banks or a Lien in favor of a Person other than Agent for the benefit of Banks. ARTICLE VII REPRESENTATIONS AND WARRANTIES To induce Banks to make the Revolving Credit Loans, Borrowers represent and warrant to Banks that: 7.01. ORGANIZATION AND GOOD STANDING OF BORROWERS. Each of Borrowers is a corporation duly organized and existing in good standing under the laws of the state of its incorporation, is duly qualified as a foreign corporation and in good standing in all states in which the failure to so qualify would have a Material Adverse Effect and has the corporate power and authority to own its properties and assets and to transact the business in which -22- it is engaged and is or will be qualified in those states wherein it will transact business in the future and where the failure to so qualify would have a Material Adverse Effect. 7.02. ORGANIZATION AND GOOD STANDING OF THE GUARANTORS. Each of the Guarantors is a corporation duly organized and existing in good standing under the laws of the state of its incorporation, is duly qualified as a foreign corporation and in good standing in all states in which the failure to so qualify would have a Material Adverse Effect and has the corporate power and authority to own its properties and assets and to transact the business in which it is engaged and is or will be qualified in those states wherein it will transact business in the future and where the failure to so qualify would have a Material Adverse Effect. 7.03. AUTHORIZATION AND POWER. Each of Borrowers has the corporate power and requisite authority to execute, deliver and perform this Loan Agreement and the other Loan Documents to be executed by such Borrower; each of Borrowers is duly authorized to, and has taken all corporate action necessary to authorize such Borrower to, execute, deliver and perform this Loan Agreement, the Notes and such other Loan Documents and is and will continue to be duly authorized to perform this Agreement, the Notes and such other Loan Documents. Each of the Guarantors has the corporate power and requisite authority to execute, deliver and perform the Guaranty Agreement. 7.04. NO CONFLICTS OR CONSENTS. Neither the execution and delivery of this Loan Agreement, the Notes, the Guaranty Agreement or the other Loan Documents, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or with the terms and provisions thereof, will contravene or materially conflict with any provision of law, statute or regulation to which any of Borrowers or any of the Guarantors is subject or any judgment, license, order or permit applicable to any of Borrowers or any of the Guarantors, or any indenture, loan agreement, mortgage, deed of trust, or other agreement or instrument to which any of Borrowers or any of the Guarantors is a party or by which any of Borrowers or any of the Guarantors may be bound, or to which any of Borrowers or any of the Guarantors may be subject, or violate any provision of the Charter or Bylaws of any of Borrowers or any of the Guarantors. No consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by any of Borrowers or any of the Guarantors of the Loan Documents or to consummate the transactions contemplated hereby or thereby. 7.05. ENFORCEABLE OBLIGATIONS. This Loan Agreement, the Notes, the Security Agreement, the Guaranty Agreement and the other Loan Documents are the legal and binding obligations of the corporation executing such Loan Documents, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights. 7.06. NO LIENS. Except for Permitted Liens, all of the properties and assets of Company and each of its Subsidiaries are free and clear of all mortgages, liens, encumbrances and other adverse claims of any nature, and such corporation has and will have good and marketable title to such properties and assets. 7.07. FINANCIAL CONDITION. Company has delivered to Agent copies of the Consolidated balance sheet of Company and its Subsidiaries as of March 31, 1995, and the related consolidated statements of income, shareholders' equity and cash flows for the period ended such date; such financial statements are true and correct in all material respects, fairly present the financial condition of Company and its Subsidiaries as of such date and have been prepared in accordance with Generally Accepted Accounting Principles applied on a basis consistent with that of prior periods except for the exclusion of footnotes and normal adjustments; as of the date hereof, there are no obligations, liabilities or indebtedness (including contingent and indirect liabilities and obligations or unusual forward or long-term commitments) of Company and its Subsidiaries which are (separately or in the aggregate) material and are not reflected in such financial statements or disclosed in writing to Agent; no changes having a Material Adverse Effect have occurred in the financial condition or business of any Borrower since March 31, 1995. 7.08. FULL DISCLOSURE. There is no material fact that Borrowers have not disclosed to Agent and Banks which could have a Material Adverse Effect on the properties, business, prospects or condition (financial or otherwise) of any of Borrowers or any of the Guarantors. Neither the financial statements referred to in Section 7.07 hereof, nor any certificate or statement delivered herewith or heretofore by any of Borrowers to Banks -23- in connection with negotiation of this Loan Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to keep the statements contained herein or therein from being misleading in any material respect. 7.09. NO DEFAULT. No event has occurred and is continuing which constitutes an Event of Default or which, with the lapse of time or giving of notice or both, would constitute an Event of Default. 7.10. NO LITIGATION. Except as described in EXHIBIT E attached hereto, there are no actions, suits or legal, equitable, arbitration or administrative proceedings pending, or to the knowledge of Borrowers threatened, against any of Borrowers or any of the Guarantors that would, if adversely determined, have a Material Adverse Effect. 7.11. REGULATORY DEFECTS. As of the date hereof, Borrowers have advised Banks, in writing, of all Regulatory Defects of which any of Borrowers has been advised or has knowledge. 7.12. USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Revolving Credit Loans will be used by the Borrowers and the Guarantors solely for working capital for and general corporate purposes of AmeriCredit Corp., AmeriCredit Financial Services, Inc. and AmeriCredit Operating Co., Inc. None of such proceeds will be used for the purpose of purchasing or carrying any "margin stock" as defined in Regulation U or G of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221 and 207), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of such Regulation U or G. No Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stocks. No Borrower nor any Person acting on behalf of Borrowers has taken or will take any action which might cause the Notes or any of the other Loan Documents, including this Loan Agreement, to violate Regulations U or G or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Borrowers do not own any "margin stock" except for that described in the financial statements referred to in Section 7.07 hereof and, as of the date hereof, the aggregate value of all "margin stock" owned by Company and its Subsidiaries does not exceed 25% of the aggregate value of all of the assets of Company and its Subsidiaries. 7.13. NO FINANCING OF CORPORATE TAKEOVERS. Except as permitted by Section 9.07, no proceeds of the Revolving Credit Loans will be used to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, including particularly (but without limitation) Sections 13(d) and 14(d) thereof. 7.14. TAXES. Except as previously disclosed to Bank, all tax returns required to be filed by Company and its Subsidiaries in any jurisdiction have been filed or will be filed prior to the date on which the tax payable with respect to such return will become delinquent and all taxes (including mortgage recording taxes), assessments, fees and other governmental charges upon Company or any of its Subsidiaries or upon any of its or their properties, income or franchises have been paid prior to the time that such taxes could give rise to a lien thereon. To the best of each Borrower's knowledge, there is no proposed tax assessment against any of Borrowers except as disclosed to Banks. 7.15. PRINCIPAL OFFICE, ETC. The principal office, chief executive office and principal place of business of each of Borrowers is at 200 Bailey Avenue, Fort Worth, Tarrant County, Texas 76107, and Borrowers maintain their principal records and books at such address. 7.16. ERISA. (a) No Reportable Event has occurred and is continuing with respect to any Plan; (b) PBGC has not instituted proceedings to terminate any Plan; (c) neither the Borrowers, any member of the Controlled Group, nor any duly appointed administrator of a Plan (i) has incurred any liability to PBGC with respect to any Plan other than for premiums not yet due or payable or (ii) has instituted or intends to institute proceedings to terminate any Plan under Section 4041 or 4041A of ERISA or withdraw from any Multi-Employer Pension Plan (as that -24- term is defined in Section 3(37) of ERISA); and (d) each Plan of Company or its Subsidiaries has been maintained and funded in all material respects in accordance with its terms and with all provisions of ERISA applicable thereto. 7.17. COMPLIANCE WITH LAW. Except as described on EXHIBIT F, Company and each of its Subsidiaries are in compliance in all material respects with all laws, rules, regulations, ordinances, orders and decrees which are applicable to Company, any of its Subsidiaries or any of their respective properties or business, the failure to comply with which could have a Material Adverse Effect, including all Environmental Laws. Neither Company nor any Subsidiary has been notified by any Governmental Authority that Company or any Subsidiary has failed to comply with any such laws, rules, regulations, orders or decrees, the failure to comply with which would result in a Material Adverse Effect, nor has Company or any Subsidiary been notified of any Environmental Claim except as described in EXHIBIT G. 7.18. GOVERNMENT REGULATION. No Borrower nor any of the Guarantors are subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as any of the preceding acts have been amended), or any other law (other than Regulation X) which regulates the incurring by Company or any of its Subsidiaries of indebtedness, including but not limited to laws relating to common contract carriers or the sale of electricity, gas, steam, water, or other public utility services. 7.19. INSIDER. Company is not, and no Person having "control" (as that term is defined in 12 U.S.C. Section 375(b)(5) or in regulations promulgated pursuant thereto) of Company is, an "executive officer", "director", or "person who directly or indirectly or in concert with one or more persons owns, controls, or has the power to vote more than 10% of any class of voting securities" (as those terms are defined in 12 U.S.C. Section 375(b) or in regulations promulgated pursuant thereto) of any Bank, of a bank holding company of which any Bank is a subsidiary, or of any subsidiary of a bank holding company of which Bank is a subsidiary, or of any bank at which Bank maintains a correspondent account, or of any bank which maintains a correspondent account with any Bank. 7.20. SUBSIDIARIES. Company directly owns all of the capital stock of AmeriCredit Financial Services, Inc., AmeriCredit Operating Co., Inc., AmeriCredit Premium Finance, Inc. and ACF Investment Corp., in each case free and clear from all liens, security interests, charges and encumbrances. 7.21. SOLVENCY. Excluding intercompany indebtedness, Company and each of its Subsidiaries now have capital sufficient to carry on their businesses and transactions and all business and transactions in which they are about to engage, and for which they have projected, and are now solvent and able to pay their debts as they mature and each of Company and its Subsidiaries now owns property having a value, both at fair valuation and at present fair saleable value greater than the amount required to pay its respective debts. Excluding intercompany indebtedness and without giving effect to the Guaranty Agreement, no Guarantor is "insolvent" on the date hereof (that is, the sum of such Guarantor's absolute and contingent liabilities does not exceed the fair market value of such Guarantor's assets). Each Guarantor has received or will receive good and fair consideration for its liability and obligations incurred in connection with the Guaranty Agreement, and the incurrence of its liability under the Guaranty Agreement in return for such consideration may reasonably be expected to benefit each Guarantor, directly or indirectly. 7.22. ENVIRONMENTAL MATTERS. Except as described in EXHIBIT "G" attached hereto, none of the properties of Company or its Subsidiaries which are presently owned has been used at any time during their ownership to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process, or in any manner deal with Hazardous Materials. Except as described in EXHIBIT "G" attached hereto, there are no past, pending or, to the best of Company's knowledge, threatened or potential Environmental Claims against Company or any of its Subsidiaries or with respect to any properties presently owned or controlled by Company or any of its Subsidiaries. Except as described in EXHIBIT "G" attached hereto, there are no underground storage tanks located on any of the properties presently owned or controlled by Company or any of its Subsidiaries and, to Company's best knowledge, there never have been any underground storage tanks located on any of the properties presently owned or controlled by Company or any -25- of its Subsidiaries, and the Company has received no actual (as contrasted with constructive) notification of any Environmental Claims relating to any property contiguous to any property owned or controlled by Company or any of its Subsidiaries. 7.23. ENDORSEMENT OF INDIRECT LOANS. Borrowers have endorsed to Agent all Finance Contracts evidencing Indirect Loans except Finance Contracts that are subject to a Securitization approved by Majority Banks or subject to a security interest in favor of a Person other than Agent for the benefit of Banks. 7.24. REPRESENTATIONS AND WARRANTIES. Each Request for Borrowing shall constitute, without the necessity of specifically containing a written statement, a representation and warranty by Borrowers that no Event of Default, or any event which with the giving of notice or lapse of time or both would constitute, mature into or become an Event of Default, shall have occurred and be continuing and that all representations and warranties contained in this ARTICLE VII (other than in Section 7.07) or in any other Loan Document are true and correct at and as of the date the Advance is to be made. 7.25. SURVIVAL OF REPRESENTATIONS, ETC. All representations and warranties made herein are true and correct when made by Borrowers and shall survive delivery of the Notes and the Guaranty Agreement and the making of the Revolving Credit Loan and any investigation at any time made by or on behalf of Agent or any Bank shall not diminish Agent or such Bank's right to rely thereon. ARTICLE VIII AFFIRMATIVE COVENANTS So long as Banks have any commitment to make Advances hereunder and until payment in full of the Notes and the Obligation, Borrowers agree and covenant that Borrowers will (unless Majority Banks shall otherwise consent in writing): 8.01. BORROWING BASE CERTIFICATE. Within thirty (30) days after the end of each month, Borrowers shall furnish to Agent a certificate in form satisfactory to Agent executed by the chief financial officer or controller of each of Borrowers reflecting in detail a computation of the Revolving Credit Borrowing Base as of the end of such month. 8.02. COMPLIANCE CERTIFICATES. Within thirty (30) days after the end of each calendar month hereafter, Borrowers shall deliver to Agent a certificate executed by the chief financial officer or controller of each of Borrowers stating that a review of its activities during such month has been made under his supervision and that such Borrower has observed, performed and fulfilled each and every obligation and covenant contained herein and is not in default under any of the same or, if any such default shall have occurred, specifying the nature and status thereof. At the same time compliance and other certificates are furnished to the collateral agent for each Securitization, Borrowers shall deliver to Agent copies of the compliance and other certificates furnished such collateral agent for each such Securitization. 