EXHIBIT 4(f)(2)
EXECUTION COPY
SERVICING AGREEMENT
SERVICING AGREEMENT (the "AGREEMENT"), dated as of July 7, 1998, between
CAC FUNDING CORP., a Nevada corporation, (together with its successors and
assigns, the "DEBTOR") and CREDIT ACCEPTANCE CORPORATION, a Michigan corporation
("CAC"), as servicer (in such capacity, together with its successors and
assigns, the "SERVICER").
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of this Agreement and the
Security Agreement, the Debtor desires to obtain the services of the Servicer to
provide, among other things, for the servicing of the Loans. For its services
hereunder and under the Security Agreement, the Servicer will receive a fee
payable as described herein and therein;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the meanings specified in, or incorporated by reference into,
the Security Agreement. The following terms shall have the meanings specified
below, and shall include in the singular number the plural and in the plural
number the singular:
"AGGREGATE OUTSTANDING ELIGIBLE LOAN BALANCE" shall mean, with respect to
any date of determination, the aggregate Outstanding Balance under all Eligible
Loans at the end of such day.
"CAC" shall mean Credit Acceptance Corporation, a Michigan corporation, and
its successors and assigns.
"COLLATERAL AGENT" shall mean NationsBank, N.A., or any successor thereto,
as Collateral Agent hereunder.
"COLLECTION GUIDELINES" shall mean policies and procedures of the Servicer,
relating to the collection of amounts due on contracts for the sale of
automobiles and/or light-duty trucks, as in effect on the Cut-Off Date and as
amended from time to time in accordance herewith and with the other Transaction
Documents.
"COLLECTIONS" shall mean all payments (including Recoveries, credit-related
insurance proceeds, Interest Rate Cap proceeds and proceeds of Related Security)
received by the Servicer,
CAC or the Debtor on or after the Cut-Off Date in respect of the Loans in the
form of cash, checks, wire transfers or other form of payment in accordance
with the Loans and the Dealer Agreements.
"COMPANY" shall mean Kitty Hawk Funding Corporation, a Delaware
corporation, and its successors and assigns.
"CONTRACT" shall mean each retail installment sales contract, in
substantially one of the forms attached to the Security Agreement as Exhibit A,
relating to the sale of a new or used automobile or light-duty truck originated
by a Dealer and in which the Seller shall have been granted a security interest
or certain other ownership rights under the related Dealer Agreement to secure
the related dealer's obligation to repay one or more Loans.
"CONTRIBUTION AGREEMENT" shall mean the Contribution Agreement dated as of
July 7, 1998, among CAC and the Debtor, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"CREDIT GUIDELINES" shall mean policies and procedures of CAC relating to
the extension of credit to automobile and light-duty truck dealers in respect of
retail installment contracts for the sale of automobiles and/or light-duty
trucks, including, without limitation, the policies and procedures for
determining the creditworthiness of such dealers and relating to this extension
of credit to such dealers and the maintenance of installment sale contracts, as
in effect on the Cut-Off Date and as amended from time to time in accordance
herewith and with the other Transaction Documents.
"DEALER AGREEMENT" shall mean each agreement between the Seller and any
Dealer, in substantially the form attached to the Security Agreement as
Exhibit C.
"DEBTOR" shall mean CAC Funding Corp. and its successors and assigns.
"LOAN" shall mean all amounts advanced by CAC under a Dealer Agreement and
payable from Collections, including servicing charges, insurance charges and
service policies and all related finance charges, late charges, and all other
fees and charges charged to customers; PROVIDED, HOWEVER, that the term "Loan"
shall include only those Loans identified on Exhibit A to the Contribution
Agreement, as amended from time to time in accordance therewith and with the
other Transaction Documents.
"MONTHLY SERVICING FEE" shall mean, with respect to any Remittance Date, an
amount equal to the product of (i) 4.00% and (ii) the Available Collections
(excluding from Available Collections such amounts paid by the Debtor under
Section 3.2(e) of the Security Agreement with respect to such Remittance Date
and any proceeds received pursuant to the Interest Rate Cap).
