Execution Copy
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SERVICING AGREEMENT
(Variable Funding Notes, Series A)
among
AUTOBOND MASTER FUNDING CORPORATION II,
as Issuer
AUTOBOND ACCEPTANCE CORPORATION,
as Servicer
and
MANUFACTURERS & TRADERS TRUST COMPANY,
as Trustee
Dated as of December 31, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION...............................2
SECTION 1.01. Defined Terms......................................................2
SECTION 1.02. Rules of Interpretation............................................4
ARTICLE II
SERVICING OF AUTO LOANS...........................................5
SECTION 2.01. Appointment of Servicer............................................5
SECTION 2.02. Subservicing Agreements Between Servicer and Subservicer...........6
SECTION 2.03. Representations and Warranties of the Servicer.....................7
SECTION 2.04. Duties and Responsibilities of the Servicer........................9
SECTION 2.05. Fidelity Bond, Errors and Omissions Insurance; Contingent Disaster
Relief Protection.................................................12
SECTION 2.06. Inspection........................................................13
SECTION 2.07. Possession and Payment of Receivables.............................13
SECTION 2.08. Monthly Servicing Fee; Servicing Expenses.........................13
SECTION 2.09 ..................................................................15
SECTION 2.10. Servicer Not to Resign............................................15
SECTION 2.11. Reliance on the Servicer..........................................15
SECTION 2.12. Events of Servicing Termination...................................15
SECTION 2.13. Appointment of the Successor Servicer.............................17
SECTION 2.14. Effect of Service Transfer........................................18
SECTION 2.15. Annual Reports; Statements as to Compliance.......................19
SECTION 2.16. Servicer Reports..................................................19
SECTION 2.17. Confidentiality...................................................20
SECTION 2.18. Delivery of Documents.............................................20
SECTION 2.20. Standard of Care..................................................21
ARTICLE III
REPOSSESSION AND DISPOSAL.........................................21
SECTION 3.01. Repossession and Disposal.........................................21
ARTICLE IV
LIMITATION ON LIABILITY; INDEMNITIES..............................22
SECTION 4.01. Liabilities of Obligors...........................................22
SECTION 4.02. Limitation on Liability of the Trustee and the Servicer...........22
SECTION 4.03. Indemnities of the Servicer.......................................23
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Page
ARTICLE V
MISCELLANEOUS.....................................................24
SECTION 5.01. Beneficiaries.....................................................24
SECTION 5.02. Amendment.........................................................24
SECTION 5.03. Notices...........................................................24
SECTION 5.04. Severability of Provisions........................................25
SECTION 5.05. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL.....................................................25
SECTION 5.06. Counterparts......................................................26
SECTION 5.07. No Proceedings....................................................26
SECTION 5.08. Further Assurance.................................................26
SECTION 5.09. Term of Agreement.................................................26
SECTION 5.10 Limitation of Liability of Trustee................................26
EXHIBIT A - AUTOBOND PROGRAM MANUAL
EXHIBIT B - FORM OF TRUST RECEIPT
EXHIBIT C - FORM OF MONTHLY SERVICER REPORT
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SERVICING AGREEMENT, dated as of December 31, 1997 (this "Agreement"),
among AUTOBOND MASTER FUNDING CORPORATION II, a Nevada corporation (the
"Issuer"), AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation, individually
("AutoBond"), and as servicer (the "Servicer") and MANUFACTURERS & TRADERS TRUST
COMPANY, as trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer has purchased, pursuant to the Loan Sale and
Contribution Agreement dated of December 31, 1997 (the "Sale Agreement"), by and
between the Issuer and AutoBond, certain Auto Loans (as defined herein) and
pledged such Auto Loans to the Trustee pursuant to the Indenture (as defined
herein) on behalf of the holders (the "Noteholders") of the Issuer's Variable
Funding Notes, Series A (the "Notes");
WHEREAS, the Trustee has been appointed to hold the Auto Loans conveyed to
it pursuant to the Indenture in trust for the benefit of the Noteholders and to
make certain payments with respect thereto;
WHEREAS, the Issuer desires that a servicer be appointed to perform certain
servicing and insurance tracking functions in respect of the Auto Loans pledged
to the Trustee on behalf of the Noteholders;
WHEREAS, Autobond has been requested and is willing to act as the Servicer
hereunder;
WHEREAS, the rights and benefits of the Issuer hereunder (but not the
obligations) have been assigned to the Trustee on behalf of the Noteholders.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.01. Defined Terms. Capitalized terms used herein and not defined
shall have the meaning specified in the Indenture. As used herein, the following
terms shall have the following meanings:
"Administrator" means AutoBond and any permitted successor to such
functions in accordance, and in connection with, the Indenture in its
capacity as Administrator thereunder and, if AutoBond is acting as Servicer
hereunder, also in its capacity as Servicer.
"Adverse Claim" means any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other
type of preferential arrangement having the effect or purpose of creating a
lien or security interest, other than the interests created in favor of the
Trustee and the Noteholders under the Indenture.
"Affiliate" means, 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.
"Agreement" means this Servicing Agreement, as amended or supplemented from
time to time in accordance with the terms hereof, including all exhibits
and schedules hereto.
"AutoBond" means AutoBond Acceptance Corporation, a Texas corporation.
"AutoBond Program Manual" means the AutoBond Program Manual (including the
Credit and Collection Policies) attached hereto as Exhibit A, as modified
from time to time, with notice of each such modification to the Trustee.
"Auto Loan" means a fixed-rate, closed-end consumer installment automobile
loan which finances the purchase of a new or used automobile, light-duty
truck or van, which loan is secured by a lien and security interest in such
financed vehicle.
"Business Day" means any day other than a Saturday or a Sunday, or another
day on which banks in the City of New York, or the City of Buffalo, New
York or in Texas (or such other cities or states in which the Corporate
Trust Office, the principal administrative offices of the Administrator,
Note Registrar and Paying Agent or the principal offices of the Servicer
are subsequently located, as specified in writing by the Administrator to
the other parties hereto) are required, or authorized by law, to close.
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"Closing Date" means December 31, 1997.
"Continuing Errors" has the meaning specified in Section 2.13(e).
"Electronic Ledger" means the electronic master record of the Receivables
maintained by the Servicer.
"Errors" has the meaning specified in Section 2.13(e).
"Event of Administrator Termination" means an Event of Servicing
Termination hereunder.
"Event of Servicing Termination" has the meaning specified in Section 2.12
hereunder.
"Financed Vehicle" means a new or used automobile, van or light-duty truck,
the purchase of which the Obligor financed with an Auto Loan.
"Governmental Authority" means the United States of America, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
thereof or pertaining thereto.
"Indenture" means the Trust Indenture and the Supplements.
"Independent Public Accountant" means any of (a) Xxxxxx Xxxxxxxx & Co., (b)
Deloitte & Touche, (c) Coopers & Xxxxxxx, (d) Ernst & Young, (e) KPMG Peat
Marwick and (f) Price Waterhouse (and any successors thereof); provided,
that such firm is independent with respect to the Issuer and the
Administrator, the Servicer and any Subservicer, as the case may be, within
the meaning of the Securities Act of 1933, as amended.
"Issuer" means AutoBond Master Funding Corporation II, a Nevada
corporation, in its capacity as issuer under the Indenture.
"Noteholder" means any of the registered holders of a Variable Funding
Note, Series A, issued under the Indenture.
"Notes" means any of the Variable Funding Notes, Series A, issued under the
Indenture.
"Opinion of Counsel" means a written opinion of counsel (who may be counsel
to the Issuer, the Administrator or the Servicer), which opinion is
acceptable to the Trustee.
"Records" means all documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch
cards, data processing software and related property and rights) prepared
and maintained by the Servicer or by or on behalf of the Issuer with
respect to Receivables and the related Obligors.