8.03. MONTHLY STATEMENTS. Within thirty (30) days after the end of each calendar month, Company shall furnish Agent copies of the consolidated balance sheet of Company and its Subsidiaries as of the close of such calendar month, and consolidated statements of income and of cash flow of Company and its Subsidiaries for the portion of the year then ended, in each case setting forth in comparative form the figures for the preceding year. 8.04. QUARTERLY STATEMENTS. Within forty five (45) days after the end of each fiscal quarter of Company, Company shall furnish to Agent copies of the consolidated and consolidating balance sheet of Company and its Subsidiaries as of the close of such fiscal quarter and consolidated and consolidating statements of income and of cash flow of Company and its Subsidiaries for the portion of the year then ended. -26- 8.05. AUDITED ANNUAL STATEMENTS. As soon as available and in any event within one hundred twenty (120) days after the close of each fiscal year of Company, Company shall furnish to each of Banks copies of the Consolidated balance sheet of Company and its Subsidiaries as of the close of such fiscal year and Consolidated statements of income, shareholders' equity and the statement of cash flow of Company and its Subsidiaries for such fiscal year, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon (which shall not be qualified by reason of any limitation imposed by Company) of independent public accountants of recognized national standing selected by Company and satisfactory to Agent, to the effect that such financial statements have been prepared in accordance with Generally Accepted Accounting Principles and that the examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards. 8.06. SEC AND OTHER REPORTS. Promptly upon transmission thereof, Company shall furnish Agent with copies of all financial statements, proxy statements, notices and reports which Company sends to its public security holders and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission). 8.07. DELINQUENCIES. Within thirty (30) days after the end of each month, Borrowers shall furnish to Agent (a) a summary report reflecting the amount of all delinquencies and charge-offs for Indirect Loans, the percentage of Indirect Loans which are delinquent, and the percentage of Indirect Loans which have been charged off and (b) a summary report reflecting the amount of all Indirect Loans that are past due by cycle. 8.08. LIST OF INDIRECT LOANS. Within thirty (30) days after the end of each calendar month, Borrowers shall furnish to Agent two (2) copies of a list of all Finance Contracts and promissory notes evidencing Indirect Loans (other than Finance Contracts subject to a Securitization which has been approved by Majority Banks) that reflects the name, address and account number of each Obligor and the unpaid principal balance of each Finance Contract and promissory note as of the end of such preceding calendar month. 8.09. CHARGE OFF VINTAGE REPORTS. Within thirty (30) days after the end of each month, Borrowers shall furnish Agent with a delinquency and charge-off vintage report reflecting the percentage of Indirect Loans which are delinquent and which have been charged off by month of origination accompanied by the supporting data. 8.10. ROLLFORWARD REPORT. Within thirty (30) days after the end of each month, Borrowers shall furnish to Agent with a notes receivable rollforward report reflecting all originations, collections, charge-offs, pay-offs and ending balances for Indirect Loans. 8.11. REPOSSESSIONS. Within thirty (30) days after the end of each month, Borrowers shall furnish to Agent a summary report reflecting the aggregate principal amount of Finance Contracts in respect of which the related motor vehicle has been repossessed, excluding Finance Contracts which have been charged off. 8.12. MODIFIED CONTRACTS. Within thirty (30) days after the end of each month, Borrowers shall furnish to Agent a summary report reflecting the principal amount of all Finance Contracts that have been modified in any way which affects the contractual timing or amount of any installment payment due under such Finance Contract. 8.13. MATERIAL EVENTS. Each of the Borrowers shall promptly notify Agent of (i) any Material Adverse Effect in its financial condition or business; (ii) any material default under any material agreement, contract or other instrument to which such Borrower is a party or by which any of its properties are bound, or any acceleration of any maturity of any Indebtedness owing by such Borrower, (iii) any material adverse claim against or affecting such Borrower or any of its properties which might or could reasonably be expected to have a Material Adverse Effect; (iv) any litigation, -27- or any claim or controversy which might become the subject of litigation, against such Borrower or affecting any of such Borrower's property, if such litigation or potential litigation might be expected to have or could reasonably be expected to have, in the event of any unfavorable outcome, a Material Adverse Effect on such Borrower's financial condition or business or might or could reasonably be expected to cause an Event of Default; and (v) any material change in underwriting standards or criteria and (vi) a change in the executive officers of any of Borrowers. 8.14. INSURANCE. Each Borrower shall maintain on its properties insurance of responsible and reputable companies in such amounts and covering such risks as is prudent and is usually carried by companies engaged in businesses similar to that of such Borrower; each Borrower shall furnish Agent, on request, with certified copies of insurance policies or other appropriate evidence of compliance with the foregoing covenant. 8.15. LICENSES. Borrowers shall preserve and maintain all material licenses, privileges, franchises, certificates and the like necessary for the operation of their respective business. 8.16. COMPLIANCE WITH LOAN DOCUMENTS. Borrowers will comply in all material respects with any and all covenants and provisions of this Loan Agreement, the Notes and all other of the Loan Documents. 8.17. COMPLIANCE WITH MATERIAL AGREEMENTS. Borrowers will comply in all material respects with all material agreements, indentures, mortgages or documents binding on it or affecting their properties or business where the failure to so comply would have a Material Adverse Effect. 8.18. OPERATIONS AND PROPERTIES. Borrowers will act prudently and in accordance with customary industry standards in managing or operating its assets, properties, business and investments; Borrowers will keep in good working order and condition, ordinary wear and tear excepted, all of their respective assets and properties which are necessary to the conduct of its business except for worn out or obsolete assets which have been replaced. 8.19. BOOKS AND RECORDS; ACCESS. Upon prior written notice, Borrowers will give any representative of any Bank access during all business hours to, and permit such representative to examine, copy or make excerpts from, any and all books, records and documents in the possession of Borrowers and relating to its affairs, and to inspect any of the properties of Borrowers. Borrowers will maintain complete and accurate books and records of its transactions in accordance with good accounting practices. 8.20. COMPLIANCE WITH LAW. Company will comply with and will cause each Subsidiary to comply with all applicable laws, rules, regulations, and all orders of any Governmental Authority applicable to it or any of its property, business operations or transactions, a breach of which could have a Material Adverse Effect on Company's or any Subsidiary's financial condition, business or credit. 8.21. ERISA COMPLIANCE. Each Borrower shall (a) at all times, make prompt payment of all contributions required under all Plans and required to meet the minimum funding standard set forth in ERISA with respect to its Plans; (b) notify each Bank immediately of any fact, including, but not limited to, any Reportable event arising in connection with any of its Plans, which might constitute grounds for termination thereof by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Plan, together with a statement, if requested by a Bank, as to the reason therefor and the action, if any, proposed to be taken with respect thereto; and (c) furnish to each Bank, upon its request, such additional information concerning any of its Plans as may be reasonably requested. 8.22. ADDITIONAL INFORMATION. Borrowers shall promptly furnish to Agent, at Agent's request, such additional financial or other information concerning assets, liabilities, operations and transactions of Borrowers as Agent may from time to time reasonably request. 8.23. PRINCIPAL DEPOSITORY. Borrowers shall use Agent as their principal depository; Borrowers shall use the lockbox services of Agent. -28- 8.24. GUARANTY OF SUBSIDIARY CORPORATIONS. Company shall cause each Subsidiary formed after the date of this Agreement to execute a Guaranty of the Notes within ten (10) days after the date of formation of such Subsidiary except any special purpose Subsidiary formed solely for the purpose of consummating a Securitization approved by Majority Banks. 8.25. FINANCING STATEMENTS. If requested by Agent, each of Borrowers shall execute and deliver to Agent new financing statements in form satisfactory to Agent at the time it commences conducting business in any state in which it has not previously conducted business. 8.26. FIELD TESTS. Borrowers shall from time to time permit Banks to conduct field examinations at the expense of Banks. Borrowers shall permit Agent to conduct a field examination annually at the expense of Borrowers. 8.27. DELIVERY OF INDIRECT LOANS. At the request of Agent or Majority Banks after the occurrence of an Event of Default, Borrowers shall promptly deliver to Agent all Finance Contracts and promissory notes evidencing Indirect Loans duly endorsed or assigned to Agent. 8.28. INSPECTION OF INDIRECT LOANS. Borrowers shall permit Agent and its officers and representatives to inspect all Finance Contracts and promissory notes evidencing Indirect Loans once each month during normal business hours. 8.29. FURTHER ASSURANCES. Upon request of the Agent, Borrowers agree to promptly cure any defects in the creation, issuance, execution and delivery of this Loan Agreement or in the Loan Documents. Each of Borrowers, at their expense, will further promptly execute and deliver to Agent upon request all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of Borrowers hereunder, or to further evidence and more fully describe the obligations of Borrowers hereunder, or to correct any omissions herein, or to more fully state the obligations set out herein. ARTICLE IX NEGATIVE COVENANTS So long as Banks have any commitment to make Advances hereunder, and until full payment of the Notes and the performance of the Obligation, Company covenants and agrees that neither Company nor any of its Subsidiaries will, unless Majority Banks otherwise consent in writing: 9.01. RATIO OF INDEBTEDNESS TO TANGIBLE NET WORTH. Permit the ratio of the difference between the total amount of the Indebtedness and cash balances of Company and its Subsidiaries to the Tangible Net Worth of Company and its Subsidiaries on a Consolidated basis to be more than 1.8 to 1.0 at any time; or 9.02. CASH FLOW. Permit its Cash Flow to be less than eight million dollars ($8,000,000) during any twelve (12) month period; or 9.03. FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge Coverage Ratio computed on a trailing twelve (12) month basis to be less than 2.2 to 1.0 at any time; or 9.04. CAPITAL EXPENDITURES. Permit the aggregate amount of all Capital Expenditures of Company and its Subsidiaries to exceed $2,500,000 during any trailing 12 month period; or -29- 9.05. LOSS. Incur any net loss on a consolidated basis determined in accordance with GAAP during any trailing three (3) month period; or 9.06. LIMITATION ON ADDITIONAL INDEBTEDNESS. Incur or assume or permit any of its Subsidiaries to incur or assume any Indebtedness for borrowed money, except for (i) the indebtedness evidenced by the Notes; (ii) trade debt incurred in the ordinary course of business; (iii) up to but not exceeding one million dollars ($1,000,000) in the aggregate at any time; and (iv) indebtedness arising from Securitizations approved by Majority Banks; or 9.07. RESTRICTIONS ON DIVIDENDS ON CAPITAL STOCK. Pay any dividends or make any distributions on or with respect to its outstanding capital stock or purchase, redeem or purchase any of it capital stock in excess of the lesser of fifty percent (50%) of Net Income or $6,000,000 in the aggregate during any trailing 12 month period; or 9.08. LOSSES TO NET INDIRECT LOANS. Permit the ratio of Net Credit Losses during the prior 12 months to the sum of month end balances of Net Indirect Loans over the prior 13 months DIVIDED BY 13 to be greater than .10 to 1.0 at any time; or 9.09. DELINQUENT LOANS TO NET INDIRECT LOANS. Permit the ratio of Delinquent Loans to Net Indirect Loans to be greater than .045 to 1.0 at any time; or 9.10. LIQUIDATION, MERGERS, CONSOLIDATION AND DISPOSITION OF SUBSTANTIAL ASSETS. Liquidate, dissolve or reorganize; or merge or consolidate with any other corporation or entity; or acquire or permit any of its Subsidiaries to acquire all or substantially all of the assets of, any other company, firm or association except for the purchase of loans or Finance Contracts; or make or permit any of its Subsidiaries to make any other substantial change in its capitalization or its business other than a Securitization approved by Majority Banks; or 9.11. ENTER INTO TRANSACTION WITH AFFILIATES. Enter into, or be a party to, any transaction with any Affiliate, Subsidiary or shareholder of Company, except (i) as permitted by this Agreement, (ii) in the ordinary course of and pursuant to the reasonable requirements of Company's business and upon fair and reasonable terms which are fully disclosed to Agent or (iii) sales of equity securities to its current shareholders other than management in connection with future financing upon fair and reasonable terms which are fully disclosed to Agent which are no less favorable to Company than would be in an arm's length transaction with Person's not an Affiliate; or 9.12. BUSINESS ACQUISITIONS. Purchase, lease or otherwise acquire all or substantially all of the assets of any other corporation, partnership or person except the purchase of loans or Finance Contracts; or 9.13. NEGATIVE PLEDGE. Create or suffer to exist any mortgage, pledge, security interest, conditional sale or other title retention agreement, charge, encumbrance or other Lien (whether such interest is based on common law, statute, other law or contract) upon any of its property or assets, now owned or hereafter acquired, except for Permitted Liens and Liens in favor of Agent; or 9.14. NO GRANT OF NEGATIVE PLEDGE. Agree with any Person not to create or suffer to exist any mortgage, pledge, security interest or encumbrance or Lien upon any of its property or assets now owned or hereafter acquired; or 9.15. SALE OF ACCOUNTS RECEIVABLE. Sell or permit any Subsidiary to sell any of its accounts receivable, with or without recourse; or 9.16. SECURITIZATION AGREEMENT. Enter into any Securitization or similar agreement; or -30- 9.17. LOAN LOSS RESERVE RATIO. Permit the ratio of the Loan Loss Reserve to Net Indirect Loans to be less than .06 to 1.0 at any time. If any action or failure to act by Company or any Subsidiary violates any covenant or obligations of Borrowers contained herein, then such violation shall not be excused by the fact that such action or failure to act would otherwise be required or permitted by any covenant (or exception to any covenant) other than the covenant violated. ARTICLE X EVENTS OF DEFAULT; REMEDIES UPON EVENT OF DEFAULT 10.01. EVENTS OF DEFAULT. An "Event of Default" shall exist if any one or more of the following events (herein collectively called "Events of Default") shall occur and be continuing: (a) Borrowers shall fail to pay when due any principal of, or interest on any Note, or any other fee or payment due hereunder or under any of the Loan Documents; or (b) Any representation or warranty made under this Loan Agreement, or any of the Loan Documents or in any certificate or statement furnished to or made to Banks pursuant hereto or in connection herewith shall prove to be untrue or inaccurate in any material respect as of the date on which such representation or warranty is made; or (c) Failure of any of Borrowers to observe, keep and perform any of the covenants or agreements in Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11 or 8.12 and the continuance of such failure for a period of at least ten (10) days after receipt of written notice from Agent to Borrowers specifying such failure; or (d) Failure or refusal of any of Borrowers to observe, keep and perform any of the covenants, agreements and obligations hereunder or any of the Loan Documents (except the covenants in Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11 and 8.12) and the continuance of such failure or refusal for a period of twenty (20) days after receipt of written notice from Agent to Borrowers specifying such failure; or (e) Company or any of its Subsidiaries shall (i) apply for or consent to the appointment of a receiver, custodian, trustee, intervenor or liquidator of all or a substantial part of its assets, (ii) voluntarily become the subject of a bankruptcy, reorganization or insolvency proceeding or be insolvent or admit in writing that it is unable to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy or insolvency laws, (v) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or (vi) become the subject of an order for relief under any bankruptcy, reorganization or insolvency proceeding; or (f) An order, judgment or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition appointing a receiver, custodian, trustee, intervenor or liquidator of Company or any of its Subsidiaries or of all or substantially all of its assets, and such order, judgment or decree shall continue unstayed and in effect for a period of sixty (60) days; or a complaint or petition shall be filed against Company or any of its Subsidiaries seeking or instituting a bankruptcy, insolvency, reorganization, rehabilitation or receivership proceeding of Company or any of its Subsidiaries, and such petition or complaint shall not have been dismissed within sixty (60) days; or -31- (g) Any final judgment(s) for the payment of money in excess of the sum of two hundred thousand dollars ($200,000) in the aggregate