"NOTE PURCHASE AGREEMENT" shall mean the Note Purchase Agreement dated as
of July 7, 1998 among the Debtor, the Company and NationsBank, N.A., a national
banking association, as Agent and as a Bank Investor, as such agreement may be
amended, modified and supplemented from time to time.
"PERSON" shall mean any legal person, including any individual,
corporation, limited liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Authority
or other entity of similar nature.
"SECURED PARTIES" shall mean the Company, the Bank Investors and their
respective successors and assigns.
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of July
7,1998 among CAC, as Servicer, the Debtor, the Collateral Agent and the Company.
"SERVICER" shall mean initially CAC and thereafter any Person appointed as
Successor Servicer.
"SERVICER EVENT OF DEFAULT" shall mean (a) the failure of the Servicer to
make any payment, transfer or deposit as required hereunder, under the Note
Purchase Agreement or the Servicing Agreement, (b) the failure of the Servicer
to observe or perform in any material respect any other representation,
warranty, covenant or agreements of the Servicer (including its Credit
Guidelines) in the Servicing Agreement as reasonably determined by the
Collateral Agent, (c) the occurrence of any Material Adverse Change, and (d) an
event of the type described in Section 6.1(ii) of the Security Agreement shall
occur with respect to the Servicer.
ARTICLE 2
ADMINISTRATION AND COLLECTION
SECTION 2.1. SERVICING AND RETENTION OF SERVICER. (a) The servicing,
administering, managing and collection of the Loans shall be conducted by the
Person (the "SERVICER") so designated from time to time in accordance with this
Section 2.1. Subject to early termination due to the occurrence of a Servicer
Event of Default or as otherwise provided below in this Section 2.1, CAC shall
serve as Servicer for an initial term commencing on the date hereof and expiring
June 30, 2006.
(b) In the event of a Servicer Event of Default, the Collateral Agent
shall have the right to terminate CAC as servicer hereunder. Upon the
termination or resignation of CAC as servicer of the Loans, the Collateral Agent
shall have the right to appoint a successor servicer (the "SUCCESSOR SERVICER")
and enter into a servicing agreement with such Successor Servicer at such time
and exercise all of its rights under Section 4.3 of the Security Agreement. In
the event that the Successor Servicer is not appointed within 30 days of the
Servicer Event of Default which led to the termination of the preceding
Servicer, NationsBank, N.A., shall thereupon be
appointed to act as Successor Servicer. Such servicing agreement shall
specify the duties and obligations of such Successor Servicer, and all
references herein to the Servicer shall be deemed to refer to such Successor
Servicer. Notwithstanding the above, NationsBank, N.A., may appoint any
established financial institution having a net worth of not less than
$50,000,000 and whose regular business includes the servicing of automobile
installment sales contracts as the Successor Servicer hereunder.
(c) The Servicer shall not resign from the obligations and duties imposed
on it by this Agreement or the Security Agreement as Servicer except upon a
determination that (i) by reason of a change in legal requirements, the
performance of its duties hereunder or under the Security 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, and the Collateral Agent does not elect
to waive the obligations of the Servicer 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 pursuant to this
Section 2.1(c) shall be evidenced by an opinion of counsel to such effect
delivered and acceptable to the Collateral Agent. No resignation of the
Servicer shall become effective until the Servicer or an entity acceptable to
the Collateral Agent shall have assumed the responsibilities and obligations of
the Servicer.
(d) Any Person (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) which acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer, or (iv) succeeding to the business of the
Servicer, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of the Servicer under this Agreement and, whether or
not such assumption agreement is executed, shall be the successor to the
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 Servicer from any obligation.