"Responsible Officer" means, with respect to any Person, the Person, any
Vice President, any Assistant Vice President, any Assistant Secretary, any
Assistant Treasurer or any other officer
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of such Person customarily performing functions similar to those performed
by any of the above-designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Scheduled Payment" means a payment due on an Auto Loan in accordance with
its terms.
"Service Transfer" has the meaning specified in Section 2.12.
"Servicer" means AutoBond Acceptance Corporation, in its capacity as
servicer under this Agreement and any successor thereto in accordance with
this Agreement.
"Servicer Duties" has the meaning specified in Section 2.04(a).
"Servicer Report" has the meaning specified in Section 2.17.
"Servicing Officer" means any officer or employee of the Servicer involved
in, or responsible for, the administration and servicing of Receivables
whose name appears on a list of servicing officers attached to Officer's
Certificates furnished to the Issuer and the Trustee by the Servicer, as
such list may be amended from time to time by the party furnishing any such
Officer's Certificate.
"Subservicer" means any Person with whom the Servicer enters into a
Subservicing Agreement.
"Subservicing Agreement" means any written contract between the Servicer
and any Subservicer, relating to servicing and collection of Receivables.
"Successor Servicer" has the meaning specified in Section 2.13(a)
hereunder.
"Trust Indenture" means the Trust Indenture, dated as of December 31, 1997,
among the Issuer, Autobond and the Trustee, as amended or supplemented from
time to time in accordance with the terms thereof.
SECTION 1.02. Rules of Interpretation. The following rules apply to this
Agreement:
(a) the singular includes the plural and the plural includes the
singular;
(b) "or" is not exclusive and "include" and "including" are not
limiting;
(c) a reference to any agreement or other contract includes
permitted supplements and amendments;
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(d) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder or any law enacted
in substitution or replacement therefor;
(e) a reference to a person includes its permitted successors and
assigns;
(f) a reference to an Article, a Section, an Exhibit or a Schedule
without further reference is to the relevant Article, Section, Exhibit or
Schedule of this Agreement;
(g) any right may be exercised at any time and from time to time;
(h) the headings of the Articles and the Sections are for
convenience and shall not affect the meaning of this Agreement;
(i) words such as "hereunder", "hereto", "hereof" and "herein" and
other words of like import shall, unless the context clearly indicates to
the contrary, refer to the whole of this Agreement and not to any
particular Article, Section, subsection or clause hereof; and
(j) capitalized terms used but not defined herein shall have the
respective meanings assigned thereto in the Indenture.
ARTICLE II
SERVICING OF AUTO LOANS
SECTION 2.01. Appointment of Servicer. The Issuer hereby appoints the
Servicer, and the Servicer accepts such appointment, to perform its obligations
pursuant to this Agreement on behalf of and for the benefit of the Noteholders
and the Issuer in accordance with the terms of this Agreement, the respective
Receivables and applicable law and, to the extent consistent with such terms, in
the same manner in which, and with the same care, skill, prudence and diligence
with which it services and administers Auto Loans of similar credit quality for
other portfolios, if any, giving due consideration to customary and usual
standards of practice of prudent institutional automobile loan servicers of
similar credit quality automobile loans and, in each case, taking into account
its other obligations hereunder, but without regard to:
(i) any relationship that the Servicer, any Subservicer or
any Affiliate of the Servicer or any Subservicer may have with the
related Obligor; or
(ii) the ownership, or servicing for others, by the Servicer
or any Subservicer, of any other automobile loans or property.
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SECTION 2.02. Subservicing Agreements Between Servicer and Subservicer.
(a) Upon the prior written consent of the Trustee and the Issuer, the
Servicer may enter into Subservicing Agreements with a Subservicer for the
performance of all or a part of the Servicer Duties with respect to any
Receivable. The Trustee shall have no duty to investigate any Subservicer in
connection with the granting or denial of consent to a Subservicing Agreement.
References in this Agreement to actions taken or to be taken by the Servicer in
performance of the Servicer Duties include actions taken or to be taken by a
Subservicer on behalf of the Servicer. Each Subservicing Agreement will be upon
such terms and conditions as are not inconsistent with this Agreement. Without
limiting the first sentence of this Section 2.02(a), the Servicer shall provide
written notice to the Issuer and the Trustee promptly upon the appointment of
any Subservicer. For purposes of this Agreement, the receipt by a Subservicer of
any amount with respect to a Receivable (other than amounts representing
servicing compensation) shall be treated as the receipt by the Servicer of such
amount.
(b) Upon the prior written consent of the Issuer and the Trustee, the
Servicer shall be entitled to terminate any Subservicing Agreement that may
exist in accordance with the terms and conditions of such Subservicing Agreement
and without any limitation by virtue of this Agreement.
(c) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer or a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain directly obligated and directly liable to the Issuer
and the Trustee for the servicing and administering of the Receivables in
accordance with the provisions of this Agreement without diminution of such
obligation or liability (including its indemnity obligations under Section 4.03)
by virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer or the Servicer and to the same extent and
under the same terms and conditions as if the Servicer alone were servicing and
administering the Receivables. The Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Servicer and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.
(d) Any Subservicing Agreement that may be entered into pursuant to this
Agreement and any other transaction or services relating to the Receivables
involving a Subservicer in its capacity as such that is consented to by the
Issuer and the Trustee shall be deemed to be between the Subservicer and the
Servicer alone and the Issuer, and the Trustee shall not be deemed parties
thereto and shall have no obligations, duties or liabilities with respect to the
Subservicer, but the Trustee and the Issuer shall be third-party beneficiaries
thereof.
(e) If the Servicer shall for any reason no longer be the Servicer
hereunder (including by reason of any Event of Servicing Termination), the
Servicer shall thereupon terminate each Subservicing Agreement that may have
been entered into, and neither the Issuer, the Trustee nor the Successor
Servicer shall be deemed to have assumed any liability or obligation thereunder,
the Servicer's interest therein or to have replaced the Servicer as a party to
any such Subservicing Agreement.
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SECTION 2.03. Representations and Warranties of the Servicer. The
Servicer represents, warrants and covenants to the Issuer, the Trustee and the
Noteholders, as follows, as of the date hereof (which representations and
warranties shall be deemed repeated on each date on which a Servicer Report is
due to be delivered hereunder as though made on and as of such date):
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and is duly
qualified to do business, and is in good standing in every jurisdiction
in which the nature of its business requires it to be so qualified; it
or a Subservicer is or will be in compliance with the laws of each state
to the extent necessary to perform its obligations under this Agreement;
and it or a Subservicer has obtained all necessary licenses with respect
to it or such Subservicer required by law to enable it to perform its
duties herein;
(b) It has the power and authority to execute, deliver and
perform this Agreement and the transactions contemplated hereby;
(c) The execution and delivery by it and the performance by
it or a Subservicer of this Agreement, and the execution and delivery by
it and the performance by it or a Subservicer of all other agreements,
instruments and documents which may be delivered by it pursuant hereto,
and the transactions contemplated hereby, (i) have been duly authorized
by all necessary corporate action on the part of it, (ii) do not
contravene or cause it to be in default under (A) its organizational
documents, (B) any contractual restriction, with respect to any Debt of
it, or otherwise, or contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other
material agreement or instrument binding it or its property or (C) any
law, rule, regulation, order, writ, judgment, award, injunction or
decree applicable to or binding it or its property, and (iii) do not
result in or require the creation of any Adverse Claim upon or with
respect to any of its properties;
(d) This Agreement has been duly executed and delivered on
behalf of it;
(e) No consent of, or other action by, and no notice to or
filing with, any Governmental Authority or any other party is required
for the due execution, delivery and performance by it (either directly
or through a Subservicer) of this Agreement or any other agreement,
document or instrument to be delivered by it hereunder, or if required,
has been obtained;
(f) This Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(g) There is no pending or threatened action, suit or
proceeding, nor any injunction, writ, restraining order or other order
of a material nature against or affecting it, its officers or directors,
or its property, in any court or tribunal, or before any arbitrator of
any kind or before or by any Governmental Authority (i) asserting the
invalidity of this Agreement or any document to be delivered by it
hereunder or (ii) seeking any determination or ruling that would
reasonably be expected to materially and adversely
7
affect (A) the performance by it of its obligations under this
Agreement, or (B) the validity or enforceability of this Agreement or
any document to be delivered by it hereunder or (iii) which is
inconsistent with the due consummation by it of the transactions
contemplated by this Agreement;
(h) Its facilities, plant, personnel, records and products
are adequate for the performance of its duties hereunder;
(i) The Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which would reasonably
be expected to have consequences that would materially and adversely
affect the condition (financial or otherwise) or operations of the
Servicer or its properties or would reasonably be expected to have
consequences that would materially and adversely affect its performance
hereunder;
(j) The transactions contemplated by this Agreement are in
the ordinary course of business of the Servicer;
(k) The Financed Vehicle securing each Receivable shall not
be released by the Servicer or a Subservicer in whole or in part from
the security interest granted by the Obligor, except as contemplated
herein;
(l) Each certificate and each statement furnished in writing,
report or electronic medium delivered pursuant to the terms hereof or
under the Indenture by the Servicer is accurate and complete in all
material respects with respect to the information purported to be set
forth therein; and
(m) The practices used by the Servicer to monitor
collections with respect to the Receivables and repossess and dispose of
the Financed Vehicles related to the Receivables have been, and will be,
in all material respects, legal, proper and in conformity with the
requirements of all applicable federal and state laws, rules and
regulations, VSI Policy procedures (if applicable) and as set forth with
respect to the Servicer in the AutoBond Program Manual.