shall be rendered against Company or any Subsidiary and such judgment or judgments shall not be satisfied or discharged at least ten (10) days prior to the date on which any of its assets could be lawfully sold to satisfy such judgment; or (h) There shall occur any change in the condition (financial or otherwise) of Company or any Subsidiary which, in the reasonable opinion of Majority Banks, has a Material Adverse Effect; or (i) The occurrence of a default or an event of default under any Securitization or similar agreement to which Company or any of its Subsidiaries is a party; or (j) Default shall occur under any Indebtedness for borrowed money issued, assumed or guaranteed by the Company or any of its Subsidiaries or under any indenture, agreement or other instrument under which the same may be issued and such default shall continue for a period of time sufficient to permit the acceleration of maturity of such Indebtedness or any such Indebtedness shall not be paid when due. 10.02. REMEDIES UPON EVENT OF DEFAULT. If an Event of Default shall have occurred and be continuing, then Agent shall, at the request of Majority Banks, exercise any one or more of the following rights and remedies, and any other remedies in any of the Loan Documents, as Majority Banks in their sole discretion, may deem necessary or appropriate: (i) declare the principal of, and all interest then accrued on, the Notes and any other liabilities hereunder to be forthwith due and payable, whereupon the same shall forthwith become due and payable without presentment, demand, protest, notice of default, notice of acceleration or notice of intention to accelerate or other notice of any kind, all of which Borrowers hereby expressly waive, anything contained herein or in the Notes to the contrary notwithstanding, (ii) refuse to make any additional Advances under the Notes, (iii) reduce any claim to judgment, (iv) apply to the payment of the Notes all collections received in the lockbox with Agent to which payments on the Eligible Finance Contracts pledged to Agent and Banks are sent and/or (v) without notice of default or demand, pursue and enforce any of Banks' rights and remedies under the Loan Documents or otherwise provided under or pursuant to any applicable law or agreement. Notwithstanding the foregoing, in the event of the occurrence of an Event of Default under Section 10.01(e) or Section 10.01(f), the entire amount of principal of, and interest then accrued on, the Notes shall automatically be immediately due and payable, without demand, notice of default, notice of acceleration or notice of any kind, all of which Borrowers hereby expressly waive and the Revolving Commitment of each of the Banks shall terminate. Borrowers hereby designate and appoint Agent as its attorney-in-fact to endorse to Agent for the benefit of Banks after the occurrence of an Event of Default all checks deposited in the lockbox with Agent to which payments on the Eligible Finance Contracts pledged to Agent and Banks are sent. This power of attorney is irrevocable and is coupled with an interest. 10.03. PERFORMANCE BY BANKS. Should any of Borrowers fail to perform in any material respect any covenant, duty or agreement contained herein or in any of the Loan Documents, Agent or Banks may, at their option, perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers following written notice to Borrowers of such intention to perform. In such event, Borrowers shall, at the request of Agent or Banks, promptly pay any amount reasonably expended by Agent or Banks in performance or attempted performance to Agent at its principal office in Fort Worth, Texas, together with interest thereon at the Past Due Rate from the date of such expenditure until paid. Notwithstanding the foregoing, it is expressly understood that neither Banks nor Agent assume any liability or responsibility (except liability attributable to their gross negligence or willful misconduct) for the performance of any duties of Borrowers hereunder or under any of the Loan Documents or other control over the management and affairs of the Borrowers. 10.04. REMEDIES CUMULATIVE. All covenants, conditions, provisions, warranties, indemnities and other undertakings of Borrowers contained in this Agreement, or in any document referred to herein or in any agreement supplementary hereto or in any of the Loan Documents shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions or agreements of Borrowers contained herein. The failure -32- or delay of Agent or Banks to exercise or enforce any rights, liens, powers or remedies hereunder or under any of the aforesaid agreements or other documents against any security shall not operate as a waiver of such liens, rights, powers and remedies, but all such rights, powers and remedies shall continue in full force and effect until the loans evidenced by the Notes and the entire Obligation of Borrowers to Banks shall have been fully satisfied, and all rights, liens, powers and remedies herein provided for are cumulative and none are exclusive. ARTICLE XI ARBITRATION PROGRAM 11.01. BINDING ARBITRATION. Upon the demand of any party, whether made before or after the institution of any judicial proceeding, any Dispute (as defined below) shall be resolved by binding arbitration in accordance with the terms of this Arbitration Program. A "Dispute" shall include any action, dispute, claim, or controversy of any kind (e.g., whether in contract or in tort, statutory or common law, legal or equitable, or otherwise) now existing or hereafter arising between the parties in any way arising out of, pertaining to or in connection with (1) the agreement, document or instrument to which this Arbitration Program is attached or in which it is referred to or any related agreements, documents, or instruments (the "Documents"), (2) all past, present or future loans, notes instruments, drafts, credits, accounts, deposit accounts, safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods or services, or other transactions, contracts or agreements of any kind whatsoever, (3) any past, present or future incidents, omissions, acts, practices, or occurrences causing injury to either party whereby the other party or its agents, employees, or representatives may be liable, in whole or in part, or (4) any aspect of the past, present or future relationships of the parties including any agency, independent contractor or employment relationship but excluding claims for workers' compensation and unemployment benefits ("Relationship"). Any party to this Arbitration Program may, by summary proceedings (e.g., a plea in abatement or motion to stay further proceedings), bring any action in court to compel arbitration of any Disputes. Any party who fails or refuses to submit to binding arbitration following a lawful demand by the opposing party shall bear all costs and expenses incurred by the opposing party in compelling arbitration of any Dispute. The parties agree that by engaging in activities with or involving each other as described above, they are participating in transactions involving interstate commerce. 11.02. GOVERNING RULES. All Disputes between the parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with, and in the following priority: (1) the terms of this Arbitration Program, (2) the Commercial Arbitration Rules of the AAA, (3) the Federal Arbitration Act (Title 9 of the United States Code) and (4) to the extent the foregoing are inapplicable, unenforceable or invalid, the laws of the State of Texas. The validity and enforceability of this Arbitration Program shall be determined in accordance with this same order of priority. In the event of any inconsistency between this Arbitration Program and such rules and statutes, this Arbitration Program shall control. Judgment upon any award rendered hereunder may be entered in any court having jurisdiction; provided, however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or Texas Banking Code Art. 342-609. 11.03. NO WAIVER; PRESERVATION OF REMEDIES; MULTIPLE PARTIES. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any party, during any Dispute to seek, use, and employ ancillary or preliminary remedies, judicial or otherwise, for the purpose of realizing upon, preserving, protecting, foreclosing or proceeding under forcible entry and detainer for possession of any real or personal property, and any such action shall not be deemed an election of remedies. Such rights shall include, without limitation, rights and remedies relating to (1) foreclosing against any real or personal property collateral or other security by the exercise of a power of sale under a deed of trust, mortgage, or other security agreement or instrument, or applicable law, (2) exercising self-help remedies (including setoff rights) or (3) obtaining provisional or ancillary remedies such as injunctive relief, sequestration, attachment, garnishment, or the appointment of a receiver from a court having jurisdiction. Such rights can be exercised at any time except to the extent such action is contrary to a final award or decision in any arbitration proceeding. The institution and maintenance of an action for judicial relief or pursuit of provisional or ancillary remedies or exercise of self-help remedies shall not constitute a waiver of the right of any party, including the plaintiff, to submit the Dispute to arbitration nor render inapplicable the compulsory arbitration provisions hereof. -33- In Disputes involving indebtedness or other monetary obligations, each party agrees that the other party may proceed against all liable persons, jointly and severally, or against one or more of them, less than all, without impairing rights against other liable persons. No party shall be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A party may release or settle with one or more liable persons as the party deems fit without releasing or impairing rights to proceed against any persons not so released. 11.04. STATUTE OF LIMITATIONS. All statutes of limitation shall apply to any proceeding in accordance with this Arbitration Program. 11.05. ARBITRATOR POWERS AND QUALIFICATIONS; AWARDS; MODIFICATION OR VACATION OF AWARD. Arbitrators are empowered to resolve Disputes by summary rulings substantially similar to summary judgments and motions to dismiss. Arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any arbitrator selected shall be required to be a practicing attorney licensed to practice law in the State of Texas and shall be required to be experienced and knowledgeable in the substantive laws applicable to the subject matter of the Dispute. With respect to a Dispute in which the claims or amounts in controversy do not exceed $1,000,000, a single arbitrator shall be chosen and shall resolve the Dispute. In such case, the arbitrator shall be required to make specific, written findings of fact, and shall have authority to render an award up to but not to exceed $1,000,000, including all damages of any kind whatsoever, including costs, fees and expenses. A Dispute involving claims or amounts in controversy exceeding $1,000,000 shall be decided by a majority vote of a panel of three arbitrators (an "Arbitration Panel"), the determination of any two of the three arbitrators constituting the determination of the Arbitration Panel, provided, however, that all three Arbitrators on the Arbitration Panel must actively participate in all hearings and deliberations. Arbitrators, including any Arbitration Panel, may grant any remedy or relief deemed just and equitable and within the scope of this Arbitration Program and may also grant such ancillary relief as is necessary to make effective any award. Arbitration Panels shall be required to make specific, written findings of fact and conclusions of law, and in such proceedings before an Arbitration Panel only, the parties shall have the additional right to seek vacation or modification of any award of an Arbitration Panel that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to a Federal or State Court of Appeals, following the entry of judgment on the award in Federal or State District Court, as appropriate. For these purposes, the award and judgment entered by the Federal or State District Court shall be considered to be the same as the award and judgment of the Arbitration Panel. All requirements applicable to appeals from any Federal or State District Court judgment shall be applicable to appeals from judgments entered on decisions rendered by Arbitration Panels. The Appellate Courts shall have the power and authority to vacate or modify an award based upon a determination that there has been an incorrect or erroneous ruling of law. The Appellate Court shall also have the power to reverse and/or remand the decision of an Arbitration Panel. Subject to the foregoing, the determination of an Arbitrator or Arbitration Panel shall be binding on all parties and shall not be subject to further review or appeal except as otherwise allowed by applicable law. 11.06. OTHER MATTERS AND MISCELLANEOUS. To the maximum extent practicable, the AAA, the Arbitrator (or the Arbitration Panel, as appropriate) and the parties shall take any action necessary to require that an arbitration proceeding hereunder be concluded within 180 days of the filing of the Dispute with the AAA. Arbitration proceedings hereunder shall be conducted at one of the following locations in the State of Texas agreed to in writing by the parties or, in the absence of such agreement, selected by the AAA: (1) Dallas; or (2) Fort Worth. Arbitrators shall be empowered to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could do pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure and applicable law. With respect to any Dispute, each party agrees that all discovery activities shall be expressly limited to matters directly relevant to the Dispute and any Arbitrator, Arbitration Panel and the AAA shall be required to fully enforce this requirement. This Arbitration Program constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior discussions, arrangements, negotiations, and other communications on dispute resolution. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents or the Relationship, unless the parties otherwise expressly agree in writing. To the extent permitted by applicable law, Arbitrators, including any Arbitration Panel, shall have the power to award recovery of all costs and fees (including attorneys' fees, administrative fees, and arbitrators' fees) to the prevailing party. This Arbitration Program may be amended, changed, or modified only by the express provisions of a writing which specifically refers to this Arbitration Program and which is signed by all the parties hereto. If any term, covenant, condition, or provision of this Arbitration Program is found to be unlawful, invalid or unenforceable, such illegality or invalidity -34- or unenforceability shall not affect the legality, validity, or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid, or unenforceable part had not been included. The captions or headings in this Arbitration Program are for convenience of reference only and are not intended to constitute any part of the body or text of this Arbitration Program. Each party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the parties or by applicable law or regulation. To the maximum extent permitted by law, this Arbitration Program modifies and supersedes any and all prior agreements for arbitration between the parties. ARTICLE XII THE AGENT 12.01. APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably appoints and authorizes Agent to take such action on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto. With respect to its Commitment, the Advances made by it and the Notes issued to it, Agent shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Agent in its capacity as a Bank. The Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, Borrowers, and any Person which may do business with Borrowers, all as if Agent were not Agent hereunder and without any duty to account therefor to Banks. 12.02. NOTE HOLDERS. Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it signed by such payee and in form satisfactory to Agent. 12.03. CONSULTATION WITH COUNSEL. Banks agree that Agent may consult with legal counsel selected by it and shall not be liable for any action taken or suffered in good faith by them in accordance with the advice of such counsel. 12.04. DOCUMENTS. Agent shall not be under a duty to examine or pass upon the validity, effectiveness, enforceability, genuineness or value of any of the Loan Documents or any other instrument or document furnished pursuant thereto or in connection therewith, and Agent shall be entitled to assume that the same are valid, effective, enforceable and genuine and what they purport to be. 12.05. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving written notice thereof to Banks and Borrowers and the Agent may be removed at any time with or without cause by Majority Banks. Upon any such resignation or removal, Majority Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or Majority Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article 12 shall continue in effect for its benefit in respect to any actions taken or omitted to be taken by it while it was acting as Agent. 