(e) On or before ninety (90) days after the end of each fiscal year of the
Servicer, beginning with the fiscal year ending December 31, 1998, the Servicer
shall cause a firm of independent public accountants (who may also render other
services to the Servicer or the Debtor) to furnish a report to the Collateral
Agent and the Secured Parties to the effect that they have (i) compared the
information contained in the Monthly Servicer's Certificates delivered during
such fiscal year, based on a sample size provided by the Collateral Agent, with
the information contained in the Loans, the Contracts and the Servicer's records
and computer systems for such period, and that, on the basis of such agreed upon
procedures, such firm is of the opinion that the information contained in the
Monthly Servicer's Certificates reconciles with the information contained in the
Loans and the Contracts and the Servicer's records and computer system and that
the servicing of the Loans and the Contracts has been conducted in compliance
with this Agreement, (ii) verified the Aggregate Outstanding Eligible Loan
Balance as of the end of each Collection Period during such fiscal year, and
(iii) verified that a sample of Loans and
Contracts treated by the Servicer as Eligible Loans and as Eligible
Contracts, as applicable, in fact satisfied the requirements of the
definition thereof contained herein and (iv) conducted a "negative
confirmation"' of a sample of the Loans and Contracts and verified that the
Servicer's records and computer system used in servicing the Loans and
Contracts contained correct information with regard to due dates and
outstanding balances, except, in each case for (a) such exceptions as such
firm shall believe to be immaterial (which exceptions need not be enumerated)
and (b) such other exceptions as shall be set forth in such statement.
SECTION 2.2. DUTIES OF THE SERVICER. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to collect
all amounts due under the Loans and Contracts from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit Guidelines and the Collection
Guidelines, it being understood that there shall be no recourse to the Servicer
with regard to the Loans and Contracts except as otherwise provided herein and
in the other Transaction Documents. So long as no Termination Event shall have
occurred, the Servicer may, unless otherwise required by law, in accordance with
the Credit Guidelines, extend the maturity of Loans and Contracts, as the
Servicer may determine to be appropriate to maximize Collections thereof. The
Servicer shall hold in trust for the Secured Parties all records which evidence
or relate to all or any part of the Collateral. In the event that a Successor
Servicer is appointed, the outgoing Servicer shall deliver to the Successor
Servicer and the Successor Servicer shall hold in trust for the Debtor and the
Secured Parties all records which evidence or relate to all or any part of the
Collateral.
(b) The Servicer, if other than CAC, shall as soon as practicable upon
demand, deliver to the Debtor all records in its possession which evidence or
relate to indebtedness of an Obligor which is not a Loan or Contract.
(c) The Servicer shall deposit all Collections into the Collection Account
no later than two (2) Business Days after the Date of Processing.
(d) In addition to the obligations of the Servicer under this Agreement,
the Servicer shall perform all of its obligations under the Security Agreement
and any other Transaction Document to which it is a party.
(e) The Servicer shall indemnify the Collateral Agent and the Secured
Parties, their officers, directors, employees and agents for, and hold them
harmless against any loss, liability or expense incurred without willful
misconduct, gross negligence or bad faith on their part, arising out of or in
connection with (i) this Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under this Agreement and (ii) the
negligence, willful misconduct or bad faith of the Servicer in the performance
of its duties hereunder. The provisions of this Section 2.2(e) shall survive
the termination of this Agreement.
SECTION 2.3. SERVICING COMPENSATION. As compensation for the
performance of its obligations under this Agreement, the Security Agreement,
and any other Transaction document to which it is a party, the Servicer is
entitled to a Monthly Servicing Fee payable in accordance with Section
5.1(a)(ii) of the Security Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer represents and warrants to the Debtor that:
(a) CORPORATE EXISTENCE AND POWER. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted.
The Servicer is duly qualified to do business in, and is in good standing in,
every other jurisdiction in which the nature of its business requires it to be
so qualified, except where the failure to be so qualified or in good standing
would not have a material adverse effect.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution, delivery and performance by the Servicer of this Agreement and the
Security Agreement are within the Servicer's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any Official Body or official thereof, and do not
contravene, or constitute a default under, any provision of applicable law, rule
or regulation or of the Certificate of Incorporation or Bylaws of the Servicer
or of any agreement, judgment, injunction, order, writ, decree or other
instrument binding upon the Servicer or result in the creation or imposition of
any adverse claim on the assets of the Servicer or any of its Subsidiaries.
(c) BINDING EFFECT. Each of this Agreement and the Security Agreement
constitutes the legal, valid and binding obligation of the Servicer, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors.