It is understood and agreed that the representations and warranties set forth in
this Section 2.03 shall survive the execution of this Agreement. Upon discovery
by either the Noteholders, the Issuer, the Trustee or the Servicer of a breach
of any of the foregoing representations and warranties, the party discovering
such breach shall give proper written notice to the other parties hereto and the
Noteholders; provided, that the Trustee shall have no duty or responsibility to
inquire, investigate, determine or obtain actual knowledge of facts or events
constituting a breach of any such representations or warranties.
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SECTION 2.04. Duties and Responsibilities of the Servicer.
(a) The Servicer shall manage, administer, monitor and service the Auto
Loans, including providing data management, payment processing and customer
service. In performing its duties hereunder, the Servicer shall have full power
and authority to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable,
within the terms of this Agreement (the "Servicer Duties"). Prior to a
resignation or termination of the Servicer pursuant to Sections 2.10 or 2.12,
without limitation of the servicing standard set forth in Section 2.01, the
Servicer will provide the following services (together with other activities not
inconsistent with the description below and implicitly necessary to accomplish
the usual and customary activities, of a subprime automobile loan servicer):
(i) Boarding Functions:
(1) Review for receipt of copies of Loan Documents;
(2) Input of new Receivable information into loan
accounting system; and
(3) Preparation and mailing of welcome letters.
(ii) File Maintenance/Document Control Functions:
(1) Retention of copies of the Loan Documents;
(2) Tracking of customer collision insurance on Financed
Vehicles and reporting of exposed Financed Vehicles;
and
(3) Determination of Receivables being satisfied in full.
(iii) Customer Service Functions:
(1) Preparation and transmittal of monthly billing
statements to Obligors;
(2) Response to Obligor
inquiries;
(3) Research regarding billing statements and Obligor
inquiries;
(4) Maintenance of Obligor information; and
(5) Preparation and mailing of delinquency notices.
(iv) Payment Processing Functions:
(1) Coordination of lockbox procedures; and
(2) Recording of loan payment information, including
instances of non-sufficient funds.
(v) Reporting Functions:
(1) Preparation and delivery of Servicer's Report and the
other reports described in Section 2.16 hereof.
(vi) Data Processing Functions:
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(1) Entry of data;
(2) Operation of data center;
(3) Operation of telecommunications; and
(4) Operation and maintenance of collection system.
(vii) Collection Functions:
(1) receiving, applying and administering collections on
the Auto Loans;
(2) arranging for and administering repossessions of the
Financed Vehicles related to the Auto Loans;
(3) disposing of each Financed Vehicle related to a
Receivable whether following repossession or otherwise;
and
(4) filing of insurance claims and performing the duties of
the named insured under any VSI Policy with respect to
each Auto Loan affected by a repossession or otherwise.
Notwithstanding any other provision in this Agreement, the
Servicer shall administer collections on Auto Loan at all times in such a manner
that each Auto Loan shall remain eligible for coverage under the Insurance
Policy. The Servicer, on behalf of the Trustee (and any named insured under the
Insurance Policy), shall take such reasonable action as shall be necessary to
permit recovery on each Auto Loan under the Insurance Policy and may engage such
liquidation agents, skiptracers, remarketers, repossession agents or similar
agents as it deems necessary.
(b) The Servicer shall hold in trust for the benefit of the Trustee and
Noteholders and shall forward to the Collection Account or the Lockbox Account,
as applicable, within one (1) Business Day following receipt thereof any payment
or partial payment or deposit with respect to any Receivable received by the
Servicer. The Servicer shall not assert any right of set-off or any lien with
respect to such payment or deposit.
(c) Except as expressly provided herein in connection with its duty to
effect liquidations and repossessions, the Servicer shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create any Adverse
Claim upon or with respect to, any Receivable (or any right to income in respect
thereof), or any account in which any payments with respect to any Receivable
are deposited, or assign any right to receive income in respect of any
Receivable.
(d) The Servicer shall promptly notify the Trustee following its
becoming aware that any Financed Vehicle is no longer eligible for coverage
under the Insurance Policy, or following its receipt of notice from the Insurer
that it has rejected a claim submitted by the Servicer with respect to any
Financed Vehicle or Auto Loan.
(e) Until such time as the Servicer resigns or is removed, the Servicer
shall remain the prior lienholder of record with respect to each Financed
Vehicle relating to the Auto Loans subject to the Lien of the Indenture;
provided that the Servicer shall remain the prior lienholder only in its
capacity as an agent of the Trustee. Upon any resignation or removal of the
Servicer in accordance with Section 2.10 or 2.12, the Servicer shall at its sole
expense, promptly take all
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action necessary for the Trustee or its designee to become the lienholder in
respect of each Financed Vehicle to such Auto Loans.
(f) In accordance with the standard of care in Sections 2.01 and 2.20,
the Servicer may agree, with the prior consent of the Noteholder (so long as
such Noteholder is Credit Suisse First Boston Mortgage Capital or its Affiliate)
to grant to the Obligor on any Auto Loan any rebate, refund or adjustment that
the Servicer in good faith believes is required under the Auto Loan or
applicable law in connection with a prepayment or payment in full of the Auto
Loan, and, pursuant to written instructions from the Servicer, the Trustee shall
remit the amount of any such rebate, refund or adjustment to the Servicer to be
sent to the applicable Obligors from the Collection Account. The Servicer may
not permit any rescission or cancellation of any Auto Loan nor may it take any
action with respect to any Auto Loan or Sale Assignment which would invalidate
the coverage afforded by the Insurance Policy to such Receivable or the related
Financed Vehicle, or would impair the rights of the Trustee therein or in the
proceeds thereof.
(g) The Servicer shall not release, and shall not advise the Trustee to
release, the Financed Vehicle securing an Auto Loan from the vehicle lien
granted in connection with such Receivable in whole or in part, except:
(i) when such Auto Loan has been paid in full;
(ii) immediately upon any exchange or substitution of such
Financed Vehicle by the Dealer or manufacturer thereof in settlement of
claims as to defects, breach of warranties, insurance and similar
matters, with a Financed Vehicle of equal or greater collateral value as
of the date of such exchange in the reasonable judgment of the Servicer
(subject to all the terms hereof including the recordation of the lien
thereon and the requirements of the Insurance Policies); or
(iii) in connection with a repossession of a Financed Vehicle; or
(iv) when all Insurance Proceeds with respect to such Financed
Vehicle have been received by the Servicer on behalf of the Trustee and
the Issuer.