12.06. RESPONSIBILITY OF AGENT. It is expressly understood and agreed that the obligations of Agent under the Loan Documents are only those expressly set forth in the Loan Documents and that Agent shall be entitled to assume that no Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default has occurred and is continuing, unless Agent has actual knowledge of such fact or has received notice from a Bank that such Bank considers that an Event of Default or such event has occurred and is continuing and -35- specifying the nature thereof. Agent shall furnish to each of Banks within five (5) Business Days receipt copies of the documents, statements and reports furnished to Agent pursuant to Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.06, 8.07, 8.09, 8.10, 8.11 and 8.12. Banks recognize and agree, that for purposes of Section 2.02(b) hereof, Agent shall not be required to determine independently whether the conditions described in Sections 6.02(a), (b), (c), (d) and (e) have been satisfied and, in disbursing funds to Borrowers, may rely fully upon statements contained in the relevant Request for Borrowing. Neither Agent nor any of its directors, officers or employees shall be liable for any action taken or omitted to be taken by it under or in connection with the Loan Documents, except for its own gross negligence or willful misconduct. Agent shall incur no liability under or in respect of any of the Loan Documents by acting upon any notice, consent, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment, or which may seem to it to be necessary or desirable in the premises. The relationship between Agent and each of the Banks is only that of agent and principal and has no fiduciary aspects, and Agent's duties hereunder are acknowledged to be only ministerial and not involving the exercise of discretion on its part. Nothing in this Loan Agreement or elsewhere contained shall be construed to impose on Agent any duties or responsibilities other than those for which express provision is herein made. In performing its duties and functions hereunder, Agent does not assume and shall not be deemed to have assumed, and hereby expressly disclaims, any obligation or responsibility toward or any relationship of agency or trust with or for, Borrowers. As to any matters not expressly provided for by this Loan Agreement (including, without limitation, enforcement or collection of the Notes), Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Majority Banks and such instructions shall be binding upon all Banks and all holders of Notes; PROVIDED, HOWEVER, that Agent shall not be required to take any action which exposes Agent to personal liability or which is contrary to this Loan Agreement or applicable law. 12.07. NOTICES OF EVENT OF DEFAULT. In the event that Agent shall have acquired actual knowledge of any Event of Default or of an event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default, Agent shall promptly give written notice thereof to the other Banks. 12.08. INDEPENDENT INVESTIGATION. Each of the Banks severally represents and warrants to Agent that it has made its own independent investigation and assessment of the financial condition and affairs of the Borrowers in connection with the making and continuation of its participation in the Loans hereunder and has not relied exclusively on any information provided to such Bank by Agent in connection herewith, and each Bank represents, warrants and undertakes to Agent that it shall continue to make its own independent appraisal of the creditworthiness of the Borrowers while the Loans are outstanding or its commitment hereunder is in force. 12.09. INDEMNIFICATION. Banks agree to indemnify Agent (to the extent not reimbursed by Borrowers), ratably according to the proportion that the respective principal amounts of the Note held by each of them bears to the sum of the aggregate principal amount of the Notes, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by Agent under the Loan Documents, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. 12.10. BENEFIT OF ARTICLE XII. The agreements contained in this Article XII are solely for the benefit of Agent and the Banks, and are not for the benefit of, or to be relied upon by, the Borrowers, or any third party. 12.11. NOT A LOAN TO AGENT; NO DUTY TO REPURCHASE. No amount paid by any Bank hereunder shall be considered a loan by Agent. Agent shall have no obligation to repurchase any interest from any Bank. -36- 12.12. BANK'S REPRESENTATIONS. Each Bank represents and warrants to Agent and the other Banks that: (a) it is engaged in the business of entering into commercial lending transactions (including transactions of the nature contemplated herein) and can bear the economic risk related to the same; and (b) it does not consider the obligations hereunder to constitute the "purchase" or "sale" of a "security" within the meaning of any federal or state securities statute or law, or any rule or regulation under any of the foregoing. 12.13 Co-Agent. It is expressly understood and agreed that BANK ONE, TEXAS, N.A. shall have no responsibility or obligations as a co-agent hereunder other than its obligations as a Bank under this Loan Agreement. ARTICLE XIII MISCELLANEOUS 13.01. WAIVER. No failure to exercise, and no delay in exercising, on the part of any Bank, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other further exercise thereof or the exercise of any other right. The rights of Banks hereunder and under the Loan Documents shall be in addition to all other rights provided by law. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand. 13.02. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents relating to the loans evidenced by the Notes (the "Loan Documents") must be given in writing and personally delivered, sent by telecopy or telex (answerback received) or mailed by prepaid certified or registered mail, return receipt requested, to the party to whom such notice or communication is directed at the address of such party as follows: Borrowers: AmeriCredit Corp. 200 Bailey Avenue Fort Worth, Texas 76107 Attn: Chief Financial Officer FAX No. (817) 336-9519 AmeriCredit Financial Services, Inc. 200 Bailey Avenue Fort Worth, Texas 76107 Attn: Chief Financial Officer FAX No. (817) 336-9519 AmeriCredit Operating Co., Inc. 200 Bailey Avenue Fort Worth, Texas 76107 Attn: Chief Financial Officer FAX No. (817) 336-9519 Agent: First Interstate Bank of Texas, N.A. 309 W. Seventh Street, Suite 1100 Fort Worth, Texas 76102 Attn: Kim White -37- FAX No. (817) 885-1110 Any such notice or other communication shall be deemed to have been given on the date it is personally delivered or sent by telecopy or telex as aforesaid or, if mailed, on the second day after it is mailed as aforesaid (whether actually received or not). Any party may change its address for purposes of this Loan Agreement by giving notice of such change to all other parties pursuant to this Section 13.02. Any notice given hereunder by Borrowers to Agent shall constitute notice to all of the Banks. 13.03. PAYMENT OF EXPENSES. Borrowers agree to pay all costs and expenses of Banks (including, without limitation, the reasonable attorneys' fees of Banks' outside legal counsel) incurred by Banks in connection with the preservation and enforcement of Banks' rights under this Loan Agreement, the Notes, and/or the other Loan Documents, and all reasonable costs and expenses of Banks (including without limitation the reasonable fees and expenses of Banks' outside legal counsel) in connection with the negotiation, preparation, execution and delivery of this Loan Agreement, the Notes, and the other Loan Documents and any and all amendments, modifications and supplements thereof or thereto. 13.04. MAXIMUM INTEREST RATE. Regardless of any provisions contained in this Loan Agreement, the Notes or in any of the other Loan Documents, Banks shall never be deemed to have contracted for or be entitled to receive, collect or apply as interest on the Notes any amount in excess of the Maximum Rate, and, in the event any Bank ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be deemed to be a partial prepayment of principal and treated hereunder as such, and, if the principal amount of the Obligations is paid in full, any remaining excess shall forthwith be paid to Borrowers. In determining whether or not the interest paid or payable under any specific contingency exceeds the Maximum Rate, Borrowers and Banks shall, to the maximum extent permitted by applicable law, (i) characterize any nonprincipal payments (other than payments which are expressly designated as interest payments hereunder) as an expense, fee, or premium, rather than as interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii) amortize, prorate, allocate and spread, in equal parts, the total amount of interest throughout the entire contemplated term of the indebtedness so that interest paid by Borrowers does not exceed -38- the Maximum Rate; provided that, if a Note is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Rate, Banks shall refund to Borrowers the amount of such excess or credit the amount of such excess against the principal amount of the Notes and, in such event, Banks shall not be subject to the penalties provided by any laws for contracting for, charging, taking, reserving or receiving interest in excess of the Maximum Rate. 13.05. AMENDMENTS, WAIVERS, ETC. Agent may enter into any amendment or modification of, or may waive compliance with the terms of, any of the Loan Documents with the written direction of the Majority Banks; PROVIDED THAT the consent of all Banks shall be required before Agent may take or omit to take any action under any of the Loan Documents directly affecting (a) the extension of the maturity of or the postponement of the payment of any portion of the principal of or interest on Revolving Credit Loans or any fees relating thereto, (b) a reduction of or increase in the principal amount of or rate of interest payable on Revolving Credit Loans or any fees related thereto, (c) the release of any of Borrowers, (d) the release of any of the Guarantors, (e) the release of any collateral except in the case of a Securitization approved by Majority Banks or (f) any material change in the definition of Revolving Credit Borrowing Base, in the definition of Net Amount or in the definition of Eligible Finance Contract. Nor shall any of the following occur without the consent of all Banks: (a) any amendment to the definition of Majority Banks, or (b) any amendment to this Section 13.05. The Commitment of a Bank shall not be increased without the consent of such Bank. If any Bank is unwilling to consent to any amendment or modification of, or waiver of compliance with, the Loan Agreement (where the consent of such Bank is required), the consenting Majority Banks shall have the right, but not the obligation, to repurchase such Bank's Percentage of the Obligation at such time for a purchase price equal to Bank's Percentage of any and all unpaid Advances made by Agent to the Borrowers under the Loan Agreement, any and all unpaid interest thereon and unpaid accrued fees or other amounts owing to such Bank. 13.06. GOVERNING LAW. This Loan Agreement has been prepared, is being executed and delivered, and is intended to be performed in the State of Texas, and the substantive laws of such state and the -39- applicable federal laws of the United States of America shall govern the validity, construction, enforcement and interpretation of this Loan Agreement and all of the other Loan Documents. 13.07. INVALID PROVISIONS. If any provision of any Loan Document is held to be illegal, invalid or unenforceable under present or future laws during the term of this Loan Agreement, such provision shall be fully severable; such Loan Document shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of such Loan Document; and the remaining provisions of such Loan Document shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from such Loan Document. Furthermore, in lieu of each such illegal, invalid or unenforceable provision shall be added as part of such Loan Document a provision mutually agreeable to Borrowers, Agent and Majority Banks as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. In the event Borrowers, Agent and Majority Banks are unable to agree upon a provision to be added to the Loan Document within a period of ten (10) Business Days after a provision of the Loan Document is held to be illegal, invalid or unenforceable, then a provision reasonably acceptable to Agent and Majority Banks as similar in terms to the illegal, invalid or unenforceable provision as is possible and be legal, valid and enforceable shall be added automatically to such Loan Document. In either case, the effective date of the added provision shall be the date upon which the prior provision was held to be illegal, invalid or unenforceable. 13.08. HEADINGS. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Loan Agreement. 13.09. PARTICIPATION AGREEMENTS AND ASSIGNMENTS. (a)(i) Subject to Section 13.09(a)(ii), each Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Loan Agreement (including, without limitation, all or a portion of its Commitment, the Loan owing to it and the Note held by it) and the other Loan Documents; provided, however, that (A) no such assignment shall be made except to an Affiliate unless such assignment and assignee have been approved by the Agent and, so long as no Events of Default exists, the Borrowers, such approvals not to be unreasonably withheld, (B) each -40- such assignment shall be of a constant, and not a varying, percentage of all rights and obligations of the assignor under this Loan Agreement and the other Loan Documents, and no assignment shall be made unless it covers a pro rata share of all rights and obligations of such assignor under this Loan Agreement and the other Loan Documents, (C) the amount of the Commitment of the assigning Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance substantially in the form of EXHIBIT H (hereinafter referred to as the "Assignment and Acceptance") with respect to such assignment) shall, unless otherwise agreed to by the Agent, in no event be less than $10,000,000 or, if less, the entirety of its Commitment and shall be an integral multiple of $1,000,000, (D) each such assignment shall be to an Eligible Assignee (defined below), (E) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (defined below), an Assignment and Acceptance, together with any Note subject to such assignment and (F) Agent receives a fee from the assignor in the amount of $2,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (1) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank under the Loan Documents, (2) the assigning Bank thereunder shall, to the extent that rights and obligations under the Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Loan Agreement, such Bank shall cease to be a party hereto), and (3) Section 2.01(a) shall be deemed to have been automatically amended to reflect the revised Commitments. As used herein, "Eligible Assignee" shall mean (a) any Bank or any Affiliate of any Bank; (b) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $1,000,000,000 and having deposits rated in either of the two highest generic letter rating categories (without regard to subcategories) from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development ("OECD"), or a political -41- subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (d) the central bank of any country which is a member of the OECD; and (e) any other financial institution approved by the Agent. (ii) In the event any Bank desires to transfer all or any portion of its rights and obligations under the Loan Documents, it shall give the Borrowers and the Agent prior written notice of the identity of such transferee and the terms and conditions of such transfer (a "TRANSFER NOTICE"). So long as no Event of Default has occurred and is continuing, the Borrowers may, no later than ten (10) days following receipt of such Transfer Notice, designate an alternative transferee and such Bank shall thereupon be obligated to sell the interests specified in such Transfer Notice to such alternative transferee, subject to the following: (A) such transfer shall be made on the same terms and conditions outlined in such Transfer Notice, (B) such transfer shall otherwise comply with the terms and conditions of the Loan Documents (including Section 13.09(a)(i), and (C) such alternative transferee must be an Eligible Assignee approved by the Agent. If the Borrowers shall fail to designate an alternative transferee within such ten (10) day period, such Bank shall, subject to compliance with the other terms and provisions hereof, be free to consummate the transfer described in such Transfer Notice. (b) By executing and delivering an Assignment and Acceptance substantially in the form of EXHIBIT H, the assigning Bank thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Loan Agreement or any other instrument or document furnished pursuant hereto, (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the performance or observance by the Borrowers of any of its obligations under this Loan Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms -42- that it has received a copy of this Loan Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 7.07 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any of the Banks (including such assigning Bank) and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Loan Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Loan Agreement and the other Loan Documents as are delegated to such Person by the terms thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Loan Agreement and the other Loan Documents are required to be performed by it as a Bank. (c) The Agent shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Notes owing to, each Bank from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers and each of the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Loan Agreement. The Register shall be available for inspection by the Borrowers or any of the Banks at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee representing that it is an Eligible