(d) ACCURACY OF INFORMATION. All information heretofore furnished by the
Servicer to the Debtor, the Collateral Agent, the Company or any Bank Investor
for purposes of or in connection with this Agreement or the Security Agreement
or any transaction contemplated hereby or thereby is, and all such information
hereafter furnished by the Servicer to the Debtor, the Collateral Agent, the
Company or any Bank Investor will be, true and accurate in every material
respect, on the date such information is stated or certified.
(e) ACTION, SUITS. There are no actions, suits or proceedings pending, or
to the knowledge of the Servicer threatened, against or affecting the Servicer
or any Affiliate of the
Servicer or their respective properties, in or before any court, arbitrator
or other body, which may, individually or in the aggregate, have a material
adverse effect.
(f) NATURE OF LOANS. (i) Each Loan classified as an Eligible Loan (or
included in any aggregation of balances of Eligible Loans) by the Servicer in
any document or report delivered under the Security Agreement was an Eligible
Loan as of the date so classified, and (ii) each related Contract classified as
an Eligible Contract (or included in any aggregation of balances of Eligible
Contracts) by the Servicer in any document or report delivered under the
Security Agreement was an Eligible Contract as of the date so classified.
(g) AMOUNT OF LOANS AND CONTRACTS; COMPUTER FILE. As of the Cut-Off Date,
as reported in the loan servicing system, (i) the Aggregate Outstanding Eligible
Loan Balance was $69,712,673.71, and (ii) the aggregate Outstanding Balance of
the Contracts was $253,886,307.58. The computer file or microfiche list
delivered pursuant to Section 2.1 of the Security Agreement is complete and
accurately reflects the information regarding the Loans, Dealer Agreements and
Contracts in all material respects as of the applicable time referred to in such
Section 2.1.
(h) COLLECTIONS AND SERVICING. Since April 1, 1998, there has been no
material adverse change in the ability of the Servicer to service and collect
the Loans.
(i) NOT AN INVESTMENT COMPANY. The Servicer is not, and is not controlled
by, an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or is exempt from all provisions of such Act.
ARTICLE 4
COVENANTS OF THE SERVICER
SECTION 4.1. AFFIRMATIVE COVENANTS OF THE SERVICER. The Servicer hereby
covenants to the Debtor, until all amounts due under the Security Agreement, the
Note Purchase Agreement and the Note have been paid in full, that:
(a) CONDUCT OF BUSINESS. The Servicer will carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted and do all things necessary to remain
duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
(b) COMPLIANCE WITH LAWS. The Servicer will comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it or its respective properties may be subject.
(c) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The Servicer
will furnish to
the Collateral Agent from time to time such information with respect to the
Loans as the Collateral Agent may reasonably request, including, without
limitation, listings identifying the Obligor and the Outstanding Balance for
each Loan. The Servicer will, at any time and from time to time during
regular business hours permit the Collateral Agent, or its agents or
representatives, (i) to examine and make copies of and take abstracts from
all Records and (ii) to visit the offices and properties of the Servicer for
the purpose of examining such Records, and to discuss matters relating to
Loans or the Debtor's or the Servicer's performance hereunder and under the
other Transaction Documents to which such Person is a party with any of the
officers, directors, employees or independent public accountants of the
Servicer having knowledge of such matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Servicer will maintain
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Loans in the event of the
destruction of the originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Loans (including, without limitation, records adequate to
permit the daily identification of each new Loan and all Collections of and
adjustments to each existing Loan). The Servicer will give the Collateral Agent
notice of any material change in the administrative and operating procedures of
the Servicer referred to in the previous sentence.
(e) NOTICE OF COLLATERAL AGENT'S INTEREST. In the event that the Debtor
shall sell or otherwise transfer any interest in any Loan, any computer tapes or
files or other documents or instruments provided by the Servicer in connection
with any such sale or transfer shall disclose the Debtor's ownership of the
Loans and the Collateral Agent's interest in the Loans.