The Servicer shall not extend or otherwise amend the terms of any Receivable,
except in accordance with the provisions of Section 2.04(f) of this Agreement.
(h) The Servicer agrees to monitor and track each Financed Vehicle for
maintenance of required physical damage insurance and to notify the Issuer and
the Trustee, as soon as practicable but not later than 30 days after becoming
initially aware, of circumstances that would lead a reasonable person to believe
that the insurance on any Financed Vehicle is not being or will not be
maintained in accordance with applicable law and the terms of the applicable
retail installment sales contract.
(i) Except as expressly provided herein, the Servicer shall not sell,
assign (by operation of law or otherwise) or otherwise dispose of, or create any
Adverse Claim upon or with respect to, any Receivable (or any right to income in
respect thereof), or any account in which any
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payments with respect to any Receivable are deposited, or assign any right to
receive income in respect of any Receivable.
(j) The Servicer and the Issuer shall each instruct each Obligor by
written notice that all payments on Receivables shall be mailed to the Lockbox,
and, so long as AutoBond is serving as the Servicer and the Administrator
hereunder, that such payments shall be made payable to the order of "AutoBond
Acceptance Corporation," in its capacity as Servicer.
SECTION 2.05. Fidelity Bond, Errors and Omissions Insurance; Contingent
Disaster Relief Protection.
(a) The Servicer shall maintain, at its own expense, a blanket fidelity
bond and an errors and omissions insurance policy, with broad coverage with
responsible insurers on all officers, employees or other Persons acting on
behalf of the Servicer in any capacity with regard to the Receivables to handle
funds, money, documents and papers relating to the Receivables. Any such
fidelity bond and errors and omissions insurance shall protect and insure the
Servicer against losses, including forgery, theft, embezzlement, fraud, errors
and omissions and negligent acts of such Persons and shall be maintained in a
form that would meet the requirements of prudent institutional servicers of
similar auto loans, and in the case of the fidelity coverage in the amount of
$100,000 and in the amount of $1,000,000 in the case of errors and omissions
coverage. No provision of this Section 2.05(a) requiring such fidelity bond and
errors and omissions insurance shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. The Servicer shall be
deemed to have complied with this provision with respect to itself if one of its
respective Affiliates has such fidelity bond and errors and omissions policy
coverage and, by the terms of such fidelity bond and errors and omissions
policy, the coverage afforded thereunder extends to the Servicer. The Servicer
shall cause each and every Subservicer for it to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements. Upon request of the Issuer or the Trustee, the Servicer shall
cause to be delivered to the Issuer and the Trustee a certification evidencing
coverage under the Servicer's or any Subservicer's fidelity bond and insurance
policy. The Trustee shall have no obligation to request any such certification
or upon receipt of any such certification or of any notice provided for in this
Section 2.05(a), to approve, consent to, or determine its compliance with, the
requirements of this Section 2.05(a). Any such fidelity bond or insurance policy
shall (i) not be cancelled without the Servicer giving prior written notice to
the Issuer and the Trustee immediately following the giving or receipt of such
notice as is required or allowed under the terms of such fidelity bond or
insurance policy, as the case may be and (ii) not be modified in a materially
adverse manner without ten days' prior written notice by the Servicer to the
Issuer and the Trustee.
(b) The Servicer currently maintains, at its own expense, a computer
disaster recovery plan and computer disaster recovery procedures in forms
consistent with industry standards of prudent institutional receivables
servicers and shall continue to maintain, at its own expense, such a plan and
such procedures as are consistent with such standards and shall not materially
modify, amend or revoke such procedures without giving prior written notice
thereof to the Trustee. No provision of this Section 2.05(b) requiring such a
plan and such procedures shall diminish or relieve the Servicer from its duties
and obligations as set forth in this Agreement.
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SECTION 2.06. Inspection.
(a) At all times during the term hereof, the Servicer shall afford the
Issuer, the Trustee, and each Noteholder owning a Note evidencing at least 25%
of the unpaid principal amount of Notes of such Series, together with each of
their authorized agents (including auditors), upon reasonable notice, reasonable
access (subject to the security rules and regulations of the Servicer) during
normal business hours to its records relating to the Receivables and will cause
its personnel to assist in any examination of such records by any of such
Persons; provided, that the foregoing shall not require any of such Persons to
conduct any inspection. The examination referred to in this Section 2.06(a) will
be conducted in a manner which does not unreasonably interfere with the
Servicer's normal operations or customer or employee relations or require the
Servicer to disclose or expose confidential information related to its services
to its other clients or its other areas of its operations. Without otherwise
limiting the scope of the examination, the Issuer, the Trustee, and each such
Noteholder may, using generally accepted auditing standards, verify the status
of each Receivable and review the copies of the Loan Documents, Electronic
Ledger and records relating thereto for conformity to reports prepared pursuant
to Section 2.17 and compliance with the standards represented or required to
exist as to each Receivable in this Agreement. Nothing in this section shall
affect the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and failure of the Servicer to
provide access to information as a result of such obligation shall not
constitute a breach of this Section 2.06.
(b) All information obtained by the Issuer, the Trustee, such
Noteholders or their respective agents regarding the Obligors and the
Receivables, whether upon exercise of their respective rights under this Section
2.06 or otherwise, shall be maintained by the Issuer, the Trustee, such
Noteholders and their respective agents in confidence and shall not be disclosed
to any other Person other than the Noteholders, except as otherwise required by
applicable law or regulation.
SECTION 2.07. Possession and Payment of Receivables. The Servicer shall
determine when a Receivable has been paid in full. The Servicer shall notify the
Trustee in writing monthly as to each Receivable in connection with which such a
determination has been made. If the Servicer requires possession of any Loan
Documents or any documents related thereto in order to perform its duties or
obligations hereunder, prior to taking possession of any such Receivable or
documents, the Servicer shall deliver to the Trustee a trust receipt
substantially in the form attached hereto as Exhibit B. The Servicer agrees to
promptly return any such Receivable and documents, possession of which the
Servicer takes in accordance with this Section 2.07, after its need for
possession thereof ceases, unless satisfied in full.
SECTION 2.08. Monthly Servicing Fee; Servicing Expenses.
(a) On each Payment Date the Servicer shall be entitled to receive by
wire transfer of immediately available funds to an account designated in writing
by the Servicer to the Trustee from the funds on deposit in the Collection
Account an amount equal to the Monthly Administrator Fee as of such Payment
Date. The Servicer acknowledges and agrees that, so long as no Event of Default
under the Trust Indenture with respect to the Variable Funding Notes has
occurred and is continuing, its right to receive on any Payment Date the Monthly
Administrator Fee is
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subordinate to the right of payment on such day of any or all of the following
amounts that are payable on such date pursuant to Section 13.05(b) of the Trust
Indenture:
(i) the payment to the Noteholders of the interest due on such
Payment Date;
(ii) the payment to the Trustee of the Monthly Trustee fee; and
(iii) the payment to the Noteholders of principal due on the
Notes and all other obligations under the Credit Agreement.
(b) (i) The Servicer shall be required to pay for all expenses incurred
by it in connection with its activities hereunder (including any payments to
accountants, counsel, Subservicers, or any other Person) out of the compensation
paid to it pursuant to Section 2.08(a) above, and shall not be entitled to any
extra payment or reimbursement therefor; provided, however, that the Servicer
shall be entitled to reimbursement by wire transfer of immediately available
funds to an account designated in writing by the Servicer to the Trustee for the
amount of any (x) applicable Lockbox charges, freight, communication charges and
refunds for overpayments, and (y) other expenses incurred with the prior written
consent of the Issuer and the Trustee. No later than ten Business Days prior to
each Payment Date, the Servicer shall provide the Issuer and the Trustee with a
list of items eligible for reimbursement pursuant to the immediately preceding
sentence, in such reasonable detail as the Issuer and the Trustee may request,
together with its certification by a Servicing Officer that all such items are
eligible for reimbursement hereunder.