Assignee, together with any Note subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of EXHIBIT H hereto and satisfies all other requirements set forth in this Section 13.09, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrowers and the other Banks. Within five (5) Business Days after its receipt of such notice, the Borrowers, -43- at their own expense, shall execute and deliver to the Agent, in exchange for the surrendered Note, a new Note to the order of such Eligible Assignee in an amount corresponding to the Commitment assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained a Commitment hereunder, a new Note to the order of the assigning Bank in an amount corresponding to the Commitment retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form prescribed by EXHIBIT H hereto. (e) Each Bank may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Loan Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitment and the Notes owing to it); PROVIDED, HOWEVER, that (i) such Bank's obligations under this Loan Agreement (including, without limitation, its Commitment to the Borrowers hereunder) and the other Loan Documents shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, and the participating banks or other entities shall not be considered a "Bank" for purposes of the Loan Documents, (iii) the participating banks or other entities shall be entitled to the cost protection provision contained in Section 4.03 and Section 4.05, in each case to the same extent that the Bank from which such participating bank or other entity acquired its participations would be entitled to the benefit of such cost protection provisions and (iv) the Borrowers and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Loan Agreement and the other Loan Documents, and such Bank shall retain the sole right to enforce the obligations of the Borrowers relating to the Loans and to approve any amendment, modification or waiver of any provision of this Loan Agreement (other than amendments, modifications or waivers with respect to the amounts of any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Notes, or the dates fixed for payments of principal or interest on the Notes). -44- (f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 13.09, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Bank by or on behalf of the Borrowers; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of any confidential information relating to the Borrowers received from such Bank. (g) The obligations of the Banks in this Loan Agreement, the Notes and any other Loan Documents shall not be assignable or transferable by Borrowers and any purported assignment or transfer shall, as to the Agent and Banks, be of no force and effect. 13.10. ARTICLE 15.10(b). Borrowers and Banks hereby agree that, except for Article 15.10(b) thereof, the provisions of Charter 15 of Title 79 of the Revised Civil Statutes of Texas, 1925, as amended (regulating certain revolving credit loans and revolving triparty accounts) shall not apply to the Loan Documents. 13.11. SURVIVAL. All representations and warranties made by Borrowers herein shall survive delivery of the Notes and the making of the Revolving Credit Loans. 13.12. NO THIRD PARTY BENEFICIARY. The parties do not intend the benefits of this Agreement to inure to any third party, nor shall this Loan Agreement be construed to make or render Banks liable to any materialman, supplier, contractor, subcontractor, purchaser or lessee of any property owned by Borrowers, or for debts or claims accruing to any such persons against Borrowers. Notwithstanding anything contained herein or in the Notes, or in any other Loan Document, or any conduct or course of conduct by any or all of the parties hereto, before or after signing this Loan Agreement or any of the other Loan Documents, neither this Loan Agreement nor any other Loan Document shall be construed as creating any right, claim or cause of action against Banks, or any of its officers, directors, agents or employees, in favor of any materialman, supplier, contractor, subcontractor, purchaser or lessee of any property owned by Borrowers, nor to any other person or entity other than Borrowers. -45- 13.13. COUNTERPARTS. This Loan Agreement may be executed by one or more of the parties to this Loan Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Loan Agreement signed by all the parties shall be lodged with the Borrowers and the Agent. 13.14. FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED effective as of the 2nd day of June 1995. AMERICREDIT CORP., a Texas corporation By: __________________________ Daniel E. Berce, Executive Vice President AMERICREDIT FINANCIAL SERVICES, INC., a Delaware corporation By: __________________________ Daniel E. Berce, Vice President AMERICREDIT OPERATING CO., INC., a Delaware corporation By: __________________________ Daniel E. Berce, Vice President BORROWERS AMERICREDIT PREMIUM FINANCE, INC., a Delaware corporation -46- By: __________________________ Daniel E. Berce, President ACF INVESTMENT CORP., a Delaware corporation By: __________________________ Daniel E. Berce, Vice President GUARANTORS FIRST INTERSTATE BANK OF TEXAS, N.A. By: __________________________ Kimberly K. White, Assistant Vice President BANK ONE, TEXAS, N.A. By: __________________________ J. Michael Wilson, Vice President LASALLE NATIONAL BANK By: __________________________ Terry M. Keating, First Vice President THE DAIWA BANK, LTD. By: __________________________ James T. Wang, Vice President and Manager -47- By: __________________________ Kirk L. Stites, Vice President HARRIS TRUST AND SAVINGS BANK By: __________________________ Jerome P. Crokin, Vice President COMERICA BANK-TEXAS By: __________________________ Jeffrey A. Moten, Vice President BANKS FIRST INTERSTATE BANK OF TEXAS, N.A. By: __________________________ Kimberly K. White, Assistant Vice President -48- AGENT BANK ONE, TEXAS, N.A. By: __________________________ J. Michael Wilson, Vice President CO-AGENT -49- -50- EX-11.1 5 EXHIBIT 11.1 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (dollars in thousands, except per share amounts)
Years Ended ----------------------------------------- June 30, June 30, June 30, 1995 1994 1993 ---------- ---------- ---------- PRIMARY: Average common shares outstanding . . . . . . . 28,730,151 29,067,323 29,267,419 Common share equivalents resulting from assumed exercise of stock options and warrants. . . . . . . 1,650,598 2,750,760 ---------- ---------- ---------- Average common shares and share equivalents outstanding . . . . . . . 30,380,749 31,818,083 29,267,419 ========== ========== ========== FULLY DILUTED: Average common shares outstanding . . . . . . . 28,730,151 29,067,323 29,267,419 Common share equivalents resulting from assumed exercise of stock options and warrants. . . . . . . 2,405,317 2,750,760 ---------- ---------- ---------- Average common shares and share equivalents outstanding . . . . . . . 31,135,468 31,818,083 29,267,419 ========== ========== ========== NET INCOME (LOSS). . . . . $ 28,893 $ 5,065 $ (19,366) ========== ========== ========== EARNINGS (LOSS) PER SHARE: Primary . . . . . . . . . $ .95 $ .16 $ (.66) ========== ========== ========== Fully diluted . . . . . . $ .93 $ .16 $ (.66) ========== ========== ==========
Primary earnings (loss) per share has been computed by dividing net income (loss) by the average common shares and share equivalents outstanding. Common share equivalents were computed using the treasury stock method. The average common stock market price for the period was used to determine the number of common share equivalents. Fully diluted earnings (loss) per share has been computed in the same manner as primary earnings (loss) per share except that the higher of the average or end of period common stock market price was used to determine the number of common share equivalents. EX-13.1 6 EXHIBIT 13.1 ANNUAL REPORT CORPORATE PROFILE AmeriCredit Corp. is a national consumer finance company specializing in purchasing automobile sales finance contracts. The Company is headquartered in Fort Worth, Texas, and its common shares are traded on the New York Stock Exchange. Through its branch offices and marketing representatives, the Company serves as a funding source for franchised and independent dealers to finance their customers' purchases of primarily used automobiles. The Company targets consumers who are typically unable to obtain financing from traditional sources. Consumer finance contracts originated by dealers which conform to the Company's credit policies are purchased by the Company, generally for a non-refundable acquisition fee and without recourse to the dealer. These consumer finance loans typically range in amounts from $6,000 to $12,000, with repayment terms usually ranging from 24 to 60 months. The Company services its consumer loan portfolio at its central facility using automated loan servicing and collection systems. LETTER TO SHAREHOLDERS Fiscal 1995 was a prosperous year for AmeriCredit Corp. The Company more than doubled in size as measured by finance charge income, finance receivables and total assets. Operating income increased 98% from fiscal 1994. We arranged $275 million in debt financing to fund expansion. But most importantly, we continued to invest in our people and systems to strengthen dealer and customer service and ensure that the infrastructure is in place to posture AmeriCredit for future growth. FISCAL 1995 RESULTS AmeriCredit earned $28,893,000, or $.95 per share for the fiscal year ended June 30, 1995. These results include an income tax benefit of $18,875,000. On a pre-tax or operating income basis, earnings for the fiscal year ended June 30, 1995 were $10,018,000, or $.33 per share. Net income and pre-tax income for fiscal 1994 was $5,065,000, or $.16 per share. The income tax benefit included in net income for fiscal 1995 resulted from recognition of a deferred tax asset equal to the expected future tax savings from using our net operating loss carryforward and other future tax benefits. Based on the Company's trend of positive operating results since entering the indirect consumer lending business and future expectations, management determined that it is more likely than not that the net operating loss carryforward and other future tax benefits will be fully utilized prior to expiration of the carryforward periods. Although the Company will not actually pay regular federal income taxes until the net operating loss carryforward and other future tax benefits are used, AmeriCredit will report fully taxed earnings starting in fiscal 1996. RECEIVABLES GROWTH AmeriCredit achieved indirect loan portfolio growth of 256% during fiscal 1995, increasing indirect finance receivables to $240.5 million at June 30, 1995 from $67.6 million at June 30, 1994. This growth resulted from branch expansion as well as added loan production from branch offices open for the full year. A total of 13 new locations were opened in fiscal 1995, bringing our branch network to 31 offices in 20 states at June 30, 1995. Including loan production from marketing representatives, AmeriCredit was doing business in 36 states at Page -2- fiscal year end. We plan to open 15 new branches in fiscal 1996, and continue to focus on increasing market penetration in existing branch territories. Indirect loan purchases amounted to $230.2 million in fiscal 1995, a 249% increase over fiscal 1994 loan volume of $65.9 million. Our dealer network included 822 automobile dealers at fiscal year end, compared to 319 dealers a year ago. The AmeriCredit Dealer Stock Option Plan proved to be a successful marketing tool as 165 of our highest-volume dealers were awarded options to purchase AmeriCredit stock. Looking forward to fiscal 1996, we have developed a comprehensive dealer marketing strategy which will include print media and direct mail campaigns. OPERATING EFFICIENCY While experiencing significant growth in loan volume, our operating efficiency also improved. The Company's ratio of operating expenses to average net finance receivables outstanding decreased to 10% for fiscal 1995 from 15% for fiscal 1994. This ratio should improve further as we continue to realize economies of scale from our centralized branch support and loan servicing operations. FINANCE ACTIVITY Several major financing transactions were completed in fiscal 1995. In December 1994, we issued $51 million of automobile receivables-backed notes with an interest rate of 8.19%. Taking advantage of lower interest rates and enhanced recognition of AmeriCredit in the asset-backed securities markets, another $99.2 million of notes was issued in June with an interest rate of 6.55%. Each note series is covered by a financial guaranty insurance policy issued by Financial Security Assurance Inc. and is rated Aaa by Moody's Investors Service, Inc. and AAA by Standard & Poor's Corporation. In June, we expanded our bank line of credit to $125 million and reduced the cost of borrowings under the agreement. Although no borrowings were outstanding under this credit facility at year end, our strategy is to utilize the line of credit to fund new loan volume until the receivables accumulate to a size that can be pooled to access the asset-backed securities markets. The Company repurchased 433,200 shares of stock in fiscal 1995 at an aggregate price of $3.4 million or $7.88 per share. An additional 185,000 shares have been repurchased between July 1 and September 15, 1995. The Company's stock buyback Page -3- program, authorized by the Board of Directors, allows the repurchase of another 2,400,000 shares. NEW INVESTMENTS As mentioned above, our rapid growth in fiscal 1995 has been supported by continued investments in our people and systems. The AmeriCredit Corp. Employee Stock Purchase Plan was introduced in November with approximately 75% of our employees electing to participate and become shareholders. Our accelerated management training program is now producing manager candidates for new branch locations. AmeriCredit remains at the forefront of technology in the sub-prime auto finance sector. In the first quarter, we implemented a credit scoring system developed by Fair Isaac & Co., Inc. from our loan origination and portfolio databases. Credit scoring enables us to target a wider range of the sub-prime automobile finance market by tailoring loan pricing and structure to an empirical assessment of credit risk. We are currently pursuing the development of an even more predictive scorecard for introduction in fiscal 1996. Among other information systems enhancements, an optical scanning system has been installed to automate processing and storage of loan documents. In an effort to contain collection expenses, behavioral scoring methods are being developed to statistically determine when delinquent accounts should enter the collection process. In early fiscal 1996, we plan to upgrade the predictive dialing system used in the collection process and install a voice response package to streamline customer service. OUTLOOK A number of sub-prime automobile lenders have recently raised capital in the public equity and debt markets, creating the perception of increased competition in our business. Our business has always been intensely competitive. We face competition in each of our markets and for virtually every loan we purchase. Despite these competitive pressures, our emphasis on superior dealer service has enabled us to grow our receivables base. The used car finance industry is very large and is experiencing favorable growth trends. In addition, the business is highly fragmented geographically as well Page -4- as by credit segment. All sub-prime lenders are not necessarily competing within the same consumer niche. Significant growth opportunities exist in our business as the industry consolidates. Our ability to target a wide spectrum of the market through risk-adjusted pricing should provide us an advantage in this environment. We believe that AmeriCredit is well positioned for the future. The strength and experience of our people combined with our investments in systems and technology give us the confidence that we can continue to prosper. We appreciate your continued interest and support. Sincerely, Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer & President September 15, 1995 Page -5- AMERICREDIT CORP. SUMMARY FINANCIAL AND OPERATING INFORMATION (dollars in thousands, except per share data)
Years Ended ------------------------------------------------------------- June 30, June 30, June 30, June 30, June 30, 1995 (a) 1994 1993 (b) 1992 1991 ------ -------- ------ ------- ------- Operating Data: Finance charge income $ 30,249 $ 12,788 $ 13,904 $ 23,989 $ 30,737 Sales 8,271 48,454 155,924 Income (loss) before income taxes 10,018 5,065 (19,366) (23,257) (47,226) Net income (loss) 28,893 5,065 (19,366) (24,201) (36,188) Earnings (loss) per share .95 .16 (.66) (.77) (1.15) Weighted average shares and share equivalents 30,380,749 31,818,083 29,267,419 31,482,225 31,388,686
June 30, June 30, June 30, June 30, June 30, 1995 1994 1993 (a) 1992 1991 ------- ------- ------- ------- -------- Balance Sheet Data: Cash and cash equivalents and investment securities $ 33,586 $ 42,262 $ 68,425 $ 39,303 $ 14,255 Finance receivables, net 221,888 72,150 43,889 69,527 115,399 Total assets 285,725 122,215 131,127 153,564 181,388 Total liabilities 138,499 2,714 8,343 6,224 9,486 Shareholders' equity 147,226 119,501 122,784 147,340 171,902 (a) As further described in the Financial Review, the Company recognized an income tax benefit in fiscal 1995 equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. (b) As further described in the Financial Review, the Company withdrew from the retail used car sales business effective December 31, 1992.