(f) CREDIT, COLLECTION, AND ACCOUNTING POLICIES. The Servicer will comply
in all material respects with the Credit Guidelines and Collection Guidelines in
regard to each Loan and the related Contract. The Servicer shall deliver to the
Collateral Agent and the Agent, within ten (10) days after the date any material
change in or amendment to the Collection Guidelines is made a notice describing
such change or amendment. The Servicer shall notify the Collateral Agent of any
material change in or amendment to the Servicer's accounting policies within ten
(10) days after the date such change or amendment has been made.
SECTION 4.2. NEGATIVE COVENANTS OF THE SERVICER. The Servicer hereby
covenants to the Debtor, until all amounts due under the Security Agreement, the
Note Purchase Agreement and the Note have been paid in full, that:
(a) NO EXTENSION OR AMENDMENT OF LOANS. Except as otherwise permitted in
Section 2.2 hereof or in the Security Agreement, the Servicer will not extend,
amend or otherwise modify the terms of any Loan, or amend, modify or waive any
term or condition of any Contract related thereto.
(b) NO CHANGE IN BUSINESS OR CREDIT GUIDELINES. The Servicer will not
make any
change in the character of its business or in the Collection Guidelines,
which change would, in either case, impair the collectibility of any Loan or
otherwise have a material adverse effect on the ability of the Servicer to
service the Loans or to perform any of its other duties hereunder or under
the other Transactions Documents to which it is a party.
(c) NO MERGERS, ETC. The Servicer will not (i) consolidate or merge with
or into any other Person unless the Servicer shall be the surviving corporation,
or (ii) sell, lease or transfer all or substantially all of its assets to any
other Person.
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. NOTICES, ETC. Except where telephonic instructions or
notices are authorized herein to be given, all notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be sent by facsimile transmission
with a confirmation of the receipt thereof and shall be deemed to be given for
purposes of this Agreement on the day that the receipt of such facsimile
transmission is confirmed in accordance with the provisions of this Section 5.1.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section, notices, demands, instructions (including
payment instructions) and other communications in writing shall be given to or
made upon the respective parties hereto at their respective addresses and
accounts indicated below, and, in the case of telephonic instructions or
notices, by calling the telephone number or numbers indicated for such party
below:
If to the Servicer:
Credit Acceptance Corporation
Silver Triangle Building
00000 Xxxx Xxxxxx Xxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000 (ext. 432)
Telecopy: (000) 000-0000
If to the Debtor:
CAC Funding Corp.
Silver Triangle Building
00000 Xxxx Xxxxxx Xxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000 (ext. 432)
Telecopy: (000) 000-0000
If to the Collateral Agent:
NationsBank, N.A.
NationsBank Corporate Center
000 Xxxxx Xxxxx Xxxxxx
XX0-000-00-00
Xxxxxxxxx, Xxxxx Xxxxxxxx 28255-0001
Attention: Xxxxxxxx X. Xxxxx
Investment Banking
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SECTION 5.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Servicer, and shall inure to the benefit of the Debtor, the Collateral Agent
and the Secured Parties and their respective successors and permitted assigns
including any Liquidity Provider (it being expressly understood that such
Persons shall be third-party beneficiaries of this Agreement); PROVIDED that the
Servicer shall not assign any of its rights or obligations hereunder without the
prior written consent of the Collateral Agent acting upon written instruction of
the Secured Parties, and any such assignment in contradiction of the foregoing
shall be null and void.
SECTION 5.3. SEVERABILITY CLAUSE. Any provisions of this Agreement which
are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 5.4. AMENDMENTS. This Agreement and the rights and obligations of
the parties hereunder may not be changed orally but only by an instrument in
writing signed by the party against which enforcement is sought.
SECTION 5.5. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Michigan.
SECTION 5.6. COUNTERPARTS. This Agreement may be executed in any number
of copies, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
SECTION 5.7. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Debtor and the Servicer have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
CAC FUNDING CORP.
as Debtor
By: /S/ XXXXXXX X. XXXX
--------------------------------
Name: XXXXXXX X. XXXX
--------------------------------
Title: TREASURER
--------------------------------
CREDIT ACCEPTANCE CORPORATION
As Servicer
By: /S/ XXXXX X. XXXXXXX
--------------------------------
Name: XXXXX X. XXXXXXX
--------------------------------
Title: CFO
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