In addition, the Servicer shall be reimbursed by the
Issuer for the following out-of-pocket costs and expenses incurred in connection
with the performance of its Servicing Duties hereunder, including:
(A) any reasonable compensation paid to outside legal
counsel retained to protect the interests of the Issuer and the
Trustee (but not if such retention was made to defend the
Servicer against its own negligence or willful misfeasance);
(B) any reasonable compensation paid to professional
accountants retained to review the assets administered under this
Agreement (but not if such retention was made to defend the
Servicer against it own negligence or willful misfeasance); and
(C) any insurance, title, title transfer or other such
fees arising from or related to any Receivables administered
under this Agreement.
Any reimbursement to the Servicer for fees or costs pursuant to this Section
2.08(b) shall be limited to the extent of the funds available for reimbursement
of Servicer and Administrator fees and expenses under the Indenture.
(c) The Servicer acknowledges and agrees that if an Event of Default
under the Trust Indenture shall have occurred and be continuing, the Servicer's
right to receive any fees, costs and
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expenses owing to the Servicer under this Agreement shall be subordinated to the
fees and expenses of the Trustee, if the Servicer is not AutoBond or an
Affiliate of Auto Bond.
(d) Each of the Issuer and the Trustee covenants and agrees that upon a
Responsible Officer obtaining actual knowledge of the occurrence of an Event of
Default under the Indenture, it shall promptly give notice thereof to the
Servicer; provided, that the Trustee shall have no duty to inquire or to
investigate the occurrence of such Event of Default.
(e) Each of the Issuer and the Trustee agrees that, without the written
consent of the Servicer, it will not amend the Indenture (i) to change the
source and/or priority of the payment of the Monthly Administrator Fee or (ii)
to materially change the rights, duties and obligations under this Agreement of
the Servicer.
SECTION 2.09. [RESERVED]
SECTION 2.10. Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties hereby
imposed on it hereunder, except upon its determination that (i) the performance
of its duties hereunder has become impermissible under applicable law and (ii)
there is no reasonable action which the Servicer could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be evidenced as
to clause (i) above by an Opinion of Counsel to such effect delivered to the
Issuer and the Trustee before any such resignation and as to clause (ii) by an
Officer's Certificate to such effect delivered to the Issuer and the Trustee
before any such resignation. Promptly upon any such resignation, the Trustee
shall notify each Rating Agency and each Noteholder in writing.
SECTION 2.11. Reliance on the Servicer. The Issuer and Trustee have
entered into this Agreement with the Servicer in reliance upon its ability to
perform the servicing duties, if necessary, without any delegation thereof; the
adequacy of its plant, personnel, records and procedures; its integrity,
reputation and financial standing and the continuance of each of the foregoing.
SECTION 2.12. Events of Servicing Termination. If any of the following
events (each, an "Event of Servicing Termination") shall occur and be
continuing:
(a) Any failure by the Servicer to forward to the Trustee, the
Collection Account or the Lockbox, as applicable, any payment or partial
payment or deposit identified with respect to any Receivable received by
the Servicer and the continuance of such failure for a period of one
Business Day after the date upon which such payment or deposit is
received by the Servicer; or
(b) Failure on the part of the Servicer to observe or perform any
term, covenant or agreement in this Agreement, including the Servicer
Duties (other than the agreement to deliver the Servicer's Report
pursuant to Section 2.17 and subsection (e) of this Section 2.17), which
failure continues unremedied for 10 Business Days after discovery by the
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Servicer or 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 or by the Trustee; or
(c) Any proceeding shall be instituted against the Servicer (or,
if the Servicer is actively contesting the merits thereof, such
proceeding is not dismissed within 60 days) seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or any of its Debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its
property) shall occur; or
(d) The commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the consent by it to the
entry of a decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or
the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Servicer or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its Debts generally as they become due, or the taking
of corporate action by the Servicer in furtherance of any such action;
or
(e) The Servicer shall fail to deliver a report at the time, in
the form and containing the information expressly required by this
Agreement, which failure continues for a period of 5 Business Days; or
(f) There is a breach of any of the representations and
warranties of the Servicer set forth in Section 2.03 and such breach
shall not have been cured in all material respects within 10 Business
Days or such longer period as may be agreed to by the Servicer and the
Trustee after receipt of written notice thereof by the Servicer (if
notice is given by the Trustee or the Issuer) or upon discovery by the
Servicer;
(g) An Event of Default shall haveoccurred and be continuing
under the Indenture then, and in any such event, either the Issuer or
the Trustee may, by delivery to the Servicer (and to the Trustee or the
Issuer, as applicable) of a written notice specifying the occurrence of
any of the foregoing events, terminate the rights and responsibilities
of the Servicer hereunder, without demand, protest or further notice of
any kind, all of which are hereby waived by the Servicer (such
termination and any termination of the Servicer pursuant to Section 2.10
hereby called a "Service Transfer"); provided, that in the event
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any of the events described in subsections (c) or (d) of this Section
2.12 shall have occurred, termination of the duties and responsibilities
of the Servicer shall automatically occur, without, demand, protest, or
further notice of any kind, all of which are expressly waived by the
Servicer.
SECTION 2.13. Appointment of the Successor Servicer.
(a) Upon the effectiveness of termination of the Servicer's
responsibilities under this Agreement pursuant to Section 2.10 or Section 2.12,
the Trustee shall immediately succeed to the duties of the Servicer as a
successor Servicer (the "Successor Servicer"), unless and until another
Successor Servicer has been appointed by the Trustee (which may be the Trustee).
The Trustee shall give the Noteholders not less than 30 days' prior written
notice of its intent to appoint a Successor Servicer pursuant to this Section
2.13(a). Such appointment shall become effective following the expiration of
such 30-day period (or such shorter period agreed to by the Trustee and the
Noteholders) on a date to be specified by the Trustee. Such Successor Servicer
shall succeed to all rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement; provided, that such Successor
Servicer shall have no responsibility for any actions of the Servicer prior to
the date of the appointment of such Successor Servicer as Servicer. Such
Successor Servicer shall be authorized and empowered to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do any and all acts or things necessary or
appropriate to effect the purposes of such notice of termination and to perform
the duties of the Servicer hereunder (including its duties as Successor Servicer
hereunder but excluding its duty to indemnify pursuant to Sections 4.03(a) and
(b)). The standard of care, representations and warranties, covenants,
liabilities, rights of indemnification, and all other rights and obligations of
the Trustee under this Agreement and the Indenture shall also be applicable to
the Trustee in its capacity as Successor Servicer hereunder. The Trustee shall
have the right to appoint as its agent a third party to perform the duties and
obligations of the Trustee as Successor Servicer hereunder. The Trustee shall
not be responsible for compensating the Issuer for any increase in the Monthly
Servicing Fee associated with a Successor Servicer.
(b) Any Successor Servicer appointed by the Trustee hereunder shall be
entitled to reasonable compensation (including the estimated termination costs
of such servicing and a reasonable profit) which shall be determined by the
Trustee; provided, however, that the Trustee, when acting as Successor Servicer
hereunder, shall receive compensation that is no less than was being received by
the Servicer at the time of its termination. Any Successor Servicer appointed by
a court of competent jurisdiction or any agent of the Trustee as Successor
Servicer upon becoming the Successor Servicer pursuant to Section 2.13 (a) or
subservicer to the Successor Servicer, shall be entitled to compensation
(including the estimated costs of servicing and a reasonable profit) equal to
the prevailing market rate for such services.