-6- FINANCIAL REVIEW GENERAL Since September 1992, the Company has been in the business of purchasing automobile sales finance contracts originated by franchised and independent car dealers, generally referred to as indirect consumer lending. The Company previously engaged in the retail used car sales and finance business. However, in connection with a restructuring during the year ended June 30, 1993, the Company withdrew from the retail used car sales business effective December 31, 1992. The finance receivables originated in this previous business are referred to as the direct lending portfolio and are being liquidated over time as the contracts are collected or charged-off. From April 1993 through January 1995, the Company also financed insurance premiums for consumers purchasing car insurance through independent insurance agents. The Company curtailed its activities in this business in order to concentrate its resources on the core indirect consumer lending business. RESULTS OF OPERATIONS YEAR ENDED JUNE 30, 1995 AS COMPARED TO YEAR ENDED JUNE 30, 1994 REVENUE: The Company's overall finance charge income consisted of the following (in thousands):
Years Ended -------------------------------- June 30, June 30, 1995 1994 ----------- ----------- Indirect consumer lending $29,039 96% $ 7,820 61% Direct lending 500 2 3,711 29 Premium finance 710 2 1,257 10 ------- --- ------ --- $30,249 100% $12,788 100% ======= === ======= ===
The increase in finance charge income for the indirect consumer lending business is due to growth of 277% in average net indirect finance receivables outstanding. Average net indirect finance receivables outstanding were $141.5 million for the year ended June 30, 1995 compared to $37.5 million for the year ended June 30, 1994. The Company purchased $230.2 million of indirect loans during fiscal 1995 versus $65.9 million during fiscal 1994. This growth resulted from loan -7- production at branches open at the beginning of the fiscal year as well as expansion of the Company's loan production capacity. The Company opened thirteen branch offices in fiscal 1995 bringing the total number of branches to thirty-one as of June 30, 1995. The decrease in direct lending and premium financing finance charge income is due to the ongoing liquidation of these portfolios. The Company's overall effective yield on its finance receivables was 20.4% for both fiscal years. The effective yield on indirect consumer lending receivables was 20.5% for the year ended June 30, 1995 and 20.8% for the year ended June 30, 1994. Investment income decreased as a result of lower average cash and cash equivalents and investment securities balances in fiscal 1995. The Company's yield on its cash and cash equivalents and investment securities was 5.3% for the year ended June 30, 1995 as compared to 3.8% for the year ended June 30, 1994. Other income for the years ended June 30, 1995 and 1994 included $964,000 and $105,000, respectively, related to the Company's participation in certain joint ventures which acquire and collect distressed receivables portfolios. These joint ventures were formed in December 1993. COSTS AND EXPENSES: Operating expenses as a percentage of average net finance receivables outstanding decreased to 10.0% for the year ended June 30, 1995 as compared to 15.0% for the year ended June 30, 1994. The ratio improved as a result of the Company's ability to leverage its fixed overhead costs by growing its finance receivables portfolio. The dollar amount of operating expenses increased by $5.4 million, or 57%, primarily due to the addition of branch offices and home office supervisory and portfolio servicing staff. The provision for losses increased to $4.3 million as compared to $1.2 million. Further discussion concerning the provision for losses is included under the caption, "Finance Receivables". Interest expense of $4.0 million for the year ended June 30, 1995 resulted from borrowings on the Company's bank line of credit and the issuance of $51 million and $99.2 million of automobile receivables-backed notes in December 1994 and June 1995, respectively. The Company did not have any bank borrowings during the year ended June 30, 1994. -8- The income tax benefit in fiscal 1995 resulted from the Company's recognition of a deferred tax asset equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. Based on the Company's trend of positive operating results since entering the indirect consumer lending business in September 1992 and future expectations, the Company determined in the fourth quarter of fiscal 1995 that it is more likely than not that its net operating loss carryforward and other future tax benefits will be fully utilized prior to expiration of the carryforward periods. The Company's net operating loss carryforward was approximately $50 million as of June 30, 1995 and expires between 2007 and 2009. Prior to the fourth quarter of fiscal 1995, the Company had offset the deferred tax asset associated with its net operating loss carryforward and other future tax benefits with a valuation allowance. The deferred tax asset will be expensed through a non-cash income tax provision against the Company's future earnings as the net operating loss carryforward and other future tax benefits are utilized. The Company will not pay regular federal income taxes until the net operating loss carryforward and other future tax benefits have been fully recovered. YEAR ENDED JUNE 30, 1994 AS COMPARED TO YEAR ENDED JUNE 30, 1993 REVENUE: The Company's overall finance charge income consisted of the following (in thousands):
Years Ended -------------------------------- June 30, June 30, 1994 1993 ----------- ----------- Indirect consumer lending $ 7,820 61% $ 1,125 8% Direct lending 3,711 29 12,718 92 Premium finance 1,257 10 61 ------- --- ------- --- $12,788 100% $13,904 100% ======= === ======= ===
The increase in finance charge income for the indirect consumer lending business is a result of growth of 443% in average net indirect finance receivables outstanding. Average net indirect finance receivables outstanding were $37.5 million for the year ended June 30, 1994 compared to $6.9 million for the year ended June 30, 1993. The Company purchased $65.9 million of indirect loans during fiscal 1994 versus $18.4 million during fiscal 1993. This growth resulted from loan production at branches open at the beginning of the fiscal year as well as expansion of the Company's loan production capacity. The Company -9- opened thirteen branch offices in fiscal 1994 compared to five new locations opened during fiscal 1993. The decrease in direct lending finance charge income is due to the ongoing liquidation of the direct lending portfolio. The Company's overall effective yield on its finance receivables increased to 20.4% from 18.5% primarily as a result of higher finance charge rates realized in the Company's indirect consumer lending business. The effective yield on indirect consumer lending receivables was 20.8% for the year ended June 30, 1994, while the effective yield on direct lending receivables was 17.6% for the same period. Investment income increased as a result of higher average cash and cash equivalents and investment securities balances in fiscal 1994. The Company's yield on its cash and cash equivalents and investment securities was 3.8% for the year ended June 30, 1994 as compared to 3.6% for the year ended June 30, 1993. Other income for the year ended June 30, 1994 included $105,000 related to the Company's participation in certain joint ventures which acquire and collect distressed receivables portfolios. These joint ventures were formed in December 1993. As described under the caption "General" above, the Company exited the retail used car sales business effective December 31, 1992, and thus did not have sales or cost of sales in fiscal 1994. The Company's share of operating results of its former affiliate, Pacific Automart Inc., resulted in income of $392,000 for the year ended June 30, 1993. The Company sold its entire interest in Pacific Automart Inc. for $11,300,000 in cash on August 3, 1993. No gain or loss was recognized on the sale. COSTS AND EXPENSES: Operating expenses as a percentage of average net finance receivables outstanding decreased to 15.0% for the year ended June 30, 1994 as compared to 18.2% for the year ended June 30, 1993. The ratio improved as a result of the Company's ability to leverage its fixed overhead costs by growing its finance receivables portfolio. The dollar amount of operating expenses decreased by $4.3 million, or 31%, primarily due to the Company's exit from the retail used car sales business. The provision for losses decreased to $1.2 million as compared to $8.0 million. -10- Further discussion concerning the provision for losses is included in the paragraph below and under the caption, "Finance Receivables". The restructuring charges of $15.4 million in the year ended June 30, 1993 related to the Company's exit from the retail used car sales business. These restructuring charges included an accrual of future retail lease and other facility costs, a write-down of used car inventories, a write-down of property and equipment and other assets and an accrual of other costs necessary to complete the liquidation of the retail sales operations. In addition, the Company recorded an additional provision for losses of $5.0 million in light of the impact that closure of the Company's retail sales locations has on the Company's direct finance customer base. FINANCE RECEIVABLES The Company provides financing in relatively high-risk markets, and therefore, charge-offs and related losses are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheet as a reserve against estimated losses in the finance receivables portfolio. In the indirect consumer lending business, the Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are recorded in the consolidated balance sheet as an allowance for losses. The Company reviews historical origination and charge- off relationships, charge-off experience factors, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the periodic provision for losses and the allowance for losses. Although the Company uses many resources to assess the adequacy of the allowance for losses, there is no precise method for accurately determining the ultimate losses in the finance receivables portfolio. Net finance receivables represented 77.7% and 59.0% of the Company's total assets at June 30, 1995 and 1994, respectively. The following tables present certain data related to the finance receivables portfolio (dollars in thousands): -11-
June 30, 1995 ---------------------------------------- Indirect Direct Premium Total -------- ------- ------- -------- Gross finance receivables $287,360 $ 552 $ 821 $288,733 Unearned finance charges and fees (46,869) (19) (6) (46,894) -------- ------- ------ -------- Finance receivables (principal amount) 240,491 533 815 241,839 Allowance for losses (19,376) (387) (188) (19,951) -------- ------- ------ -------- Finance receivables, net $221,115 $ 146 $ 627 $221,888 ======== ======= ====== ======== Number of outstanding contracts 30,941 503 5,827 37,271 ======== ======= ====== ======== Allowance for losses as a percentage of finance receivables (principal amount) 8.1% 72.6% 23.1% 8.2% ======== ======= ====== ======== Average amount of outstanding contract principal amount (in dollars) $ 7,773 $ 1,060 $ 140 $ 6,489 ======== ======= ====== ========
June 30, 1994 ---------------------------------------- Indirect Direct Premium Total -------- ------- ------- -------- Gross finance receivables $ 80,507 $ 8,467 $ 6,631 $ 95,605 Unearned finance charges and fees (12,871) (770) (484) (14,125) -------- ------- ------- -------- Finance receivables (principal amount) 67,636 7,697 6,147 81,480 Allowance for losses (7,721) (1,173) (436) (9,330) -------- ------- ------- -------- Finance receivables, net $ 59,915 $ 6,524 $ 5,711 $ 72,150 ======== ======= ======= ======== Number of outstanding contracts 9,375 4,232 11,867 25,474 ======== ======= ======= ======== -12- Allowance for losses as a percentage of finance receivables (principal amount) 11.4% 15.2% 7.1% 11.5% ======== ======= ======= ======== Average amount of outstanding contract principal amount (in dollars) $ 7,215 $ 1,819 $ 518 $ 3,199 ======== ======= ======= ========
Indirect Finance Receivables: The following is a summary of indirect consumer lending contracts which are more than 60 days delinquent (dollars in thousands):
June 30, June 30, 1995 1994 -------- -------- Principal amount of delinquent contracts $4,907 $1,269 Principal amount of delinquent contracts as a percentage of total net indirect finance receivables outstanding 2.0% 1.9%
The following table presents charge-off data with respect to the Company's indirect finance receivables portfolio (dollars in thousands):
Years Ended ------------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- Net charge-offs $6,409 $1,432 $49 Net charge-offs as a percentage of average net indirect finance receivables outstanding 4.5% 3.8% 0.7%
The Company recorded periodic provisions for losses as charges to operations of $4,156,000, $1,062,000 and $435,000 related to its indirect finance receivables portfolio for the years ended June 30, 1995, 1994 and 1993, respectively. The increased loss provisions are a result of higher average net indirect receivables balances. The Company also accounts for acquisition fees on indirect consumer lending contracts as additional allowances for losses. The Company began its indirect consumer lending business in September 1992 and -13- has grown its indirect finance receivables portfolio to $240.5 million as of June 30, 1995. The Company expects that its delinquency and charge-offs will increase over time as the portfolio gains more maturity. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a more seasoned portfolio. Direct Finance Receivables: The following is a summary of direct lending contracts which are more than three payments delinquent if payment terms are weekly, bi-weekly or semi-monthly, and 60 days delinquent if payment terms are monthly (dollars in thousands): -14-
June 30, June 30, 1995 1994 -------- -------- Number of delinquent contracts 92 319 Number of delinquent contracts as a percentage of the total number of contracts outstanding 18.3% 7.5% Amount of delinquent contracts * $ 145 $ 897 Amount of delinquent contracts as a percentage of total gross direct finance receivables outstanding * 26.3% 10.6% *Includes unearned finance charges
The following table presents repossession and charge-off data with respect to the Company's direct finance receivables portfolio:
Years Ended ------------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- Repossessions and other charge-offs 636 2,613 7,780 Repossessions and other charge-offs as a percentage of the average number of contracts outstanding 31.8% 32.9% 49.4% Net charge-offs (in thousands) $ 786 $7,626 $34,191 Average net charge-off $1,236 $2,918 $ 4,395 Net charge-offs as a percentage of average direct finance receivables outstanding, less unearned finance charges 25.3% 36.2% 49.0%
Net charge-offs as a percentage of average direct finance receivables outstanding has decreased as the portfolio has become more seasoned and average outstanding contract balances have decreased. The Company recorded provisions for losses of $7,522,000 related to its direct lending portfolio for the year ended June 30, 1993. No provision for losses was recorded for the years ended June 30, 1995 and 1994. As of June 30, 1994, the Company reassigned $2,000,000 of allowances for losses from the direct lending portfolio to the indirect consumer lending and premium finance portfolios based upon an evaluation of the level of reserves necessary for the remaining liquidation of the direct lending finance receivables. Premium Finance Receivables: The Company recorded periodic provisions for losses of $122,000, $187,000 and $7,000 related to its premium finance receivables portfolio for the years ended June 30, 1995, 1994 and 1993, respectively. -15- The following table presents charge-off data with respect to the Company's premium finance receivables portfolio (dollars in thousands):
Years Ended ------------------ June 30, June 30, 1995 1994 -------- -------- Net charge-offs $370 $158 Net charge-offs as a percentage of average net premium finance receivables outstanding 9.7% 3.7%
LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands):
Years Ended ------------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- Operating activities $ 14,637 $ 3,900 $17,332 Investing activities (144,512) (12,174) (8,121) Financing activities 132,433 (9,238) (5,705) -------- ------- ------- Net increase (decrease) in cash and cash equivalents $ 2,558 ($17,512) $ 3,506 ======== ========= =======