(c) The outgoing Servicer, the Trustee and the Successor Servicer shall
take such action, consistent with this Agreement and the Indenture, that shall
be reasonably necessary to effectuate any such succession, including, without
limitation, (i) the express assumption by such Successor Servicer of the duties
and obligations of the outgoing Servicer hereunder (except as to the Trustee as
the Successor Servicer, the Servicer's indemnification obligation under Section
4.03(a) and (b) shall not apply), (ii) notifying Obligors in writing of the
existence of the Successor
17
Servicer, and (iii) providing such Successor Servicer with all Records
maintained or held by the outgoing servicer as Servicer hereunder, including all
paper files and all electronic files and the Servicer shall be reimbursed for
related expenses in accordance with Section 2.08(b).
(d) Upon appointment, any Successor Servicer shall be successor in all
respects to the outgoing Servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all responsibilities,
duties and liabilities relating thereto placed upon the Servicer by the terms
and provisions hereof (subject to the same limitations as are contained in this
Section 2.13 with respect to a succession to the outgoing Servicer by the
Trustee).
(e) Upon an assumption by a Successor Servicer, or in the event of
transfer of servicing of any Auto Loans to the Successor Servicer from a prior
servicer (including after the execution of this Agreement), the Successor
Servicer is authorized to accept and rely on all of the accounting, records and
work of the prior servicer without any audit or other examination thereof, and
the Successor Servicer shall have no duty, responsibility, obligation or
liability to any Person for any acts or omissions of the prior servicer. If any
error, inaccuracy or omission (collectively, "Errors") exists in any information
received from the prior servicer and such Errors should cause or materially
contribute to the Successor Servicer making, or continuing to make, any Errors
(collectively, "Continuing Errors"), the Successor Servicer shall have no
liability to any Person for such Continuing Errors. In the event the Successor
Servicer becomes aware of any Errors or Continuing Errors, which in the opinion
of the Successor Servicer impair its ability to perform its services hereunder,
the Successor Servicer may with prior written notice to the Issuer and the
Trustee, undertake such data or records reconstruction as it deems appropriate
to correct such Errors and Continuing Errors and to prevent future Continuing
Errors, and the Successor Servicer's reasonable expenses incurred in connection
therewith shall be deemed expenses owing to the Successor Servicer hereunder for
purposes of the Indenture.
SECTION 2.14. Effect of Service Transfer.
(a) Prior to any Service Transfer, the outgoing Servicer shall notify
(or, to the extent that such Servicer provided such notice pursuant to Section
2.13(c), confirm the notice to) Obligors of the existence of the Successor
Servicer.
(b) After any Service Transfer, the outgoing Servicer shall have no
further obligations with respect to the management, servicing, custody or
monitoring of the collection of the Receivables and the Successor Servicer shall
have all of such obligations.
(c) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including, but not limited to, the obligations and
indemnities of the outgoing Servicer pursuant to Article IV) other than those
relating to the management, servicing, custody or monitoring of the collection
of the Receivables by the Successor Servicer.
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SECTION 2.15. Annual Reports; Statements as to Compliance.
(a) On or before ninety (90) days after the end of each fiscal
year of the Servicer, the Servicer shall deliver to the Issuer and the Trustee
(who shall promptly forward a copy to each Noteholder), a copy of the financial
statements of the Servicer containing a report of a firm of Independent Public
Accountants to the effect that such firm has examined certain books and records
of the Servicer and that, on the basis of such examination conducted
substantially in compliance with generally accepted audit standards, such
financial statements accurately reflect the financial condition of the Servicer.
In the event such firm of Independent Public Accountants requires the Trustee to
agree to the procedures performed by such firm of Independent Public
Accountants, the Servicer shall direct the Trustee in writing to so agree; it
being understood and agreed that the Trustee will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Trustee has not made any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
(b) The Servicer shall deliver to the Trustee (who shall promptly
forward a copy to each Noteholder) by the close of business on the Determination
Date of each month the Officer's Certificate contemplated in Section 2.17, which
shall state as to each signer thereof, that (a) a review of the activities of
the Servicer (and each Subservicer) during the preceding calendar month and of
performance under this Agreement has been made under such officer's supervision
and (b) to the best of such officer's knowledge, based on such review, each of
the Servicer and any Subservicer has fulfilled all its respective obligations
under this Agreement throughout such month, or, if there has been an Event of
Servicing Termination or if an event has occurred that with notice or lapse of
time or both would become an Event of Servicing Termination, specifying each
such Event of Servicing Termination or event known to such officer and nature
and status thereof, and remedies therefor being pursued. Notwithstanding the
obligation to deliver such certificates, the Servicer shall promptly (but in any
event within five Business Days) notify the Issuer, the Noteholders and the
Trustee upon receiving actual knowledge of any event which constitutes an Event
of Servicing Termination or would constitute an Event of Servicing Termination
but for the requirement that notice be given or time elapse or both.
SECTION 2.16. Servicer Reports.
(a) The Servicer shall furnish by close of business on each
Determination Date (or the next succeeding Business Day if such day is not a
Business Day), to the Trustee and each Noteholder an Officer's Certificate,
substantially in the form attached hereto as Exhibit C (the "Servicer Report"),
which Servicer Report shall contain all information necessary for the
Administrator to prepare the report allowing the Trustee to make the
distributions from, and transfers among, the accounts required by the Indenture
or in such other form as is mutually acceptable to the Servicer, and the
Trustee. In addition, the Servicer shall provide the Trustee with such
additional written information and certifications as the Trustee may request in
order for the Trustee to make the distributions from, and transfers among, the
various accounts required by this Agreement and the Trust Indenture on a daily,
or other, basis. Each of the parties hereto shall provide to the Noteholders
evidencing a Percentage of not less than 50% such additional
19
information as they may reasonably request in order to assist such Noteholders
evidencing a Percentage of not less than 50% in their ongoing monitoring and
assessment of the performance of the Receivables, including the related computer
files. To the extent such information is not currently provided in the form of
Servicer Report, then the Servicer shall develop and provide such information at
its customary hourly rate and cost, which shall be paid to Servicer as part of
its compensation hereunder.
(b) The Servicer Report shall include a certification (i) that the
information contained in such certificate is accurate, (ii) that no Event of
Servicing Termination, or event that with notice or lapse of time or both would
become an Event of Servicing Termination, has occurred, or if an Event of
Servicing Termination or such event has occurred and is continuing, specifying
the Event of Servicing Termination or such event and its status and (iii) that
the representations and warranties of the Servicer contained in Section 2.03 of
this Agreement are true and correct as though made on and as of the date of such
certificate.
SECTION 2.17. Confidentiality. Each of the Issuer and the Trustee
acknowledges the proprietary nature of certain of the software, software
procedures, software development tools, know-how, methodologies, processes and
technologies of the Servicer ("Confidential Material") and agrees (i) that it
shall use the same means as it uses to protect its own confidential information,
but in no event less than reasonable means, to avoid disclosure, by it or its
agents or employees, to any third party of any confidential or proprietary
information of the Servicer identified as such by the Servicer to it, except to
the extent that any such person may be required to disclose any such information
(x) by law or any legal process or proceeding, including, without limitation, in
connection with an examination or audit by any governmental regulatory agency,
in which case such person shall give notice of such event to the Servicer or (y)
in connection with its duties and obligations hereunder and under the other
transaction documents, and (ii) that all such confidential or proprietary
software, software procedures, software development tools, know-how,
methodologies, process and technologies that are based upon trade secrets or
proprietary information of the Servicer identified as such by the Servicer to it
shall be and remain the property of the Servicer and that each of the Issuer and
the Trustee will have no ownership interest therein or ownership claim thereto.
Each of the Issuer and the Trustee shall confine the knowledge and use of the
Confidential Material only to its employees who require such knowledge and use
in the ordinary course and scope of their employment. Upon any expiration or
termination of this Agreement, each of the Issuer and the Trustee shall promptly
return to the Servicer all property or information which is covered by this
section.
SECTION 2.18. Delivery of Documents.
(a) On the date hereof the Servicer shall have delivered to the Issuer
and the Trustee in form and substance satisfactory to the Issuer an Officer's
Certificate from the Servicer certifying that (i) the representations and
warranties of the Servicer contained in Section 2.03 of this Agreement are true
and correct as though made on and as of such date and (ii) no Event of Servicing
Termination, or event that with notice or lapse of time or both would become an
Event of Servicing Termination, has occurred.
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(b) On or prior to February 15, 1998 in each calendar year, beginning in
1998, the Servicer shall deliver to the Issuer and the Trustee (who shall
promptly forward a copy to each of the Noteholders) an Officer's Certificate
from the Servicer dated such date certifying to the items listed in Section
2.19(a).
SECTION 2.20. Standard of Care. In performing its duties and obligations
hereunder and in administering, tracking and enforcing the insurance policies
maintained by obligors relating to the Receivables pursuant to this Agreement,
the Servicer will follow the standard of care set forth in Section 2.01;
provided, however, that notwithstanding the foregoing, the Servicer shall not,
except pursuant to a judicial order from a court of competent jurisdiction, or
as otherwise required by applicable law or regulation, release or waive the
right to collect the unpaid balance on any Receivable. In performing its duties
and obligations hereunder, the Servicer shall comply with all applicable federal
and state laws and regulations, shall maintain all state and federal licenses
and franchises necessary for it to perform its servicing responsibilities
hereunder, and shall not impair the rights of the Issuer or the Trustee in the
Receivables.
ARTICLE III
REPOSSESSION AND DISPOSAL
SECTION 3.01. Repossession and Disposal.
(a) The Servicer agrees to use its best efforts to arrange with a third
party for the repossession or other conversion of ownership of any Financed
Vehicle by a professional repossession service within 90 days after the related
Auto Loan becomes past due and agrees not to discriminate among Financed
Vehicles in its performance of its duties hereunder based on its right, if any,
to receive bonus or increased compensation with respect to the repossession and
disposal of certain Financed Vehicles, and otherwise in accordance with the
AutoBond Program Manual, in order to maximize collections.
(b) If requested in writing by the Issuer or the Trustee, the Servicer
is authorized and empowered by the Issuer and the Trustee to execute and
deliver, on behalf of itself, the Issuer and the Trustee, as the case may be,
any and all instruments of satisfaction or cancellation, or partial or full
release or discharge, and all other comparable instruments, with respect to the
Financed Vehicles related to the Receivables, all in accordance with the
standard of care set forth in Section 2.20. Without limiting the generality of
the foregoing, the Issuer and the Trustee shall, upon the receipt of a written
request of the Servicer, execute and deliver to the Servicer any limited powers
of attorney and other documents prepared by the Servicer and reasonably
necessary or appropriate (as certified in such written request) to enable the
Servicer to carry out its duties hereunder (including, without limitation,
matters relating to the certificates of title with respect to the Financed
Vehicles), and neither the Issuer nor the Trustee shall be held responsible for
any negligence by the Servicer in its use of such limited powers of attorney.
(c) The Servicer shall forward the proceeds of any disposition of a
Financed Vehicle related to a Receivable upon receipt thereof to the Lockbox or
the Series A Collection Account. If subsequent to the disposal of a Financed
Vehicle related to a Receivable in accordance herewith
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and, as required by this Agreement, with the AutoBond Program Manual, the
transaction disposing of such Financed Vehicle is rescinded or adjusted, through
arbitration or otherwise, due to any condition affecting such Financed Vehicle,
then the Servicer shall be entitled to reimbursement from the Series A
Collection Account (out of available funds) for any amount which the Servicer
pays in connection with such rescission or adjustment which amount shall be the
"Post-Sale Adjustment".
(d) The Servicer represents and warrants to the Issuer, the Trustee and
the Noteholders and shall be deemed to continuously represent and warrant to the
Issuer, the Trustee and the Noteholders, with respect to each Financed Vehicle
assigned to the Servicer pursuant hereto, that the Servicer will comply in all
material respects with all applicable federal, state and local regulations
pertaining to its services hereunder, including disclosure requirements,
required to be complied with in conjunction with such services. The Servicer
shall defend, indemnify and hold the Issuer, the Noteholders and the Trustee
harmless from and against any claim, suit, loss, cost or liability, direct or
indirect, including reasonable attorney's fees, arising out of any breach of any
representation or warranty made by the Servicer in the immediately preceding
sentence.
(e) Except as expressly provided herein, in the Indenture and in the
AutoBond Program Manual, the Servicer shall not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create any Adverse Claim upon or
with respect to, any Financed Vehicle related to any Receivable (or any right to
income in respect thereof), or assign any right to receive income in respect of
any such Financed Vehicle.
ARTICLE IV
LIMITATION ON LIABILITY; INDEMNITIES
SECTION 4.01. Liabilities of Obligors. No obligation or liability of any
Obligor under any of the Receivables is intended to be assumed by the Issuer,
the Servicer, the Trustee or any Noteholder under or as a result of this
Agreement and the transactions contemplated hereby and, to the maximum extent
permitted and valid under mandatory provisions of law, the Issuer, the Servicer,
and the Trustee or any Noteholder expressly disclaim such assumption.
SECTION 4.02. Limitation on Liability of the Trustee and the Servicer.
(a) The Trustee and the Servicer shall each have no liability in
connection with this Agreement except to the extent of the obligations
specifically imposed by this Agreement, it being understood that no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or shall otherwise exist against the Trustee or the
Servicer.
(b) None of the Trustee or the Servicer nor any of the directors,
officers, employees or agents thereof shall be under any liability to the
Issuer, to each other or to any other Person for any action taken, or for
refraining from the taking of any action, in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Servicer, the Trustee or any such Person against any
breach of warranties, representations or covenants made herein or against any
liability which would otherwise be imposed by reason of
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willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations or duties hereunder. The Servicer,
the Trustee and any director, officer, employee or agent thereof may rely in
good faith on any document of any kind which, prima facie, is properly executed
and submitted by any appropriate Person respecting any matters arising
hereunder.
(c) Except to the extent resulting from the Servicer's willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of reckless disregard of its obligation or duties hereunder, the Servicer
shall not be liable to any party indemnified under this Agreement, for any
liability, cost, expenses or financial loss which may arise as a result of the
economic performance of the Receivables or other assets.
SECTION 4.03. Indemnities of the Servicer.
(a) The Servicer agrees to indemnify the Issuer, the Trustee and the
Noteholders and any of their respective directors, officers, employees or agents
from, and hold each of them harmless against, any and all losses, liabilities,
damages (other than incidental or indirect damages), claims or expenses
(including reasonable attorneys' fees and expenses) proximately caused by the
Servicer's acts or omissions in violation of this Agreement, except to the
extent the Issuer's, the Trustee's, the Servicer's or the directors, officers,
employees or agents thereof, as the case may be, own bad faith, willful
misconduct or negligence contributes to the loss, liability, damage, claim or
expense; provided, however, that the Servicer's cumulative aggregate liability
pursuant to this Section 4.03 for such acts or omissions, other than those
relating to its failure to account for collections actually received, shall not
exceed $3,000,000. Except to the extent otherwise constituting bad faith,
willful misconduct or negligence, the Servicer shall not be liable to any person
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Servicing Agreement or for errors in judgment.
(b) The Servicer agrees to indemnify the Issuer, the Trustee, and the
Noteholders and any of their respective directors, officers, employees or agents
from, and hold each of them harmless against, any and all losses, liabilities,
damages, claims or expenses (including reasonable attorneys' fees and expenses)
arising as a result of the use, ownership or operation by the Servicer or any
agent thereof of any Financed Vehicle.