In addition to the net change in cash and cash equivalents shown above, the Company also had net decreases in investment securities of $16.2 million and $8.7 million for the years ended June 30, 1995 and 1994, respectively, and a net increase of $25.6 million for the year ended June 30, 1993. Such amounts are included as investing activities in the above table. The Company's primary sources of cash have been collections and recoveries on its finance receivables portfolio, borrowings under its bank line of credit and the issuance of automobile receivables-backed notes. The Company has a line of credit arrangement with a group of banks under which the Company may borrow up to $125 million, subject to a defined borrowing base. Although the Company utilized the line of credit at various times during fiscal 1995 to fund its lending activities, no borrowings were outstanding as of June 30, 1995. -16- During fiscal 1995, the Company completed two private placements of automobile receivables-backed notes. The Series 1994-A notes were issued in December 1994 and aggregated $51 million. The notes bear interest at 8.19%, are collateralized by a pool of indirect finance receivables originally totalling $56.7 million and have a final maturity date of December 1999. The Series 1995-A notes were issued in June 1995 and aggregated $99.2 million. The notes bear interest at 6.55%, are collateralized by a pool of indirect finance receivables originally totalling $106.7 million and have a final maturity date of September 2000. Each series of notes was issued by a wholly-owned special purpose subsidiary of the Company which holds the related finance receivables. Principal and interest on the notes are payable monthly from collections and recoveries on the specific pool of finance receivables. Both note series are rated "Aaa" by Moody's Investors Services Inc. and "AAA" by Standard & Poor's Corp. Financial Security Assurance Inc. issued financial guaranty insurance policies for the benefit of the noteholders of each series. The Company's primary use of cash has been purchases and originations of finance receivables. The Company entered the indirect consumer lending business in September 1992 and has grown the indirect finance receivables portfolio to $240.5 million as of June 30, 1995. The Company operated 31 indirect consumer lending branches in 20 states and had a group of marketing representatives doing business in both branch territories and other states as of June 30, 1995. The Company plans to open fifteen additional consumer lending branches and expand loan production capacity at existing branch offices in fiscal 1996. While the Company has been able to establish and grow this business thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. The Company's Board of Directors has authorized the repurchase of up to 6,000,000 shares of the Company's common stock. A total of 3,450,500 shares of common stock at an aggregate purchase price of $12,155,000 had been purchased pursuant to this program through June 30, 1995. As of June 30, 1995, the Company had $28.6 million in cash and cash equivalents and investment securities. The Company also has available borrowing capacity of up to $125 million under its bank line of credit. The Company estimates that it will require substantial additional external capital in fiscal 1996 in addition to these existing capital resources and collections and recoveries on its finance receivables portfolio in order to fund expansion of its indirect consumer lending business, capital expenditures, additional common stock repurchases and other costs and expenses. The Company anticipates that such funding will be in the form of additional issuances of automobile receivables-backed notes. There can be no assurance that external funding will be available, or if available, that it will be on terms acceptable to the Company. -17- AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS
June 30, June 30, 1995 1994 -------- -------- Cash and cash equivalents $ 18,314 $ 15,756 Restricted cash 5,007 Investment securities 10,265 26,506 Finance receivables, net 221,888 72,150 Property and equipment, net 6,036 5,345 Other assets 4,427 2,458 Deferred income taxes 19,788 -------- -------- Total assets $285,725 $122,215 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Automobile receivables-backed notes $134,520 $ Notes payable 716 388 Accrued taxes and expenses 3,263 2,326 -------- ------ Total liabilities 138,499 2,714 -------- ------ Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none issued Common stock, $.01 par value per share, 120,000,000 shares authorized; 32,117,201 and 31,757,333 shares issued 321 318 Additional paid-in capital 185,573 183,588 Accumulated deficit (26,824) (55,717) -------- --------- 159,070 128,189 Treasury stock, at cost (3,400,039 and 3,008,360 shares) (11,844) (8,688) -------- -------- Total shareholders' equity 147,226 119,501 -------- -------- Total liabilities and shareholders' equity $285,725 $122,215 ======== ========
The accompanying notes are an integral part of these consolidated financial statements -18- AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data)
Years Ended ------------------------------------- June 30, June 30, June 30, 1995 1994 1993 ----------- ----------- ----------- Revenue: Finance charge income $30,249 $12,788 $ 13,904 Investment income 1,284 2,550 2,052 Other income 1,551 544 262 Sales 8,271 Equity in income of affiliate 392 ------- ------- -------- 33,084 15,882 24,881 ------- ------- -------- Costs and expenses: Operating expenses 14,773 9,400 13,672 Provision for losses 4,278 1,249 7,964 Interest expense 4,015 168 221 Cost of sales 6,986 Restructuring charges 15,404 ------- ------- -------- 23,066 10,817 44,247 ------- ------- -------- Income (loss) before income taxes 10,018 5,065 (19,366) Income tax benefit 18,875 ------- ------- -------- Net income (loss) $28,893 $ 5,065 ($19,366) ======= ======= ======== Earnings (loss) per share $ .95 $ .16 ($ .66) ======= ======= ======== Weighted average shares and share equivalents 30,380,749 31,818,083 29,267,419 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements -19- AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands)
Common Stock Treasury Stock Additional --------------- ------------------- Paid-in Accumulated Shares Amount Shares Amount Capital Deficit ------ ------ ------ ------ ----------- ----------- Balance at July 1, 1992 31,501,566 $315 220,500 ($594) $189,035 ($41,416) Common stock issued on exercise of options 222,167 2 660 Purchase of treasury stock 2,393,700 (5,852) Net loss (19,366) ---------- ---- --------- -------- -------- -------- Balance at June 30, 1993 31,723,733 317 2,614,200 (6,446) 189,695 (60,782) Common stock issued on exercise of options 33,600 1 130 Purchase of treasury stock 403,100 (2,297) Purchase and cancellation of stock option (6,237) Common stock issued for employee benefit plan (8,940) 55 Net income 5,065 ---------- ---- --------- -------- -------- -------- Balance at June 30, 1994 31,757,333 318 3,008,360 (8,688) 183,588 (55,717) Common stock issued on exercise of options 359,868 3 1,302 Income tax benefit from exercise of options 683 Purchase of treasury stock 433,200 (3,412) Common stock issued for employee benefit plans (41,521) 256 Net income 28,893 ---------- ---- --------- -------- -------- -------- Balance at June 30, 1995 32,117,201 $321 3,400,039 ($11,844) $185,573 ($26,824) ========== ==== ========= ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements -20- AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Years Ended --------------------------------- June 30, June 30, June 30, 1995 1994 1993 --------- -------- --------- Cash flows from operating activities: Net income (loss) $ 28,893 $ 5,065 ($19,366) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,317 1,274 1,862 Provision for losses 4,278 1,249 7,964 Equity in income of affiliate (392) Deferred income taxes (18,954) Restructuring charges 2,401 Changes in assets and liabilities: (Increase) decrease in other assets (1,834) 1,051 22,229 Increase (decrease) in accrued taxes and expenses 937 (4,739) 2,634 --------- -------- --------- Net cash provided by operating activities 14,637 3,900 17,332 --------- -------- --------- Cash flows from investing activities: Purchases and originations of finance receivables (225,350) (76,208) (24,716) Principal collections and recoveries on finance receivables 71,334 46,698 42,390 Purchases of property and equipment (1,791) (3,255) (544) Proceeds from disposition of property and equipment 61 640 365 Purchases of investment securities (19,183) (31,692) Proceeds from sales and maturities of investment securities 16,241 27,834 6,076 Increase in restricted cash (5,007) Proceeds from sale of investment in affiliate 11,300 --------- -------- --------- Net cash used by investing activities (144,512) (12,174) (8,121) --------- -------- -------- Cash flows from financing activities: Borrowings on bank line of credit 83,900 Repayments on bank line of credit (83,900) Proceeds from issuance of automobile receivables-backed notes 150,170 Repayments on automobile receivables-backed notes (15,650) Payments on notes payable (236) (890) (515) Proceeds from issuance of common stock 1,561 186 662 Purchase of treasury stock (3,412) (2,297) (5,852) Purchase and cancellation of stock option (6,237) --------- -------- --------- Net cash provided (used) by financing activities 132,433 (9,238) (5,705) --------- -------- --------- Net increase (decrease) in cash and cash equivalents 2,558 (17,512) 3,506 Cash and cash equivalents at beginning of year 15,756 33,268 29,762 --------- -------- --------- Cash and cash equivalents at end of year $ 18,314 $15,756 $33,268 ========= ======== =========
The accompanying notes are an integral part of these consolidated financial statements -21- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY AND OPERATIONS AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and began operations in March 1987. Since September 1992, the Company has been in the business of purchasing automobile sales finance contracts originated by franchised and independent car dealers, generally referred to as indirect consumer lending. The Company operated 31 indirect consumer lending branch offices in 20 states as of June 30, 1995 and also had a group of marketing representatives doing business in both branch territories and other states. The Company previously engaged in the retail used car sales and finance business. However, in connection with a restructuring during the year ended June 30, 1993 (see Note 10), the Company withdrew from the retail used car sales business effective December 31, 1992. The finance receivables originated in this previous business are referred to as the direct lending portfolio and are being liquidated over time as the contracts are collected or charged-off. From April 1993 through January 1995, the Company also financed insurance premiums for consumers purchasing car insurance through independent insurance agents. The Company curtailed its activities in this business in order to concentrate its resources on the core indirect consumer lending business. CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. CASH EQUIVALENTS Investments in highly liquid securities with original maturities of 90 days or less are included in cash and cash equivalents. INVESTMENT SECURITIES Investment securities are considered held-to-maturity and are carried at amortized cost. FINANCE RECEIVABLES Finance charge income related to finance receivables is recognized using the interest method. Accrual of finance charge income is suspended on finance contracts which are more than 60 days delinquent. Fees and commissions received and direct costs of originating loans are deferred and amortized over the term of the related finance contracts also using the interest method. -22- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: Provisions for losses are charged to operations in amounts sufficient to maintain the allowance for losses at a level considered adequate to cover estimated losses in the existing finance receivables portfolio. In the indirect lending business, the Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are also added to the allowance for losses. The Company reviews charge-off experience, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the periodic provision for losses and the allowance for losses. Finance contracts are charged-off to the allowance for losses when the Company repossesses the collateral or the account is otherwise deemed uncollectible. PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is generally provided on a straight-line basis over the estimated useful lives of the assets. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is included in operations. Maintenance, repairs, and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. INCOME TAXES Deferred income taxes are provided, when appropriate, in accordance with the asset and liability method of accounting for income taxes as prescribed by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", to recognize the tax effects of temporary differences between financial statement and income tax accounting. EARNINGS (LOSS) PER SHARE Earnings (loss) per share is based upon the weighted average number of shares outstanding during each year, adjusted for any dilutive effect of warrants and options using the treasury stock method. 2. INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities as of June 30, 1995, by issuer type, are as follows (in thousands): -23- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 2. INVESTMENT SECURITIES, continued:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- U.S. Government obligations $ 5,000 $ $220 $4,780 Corporate debt securities 1,000 1,000 Mortgage-backed securities 4,265 4 122 4,147 ------- -- ---- ------ $10,265 $4 $342 $9,927 ======= == ==== ======
The amortized cost and estimated fair value of investment securities as of June 30, 1994, by issuer type, are as follows (in thousands):
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- U.S. Government obligations $ 5,600 $ $347 $ 5,253 State and local government obligations 550 550 Corporate debt securities 10,152 30 10,122 Mortgage-backed securities 10,204 3 188 10,019 ------- -- ---- ------- $26,506 $3 $565 $25,944 ======= == ==== =======
The amortized cost and estimated fair value of investment securities as of June 30, 1995, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Amortized Fair Cost Value --------- --------- Due in one year or less $ 1,000 $1,000 Due after one year through three years 5,000 4,780 ------- ------ 6,000 5,780 Mortgage-backed securities 4,265 4,147 ------- ------ $10,265 $9,927 ======= ======
-24- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 2. INVESTMENT SECURITIES, continued: Proceeds from the sale of investment securities during the years ended June 30, 1994 and 1993 were $1,857,000 and $942,000, respectively. No material gain or loss was realized on those sales. 3. FINANCE RECEIVABLES Finance receivables consist of the following (in thousands):
June 30, June 30, 1995 1994 -------- -------- Indirect consumer lending: Precomputed interest $191,700 $55,617 Simple interest 95,660 24,890 -------- ------- 287,360 80,507 Direct lending 552 8,467 Premium finance 821 6,631 -------- ------- Total finance receivables 288,733 95,605 Less unearned finance charges and fees (46,894) (14,125) -------- ------- Principal amount of finance receivables 241,839 81,480 Less allowance for losses (19,951) (9,330) -------- ------- Finance receivables, net $221,888 $72,150 ======== =======
The Company's finance contracts typically provide for finance charges on either a precomputed or simple interest basis. Precomputed interest finance receivables include principal and unearned finance charges. Simple interest finance receivables include principal only. All direct lending and premium finance contracts are precomputed interest finance receivables. Direct and indirect consumer lending finance contracts are collateralized by car titles and the Company has the right to repossess the car in the event that the consumer defaults on the payment terms of the contract. Approximately 24% of such finance receivables are with consumers located in the state of Texas. The accrual of finance charge income has been suspended on $7,863,000 and $2,244,000 of delinquent finance contracts as of June 30, 1995 and 1994, respectively. -25- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 3. FINANCE RECEIVABLES, continued: Contractual maturities of finance receivables for years ending June 30 are as follows (in thousands): 1996 $ 71,969 1997 70,475 1998 56,465 1999 33,599 2000 9,331 -------- $241,839 ========
The Company's experience has been that a portion of the scheduled payments will be received prior to contractual maturity dates. A summary of the allowance for losses is as follows (in thousands):
Years Ended ----------------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- Balance at beginning of year $ 9,330 $12,581 $ 37,468 Provision for losses 4,278 1,249 7,964 Acquisition fees on indirect consumer lending contracts 13,908 4,716 1,389 Net charge-offs (7,565) (9,216) (34,240) ------- ------- -------- Balance at end of year $19,951 $ 9,330 $ 12,581 ======= ======= ========
4. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
June 30, June 30, 1995 1994 -------- -------- Land $ 600 $ 700 Buildings and improvements 1,903 2,279 Equipment 6,230 5,307 Furniture and fixtures 1,003 867 ------- ------- 9,736 9,153 Less accumulated depreciation and amortization (3,700) (3,808) ------- ------- $ 6,036 $ 5,345 ======= =======
-26- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 5. INVESTMENT IN AFFILIATE The Company had a joint venture arrangement with certain entities and individuals for the purpose of establishing and operating retail used car sales lots in the state of California. The joint venture entity, Pacific Automart Inc., was owned 50% by the Company and 50% by the other investors. On August 3, 1993, the Company sold its entire interest in the joint venture to Pacific Automart Inc. for $11,300,000 in cash. No gain or loss was recognized on the sale. The joint venture investment was being accounted for using the equity method, whereby the Company recorded its 50% share of earnings or losses of the joint venture in its consolidated financial statements. 6. DEBT Automobile receivables-backed notes consist of the following (in thousands):
June 30, 1995 -------- Series 1994-A notes, interest at 8.19%, collateralized by certain finance receivables in the principal amount of $36,657, final maturity in December 1999 $ 35,350 Series 1995-A notes, interest at 6.55%, collateralized by certain finance receivables in the principal amount of $104,524, final maturity in September 2000 99,170 -------- $134,520 ========
The Series 1994-A notes were issued in December 1994 and initially aggregated $51,000,000. The Series 1995-A notes were issued in June 1995 and initially aggregated $99,170,000. Each series of notes was issued by a wholly-owned special purpose subsidiary of the Company which holds the related finance receivables. Principal and interest on the notes are payable monthly from collections and recoveries on the specific pools of finance receivables. Financial Security Assurance Inc. ("FSA") issued financial guaranty insurance policies for the benefit of the noteholders of each series. In connection with the issuance of the financial guaranty insurance policies by FSA, the Company was required to establish a cash account for each note series with a trustee for the benefit of FSA and the noteholders. Such cash accounts are shown as restricted cash on the Company's consolidated balance sheets. Monthly collections and recoveries from the pool of finance receivables in excess of required principal and interest payments on the notes are added to the restricted cash accounts until the balance reaches a specified percentage of the pool of finance receivables, and thereafter are distributed to the Company. In the event that monthly collections and recoveries from the pool of finance -27- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 6. DEBT, continued: receivables are insufficient to make required principal and interest payments on the notes, any shortfall would be drawn from the restricted cash accounts. Certain agreements with FSA contain restrictive covenants relating to delinquency, default and net loss ratios in the pools of finance receivables which collateralize the automobile receivables-backed notes. Maturities of the automobile receivables-backed notes, based on the contractual maturities of the underlying finance receivables, for years ending June 30 are as follows (in thousands): 1996 $ 69,788 1997 43,043 1998 15,396 1999 4,179 2000 2,114 -------- $134,520 ========
The Company's experience has been that a portion of the scheduled payments on the underlying finance receivables will be received prior to the contractual maturity dates. Accordingly, scheduled payments shown above for the automobile receivables-backed notes would also be paid prior to the dates indicated. The Company has a revolving credit agreement with a group of banks under which the Company may borrow up to $125 million, subject to a defined borrowing base. No borrowings were outstanding as of June 30, 1995. Borrowings under the credit agreement are collateralized by certain indirect finance receivables and bear interest, based upon the Company's option, at either the reference prime rate (9.0% as of June 30, 1995) or various market London Interbank Offered Rates plus 1.65%. The Company is also required to pay an annual commitment fee equal to 3/8% of the unused portion of the credit agreement. The credit agreement, which expires in May 1996, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the incurrence of additional debt, capital expenditures and repurchase of common stock. 7. COMMITMENTS AND CONTINGENCIES Indirect consumer lending branch offices are generally leased for terms of up to three years with certain rights to extend for additional periods. Lease expense, including amounts related to the retail sales locations prior to the Company's exit from the retail used car sales business, was $422,000, $419,000 and $1,259,000 for the years ended June 30, 1995, 1994, and 1993, respectively. Lease commitments for years ending June 30 are as follows (in thousands): -28- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 7. COMMITMENTS AND CONTINGENCIES, continued: 1996 $ 513 1997 415 1998 178 1999 64 2000 12 ------ $1,182 ======
The Company is involved in various lawsuits arising in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. 8. STOCK OPTIONS The Company has certain stock option plans for key employees, marketing representatives and non-employee directors. The employee and marketing representative plans generally provide for options to be granted, become exercisable, and terminate upon terms established by a committee of the Board of Directors. The 1995 Omnibus Stock and Incentive Plan also provides for the issuance of other stock-based awards to key employees. Except for the 1989 Stock Option Plan for Non-Employee Directors which has been terminated as to future grants, the terms under which non-employee director options are to be granted, become exercisable and terminate are established by the plans. The Company also has a stock option plan for car dealers that become part of the Company's dealership network and refer business to the Company. Dealer options are granted based upon the volume of finance contracts purchased by the Company from such dealer and terminate three years from the date of grant. A summary of stock option activity under these plans is as follows:
Options Outstanding Options ------------------------- Available Shares Price Per Share --------- ------------------------- Balance at July 1, 1992 (634,133 shares exercisable) 2,434,337 3,475,798 1.80 - 14.50 Granted (545,000) 545,000 3.00 - 4.26 Canceled 396,300 (741,100) 2.88 - 4.38 Exercised (222,167) 1.80 - 4.63 --------- --------- ------------ Balance at June 30, 1993 (1,893,400 shares exercisable) 2,285,637 3,057,531 2.50 - 14.50 Granted (814,880) 814,880 5.63 - 7.50 Canceled 78,900 (78,900) 2.88 - 14.50 Exercised (33,600) 2.50 - 5.75 --------- --------- ------------
-29- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 8. STOCK OPTIONS, continued:
Options Outstanding Options --------------------------- Available Shares Price Per Share ---------- --------- --------------- Balance at June 30, 1994 (2,259,465 shares exercisable) 1,549,657 3,759,911 2.50 - 14.50 Granted (1,346,490) 1,346,490 5.50 - 14.50 Canceled 162,100 (162,100) 3.00 - 14.50 Exercised (359,868) 2.80 - 8.13 Adoption of plans 4,000,000 ---------- --------- ------------ Balance at June 30, 1995 (3,247,084 shares exercisable) 4,365,267 4,584,433 2.50 - 14.50 ========== ========= ============
On April 24, 1991, the Company entered into a management services agreement with Rainwater Management Partners, Ltd. ("RMP"). As part of the transaction, the Company issued to RMP a stock option to purchase 3,500,000 shares of its common stock at an exercise price of $3.218 per share. On April 4, 1994, the Company purchased and cancelled this stock option for $1.782 per option share, or $6,237,000. The management services agreement with RMP was also terminated. 9. EMPLOYEE BENEFIT PLANS Effective July 1993, the Company established a defined contribution retirement plan covering substantially all employees. The Company's contributions to the plan, which were made in Company common stock, were $99,000 and $55,000 for the years ended June 30, 1995 and 1994, respectively. In November 1994, the Company established an employee stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the fair market value at specified dates. A total of 500,000 shares have been reserved for issuance under the plan. As of June 30, 1995, 31,361 shares had been purchased for an aggregate price of $157,000. 10. RESTRUCTURING CHARGES Restructuring charges consist of the following for the year ended June 30, 1993 (in thousands): Facility closing costs $ 4,892 Write-down of inventories 4,123 Write-down of retail car sales assets 2,401 Severance pay and other retail car sales phase out costs 1,813 Other 2,175 ------- $15,404 =======
-30- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 11. INCOME TAXES The income tax benefit consists of the following for the year ended June 30, 1995 (in thousands): Current ($ 79) Deferred 18,954 -------- $18,875 ========
The Company's effective income tax rate on income (loss) before income taxes differs from the U.S. statutory tax rate as follows:
Years Ended ----------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- U.S. statutory tax rate 35% 35% (35%) Change in valuation allowance (226) (35) 35 Other 3 ---- --- --- (188%) 0% 0% ==== === ===
The deferred income tax benefit consists of the following (in thousands):
Years Ended ----------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- Change in valuation allowance $22,615 $ 1,606 ($ 7,019) Net operating loss carryforwards (2,266) 2,447 13,768 Allowance for losses (32) (2,278) (8,271) Other (1,363) (1,775) 1,522 ------- ------- ------- $18,954 $ 0 $ 0 ======= ======= =======
The deferred tax asset consists of the following (in thousands):
June 30, June 30, 1995 1994 -------- -------- Net operating loss carryforwards $17,356 $19,622 Allowance for losses 1,151 1,183 Alternative minimum tax credits 1,047 896 Other, net 554 1,234 ------- ------- 20,108 22,935 Valuation allowance (320) (22,935) ------- ------- $19,788 $ 0 ======= =======
-31- AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued: 11. INCOME TAXES, continued: The Company reduced the valuation allowance in the fourth quarter of the year ended June 30, 1995 after re-evaluating the realizability of the deferred tax asset. Based on the Company's trend of positive operating results since entering the indirect consumer lending business in September 1992 and future expectations, the Company determined that it is more likely than not that its net operating loss carryforward and other future tax benefits will be fully utilized prior to expiration of the carryforward periods. As of June 30, 1995, the Company has a net operating loss carryforward of approximately $50,000,000 for income tax reporting purposes which expires between 2007 and 2009 and an alternative minimum tax carryforward of $1,047,000 with no expiration date. 12. SUPPLEMENTAL INFORMATION Cash payments (receipts) for interest costs and income taxes consist of the following (in thousands):
Years Ended ----------------------------- June 30, June 30, June 30, 1995 1994 1993 -------- -------- -------- Interest costs (none capitalized) $5,167 $ 168 $ 221 Income taxes 151 (10,546)
During the year ended June 30, 1995, the Company sold certain property for cash and a note receivable of $184,000. During the year ended June 30, 1995, a capital lease obligation of $564,000 was incurred when the Company entered into a lease for equipment. During the year ended June 30, 1994, the Company sold certain property and equipment for cash and a note receivable of $740,000. -32- REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders AmeriCredit Corp. We have audited the accompanying consolidated balance sheets of AmeriCredit Corp. as of June 30, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmeriCredit Corp. as of June 30, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Fort Worth, Texas August 10, 1995 -33- AMERICREDIT CORP. Common Stock Data The Company's common stock trades on the New York Stock Exchange under the symbol ACF. There were 28,717,162 shares of common stock outstanding as of June 30, 1995. The following table sets forth the range of the high, low and closing sale prices for the Company's common stock as reported on the Composite Tape of New York Stock Exchange Listed Issues. Fiscal year ended June 30, 1995: High Low Close ------ ------ ------ First Quarter $ 6.75 $ 5.25 $ 6.75 Second Quarter 7.25 5.50 6.00 Third Quarter 8.25 5.25 8.13 Fourth Quarter 11.13 8.13 11.13 Fiscal year ended June 30, 1994: High Low Close ------ ------ ------ First Quarter $ 6.50 $ 5.00 $ 5.88 Second Quarter 8.00 5.75 7.75 Third Quarter 8.13 5.38 6.50 Fourth Quarter 6.50 5.13 5.88 As of June 30, 1995, there were approximately 700 shareholders of record of the Company's common stock. -34- AMERICREDIT CORP. Quarterly Data (Unaudited) (dollars in thousands, except per share data)
Fiscal year ended First Second Third Fourth June 30, 1995: Quarter Quarter Quarter Quarter - ------------------ ------- ------- ------- ------- Finance charge income $ 4,826 $ 6,312 $ 8,237 $ 10,874 Income before income taxes 1,837 2,135 2,650 3,396 Net income 1,801 2,092 2,650 22,350 Earnings per share .06 .07 .09 .73 Weighted average shares share equivalents 30,122,210 30,191,179 30,259,850 30,809,604
Fiscal year ended First Second Third Fourth June 30, 1994: Quarter Quarter Quarter Quarter - ------------------ ------- ------- ------- ------- Finance charge income $ 2,896 $ 3,006 $ 3,099 $ 3,787 Income before income taxes 1,135 1,334 1,210 1,386 Net income 1,135 1,334 1,210 1,386 Earnings per share .04 .04 .04 .05 Weighted average shares share equivalents 31,842,088 32,614,405 32,487,816 30,345,589
-35- SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS: 200 Bailey Avenue Fort Worth, Texas 76107 (817) 332-7000 INVESTOR RELATIONS INFORMATION: For financial/investment data and general information about AmeriCredit Corp., write the Investor Relations Department at the above address, or telephone (817) 882-7009. SHAREHOLDER SERVICES: For shareholder account information and other shareholder services, write the Corporate Secretary at the above address, or telephone (817) 882-7009. ANNUAL MEETING: The Annual Meeting of the Company will be held on November 14, 1995 at 10:00 a.m. at Colonial Country Club, 3735 Country Club Circle, Fort Worth, Texas. All shareholders are cordially invited to attend. TRANSFER AGENT AND REGISTRAR: First Interstate Bank Trust Services 1445 Ross Avenue Dallas, Texas 75202 Direct Dial (800) 882-6559 INDEPENDENT ACCOUNTANTS: Coopers & Lybrand L.L.P. 301 Commerce Street, Suite 1900 Fort Worth, Texas 76102-4119 FORM 10-K: SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO THE INVESTOR RELATIONS DEPARTMENT AT THE CORPORATE HEADQUARTERS ADDRESS. -36- DIRECTORS Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT AmeriCredit Corp. Michael R. Barrington EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER AmeriCredit Corp. PRESIDENT AND CHIEF OPERATING OFFICER AmeriCredit Financial Services, Inc. Daniel E. Berce EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER AmeriCredit Corp. James H. Greer CHAIRMAN OF THE BOARD Shelton W. Greer Co., Inc. Gerald W. Haddock PRESIDENT AND CHIEF OPERATING OFFICER Crescent Real Estate Equities Limited, L.P. Kenneth H. Jones, Jr. VICE CHAIRMAN KBK Financial, Inc. -37- OFFICERS AMERICREDIT CORP.: Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT Michael R. Barrington EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER Daniel E. Berce EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER Chris A. Choate VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY Edward H. Esstman SENIOR VICE PRESIDENT AND CHIEF CREDIT OFFICER Preston A. Miller VICE PRESIDENT AND CONTROLLER AMERICREDIT FINANCIAL SERVICES, INC.: Michael R. Barrington PRESIDENT AND CHIEF OPERATING OFFICER Edward H. Esstman EXECUTIVE VICE PRESIDENT, DIRECTOR OF CONSUMER FINANCE OPERATIONS Michael T. Miller SENIOR VICE PRESIDENT, RISK MANAGEMENT, CREDIT POLICY AND PLANNING Christopher M. Barry SENIOR VICE PRESIDENT, CONSUMER FINANCE OPERATIONS Malia C. Bingham SENIOR VICE PRESIDENT, CONSUMER FINANCE OPERATIONS Randy K. Benefield VICE PRESIDENT, DIRECTOR OF MANAGEMENT INFORMATION SERVICES Patricia A. Jones VICE PRESIDENT, DIRECTOR OF HUMAN RESOURCES Cheryl L. Miller VICE PRESIDENT, DIRECTOR OF COLLECTIONS AND CUSTOMER SERVICE Cinde Perales VICE PRESIDENT, DIRECTOR OF LOAN SERVICES -38- EX-21.1 7 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 AMERICREDIT CORP. SUBSIDIARIES OF THE COMPANY
State of Subsidiary Ownership % Incorporation ---------- ----------- ------------- AmeriCredit Operating Co., Inc. 100% Delaware Crestpointe General Agency, Inc. 100% Texas AmeriCredit Financial Services, Inc. 100% Delaware ACF Investment Corp. 100% Delaware AmeriCredit Premium Finance, Inc. 100% Delaware URCARCO Enterprises, Inc. 100% Texas AmeriCredit Receivables Finance Corp. 100% Delaware AmeriCredit Receivables Corp. 100% Delaware AmeriCredit Receivables Finance Corp. 100% Delaware 1995-A
EX-23.1 8 EXHIBIT 23.1 CONSENT OF COOPERS & LYBRAND EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of AmeriCredit Corp. on Form S-8 (File Nos. 33-41203, 33-48162 and 33-56501) and Form S-3 (File Nos. 33-57517 and 33-52679) of our report dated August 10, 1995, on our audits of the consolidated financial statements as of June 30, 1995 and 1994, and for the years ended June 30, 1995, 1994 and 1993, which report is incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Fort Worth, Texas September 27, 1995 EX-27.1 9 EXHIBIT 27.1 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCORPORATED BY REFERENCE INTO THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-1995 JUL-01-1994 JUN-30-1995 23,321 10,265 241,839 (19,951) 0 0 9,736 (3,700) 285,725 0 135,236 321 0 0 146,905 285,725 0 33,084 0 14,773 0 4,278 4,015 10,018 (18,875) 0 0 0 0 28,893 .95 .93
-----END PRIVACY-ENHANCED MESSAGE-----