(c) Each of the Servicer, the Issuer and the Trustee agrees to promptly
notify the indemnifying party hereunder in writing of the commencement of any
action with respect to which indemnification may be owed to it pursuant to this
Section 4.03 promptly after receipt by such party of notice of commencement
thereof, but the omission so to notify such indemnifying party hereunder will
not relieve the indemnifying party from any liability which it may have
hereunder except to the extent the indemnifying party is prejudiced thereby.
(d) This Section 4.03 shall survive the termination of this Agreement
and the resignation or removal of the Servicer. This Agreement shall also
survive the resignation or removal of the Trustee in respect of rights accrued
to it prior to such resignation or removal.
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ARTICLE V
MISCELLANEOUS
SECTION 5.01. Beneficiaries. This Agreement will inure to the benefit of
and be binding upon the parties hereto, the Noteholders and their respective
successors and permitted assigns. The Noteholders are intended as, and shall be,
third party beneficiaries of this Agreement. No other Person will have any right
or obligation hereunder. Neither the Servicer nor the Trustee may assign any of
its respective rights and obligations hereunder or any interest herein, other
than as provided in the Indenture with respect to the Trustee, without the prior
written consent of the Issuer and the Trustee.
SECTION 5.02. Amendment. This Agreement may be amended from time to time
by the parties hereto only by a written instrument executed by all such parties,
and provided, further, that notice of any such amendment and a copy thereof
shall be given in writing promptly after the execution thereof to the Trustee.
SECTION 5.03. Notices. Unless otherwise expressly specified or permitted
by the terms hereof, notices and other communications required or permitted to
be given or made under the terms hereof shall be in writing. Any such
communication or notice shall be deemed to have been duly made or given (i) when
delivered personally, (ii) in the case of mail delivery, upon receipt, refusal
of delivery or return for failure of the intended recipient to retrieve such
communication or (iii) in the case of transmission by facsimile, upon telephone
and return facsimile confirmation and, in each case, if addressed to the
intended recipient as follows (subject to the next sentence of this Section
5.03):
If to the Issuer:
AutoBond Master Funding Corporation II
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
If to the Servicer:
AutoBond Acceptance Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
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If to the Trustee:
Manufacturers & Traders Trust Company
0 X&X Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Corporate Trust
Department - Xxxxxx Xxxxxxxx, VP
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
Each party hereto may from time to time designate by notice in writing to the
other parties hereto a different address for communications and notices.
SECTION 5.04. Severability of Provisions. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement, and shall in no way affect the validity or enforceability of the
other provisions of this Agreement.
SECTION 5.05. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE ISSUER, THE SERVICER, AND THE TRUSTEE HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY. THE
ISSUER, THE SERVICER AND THE TRUSTEE EACH HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE PARTIES HERETO
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT
OF ANY OF THEN TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER
JURISDICTION.
(c) THE ISSUER, THE SERVICER AND THE TRUSTEE EACH HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
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SECTION 5.06. Counterparts. This Agreement may be executed in
counterparts each of which shall be an original, but all of which together shall
constitute one and the same instrument.
SECTION 5.07. No Proceedings. Each of the Servicer and the Trustee
hereby agrees that it will not, directly or indirectly, institute, or cause to
be instituted, against the Issuer any proceeding of the type described in
connection with the Servicer in Section 2.12(c) so long as there shall not have
elapsed one year plus one day since the Notes issued by the Issuer have been
paid in full in cash. The foregoing covenant shall not limit the right of the
Servicer or the Trustee, as the case may be, to institute legal proceedings of a
type other than those described in connection with the Servicer in Section
2.12(c) against the Issuer for any breach by the Issuer of its obligations
hereunder.
SECTION 5.08. Further Assurance. The Servicer shall cause to be promptly
and duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as the Issuer or the Trustee from time to time may
reasonably request in order to carry out more effectively the intent and
purposes of this Agreement and the transactions contemplated hereby.
SECTION 5.09. Term of Agreement. The term of this Agreement shall begin
on the Closing Date and shall continue until the earlier of the day after the
date on which the Noteholders have been paid in full under the Indenture and
March 15, 2003. The Trustee shall deliver to the Servicer a copy of notice to be
delivered to the Noteholders regarding payment in full of the Notes pursuant to
the Indenture.
SECTION 5.10 Limitation of Liability of Trustee. It is expressly
understood and agreed by the parties hereto that (a) Manufacturers & Traders
Trust Company is executing this Agreement not in its individual capacity but
solely in its capacity as trustee pursuant to the Indenture, as supplemented and
amended, and (b) in no case whatsoever shall Manufacturers & Traders Trust
Company in its individual capacity or, except as provided in the Indenture, as
the Trustee have any liability for any of the statements, representations,
warranties, covenants, agreements or obligations of the Issuer hereunder or in
any of the certificates, notices or agreements delivered pursuant hereto, all
such liability, if any, being expressly waived by the parties hereto. For all
purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Trustee
hereunder, the Trustee shall be subject to, and entitled to the benefits of, the
terms and provisions of Article 7 of the Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Servicing
Agreement to be executed by their respective officers thereunto duly authorized.
AUTOBOND MASTER FUNDING CORPORATION II,
as Issuer
By: /s/ Xxxxxx Xxxx
_____________________________________
Name: Xxxxxx Xxxx
Title: Vice President
AUTOBOND ACCEPTANCE CORPORATION
as Servicer
By: /s/ Xxxxxx Xxxx
_____________________________________
Name: Xxxxxx Xxxx
Title: Vice President & COO
MANUFACTURERS & TRADERS TRUST
COMPANY, not in its individual capacity, but
solely as Trustee
By: /s/ Xxxxxxxx X. Xxxxx
_____________________________________
Name: Xxxxxxxx X. Xxxxx
Title: Vice President
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EXHIBIT B
TRUST RECEIPT
[DATE]
Manufacturers & Traders
Trust Company, as Trustee
0 X&X Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Re: Servicing Agreement, dated as of December 31, 1997 (the "Servicing
Agreement"), among AutoBond Master Funding Corporation II, AutoBond
Acceptance Corporation, and Manufacturers & Traders Trust Company
("Trustee")
Ladies and Gentlemen:
In accordance with Section 2.07 of the Servicing Agreement, the
undersigned hereby certifies that it has taken possession of the items set forth
on Annex I hereto with respect to the Receivables identified below. The
undersigned (i) confirms that it holds such items in trust for the benefit of
the Trustee as trustee for AutoBond Master Funding Corporation II and its
Noteholders and (ii) agrees to promptly return such items to the Trustee after
its need for possession of them ceases, except for title and security
instruments which the undersigned is required under applicable law to otherwise
deal with in furtherance of its duties under the Servicing Agreement.
Receivables:
AUTOBOND ACCEPTANCE CORPORATION
By:
_________________________________
Name:
Title:
EXHIBIT C
FORM OF MONTHLY STATEMENT
PAYMENT DATE: ________________
DUE PERIOD: __________ - ___________
Under the Servicing Agreement dated as of December 31, 1997 by and among
AutoBond Acceptance Corporation, as Servicer, AutoBond Master Funding
Corporation II, a Nevada corporation, as Issuer, and Manufacturers & Traders
Trust Company, as Trustee, the Servicer is required to prepare certain
information each month regarding the performance of the assets held in trust
during the previous month and payments due on the Issuer's Variable Funding
Notes, Series A. The information which is required to be prepared with respect
to the Payment Date and Due Period listed above is set forth below.
Beginning Principal Balance:
Non-Cash Adjustments:
Loans Paid in Full:
Principal Collections:
Defaulted and other Excluded Loans:
Ending Principal Balance:
Interest Collections:
Miscellaneous Fee Collections:
Interest Due on Variable Funding Notes:
Principal Due on Variable Funding Notes:
Cash contributions to Collection Account:
Dated: __________ AUTOBOND ACCEPTANCE CORPORATION
By:________________________________
Name:
Title:
